Abu Dhabi, UAESaturday 7 December 2019

Fund backed by Prince Khaled bin Alwaleed bin Talal raising $150m for tech investments

Pro Rata Opportunity Fund is expected to close its Proof-II fund in first half of next year

Prince Khaled bin Alwaleed Bin Talal Al Saud, founder and chief executive of KBW Ventures, speaking at the Sharjah Entrepreneurship Forum last week. Antonie Robertson / The National
Prince Khaled bin Alwaleed Bin Talal Al Saud, founder and chief executive of KBW Ventures, speaking at the Sharjah Entrepreneurship Forum last week. Antonie Robertson / The National

Pro Rata Opportunity Fund, the venture capital firm which counts Prince Khaled bin Alwaleed bin Talal among its investors, is raising $150 million (Dh551m) in funding to co-invest in technology sector firms.

Proof, as the US-based investment vehicle is known, is looking to invest as much as $400m in joint investments with its partners through its Proof-II Fund, which is expected to close in the first half of next year, Prince Khaled, who is a limited partner in Proof, said. The fund, which had its first close in June this year, has already raised $60m of the targeted amount and is likely to reach $80m next month, he noted.

“We are looking at one-and-a-half to two times for co-investments, through the fund,” Prince Khaled told The National. “So at $150m [the size of Proof-II], we are looking at about $300m to $400m in co-investments.”

When investing in early stage companies, VC firms typically negotiate ‘pro-rata investment rights’, allowing them to maintain ownership in further funding rounds, however, they often run out of capital to maintain their pro-rata ownership in their best-performing companies, which could pose risks to their control of board seats and the right to invest in future rounds. Proof invests capital alongside a network of partner VCs to maintain their influence and optimise returns in companies experiencing meteoric growth, according to its website.

Proof closed its first fund in 2016 and made about $95m worth of investments in different firms, Prince Khaled said, adding that Proof-II is mainly targeting firms in the technology sector.

“We are looking for any disrupters out there,” he said.

“Not necessarily but importantly they [the firms] have to have a product and it just has to be in [the] tech field.”

Prince Khaled’s KBW Ventures, whose senior adviser and chief investment officer John Backus is also the co-founder and managing partner of Proof, is looking to increase its investments in the US technology sector.

The venture capital firm has already invested in 24 companies in e-gaming, e-commerce and the plant-based protein sector, among others, so far this year and it is planning more investments before the end of the year.

“We will have invested in 30 companies by year end in just about every imaginable technology sector,” Prince Khaled noted.

In an interview with Bloomberg in August, Prince Khaled said KBW had invested in companies like Zipline, a drone delivery service; Geltor, a California-based start-up that makes plant-based collagen and Beyond Meat, among others.

“We opened up access to the Middle East for these companies and the Middle East has a lot more to offer than a blank cheque. About 70 per cent of Saudi Arabia's population is below 30 years of age and they are excited about venture capital and want to be entrepreneurs and want to start new businesses [rather] than taking on father’s businesses,” he told Bloomberg.

Middle East investors — whether venture capitalist, private equity or government-controlled investment firms — are increasingly looking to invest in technology sector across the globe. Abu Dhabi-based Mubadala Investment Company, through its venture capital arm Mubadala Ventures, launched a $400m European technology fund last year and a $200m “fund of funds” programme. It has also committed $15bn to SoftBank’s first iteration of its Vision Fund. Saudi Arabia's Public Investment Fund is the biggest single investor in the Vision Fund.

KBW Ventures is undeterred by the global economic headwinds and plans to continue investing in its target sectors, Prince Khaled told The National in a September 26 interview.

“I am hoping that it would be a quick recession as opposed to being a heavy one and I don’t see that being an issue right now until the [2020 US Presidential] election year is over and then we'll see how it goes," he said at the time.

Updated: November 30, 2019 07:56 PM

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