Mapping the Middle Eastern family offices investing in tech

The Middle East often brings to mind one of two things: rich oil reserves and deserts that conjure scenes from the sci-fi movie Dune. Whether it is in reel or real life, the region’s natural resources have been its primary source of wealth.

However, the region’s governments have recently started planning for the Middle East’s future after decades of dependence on oil. Plans have varied, from investing in renewable energy to electric vehicles. Governments in the region are also focusing on laws to boost interest in family offices.

What could this rise of family offices in the Middle East mean for startups in Asia? After all, family offices in Southeast Asia have proven to be active startup investors.

Turns out, not much just yet. Tech in Asia’s research shows that only 17 family offices in the Middle East out of the 39 we’ve tracked have publicly disclosed their startup investments. The 17 include family-run investment firms and conglomerates from the region.

See also: Mapping the family offices spreading wealth across startups in SEA

According to Anand Prasanna, managing partner at Dubai-based VC firm Iron Pillar, the lack of startup investments from these family offices is a matter of preference.

“Most of the family offices in the Middle East are focused on more predictable returns available from real assets. It is a matter of risk appetite for many of these investors,” he explains.

Data from Citibank supports this view. Its latest global family office survey shows that only 17% of family offices from the Europe, Middle East, and Africa region have reported having placed their wealth in venture funds. This is much lower than North America’s 30% and the global average of 20%.

For the “very few family offices” in the Middle East that do invest in VC funds or startups, the focus has been mainly on “US or global VC funds with strong recognizable brand names,” Prasanna says.

“While certain Asian markets have done well, their track record is still lagging to that of the US’ in an apples-to-apples comparison and consistency,” he adds.

Neha Singh, co-founder and CEO of startup database Tracxn, echoes this view, as she says the US’ “innovative and mature startup ecosystem, currency strength, and large market size” make it a preferred choice for investments.

Looking for AI investment

In recent years, the AI boom has attracted attention from royal families in the Middle East, as the region looks to diversify its oil-reliant economy.

A May report by The Washington Post revealed how Silicon Valley has actively courted investors from the Middle East, to help fund their AI-related projects and companies. OpenAI’s latest fundraising round, which put its valuation at US$157 billion, includes MGX as an investor.

Is there a future for SEA startups in the Middle East?