The Weekly Circuit
👋 Good Monday morning in the Middle East!
Saudi Arabia is stretching its wings as the kingdom prepares for President Joe Biden’s expected trip to Riyadh in July. Rising global gas prices, sparked by the Russia-Ukraine conflict, are filling Saudi Aramco’s coffers with cash and fueling the state-owned petroleum producer’s drive to eclipse Apple as the world’s biggest company, with a recent market value of $2.4 trillion. The president’s imminent Mideast swing, which will also take him to Jerusalem, is shaping up as a coming-out party for Crown Prince Mohammed bin Salman, the country’s de facto ruler, who retreated from the limelight in 2018 after accepting responsibility but not blame for the murder of Washington Post columnist and Saudi dissident Jamal Khashoggi.
Got Game: Prince Mohammed is now trying to make good on his promises to wean Saudi Arabia off its historic oil dependence. In opening up the economy to non-traditional businesses, the kingdom acted on the 36-year-old king-in-waiting’s well-known interest in gaming last week when its Public Investment Fund bought a $1 billion stake in Sweden’s Embracer Group video game and media holding company. While the government allocated $100 million on a program to train 100,000 people to perk up the country’s tourist trade, a Saudi-funded $25 million golf tournament outside London tangled with the PGA, prompting the suspension of Phil Mickelson and other top players from the sport’s flagship league. It also fueled talk of Saudi “sportswashing.”
Diplomatic Response: When Israeli Prime Minister Naftali Bennett touched down last week in Abu Dhabi, Ambassador Amir Hayek was waiting on the tarmac to whisk him to the royal court. Most days, people have to wait for Hayek, Israel’s first ambassador to the UAE, whose schedule is jammed with Israeli company executives who want his help to break into Gulf markets, as he told The Circuit’s Jonathan Ferziger in an interview. Back in Israel, many of those businesses are feeling the heat from Wall Street’s plunge and demands from VC investors to tighten their belts, according to a survey outlined below.
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To crack Emirati market, CEOs line up for ‘speed-dating’ with Israel’s ambassador
Bombarded by requests for personal assistance from startup executives hoping to launch business operations in the United Arab Emirates, Israeli Ambassador to the UAE Amir Hayek has developed a technique for identifying the winners and being candid with the rest.
Meeting Needs: “In one hour, I meet 11 companies,” Hayek, Israel’s first ambassador to the oil-pumping Gulf state, told The Circuit’s Jonathan Ferziger. “It’s speed-dating. Some I tell not to come, some I say if you make a little switch in your approach, you can meet Emirati needs, and some I say, run, because we are looking for the technology you’ve got.”
Mideast Beachhead: Hayek ticks off several reasons why the UAE offers a unique opportunity for Israeli companies: access to capital from some of the world’s biggest investment funds; a diverse expatriate workforce; its position as an international shipping and logistics hub; a government-led “infrastructure for innovation” that includes grants and tax incentives; and the country’s willingness to serve as a beachhead to markets in Arab and Islamic states that Israelis haven’t been able to reach before.
Coalition Woes: Hayek, whose fluent Arabic comes from growing up in an Iraqi Jewish family that fled persecution in Baghdad in the 1950s, says the precarious state of Israel’s current coalition government won’t keep trade with the Gulf from growing. In April, Prime Minister Naftali Bennett lost his majority in the 120-seat parliament, and predecessor Benjamin Netanyahu is gathering strength to make a comeback. “Any Israeli government will support the Abraham Accords,” Hayek said. “Even if the government falls, you won’t see any gap.”
Read the full story here.
Startups fret more about cash burn than recruitment as venture funding tightens
The global tech slowdown is slowly seeping into the consciousness and corporate decision-making of Israeli executives and employees, according to a new survey conducted by data consultant Startup Snapshot.
Wake Up: Among the findings in a report released June 8, startup founders are increasingly worried about their ability to raise money, venture capital funds are pressuring companies to cut costs and employees haven’t woken up to how vulnerable they’ve become. The project was developed by Startup Snapshot founder Yael Benjamin and supported by Intel Ignite, Leumitech, The Zell Entrepreneurship Program and the Yigal Arnon & Co. law firm.
Warning Calls: Based on more than 450 responses and conducted over the past two months, the survey found that the tightening of venture funding has eclipsed hiring and retention of employees as the most pressing concern of company founders. Some 52% said they received warning calls from board members about pressure from venture capital firms to cut costs and extend their cash runway.
Hiring Slows: To reduce spending, 45% of companies surveyed said they’re slowing down hiring growth, 18% are freezing hiring altogether and 4% are firing employees. Many said company shutdowns present an opportunity for stronger firms to hire talented staff. At the same time, 68% of employees said they aren’t worried about their company’s survival. The report suggested that is due to a “clear asymmetry of information, as employees are not privy to rising investor concerns that founders hear behind closed doors.”
Stop the Burn: Startup founders are under pressure “to show investors growth while also cutting burn rates,” Benjamin said in the report. The survey shows their need to “make everything stretch and rethink their cost structure, including head count,” she said.
Abraham Accords Caucus urges integrated Middle East air-defense program
In its first legislative initiative since its founding earlier this year, the congressional Abraham Accords Caucus, comprised of members of both the House and Senate, introduced legislation on Thursday to encourage the U.S. to pursue a joint missile-defense architecture with Israel and the U.S.’s Arab allies and partners in the Middle East — including Saudi Arabia and Iraq, Jewish Insider’s Marc Rod reports.
Drone Alert: The bipartisan Deterring Enemy Forces and Enabling National Defenses (DEFEND) Act advances a priority of both lawmakers on Capitol Hill and U.S. military command in the Middle East — building an integrated air- and missile-defense capability among the U.S.’s regional partners and allies to ward off ongoing drone and missile attacks by Iran and its proxies. The legislation calls for Israel, Saudi Arabia, the United Arab Emirates, Iraq, Bahrain, Jordan, Egypt, Kuwait, Oman, Qatar and other regional partners and allies to be included within this cooperative framework.
Engaging Riyadh: While Capitol Hill is split on the issue, with some Democrats urging President Joe Biden not to upgrade relations with Saudi Arabia, the lawmakers introducing the DEFEND Act were supportive of improving U.S.-Saudi ties. “It is important that our president is engaging with Saudi Arabia. We know that there have been human rights abuses… but in order for that to change we have to have dialogue,” Sen. Joni Ernst, an Iowa Republican, one of the legislation’s cosponsors, said.
Read the full story here.
Saudi Golf Clash: The PGA suspended 17 top professional golfers, including Phil Mickelson and Dustin Johnson, for participating in the maiden event of the rival Saudi-backed LIV Golf tournament outside London. South Africa’s Charl Schwartzel won the $25 million purse.
Islamic Lending: The $2.2 trillion global Islamic finance industry will expand by about 10 percent through the end of 2023, according to a report by S&P Global Ratings.
High-Rent District: Tel Aviv is the world’s sixth most expensive city, according to ECA International. Hong Kong led the annual list of 207 major cities, followed by New York, Geneva, London and Tokyo. Ankara, Turkey, was the cheapest. Abu Dhabi was 22 on the list, Dubai 23, Riyadh, 28 and Doha, Qatar, 35.
Emirati Growth: The UAE economy is projected to grow by an annual 5.4 percent this year, up from 3.8 percent in 2021. Dubai’s non-oil private sectorreached its strongest point in nearly three years.
Teaching Tourism: Saudi Arabia will spend $100 million to train 100,000 people to work in the tourism and sustainability sectors as it seeks to become a global tourism hub.
Setting Sail: DP World will sell a minority share in three top assets to CDPQ, a Canadian investment group. CDPQ said it will invest $2.5 billion in the Jebel Ali Port, the Jebel Ali Free Zone and Dubai’s National Industries Park.
Gaming in Riyadh: Saudi Arabia’s Public Investment Fund has acquired an 8.1% stake worth $1 billion in Swedish gaming business Embracer Group.
Gas Option: Israeli real estate developer Aaron Frenkel plans to exercise an option and buy an 11% stake in the Tamar natural gas field from Abu Dhabi-Mubadala Petroleum for $485 million, according to Globes.
Controlled Environment: Mubadala Investment Company, Abu Dhabi’s strategic investment arm, and EQT Private Equity agreed to acquireEnvirotainer, a global temperature-controlled supply chain solutions company for the biopharmaceutical industry.
Growing Diamonds: Lusix, an Israeli producer of lab-grown diamonds co-founded by digital printing entrepreneur Benny Landa, raised $90 million in financing from LVMH Luxury Ventures, Ragnar Crossover Fund and More Investments.
Jordanian Tech: Abu Dhabi’s holding company ADQ has launched a $100 million technology-focused venture capital fund to invest in Jordanian tech companies.
Turkish Flight: Shares of Turk Hava Yollari AO, Turkey’s national airline,have climbed almost 150% this year as a weak currency makes the country more affordable for foreigners.
IPO Fever: Dubai will sell a 12.5% stake in Tecom Group, which operates business districts housing some 7,800 companies, with an IPO on the Dubai Financial Market.
Pay Up: Nymcard, an Abu Dhabi-based banking payment startup, raised $22.5 million in a funding round co-led by DisruptAD, Reciprocal Ventures and Shorooq Partners.
On the Circuit
Sheila Al-Ruwaili became the first woman to join the board of the Saudi Central Bank. Al-Ruwaili is CEO of Wisayah Investment Co., a board member of Saudi Aramco Power Co.
Danielle Wolfson, the only Israeli woman to reach the top of Mount Everest, secured sponsorship from Israel’s Tadiran Group in her bid to scale Alaska’s Mount Denali, the highest peak in North America.
Yoel Razvozov, Israel’s tourism minister and a former judo champion, went to Athens last week to sign an agreement with his Greek counterpart, Vassilis Kikilias, promoting travel between their two countries and joint packages for visitors from Asia and the U.S.
Ahead on the Circuit
June 13-17, Paris: Eurosatory, the European defense and security conference, will include a booth by Israel Aerospace Industries, unveiling the Othello-P gunfire-detection system, which uses artificial intelligence to alert troops to small arms, snipers, machine guns and RPGs.
June 14, Haifa, Israel: Technovation Conference 2022. Contemplating the future of technology businesses in Israel. Churchill Auditorium, Technion Israel Institute of Technology.
June 20-22, Doha, Qatar: Qatar Economic Forum. Sponsored by Bloomberg,the conference focuses on new Middle East frontiers for technology. Ritz-Carlton, Doha.
June 21-22, Jerusalem: Eli Hurvitz Conference on Economy and Society. Israel’s top political, business leaders gather for annual conference to ponder future economic and social directions. Orient Hotel.
World Cup Breakthrough: Qatar will allow Israeli soccer fans to enter its borders for the World Cup in November even though the two countries don’t have diplomatic relations. Under terms reached with FIFA, world soccer’s governing body, Israelis seeking to attend a game must first purchase a ticket, then apply online for a Fan ID card. Once they’re approved, they will be admitted to the Gulf state.
Jazz is Back: The Jerusalem Jazz Festival takes off next month for its eighth year, presenting a mix of international and Israeli musicians. Based at the Israel Museum, the festival offers a broad variety of jazz, ranging from Dixieland and Swing to tunes influenced by pop, hip hop and groove. Along with Israeli artists led by trumpeter Avishai Cohen, the festival’s artistic director, the lineup includes American pianist Fred Hersch as well as performers from North and Central Africa, Switzerland, Turkey, the U.S. and South America.