Riyadh Valley Company: capitalising on emerging investment opportunities in tech sectors

We were established in 2010 and since then we have invested in around 16 companies but it is common to pull your investments out of certain companies sometimes which we have done two or three times. Of those 16 companies, 3 are international, 3 are JVs locally here but with international partners and the remaining companies are start-ups based on Intellectual Properties emerging from the university.

Interview with Dr Khalid Al-Saleh, CEO of Riyadh Valley Company

Dr Khalid Al-Saleh, CEO of Riyadh Valley Company

Are you fully satisfied with the level of innovation and competitiveness of Saudi Arabian companies?

They are not quite up to my standards because I believe that we have the potential to be producing more. The reason for this however is our ecosystems youth. It needs more time to mature and many of the government policies need to be revisited and a major overhaul of the regulations may be required though as long as we are tackling all these issues I am very optimistic of a bright future

Your company has been established as a result of the National Aid development plan. When the Saudi Arabian government realised it needed to transfer the economy from an oil based economy to a knowledge based economy in order to be competitive globally, it led to the establishment of these universities as Parks through you. Tell us about the environment and venture capital needed?

In our experience universities do not have their own companies. Take Riyadh Valley Company, RVC for example. It is relatively unique and we know this based on our communications with our network and our colleagues in the USA and Europe. You won’t find many universities with their own companies. They might have their own technology transfer offices or some facilities like accelerators or incubation services but for a university to have its own company, this is unique to Saudi Arabia. We started from King Saud University because we are the oldest and most prestigious university in Saudi Arabia.

We took the initiative to ask the decision makers here in Saudi Arabia to allow us, as a university, to have a company. We had big ambitions with regards to technology transfers. For the people wanting to change ideas into reality it was difficult to do. You were faced with old government bureaucracies which were big hurdles in the way of any person wanting to turn their ideas into reality.

The leadership of this university approached the government for permission to have a company dedicated to venture capital in order to commercialize the ideas emerging from this university. It took us a long difficult time to convince the decision makers about the rationale behind having a company within the campus of a university. For most people the perception of a university was that all you needed to do was have graduates at the bachelors or graduates level and possibly research in various fields.

Other than that it was not thought that a university could be a business as well, especially in this region. There were some who felt that it was not appropriate for a university to be a business however they accepted the idea because we had a very strong position and it supported the university as well.  Through our initiative in King Saud University we helped the other universities to have their own companies too. Right now you have the Dhahran Techno-Valley Company in King Fahd University. You have the Jeddah Valley Company in King Abdul-Aziz University. These three companies were created on the same day by royal decree from the council of ministers. 

Two years after that we had the 4th company, Makkah Valley Company which belongs to Umm Al-Qura University. At the moment we have four companies in charge of commercializing and taking care of the venture capital activities within those universities. Each company has its own mandate and objectives but we share many similarities. We are in the same country and we are all based in universities.

This is the knowledge base economy, the National Aid plan.  The National Plan right now states that there should be venture capital and there should be funds for this. There should be more emphasis on having a broad base of economy. There should be tangible efforts made to minimize our dependence on petrol which we are now suffering with because of what has happened in the economy and the region of late.

Though this is not just happening in Saudi Arabia anymore but across the world too. We believe that we are needed, now more than ever. We believe that we will hopefully be helping the leadership of this country to achieve its goals. We are already doing this with our portfolio of investments from which we have started receiving revenues.

What differentiates you from all the other companies and other universities?

All the universities have differences. If you go on to each universities website you will be able to see the differences. Not just the differences in their objectives but also the history of each university. Each university is in a different region of Saudi Arabia and that brings with it strengths, requirements and a history of its own. For instance King Fahd University is focused on petrol, petrol applications and energy.

At King Saud University we are more universal. We have programs in engineering and computer sciences. Most importantly though are our medical programs. We have the oldest medical school in Saudi Arabia. We have a good dental school and college pharmacy. All of the medical disciplines are here. So the company itself should be linked to the university. For example, at the RVC our investment strategy was planned according to the courses we offer, the needs of the university and the region we are in. We also looked at the needs of other regions and our country as whole so we have local targets, regional targets and national targets.

Our investment policy does not focus on gas and oil because Dhahran Techno-Valley Company already focuses on that. We are looking to renewable and sustainable energies and clean technologies and you will see this reflected in our last three investment deals. We did a deal in Japan for electric vehicles. Another deal in the USA in solar power. We are also in the final stages of signing a deal in solar power with a Swedish company. We are adding value to the country in general. We also do this through other avenues when it comes to investments of course. We also invest in ICT, health and life sciences. Those are our major areas of investments.

Are you a venture capital fund that invests in companies around the world? Or do you have land and try to attract companies to establish themselves here. What exactly is your business model?

That is a very good question. There is a big difference between the Science Park that was created and venture capital. We have the Science Park called Riyadh Technology Valley. The investment activities are reserved for RVC. Though we operate out of Riyadh Technology Valley we are a totally independent company from the university. Our major objective for RVC is venture capital.  

The university itself has other components that take care of the technology transfer activities. For instance the university has the technology transfer office, also referred to as the intellectual property and technological licensing program.  I was the founder and director of the technology transfer office before I joined RVC. King Saud University is the only university in Saudi Arabia that has its own by-laws in regards to technology transfer and intellectual properties. This makes provisions for the distribution of royalties. It also covers procedures and how to apply your rights which benefits the constituents of the university. We also have other components within the university such as incubation services and innovation centres.

We even have the King Salman Intuitive Entrepreneurship Award. These facilities help the universities with technology transfer activities up until the licensing phase. When it comes to commercialization then the role of RVC comes into play. Our business model requires a certain maturity in each project so we don’t invest in abstract ideas or patents, unless certain efforts are made at the proper concept phase. We also have certain selection criteria we use when deciding how and when to invest. When those requirements are met we will invest. Our investment model allows us to invest locally as well as internationally in the three major areas of health, renewable energy and ICT.

We also have the real estate aspect which is used for funding. When we invest each investment deal requires funding and the aim for Riyadh Valley Company is to support King Saud University. We don’t want to be a burden to them. It would not be appropriate to ask the university for the money needed to invest in these projects. We should be self-sufficient. This is why we have on-going real estate projects which we utilize for the funds needed and not as real estate developers. We just lease the land to real estate developers on the basis of B.O.T contracts and then we use those revenues for our investments. We have a certain investment procedures for which we require a board.

The board is chaired by the chairman or rector of the university who I call, chairman of the RVC. Some Members of the board are from the private sector which is a requirement in our articles of association. If we only have members from the academic sector then decisions made by the board would not be orientated to business. From this board we then have committees emerging. We have a committee called the investment committee. Most of the members of the investment committee are from the private sector. The committee is led by engineer Ahmed Al Rajhi who is the VP of Al Rajhi holdings. Members of this committee are CEOs, bankers and even private equity firms as well as some members from the university.

When we look at a potential investment we first do some in-house screening. We have a very ambitious and challenging business development program. We consider numerous companies each year. Last year we looked at over 500 companies but we only invested in two. This will give you an indication of how rigorous and selective we are. We always want to minimize the potential for risk. We want to work with a calculated risk.

If a potential investment meets our criteria in-house we turn it over to a consulting firm who will do an even more in-depth screening of the company, their technologies and their team as well as the marketing and legal aspects. If the outcome of this is positive we will ask the investment committee to convene. We will discuss everything. We will invite the team of this company that we intend to invest in to join us.

They will do their presentation and there will be lengthy discussions. A second meeting may be required. Then our suggestion will be taken to the board and a decision will be made by them. So by doing this we are minimising the risk. We are making sure that this deal will be reflected in a very positive way to the Kingdom and will help to achieve the major objectives of having RVC as a company. In our articles of association the policy makers and the government expect us to deliver what we promised.

We are audited by the government because we are a company owned by the government through the university but we work according to corporate standards. Not government. This is why we think we are more dynamic.  I am still an industrial engineer faculty member in the college of engineering but now I am assigned to RVC as the CEO.

The systems and regulations that I adhere to are the corporate systems and regulations, not the governments. I am in charge of a company, not a college or department.  

When you invest in an international company how is that going to benefit the transfer of Saudi Arabia from an oil-based economy?

Since we first thought there might be potential in this company we have used faculty members in the university as consultants as well as 3rd party consultants. This in itself is a benefit because now we are providing an opportunity for the faculty members to keep up to date with the newest technologies. We provide our faculty members and research groups with insight into what is happening at the market level. We have helped the university to become more than an institution that publishes research papers.

Now the university also has the opportunity to receive benefits and revenue from these projects. When we decide to invest in a project we choose to give more thought to the technology that will benefit Saudi Arabia such as the renewable energies investments that we have made. Take for instance the solar energy investments we made recently. Saudi Arabia has plentiful sunshine and solar energy could be very beneficial for us.

The market for solar energy as well could be an advantage for the RVC itself. If there needs to be a research and development stage for this technology, as well as manufacturing and marketing it will create jobs here which also benefits Saudi Arabia. One of the companies that we have invested in had a need for a sunny, dry and dusty area to test their products and now uses some of our faculty and students in the mechanical engineering department to supervise the experiments and these students and faculty are now in very close contact with the technical team in San Francisco to set up the site for the experiments.

This would not have been possible if we had remained a regular university that does only the most basic research and development. With the creation of the RVC we have been able to create opportunities for ourselves as well.

How many companies have you invested in up until now?

We were established in 2010 and since then we have invested in around 16 companies but it is common to pull your investments out of certain companies sometimes which we have done two or three times. Of those 16 companies, 3 are international, 3 are JVs locally here but with international partners and the remaining companies are start-ups based on Intellectual Properties emerging from the university.

These Intellectual Properties are produced by faculty members or employees of KSU and protected by patents or copyrights as well as the technology transfer offices of the university. This describes our company and these investments are spread out between health, renewable energy and ICT.

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