Silicon Valley Wrestles With Saudi Arabia Ties

(CNN) -- For years, Saudi Arabia has been one of the unofficial banks for the tech industry. Now it could become a very official headache.

Uber CEO Dara Khosrowshahi and Virgin Galactic founder Richard Branson joined a growing list of business leaders distancing themselves from the Saudi government amid growing questions about the kingdom's role in the disappearance of journalist Jamal Khashoggi.

Both Uber and Virgin Galactic had previously turned to Saudi Arabia for vast investments that would once have been impossible on the private market. Uber received a staggering $3.5 billion in funding from Saudi Arabia's Public Investment Fund in 2016 and added the Public Investment Fund's managing director to its board, where he still serves today. The next year, Branson and Saudi officials announced the fund intended to invest $1 billion in Virgin's space companies.

At the time of the investments, both companies framed Saudi Arabia as becoming more reform-minded, both in terms of the economy and, in Branson's words, a "more progressive stance on areas such as women's rights."

That case is harder to make in the wake of Khashoggi's disappearance. Turkish authorities say they believe Khashoggi, a prominent journalist and critic of the Saudi regime, was killed at the consulate in Istanbul. The Saudis have denied the allegation.

On Thursday, Branson said his company will "suspend its discussions with the Public Investment Fund over the proposed investment" as investigations into Khashoggi's fate continue. Khosrowshahi, meanwhile, said he was "very troubled" by the news about Khashoggi and would be pulling out of an upcoming Saudi conference. He did not address his company's business relationship with the kingdom. A representative for Uber did not immediately respond to a request for comment.

The statements highlight the new challenge much of the tech industry may face in reconciling its financial ties to Saudi Arabia with renewed public scrutiny of the country's leadership. This year, the Public Investment Fund also reportedly took a $2 billion stake in Tesla and pumped nearly half a billion dollars into Magic Leap, a buzzy startup working on augmented reality products.

Representatives for Tesla and Magic Leap did not immediately respond to requests for comment.

Numerous other big-name startups have received funding from Saudi Arabia indirectly, through SoftBank's Vision Fund. The massive $93 billion technology investment fund launched last year with $45 billion of its backing from Saudi Arabia's sovereign wealth fund -- part of a broader effort to diversify the country's economy away from oil.

Almost overnight, the fund turned SoftBank and its CEO Masayoshi Son into the new kingmakers in Silicon Valley. The Vision Fund has pumped money into startups like WeWork, Slack, DoorDash and others. These cash infusions, often totaling hundreds of millions -- if not billions -- can supercharge businesses and significantly delay the need for startups to stage a public offering.

But Saudi Arabia is the clear kingmaker behind the kingmaker.

"We are the creators of SoftBank Vision Fund. We have 45 percent," Saudi Arabia's Crown Prince Mohammed bin Salman told Bloomberg in an interview last week. "Without the PIF [Public Investment Fund], there will be no SoftBank Vision Fund."

The country's very public involvement now runs the risk of unnerving these companies' employees and customers. WeWork declined to comment. Representatives for Slack, DoorDash and more than a dozen other startups backed by Vision Fund did not immediately respond to requests for comment on their ties to the fund. Representatives for SoftBank also did not immediately respond to request for comment.

In the same interview last week, the Crown Prince said he expected to invest another $45 billion into a new Vision Fund, paving the way for even greater influence in the tech industry.

Later that week, multiple publications, citing Turkish intelligence, began reporting that the missing Khashoggi was killed in the Saudi Arabian Consulate in Istanbul.

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