Saudi Aramco's venture capital arm Wa’ed Ventures has led a $14 million funding round for a Japanese start-up specialising in drone services, as the fund backs new technologies in line with the kingdom's economic diversification push.
Wa’ed Ventures' backing of Tokyo-based Terra Drone is the $200 million fund's first investment in Asia, after expanding its mandate last year to target global companies, said a joint statement on Wednesday.
Through this investment, Terra Drone plans to open a new subsidiary in Saudi Arabia to localise its drone services and continue to serve the global autonomous vehicles market, the statement said.
“Supported by the global track record of Terra Drone, our investment represents Wa’ed’s commitment towards building the UAM [urban air mobility] ecosystem in the kingdom, one that circles around sustainable economy” Fahad Alidi, managing director of Wa’ed Ventures, said.
“We foresee rapid adoption for drone services in numerous industries, and Terra Drone is well-positioned to localise their proprietary technology across the region, starting with the kingdom.”
The investment to bring new drone tech to the Arab world's biggest economy comes amid the kingdom's plans to attract new business, diversify non-oil revenue streams and become a local hub for advanced technologies.
The global addressable market for autonomous aircraft is projected to reach $1.5 trillion by 2040, creating opportunities for investors and benefiting various sectors, according to research by Morgan Stanley. Its more bullish forecast places the market at $2.9 trillion.
Wa’ed Ventures’ investment comes on top of the $83 million already raised in previous funding rounds by Terra Drone.
Some of Asia's largest institutional investors participated in the earlier Series A and Series B funding rounds, including Mitsui & Co, SBI Investment Co, Tokyu Land Corporation and Seika Corporation.
Founded in 2016, Terra Drone now operates in more than 25 countries, with customers including Toshiba, France's oil major TotalEnergies, ExxonMobil and Chevron, according to its website.
It specialises in geographic data acquisition, industrial inspections and high-end aerial imagery, using unmanned aircraft.
With a workforce of 500 employees, Terra Drone provides services in sectors including oil and gas, utilities, renewables, mining and construction, among others.
The company provides drone hardware and cloud-based software in more than 1,000 projects, the statement said.
Wa'ed Ventures seeks to invest in high-growth tech start-ups across various sectors.
Established in 2013 and based in the eastern city of Dhahran, Wa'ed Ventures manages a portfolio of more than 50 start-ups, providing loan financing, venture capital investment and incubation services.
Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.
“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”
The bio
Date of Birth: April 25, 1993
Place of Birth: Dubai, UAE
Marital Status: Single
School: Al Sufouh in Jumeirah, Dubai
University: Emirates Airline National Cadet Programme and Hamdan University
Job Title: Pilot, First Officer
Number of hours flying in a Boeing 777: 1,200
Number of flights: Approximately 300
Hobbies: Exercising
Nicest destination: Milan, New Zealand, Seattle for shopping
Least nice destination: Kabul, but someone has to do it. It’s not scary but at least you can tick the box that you’ve been
Favourite place to visit: Dubai, there’s no place like home
