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Before we jump into today's column, take a look at The Information's Generative AI Takeover List. This exclusive report provides insights into potential acquisition targets, like the Paris-based Mistral AI, focusing on firms that haven't raised capital in over two years and are pursuing high-cost projects like robotics and AI models.
General Catalyst is swiftly widening its global footprint. On the heels of acquiring two smaller venture firms in India and Germany, the firm plans to lead an investment in Riyadh, Saudi Arabia-based financial technology startup Lean Technologies, according to a person with direct knowledge of the firm's investments. The deal would represent General Catalyst's first investment in Saudi Arabia, the person said, and is a sign Silicon Valley investors are changing their stance on backing startups in the country. While many VC firms raised cash from the country's massive sovereign wealth funds, they've made few startup investments in the region, in part due to the government's human rights abuses and a dearth of fast-growing startups. Investors must also be willing to stomach a foreign regulatory landscape which could introduce complications. But U.S. investor interest in the Middle East is growing. VC and private equity investors believe that Persian Gulf startups are becoming more relevant due to an influx of sovereign wealth investment, which has helped foster a more mature ecosystem of startups. Lean, which has raised over $30 million to date, sells software that allows fintech companies to connect to their customers' bank accounts to enable real time payments similar to San Francisco-based Plaid. Lean CEO did not respond to requests for comment. And several U.S. private equity firms have recently made their first investments in the region or are opening offices there, a sign deal activity is likely to pick up. At the same time, some U.S. firms like General Catalyst are going more global. General Catalyst in June acquired Venture Highway, an early-stage venture firm based in Bangalore as part of a strategy to increase investment in the country. In 2023, General Catalyst acquired La Famiglia, an early-stage venture firm headquartered in Berlin. General Catalyst, based in San Francisco and Cambridge, Mass., has also made some investments in the broader Middle East and North Africa region, including Tel Aviv-based medical imaging company Aidoc and Dubai-based payments Moment. More investments in Saudi startups are expected in part because sovereign wealth funds like Saudi Arabia's $925 billion Public Investment Fund have invested heavily into U.S. VC and PE funds with the expectation that those funds return the favor and invest in homegrown Mideast companies. Coatue Management, a New York investment firm, last year participated in a $340 million investment for Riyadh-based installment lender Tamara. General Atlantic recently made an investment in the Riyadh- and Dubai-based eyewear retailer Eyewa and TPG backed Hala, a Riyadh-based point-of-sale software company, The Information reported. Coatue, General Atlantic and TPG are all backed by PIF. It's not clear whether General Catalyst has received any money from Saudi wealth funds. Cross-pollination between Silicon Valley and the Middle East, two global power players, are likely to intensify as VC firms seek more money from sovereign wealth funds and Middle East leaders look to support companies in their backyard. You're receiving Dealmaker for free. Upgrade to a paid subscription to access all of our award-winning tech and business journalism. Subscribe to The Information here for 25% off your first year (normally $399). | 
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