Prince Khaled bin Alwaleed is stepping out from the shadow of his famous father with a rapidly growing holding company and a diverse array of new investments. In a rare interview, the founder of KBW Investments talks deal-making, money and motivation.
"The assumptions are always going to be there — and that’s fine," smiles Prince Khaled Bin Alwaleed Bin Talal Al Saud.
For an outsider, it’s probably quite easy to make assumptions about a man who is both a member of the Saudi royal family and the only son of Prince Alwaleed Bin Talal Al Saud, the Arab world’s richest investor, with a slew of stakes in some of the world’s most storied corporates.
Prince Khaled is regularly pictured with the world’s top businessmen, runs a rapidly growing holding company and counts the likes of Prince Mohammed Bin Salman, Saudi Arabia’s deputy crown prince and architect of the kingdom’s ambitious economic reform programme, as a friend.
But if you were to make judgements about the 38-year-old prince based on those attributes alone, you might be in for a surprise.
In person, the prince is warm and disarmingly honest. He is dressed relatively informally in a collared shirt, introduces himself simply as ‘Khaled’ and is happy to dispense with the formalities and protocol that surround many of his peers. During the interview itself, it becomes obvious that Prince Khaled is also introspective, cerebral and considered.
His main passions — outside his central role as founder and chairman of KBW Investments — are entrepreneurship, angel investing and sustainability, but he is perhaps first and foremost a family man, as well as being an avowed vegan and a campaigner against cruelty to animals.
“I want to be successful and to be a better person than I was yesterday, and hopefully to leave this planet in a better state than it was when I arrived,” Prince Khaled says, in an answer to a question about what drives him.
“My motivation is seeing change, seeing results. Numbers don’t drive me much. I want to be successful, but I don’t want to be the richest man in the world.”
And he is also quick to credit both his parents for shaping his outlook on life, both professionally and personally.
“I’ve had a lot of support — if I said I did all this on my own, that would be an outright lie,” he says. “I’m proud of being part of my dad’s legacy of building value in investment, in companies. Right now, it’s much more of a friendship we now have.
“He definitely gets into the detail of any of the businesses I get into, and asks me questions about everything. The support I get is advice, the support I get is criticism, the support I get is guidance, and where he sees where we should manoeuvre and everything.
“And I cannot sell short what my mum has done — in terms of raising me, in terms of giving me the values that I have now, which really do stem from her. She’s very outgoing, she greets people, she goes to people, that’s really where I get my personality.”
If success is his yardstick, then Prince Khaled should be well satisfied with the performance of KBW Investments, a holding company with stakes in ten construction-related firms that is seeing impressive growth rates.
“My main thinking was that I really wanted to establish a company that had my own DNA on it — i.e. with my integrity and vision,” he says.
At the heart of the KBW Investments portfolio lies Raimondi, a 150-year-old Italian crane manufacturer that was bought by the company in 2014 for an undisclosed amount. For a young Saudi prince with a passion for tech investments, Raimondi might have seemed an odd choice. But after a friend put Prince Khaled in touch with Ahmed Alkhoshaibi, now the group CEO of KBW Investments and the prince’s right-hand man, the two put their heads together and decided that Raimondi was the perfect first step into the world of construction.
“I met Ahmed and we talked about Raimondi — and I saw the opportunity there mainly because they weren’t seizing the market as they should be,” Prince Khaled says. “It was a little difficult because it was something I wasn’t really used to. But I honestly wanted to get into construction — and I’ll tell you why. In 2011, the construction field was really growing.
“But before I get into anything I do my homework pretty excessively and I found that construction is way too much of a headache and something I really wanted to avoid. So what better way to do it than pick one part of construction and excel at that? Luckily I ran into Ahmed and we invested into Raimondi.
“Was it something that was not necessarily in my wheelhouse? Yes — it’s a crane business. But it has really become another pride and joy of my investments.”
By taking on the Raimondi stake, Prince Khaled has followed in the footsteps of his father, who has had a lengthy track record of investing in well-established companies over the long term. At the time of the purchase, KBW Investments said it would invest $100m into the Italian firm, with Alkhoshaibi saying that up to 40 percent of that investment has already been rolled out by tripling Raimondi’s research and development (R&D) department, boosting its geographical presence and adding new manufacturing facilities.
“The previous shareholders had a lot of constraint on the running of the business,” Alkhoshaibi says. “Crane manufacturing is not a business where you expect to get returns on the short term. You need to invest, especially in innovation.
“We have a timeline for the company to produce new crane models every year, and we’ve been testing a lot of things that are not traditional in the crane industry, and hiring people who are not from the crane industry, which is the way it should be.”
Under the watchful eye of Prince Khaled and Alkhoshaibi, Raimondi has pushed into North America, the Middle East and Australia, diversifying away from its traditional European hub. That has already paid off handsomely, with a steep increase in the number of cranes sold in Australia last year more than compensating for a sharp drop-off in the Gulf, courtesy of the slower economy here.
Raimondi is also buying a new factory in Italy that will enable it to quadruple its production, and another plant, this time in India, will open by the end of this year, allowing the firm to produce less expensive cranes that still have a European heritage brand - potentially a huge draw in developing markets.
But Raimondi is, of course, only the beginning of the KBW Investments story. Over the course of the last couple of years, Prince Khaled has been buying up stakes or signing off partnership agreements with ten other companies, all of which are related to the construction field.
After Raimondi came a 50 percent stake in Arcadia Engineering, also in 2014, followed by investments in TTM, a post-tensioning firm, fit-out contractor Grayscale Interiors and electronic systems provider Ascorel. The portfolio was boosted with a JV with Austrian contractor Klampfer that resulted in Klampfer Middle East, a company formed with Basma Group Sharjah.
The various different parts of the portfolio allow the companies to complement each other, although Alkhoshaibi is keen to point out the main difference between KBW Investments and the plethora of often family-owned holding firms working in the same field that dot the Gulf’s corporate landscape. In many cases, those companies began life as property developers, before folding a series of different contractors in under the banner of the original holding company.
“That’s actually a very dangerous track,” he says. “What tends to happen is that the contractor tends to become complacent — it’s only human nature. You’re working for your own company, you’re not going to improve the bottom line, so they become less productive, overcharging the mother company — without any intention, maybe — and this is a domino effect.
“What tends to happen is that the contractor becomes less competitive in the market and is priced out… so they work only for their mother company.”
That model has been turned on its head by KBW Investments, Alkhoshaibi argues. By starting from the bottom up — first with cranes and then engineering — the holding company has slowly gained expertise in each individual sector. A key policy is that each portfolio firm must procure at least 60 percent of its work from the outside market, thus ensuring that it remains competitive.
It hasn’t all been smooth sailing for the company, however. Planned investments into several sectors in Brazil have fallen victim to the South American economy’s wayward performance and rule of law in recent years, and it’s clear that this is a source of frustration.
“We went into the country and we partnered with our best intentions to make an absolute success of Raimondi and other companies over there,” Prince Khaled says.
“That didn’t go well. Total transparency wasn’t there, our partners weren’t exactly the people we thought they were. And we kept investing and studying and hoping that something would come out of there.
“But we just kept seeing bad news upon bad news with the economy, with the five biggest construction companies being indicted for this and that and judges being bribed. So we said why are we there? Let’s just cut our losses and get out of there — and that’s what we did.”
While the company is privately held and therefore does not disclose the sum that has been invested so far, the group CEO says that each company is profitable, and on average they are growing by 25 percent per year.
And there’s plenty more in the pipeline. Prince Khaled says that the team has been doing its due diligence on three further acquisitions, all of which should be announced by the end of the year. In addition, KBW Investments is also planning to make its first move into real estate development, again before the end of 2016.
Another area of real interest for Prince Khaled is the public-private partnership (PPP) model, which is relatively new in the Middle East. KBW Investments has already signed off on Dubai’s first PPP project — an automated car park on the banks of the Creek — and is working closely with the Jordanian government on two more deals, which will help replace the country’s hugely inefficient standard streetlights with light-emitting diodes (LEDs), thus enabling considerable electricity savings.
At first glance, those latter deals seem unremarkable. But Prince Khaled is hoping that a model that has worked in Europe and in the US — which involves changing all the lights for free, charging the government the amount that has been saved in electricity costs for a set number of years, and then handing everything back to the government — can be a game changer in the Middle East.
As well as Jordan, he’s planning to roll out similar schemes in the UAE, Saudi Arabia, Algeria and Egypt, and is also hoping to export LEDs from a potential plant in Jordan to countries like the US.
In particular, he thinks that the benefits to Saudi Arabia could be colossal. In 2011, the then chief executive of Saudi Aramco, Khalid Al Falih warned that, if unchecked, domestic energy consumption could rise to 8.2 million barrels a day of oil by 2030. Each barrel of oil that is burned to produce electricity means, of course, one less barrel that can be sold on the export markets.
“I got a lot of enthusiasm from a government official regarding this specific project, and why? Because it’s not every day that you go to one of the richest oil countries in the world and tell them: ‘I want to save you 70 percent of your utility bill on street lights and I don’t want you to pay me upfront for it’. That’s not something they hear every day,” the prince says.
“We want to profit from it, we want governments to profit from it. I’m really pushing for this initiative because it’s very close to my heart. It saves energy, it’s environmentally friendly, and it’ll push them to rely less on consuming oil they can sell off on public markets.
“To me, that’s a huge saving, and if I can contribute to that, even in a minuscule way, I’ll be happy.”
Aside from KBW Investments, KBW Ventures looks after the prince’s other stakes, the majority of which are in tech-related firms. Those include TechnoBuffalo, a tech news website that has seen rapid growth in recent years and listed electronic payments solution provider Square Inc.
In addition, previous investments via Levant Capital (which he chairs) have included a stake in APR Energy, a company that provides generators in developing markets, which was sold to hedge fund billionaire George Soros in 2011; an investment in June this year into Power Horse, an Austrian energy drinks firm; and a $100m investment in 2012 in Saudi supermarket chain Al Raya, which Prince Khaled says “we’re either close to exiting or taking it public soon”.
In addition, he has also partnered with Washington-based Proof (Pro Rata Opportunity Fund), which invests in venture capital firms’ rights to take part in future funding rounds for successful start-ups.
“Another company that I started and closed was an investment company in Saudi Arabia — that didn’t go very well,” Prince Khaled says. “I learnt so much from that investment. I had a bad partner and things didn’t work out, so we closed the company down, paid our dues and closed it with a white sheet of paper, so I’m happy with that.
“Honestly, if it weren’t for the failures, I wouldn’t be where I am now.”
But, as a prominent angel investor, Prince Khaled is also fairly critical about certain aspects of the start-up ecosystem here in the Gulf. One concern is the apparent desire of local governments to keep talent in the region, while another is the sky-high valuations of smaller tech firms here, which he says has put him off investing.
“I actually wanted to pursue e-commerce with one company that is Amazon-like but in the Middle East — but this is the sad part about a lot of the entrepreneurs here,” he points out. “As soon as you see a name, or a certain business, they jack up their valuations…until they’re absolutely ridiculous. So I stepped away from that.
“Other companies — I don’t want to name names, but again, prices were absolutely ridiculous so I had to step away. For some reason they seemed to think I wouldn’t look at it carefully — I’m not sure what their rationale is.”
For the long term, Prince Khaled says he has no plan to take KBW Investments public — although some of the firms within the portfolio may be listed in due course — but he is open to taking on external investors.
And with the interview inching towards the 90-minute mark, I ask him what he sees as his greatest fear.
“I think about my daughters,” he says, after a moment’s reflection. “What kind of world am I leaving them? And what did I do to make their life better? What did I instil in them to make them a better human?
“At the end of the day, we’re here temporarily. I’m not taking my money with me, or my shoes or my watches. People are just going to remember me for what I did. If I’m gone, and my daughters can say he really did everything he could for us, I can’t ask for anything more.”
“I haven’t seen much success in the region, other than Emaar, obviously, who do a fantastic and wonderful job. I haven’t seen what I see in the Western world being implemented here. Prices are exorbitant — they’re absolutely ridiculous.
“We’re really thinking about real estate development and not just in Dubai — we’re going to strategise and see maybe where the opportunity lies and then maybe expand into Dubai, Abu Dhabi and Saudi.
"In Saudi Arabia, a lot of it (development) has to come from the private sector — I believe there’s been a huge shortfall in giving back to the Saudi government and Saudi society. I’m really calling for all the businessmen, philanthropists and entrepreneurs to come together and really work out a plan in conjunction with the Saudi government to give back to the need that Saudi Arabia really has.
“We will not be getting into high-end beach houses or anything like that. I’ll tell you right now that’s not a market we’re interested in whatsoever.
“We’re interested in… the mainstream middle market type of houses — we’re not taking about 800 sq m, more something reasonable.
“We’ll be announcing something in December and we’re signing with our partner very soon.”
“We need to manage our expectations. I see a lot of people around here and in Saudi talking about the [region becoming the] next Silicon Valley and all that rubbish — that will never happen in the history of this world. There’s only one Silicon Valley and if you try to imitate it, you will lose. Don’t compete with Silicon Valley — complement Silicon Valley.
“That means curate an entrepreneurial ecosystem, a judicial ecosystem, a bankruptcy law that will help people start their businesses here, employ people here, get banks to actually fund businesses that need it as opposed to fund businesses that don’t need it — which is how banks operate.
“And then support them going to Silicon Valley and continuing their businesses over there. Because at the end of the day, that’s what’s going to happen regardless of whether we like it or not. The money is in Silicon Valley. The venture capitalists, the private equity, the investors and the networking — it’s all there. So if they want to leave, let them leave.”
An impressive, bright and well grounded young man. I wish him success in what ever he pursues. we need more young bright businessmen like him.
A very insightful perspective from a young entrepreneur and a good human being. This world needs more of Khaled.