Like many investors, Mahdi Aladel, CEO of Aramco Ventures, is spending a lot of time looking at AI investment.
“Generative AI – and the AI space in general – is getting a lot of attention and funding,” says Aladel. “We are looking at AI that can be applied in the sustainability and energy transition domains. A lot of it is hardware, but all hardware today has some software, algorithms and AI components to it.”
Aramco Ventures is the corporate venture capital unit of the world’s largest oil and gas company, Saudi Aramco. It was set up in 2012 as an evergreen programme, with a mandate to invest in technologies that could bring value to its parent.
In January, Aramco set aside an additional $4bn to Aramco Ventures, more than doubling its capital from $3.5bn to $7.5bn.
Aramco’s VC initiatives include the $500m Wa’ed Ventures fund that targets Saudi startups; the $500m Digital/Industrial Fund, investing in areas strategic to the company; the $1bn Prosperity7 Fund I and the $2bn Prosperity7 Fund II that focus on technologies beyond the energy sector, with an emphasis on financial returns; the Sustainability Fund, which manages $1.5bn and makes impact investments; and the $2bn Late-Stage Fund, which allows Aramco Venture to be a longer-term investor in its early-stage investments.
Aladel, who took up his position in August 2020, after spending three years at the parent company, says his unit will continue to back digital and sustainability technology companies in addition to AI groups.
Early investments of Aramco were mainly in core oil and gas tech, although in recent years the unit’s major focus has shifted to IR4.0, digital, sustainability and AI technologies.
The unit has 105 active portfolio companies working in strategic areas, including AI, analytics, additive manufacturing, blockchain, cybersecurity, enterprise software, medtech and healthtech, robotics, industrial and upstream technologies. For international investments, the US, China and Europe are the focus, but it has also backed companies in Australia and Singapore.
“AI capabilities are a major disruption force that can enhance the energy industry. Part of the challenge is deciphering what is differentiated from the rest, because everyone is now using the words AI and generative AI on their solutions, products or startups”
Aramco Ventures measures strategic impact by assessing how well the portfolio companies’ technologies are piloted or deployed by the parent firm’s business, says Aladel.
“That impact could help us do things quicker, safer, cheaper or better,” he says. “We should be able to convert that strategic value into dollar figures. We then get that vetted externally through a consulting group to validate the value captured.”
Aramco Ventures measures the financial returns similar to other VCs or corporate VCs, especially the financially driven programme, Prosperity7, which has two funds.
“Their emphasis is financial returns,” says Aladel. “More recently, we launched a late-stage or growth programme that allows us to continue to invest in some of our early-stage investments requiring a more substantial ticket size.”
Some of the AI and generative AI companies at very early rounds could have billion-dollar valuations and would also require a larger ticket size from the start, he says.
Regarding challenges, Aladel says the venture ecosystem goes through waves of hypes – including the generative AI technology – and it is important to cut through the noise and find the right fit for Aramco.
“AI capabilities are a major disruption force that can enhance the energy industry,” says Aladel. “Part of the challenge is deciphering what is differentiated from the rest, because everyone is now using the words AI and generative AI on their solutions, products or startups.”
Another challenge is to scale technologies in the energy transition domain, including decarbonisation technologies, renewables, energy storage, carbon, and others that require extensive capital to grow.
Aladel was previously a corporate strategist at Aramco, before leaving the role in mid-2013 to help enable the transformation of Motiva Enterprises in Houston, which at the time was a joint venture between Aramco and Shell.
He rejoined Aramco in late 2017 as the director of the base oils and lubricants department, in which he founded and led Aramco’s Global Base Oils Alliance and the development of the Aramco lubricants business and brand.
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