1/ One year ago this week, Saudi dissident and journalist Jamal Khashoggi was killed in his country’s consulate in Istanbul. At the time, we wrote about the butterfly effect—how this will eventually lead to the bursting of the Silicon Valley bubble. Read on. 🤔
2/ "The atrocious murder of Jamal Khashoggi is deeply important—not just for what it says about truth and evil—but because of the ramifications for global capital flows. Silicon Valley is coming to grips with a very basic question that has been evaded, until now."
3/ "Who are our investors and can we be proud of them?" wrote @fredwilson. “Not all money is the same. The people that come with it and who are behind it matter. That has always been the case and we are reminded of it from time to time. Like right now.” avc.com/2018/10/who-ar…
4/ Richard Branson paused talks for a Saudi investment in Virgin Galactic, saying Khashoggi’s murder "would change the ability of any of us in the West to do business with the Saudi government.” Saudi cash is "blood money" said @rabois and that Silicon Valley should reject it.
5/ Following the grisly revelation, some Silicon Valley executives including Marc Andreessen and Sam Altman resigned from an advisory panel for Neom, the Saudi government’s absurd plan to build a $500 billion “mega city” in the desert. wsj.com/articles/a-pri…
6/ Saudi money is “toxically awash” in Silicon Valley, said @karaswisher. “Anywhere you tug, at any company or VC, there is either Saudi money or questionable money everywhere, across the system. And if you remove the Saudis from the worldwide network, everything collapses.”
7/ Saudi Arabia is the single largest funding source for US startups. Since mid-2016, the Kingdom has funneled at least $11 billion into Silicon Valley. By comparison, Chinese-linked investments in US startups totaled $11 billion since 2000. wsj.com/articles/saudi…
8/ @AnandWrites called it, "Silicon Valley's Saudi Arabia problem." The proceeds from destroying the planet are reinvested in fast-growing companies that love to talk about "making the world a better place," the perfect reputation-laundering investment. nytimes.com/2018/10/12/opi…
9/ “We are the creators of SoftBank Vision Fund. We have 45%,” Saudi Arabia’s Crown Prince Mohammed bin Salman (MBS) boasted. “Without the PIF [Public Investment Fund], there will be no SoftBank Vision Fund.” The thinking was the Kingdom would leap into the high-tech future. 🙄
10/ The funny thing is the original idea for the Vision Fund was for $30 billion. Only last minute did Masa change the investor presentation to reflect $100 billion ahead of a meeting with Arab investors, the most successful fundraise ever. “Dumb money,” the thinking went.
11/ Masa said to MBS, "You came to Tokyo the first time I want to give you a gift. A trillion dollar gift. You invest hundred billion dollars to my fund. I give you a trillion dollars." And that was it, Masa raised, “$45 billion in forty five minutes." 
12/ I remember watching Masa in Riyadh at the FII conference in October 2017. His presentation focused on singularity, when artificial intelligence would finally outstrip that of humans. But what struck me the most was a slide he flashed about his investment track record.
13/ Over the last 18 years, he claimed to have delivered a 44% annualized return on Softbank’s technology investments. He boasted about his performance every time he got on stage and vowed that he’s “going to make it happen again.” His excessive pride irked me.
14/ I admire Masa’s ambition and persistence, but as a student of markets and history, alarm bells go off when I hear someone toot their own horn publicly and repeatedly. And I remembered the great saying by P. J. O’Rourke: “Hubris is one of the great renewable resources.”
15/ Masa was one of the largest investors during the late 1990’s dot-com boom— backing more than 800 startups and boasting that he owns 7% of the Web and is just getting started. But nearly all of the companies failed when the bubble burst.
16/ Masa lost more money during the 2000 tech crash than anyone else ever had—$70 billion. Softbank’s stock fell 99%. His reputation today rests mostly on his early bet on China’s Alibaba Group, which turned into one of the most lucrative venture investments of all time.
17/ In May 2018, Masa announced a second $100 billion Vision Fund would be set up in the near future. MBS said that he is ready to commit another $45 billion in the new fund. But after the Khashoggi affair, fundraising screeched to a halt. There was backlash against the Kingdom.
18/ We wrote: "Without a second Vision Fund—and with tighter scrutiny on Chinese tech investments in the US—we believe the Silicon Valley party is nearing its grand finale. As the money stops, so will the music... The Uber IPO will kickoff the endgame."
19/ Once Uber went public in May, it became clear that the Saudis notoriously late foray into Silicon Valley was dumb and expensive. They ploughed $3.5 billion into Uber in 2016 at $48.77 a share, which makes them one of the biggest losers from the IPO. Uber is trading at $30.
20/ The Saudis' ill-timed $2.9 billion bet on Tesla is also underwater despite reports they slashed their exposure via a hedging deal. Taken together, they are nursing over $2 billion in losses from those two investments. They may have lost their risk-seeking spirit.
21/ SoftBank is accelerating fundraising for Vision Fund II, which is to be seeded with $15 billion from the IPO proceeds of its mobile unit and a $20 billion rollover from the first fund. But now with the WeWork fiasco, he will face a hard time raising third-party capital.
22/ Masa has already pledged 38% of his shares in SoftBank as collateral for personal loans from 19 financial groups globally, and some staff have been encouraged to fund stakes by borrowing more than 10 times their salary. It's looking pretty grim.
23/ In The Vocation of Man, Johann Gottlieb Fichte (1762-1814) wrote, “You could not remove a single grain of sand from its place without thereby... changing something throughout all parts of the immeasurable whole.” No act is without consequences for others. Everything connects.
24/ One small, seemingly insignificant change can create drastically different outcomes in a complex system. Hence, we wrote, "The real impact of the Khashoggi murder will be the eventual bursting of the Silicon Valley bubble."
25/ A butterfly flapped its wings in Riyadh that killed a journalist in Istanbul that killed a fundraise in Japan that killed the hopes and dreams of CEOs and VCs in Silicon Valley. The end.
