Saudi Arabia's NEOM: Investment Case for AI-Focused Incubator

Since 2019, Muhammad bin Salman has spent billions of dollars in construction costs and tens of millions of dollars in consulting fees to design and develop a commercially viable NEOM as a world class hospitality destination. The results have been lackluster.

The idea was that NEOM that would overshadow Dubai, now firmly positioned as a Vegas-style metropolis for the global rich and a safe place to live and work for people from Iran (revolution), India (the taxman), Syria, Lebanon, Palestine, Pakistan, Ukraine and Russia (war) or the UK (gloomy weather and even gloomier economy), to name a few nationalities. Yet, NEOM has been suffering from lackluster progress and nearly earning the "white elephant" moniker.

I am a CFO and a former investment banker, but with a passion for AI. Professionally and academically. I strongly believe that Artificial Intelligence (more specifically Generative AI or GenAI) has a strong backbone--intellectually, scientifically and financially--to aid in the development of NEOM.

Below, I will share my views of how NEOM must quickly turn its back on the tired tourism mantra. The NEOM AI model will work but requires the following ingredients of success:

1. Outside-the-Box thinking
2. Understanding and Appreciation of Generative AI (Large Language Models or LLMs)
3. First mover advantage: Relationship building with the legions of "starved-for-cash" startups, ignored by the likes of Y-Combinator and Silicon Valley
4. Joint Venturing with NVIDIA, Open AI and other leading AI players (US and Chinese)
5. Execution
6. Energetic, non-conformist and dedicated professionals with unquestionable integrity outside the usual consulting and GCC-hand crowd

I would position NEOM as a purpose-built AI ecosystem by building infrastructure, attracting talent to establish startups and then incubating, marketing and finally commecializing those startups. How?

1) Self-Contained Campus. Build a large live-work-play campus, comprised of residences, gyms, offices, labs, cloud-based data centers (vital), an airport and a heliport and a solar-powered power plant. I am thinking of Apple's campus in Cupertino, California and multiplying it by a factor of 10.

2) A Tech University. Establish a STEM (science, tech, engineering and maths) university attracting, train and feeding young Saudis, Chinese, Indians, Russians, Iranians, Israelis, Palestinians, Ukrainians, French, Americans, Brits and Koreans into the NEOM AI (the "feeder" school model). All nationalities would be welcome and expected to work in teams to develop large language models (LLMs)

3) Recoverable Upfront Costs. Saudi will front all initial costs from constructing the infrastructure to rent-free office/lab space, room & board, multi-purpose amenities (clubs, bars, beaches, resorts) to the AI community of NEOM, in exchange for a 20%-25% equity stakes in each startup under a "modified" "SAFE" investment method. (SAFE stands for Simple Agreement for Future Equity). A SAFE allows a "seed" investor to invest in a firm without haggling over the value of the startup with the founders.

4. Attractive Returns on Saudi Capital. Once the startup has its first round (Series A), the SAFE kicks in and determines the equity stake (%) of NEOM AI in the startup based on the pre-money valuation agreed between the Startup and the Series A investor(s).

5. Vinod Khosla's Power Rule. Using Khosla's "power rule", NEOM AI sprinkles enough cash (plus free facilities) on say, 20 or 30, startups and in five to seven years, once a startup is invested in via a Series A funding, NEOM AI will have realized significant dollars! And I am not even discussing IPOs!

NEOM AI will pay for itself in multiples of X in less than seven years! I hereby stake my reputation on it and even volunteer to help create this human endeavor.

• SAFE was developed by the legal team at Y-Combinator, a leading San Francisco-based tech startup incubator
• NVIDIA is the world's leading GPU chip maker

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