EVERYTHING IN PLACE TO ENCOURAGE A NATIONAL START-UP CULTURE
▶ Accelerators give entrepreneurs the knowledge, contacts and access to funding they need to succeed, writes Rosa Panadero
All start-ups have a mission: solve a problem big enough to build a scaleable solution – and in the UAE, as Innovation Month draws to a close, it is clear there is more entrepreneurial appetite than ever.
“I love the region, because the economies here go through massive transformations,” says Erkki Aaltonen, the director of StartAD, the New York University Abu Dhabi and Tamkeen incubator. “The Abu Dhabi Government understands it.” According to theintelligentsme.com, there are around 300,000 small and medium enterprises in the UAE, contributing more than 60 per cent of the region’s GDP.
In Dubai, SMEs represent 95 per cent of all establishments.
As a place to set up a new business, the UAE scores highly.
The country came in at number 21 out of 190 of the economies for ease of starting a business, according to the World Bank Doing Business 2018 table. Compared with a year before, that’s a jump of five places.
And the country has the infrastructure needed to boost entrepreneurialism even further, offering would-be start-ups the knowledge and contacts, plus access to funding, that are almost impossible to achieve on their own.
Groups like StartAD, which offers core programmes and education initiatives for all members of the local start-up community – from innovators to early-stage entrepreneurs to investors – are crucial, Mr Aaltonen says. He is keen to point out the advantages he says StartAD offers. “We don’t compete with anyone. No one in the UAE has as many programmes as we do. We don’t ask for equity [and] we offer accommodation.”
Mr Aaltonen has worked with almost 3,000 start-ups.
StartAD takes 100 teams per year in four batches, and the competition is tough. Only five out of every batch gets extra mentoring, and just one or two secure investment.
To be considered, applicants present a working team and what is called the minimum viable product – where a new product or website is developed with sufficient features to satisfy early adopters, he says. The team aspect is crucial.
The process for a start-up, from early stage until acquisition, may last 10 years, so a solid core of staff is essential for any investor’s evaluation. “Ideas are worthless, they don’t matter if the team cannot execute them,” he says.
Mr Aaltonen says he gains great satisfaction working with the wouldbe entrepreneurs: “It is feeling the superpower, the ability to see the future, what nobody can see yet – the impact will be in two, three or five years.”He says the region’s start-up landscape is 10 to 15 years behind that of the US and Europe, but that more funding will enable more rapid development.
Successfully completing an incubator programme is merely the beginning, despite how enjoyable it may be.
“The enthusiasm goes up until the demo day,” he says, “but the day after, there is no safety net.”
Mr Aaltonen says new entrepreneurs should guard against getting too big for their boots: “When arrogance kicks in, failure comes in.”
His final recommendation: “We need more companies coming in at the early stage and to create safety nets, because the system is not that mature.”
Todd O’Brien, director of StartupBootCamp Dubai, the local branch of the global industry-focused accelerator, has been involved with about 5,000 start-ups.
Potential entrepreneurs can cram 12 months’ worth of experience into just three months: “In the first three weeks, our teams have defined their business model compass, set up their development lists and met 45 local companies,” he says.
“It is a full-time day job for them. It is a hands-on approach.”
Launched in May last year, StartupBootCamp’s Dubai Smart City programme selected its first 10-team batch out of 1,051 applications: “It is a high number, considering that we take 6 per cent equity,” says Mr O’Brien.
“We give them the programme, a package of $250,000 to $300,000 worth, but if they are going to do deals and investment, it is even more valuable.
“We will do four batches over the next three years. This will lead us to the Expo 2020.”
Mr O’Brien says it is “our global network of investors, mentors and partners that make us different”.
The accelerator’s alumni programme organises retreats twice a year with investors: “They can rub shoulders with them and real business happens,” Mr O’Brien says. The figures support the overall strategy: 78 per cent of graduates secured funding after the last programme.
He also emphasises the importance of a solid team behind any start-up ambitions.
“You may have the best products in the world, but if you don’t have the right team, they will never be successful,” he says.
Mr O’Brien sees the regional startup ecosystem as in its early stages: “In London, a few entrepreneurs got successful and gave money to fund some young start-ups. Here you need to entice them to come with successes like Souq.com.”
He says “the Dubai ecosystem supports and fits us culturally”.
Away from Abu Dhabi and Dubai, the start-up scene is no less encouraging. Najla Al Midfa is the general manager of the Sharjah-based incubator and accelerator Sheraa.
Ms Al Midfa says the big advantage of Sheraa is its location at the American University of Sharjah.
“The access to the talent and the professors has really helped,” she says. “At the AUS they invite us to speak to the students. This is a very good complement to what they learn at university.”
Ms Al Midfa says that globally, an average of 80 per cent of start-ups fail. She says with Sheraa’s mentorship, that figure is drastically reduced for local entrepreneurs. “With the help we provide them along the way, probably 40 to 50 per cent end up, if not failing, pivoting their original idea.”
Sheera employs a rolling admission system for start-up teams, while “solopreneurs” attend events to find co-founders.
After the first six months in the incubator programme, where start-ups build their products and attempt to complete three months of sales, they move into the three-month accelerator programme where they meet potential investors.
A separate programme, called “Growth”, helps more established start-ups to expand into new markets.
Ms Al Midfa also does not see the need to entice a Silicon Valley backer: “If you are going to build a product for the Mena region, it doesn’t make sense to go there,” she says.
While Sheraa has a very close relationship with AUS, Ms Al Midfa says it is the exception rather than the rule and says more universities should open up to entrepreneurial mentorship. Most UAE universities, she says, “are where a lot of students are taught to study and go for jobs”.
Another area Ms Al Midfa sees as ripe for improvement is corporate innovation.
“We assume big corporations know innovation,” she says, but that is not always the case.
For any incubator or accelerator programme, results are the bottom line when measuring success or otherwise, and with Sheraa, Ms Al Midfa points to the 20 graduating teams that have made over $6 million in revenue so far.
If you are going to build a product for the Mena region, it doesn’t make sense to go to Silicon Valley
NAJLA AL MIDFA General manager, Sheraa
She also believes that remaining grounded is crucial for any successful start-up. “Honesty has to be one of the key metrics with us.
“We have to keep them humble, because there is no room for egos in entrepreneurship,” she says.
Back in Abu Dhabi, The Catalyst, the Masdar-BP programme at Masdar City, is another player in the UAE start-up ecosystem.
Set up in 2015, it is a $5m technology start-up accelerator focusing on sustainability and clean technology. It offers individual awards of up to $50,000 over a six-month period to help new companies.
Cinar Kurra, the chief executive of Catalyst, explains how it works: “Masdar filters 10 ideas every six months. We take them through the investment committee, the CEOs of Masdar, BP and Masdar Institute, and once they are evaluated we start giving them support.
“They become a free zone company in Masdar City, get all the in-kind services of Masdar-BP and cash. We take a small percentage and sign an NDA [non-disclosure agreement].”
Mr Kurra believes renewable energy and manufacturing will diversify the UAE economy. “We have to push manufacturing to a superior level, and that will be solved with all the solar parks,” he says.
“One of the issues I see is the storage of energy, which means the battery technologies and second, the energy harvesting. We think asphalt is going to be solar asphalt or kinetic asphalt [which takes and stores energy created by the movement of vehicle tyres over the road surface].”
The Catalyst works with universities, leading local and international companies and NGOs from Germany: “There are NGOs who want to get and know the development of technology, so we are going to co-operate with them because we need to get The Catalyst name abroad.”
The founders of the first two startups that came out of The Catalyst are Masdar Institute graduates, and Mr Kurra hopes these role models will also attract students from Khalifa University and the Petroleum Institute.
But, he points out, nothing is guaranteed. “I’m not here to waste cash,” he says.