Innovation needs perspective not isolation Break free from the entrepreneurship dream bubble

I was honoured to be invited to Bahrain this week to give a talk at an event organised by Bahrain Development Bank’s Rowad Programme, a comprehensive platform providing multiple layers of support to Bahrain’s entrepreneurs and start-ups.

Rowad’s breadth and depth are far greater than anything else that I have seen in the region, and addresses multiple facets of the challenges faced by entrepreneurs and startups. The programme comes as close to being a super-contained entrepreneurial ecosystem as I have seen. If you are an entrepreneur I urge you to seriously consider their offerings. If you are an investor you might consider looking at the entrepreneurs and start-ups that Rowad is supporting as when entrepreneurs have that breadth and depth of support then they should have a greater probability of success.

The Rowad Talk, moderated by the programme’s co-founder Areije Al Shaker, was a dynamic event that featured some good discussions with the audience. One point in particular, about the necessity for entrepreneurs to seek external feedback, deserves elaborating upon. Continue reading

Sharjah’s cost advantage a win for UAE startups

Entrepreneurs are facing pressure from multiple challenges with a major one continuing to be the cost structure of doing business in the UAE.

Sharjah appears to provide a solution.

This section of today’s column is co-written with Najla Al-Midfa, General Manager of Sheraa and one of the region’s thought leaders and active architects of entrepreneurship ecosystems in the UAE.

If you are a regular reader of my column you will know that I am a little bit exasperated at what I see as deep denial in the business community about current and future economic challenges. On a personal basis this has created a challenge for me in restructuring my family investment portfolio in response to those same economic challenges. This has led me to an interesting insight.

The part of the portfolio that I was looking at that led to this insight was the real estate sub-portfolio. The real estate sector does not have as much transparency in terms of price discovery as, say, the listed equity markets. An investor needs to be continuously in the market, working with real estate brokers, to truly know where the prices are for different types of real estate in different locations. The flight from high cost residential to middle and low cost residential is relatively well known and logically sound. It is a great defensive move and one that investors believe will protect their investments and their yield. What was surprising to me was finding out that prices for these types of residential properties was rising at quite a healthy rate in the Emirate of Ajman.

A little investigation made it clear why. We have all heard about people working in Dubai but living in Sharjah due to the latter’s more affordable cost structure. What anecdotal evidence suggested was that commercial prerogatives were following personal ones, ie some companies based in Dubai who need to manage their costs are moving part, if not all, of their work force to Sharjah. So some of those working in Sharjah simply decided to live in Ajman to free up even more of their income for savings or discretionary expenditure. Continue reading

Entrepreneurs' Dreams

Noon, the online retailer, was announced in November 2016 with a launch date of January 2017. Last week, word began to emerge that Noon, now almost five months late on its originally announced launch date, might be moving many of its staff to Saudi Arabia. Why, when a venture is already delayed five months, would you make such an important shift? More perplexing is why a venture that is less than a year old would suddenly have to move people? Was the earlier plan wrong in its emphasis on Dubai? Aren’t businesses supposed to pick Dubai as their regional hub? This was perplexing, so I tried to look at it from different angles.

One angle is that since Saudi’s Pension Investment Fund (PIF) was investing half of the US$1 billion into Noon then PIF wanted to domicile the company in its own country. Wouldn’t PIF have thought of that when it decided to make the investment? It is, after all, known to be sophisticated and professional. All things being equal, it would have made that decision at the beginning. If by some oversight it didn’t, PIF would understand the high risk of moving the operational base of a late-to-launch start-up. There must have been another reason.

Perhaps looking at what little publicly available information there is on Noon might shed some light on the matter. A quick survey of relevant announcements reveals: (1). A five-month delay in launch; (2). A last-second offer for; (3). The acquisition of JadoPado, an existing online retailer; (4). One month later, senior people from JadoPado and Noon left the venture; and (5). The announcement of the move of the operating venture to Saudi.

The first four points signal negative events for Noon. The last one simply looks like PIF, the 50 per cent shareholder, deciding to exercise some corporate governance and move the operational base to Riyadh so that it could have better oversight over the venture. This is, of course, simply my theory since as of writing this nobody from Noon has provided a rational explanation to what is going on.

One of the heartbreaking issues is that JadoPado, a great entrepreneurial start-up story in the region, seems to have been unnecessarily shutdown. Is this a sign of things to come? People who have, or control, large amounts of financial assets harming our nascent venture capital ecosystem because they think they know what it means to be an entrepreneur? Will other entrepreneurs who have spent years building up their companies face the same fate because established interests are suboptimal in how they handle their acquisitions?

This reminds me of a poem by William Butler Yeats:

Aedh Wishes For The Cloths Of Heaven

Had I the heavens’ ­embroidered cloths,

Enwrought with golden and silver light,

The blue and the dim and the dark cloths

Of night and light and the half-light,

I would spread the cloths ­under your feet:

But I, being poor, have only my dreams;

I have spread my dreams ­under your feet;

Tread softly because you tread on my dreams.

In the end, that is the only thing that true entrepreneurs have – dreams. People who have money and business success handed to them will never, can never, understand this. When entrepreneurs ask in vain where the funding part of the ecosystem is, perhaps they should look to those who have received business and support in excess of the value they produced. If those who can be commercially successful can’t find funding because those who aren’t commercially successful keep hoovering it up, perhaps we should rethink the ecosystem.

I spent three years building an investment bank in Saudi Arabia dealing with regulators, government departments, investors, and staff. They are competent and professional. I hope that they can help what is left of JadoPado and invigorate Noon. Unicorn should mean sold for a billion dollar valuation, not destroyed a billion dollar valuation.

I also hope that we can rebalance the venture capital ecosystem in the UAE to support entrepreneurs.

This article was originally published in The National.

Entrepreneurs don’t need the state to do their work

Entrepreneurs don’t need the state to do their work

Last week I was honoured to participate in the Ministry of Economy’s seventh Annual Investment Meeting, a conference focused on foreign direct investment in growing markets, as well as the associated AIM Startup, held in Dubai. A large part of the conference – the talks and panels, as well as private conversation – revolved around entrepreneurship and venture capital. There were some recurring themes and I would like to share some of my thoughts on them.

An important caveat: the AIM conference was extremely positive and quite rewarding, my article simply seeks to find ways to extend the thinking.

One of the main points raised was what government can do to help entrepreneurs and the venture capital ecosystem in ­general. I find this question strange. To me an entrepreneur, by definition, looks to solve problems. Asking for the government to solve these problems seems incompatible with being an entrepreneur. Indeed, companies built locally and sold to international companies, such as to Amazon or Zawya to Reuters, happened in large part because the local entrepreneurs found ways to build the business within the local environment that foreign players don’t understand. Do not misunderstand me, the government can certainly remove obstacles, such as monopolies and security cheques, that stand in the way of entrepreneurship. But to ask them for funding, incubators or other forms of support is to admit that one is not in fact an entrepreneur.

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My Zawya Story, 2nd Edition

In 2012, Zawya, a UAE-based business media company, was sold to Thomson Reuters for a 20 times cash return by Saffar, a low-profile private equity company. I am the founding chief executive of Saffar and became chairman of Zawya after we acquired it, between 2001 and 2011. This is my story of how I bought a bankrupt, London-based company with five employees, moved it to the UAE, built it into a profitable company with more than 200 employees and then sold it to a global competitor, thus generating a 35 per cent annual rate of return over an 11-year period.

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Venture capital as a substitute for oil in driving economic growth

Venture capital is critical to the future success of not only the UAE but also the GCC. To understand this we first need to understand the historic formula for our success – oil leads to financial capital, which leads to real estate development, which creates social and business communities that attract people. Repeat.

Even if oil prices had not collapsed, sooner or later the size of the economy would reach a level at which oil alone could not deliver growth. We have not reached a point of reckoning because oil prices halved, that only accelerated the inevitable.

The conventional argument is that SMEs are the engine for growth in any economy. Some might argue that the global conglomerates coupled with global trade are the engines for growth. Whatever idea you subscribe to, in the end one has to accept that whether you believe SMEs drive economic growth or whether it is large companies, the first step is starting that company. Put simply, without start-ups an economy cannot normally achieve sustainable growth.

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Venture Capital Lessons from India, Lebanon and Ireland

In a recent article I pointed out the failure points in the UAE’s venture capital ecosystem, in particular the lack of support for entrepreneurs and start-ups. In this article I’d like to review some of the initiatives other countries have launched that could be useful in upgrading our ecosystem.

Given the recent visit to India of Sheikh Mohammed bin Zayed, Crown Prince of Abu Dhabi and Deputy Supreme Commander of the Armed Forces, let us start with that government’s efforts, and in particular the Startup India initiative. This initiative is comprehensive, starting with a streamlined registration process. Importantly, it has a streamlined bankruptcy process that seems to be fair – no extra-judicial imprisonment if an entrepreneur cannot financially meet a liability. There are also tax breaks for the company as well as investors in the company.

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Oil, Opec, Economic Reform and Venture Capital

Last week the Minister of Energy for the UAE was reported in an article as saying that it is too soon to extend the oil supply deal, and then shortly afterwards there was a report that Saudi Arabia’s minister of energy had said the deal could be extended after the first six months. I am known to be pessimistic about Opec cooperation, but given the close relationship enjoyed by Saudi and the Emirates, I thought about the perceived discord in communication and was led to an intriguing idea.

As described in an article in The National on Monday, Norway is facing challenges in diversifying away from oil. If Norway, with its more developed economy, is facing challenges then clearly diversification for a less developed oil-exporting country must be even more challenging. This would lead to the idea that differing challenges faced by each country could lead to different strategies and signalling of these strategies with regards to oil production.

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Kick-start the UAE’s venture capital ecosystem to boost the economy

So why, if everyone is telling us that the oil price is going up, are rental taxes, sorry fees, being applied? Don’t get me wrong, fiscal reform is necessary, but if oil is going back up, let us give the common man a breather. Here’s an idea – let’s start with taxing everyone who has a monopoly agency. You know, the rich.

Speaking of announcements, I would like to introduce a new statistic, similar in importance to GDP, CPI (inflation), the unemployment rate, etc. I call this statistic the Reality Based Ratio. It is the ratio of the number of projects announced to the number of projects completed. Of course this needs to be adjusted for size of project and time needed to complete, but you get the idea. The higher the ratio, the lower the reality basis of the economy. People need to stop applauding projects announced and start applauding projects completed. Well, they don’t need to, they just should if they want any sort of economy in the future.

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