By Tamara Pupic
Tamara Pupic visited one of the institutions at the centre of entrepreneurial innovation – seed accelerator TURN8
Cassette tapes, VHS tapes, and transistor radios. Just three examples of home electronics and consumer items we would be using today if there hadn’t been a few visionaries willing to pursue innovative ideas which seemed unthinkable at the time.
Innovation has been a vital driver of progress, and with 2015 being market as Dubai’s Year of Innovation, the UAE has plans to put itself at the forefront of the ever-changing tech landscape.
In a recent column, HH Sheikh Mohammed bin Rashid Al Maktoum himself stated that governments and companies had no other option: “Their choice is simple: innovate, or become irrelevant,” he wrote.
However, should the responsibility for driving innovation forward be carried solely by the government or is a holistic approach by all stakeholders in a society needed to produce meaningful results?
A significant number of current executives in the UAE are willing to follow in the government’s footsteps, with 89 percent perceiving innovation as a positive force which has contributed to better living standards for people in the country, according to the recently published fourth edition of the GE Global Innovation Barometer.
Nevertheless, the research further suggests that it is a public institution which has an eye for an ‘innovative’ detail in 40 percent of cases. Their initiatives are followed by only 26 percent of multinationals.
Looking specifically at the world’s largest companies and market power they usually enjoy, it seems reasonable that not so many of them recognise the need to encourage creative behaviours and disruptive processes outside their own R&D departments.
Yet there are exceptions. A number of transformative companies worldwide are willing to be engines of innovation within their societies. One of them is DP World, the Dubai-based world’s third largest port operator.
“It should happen from both sides,” said Yousif Al Mutawa, chief information officer at DP World and Turn8’s accelerator programme director, on the sidelines of the accelerator’s third Private Investor Demo Day event held recently at the Grosvenor House Hotel.
“The government has to play a very strong role but large corporations also have responsibility not only to the community but also because their own future is under question mark unless they innovate.
“For them to innovate, it’s not only about internal R&D but also about looking at trends and maybe acquiring some new solution that may lead them to their new core business in future.
“The corporates always look at competition and compare themselves to them but disruption doesn’t come from competition. It usually comes from places you least expect, from a start-up or a completely other industry.
“Unless they understand that, it will be difficult for them to transform themselves.”
Although its operations span across 65 locations around the world, DP World has found stepping beyond traditional business improvement models by taking the risk of nurturing entrepreneurship in the UAE to be an important part of its own ability to innovate successfully.
Seed accelerator TURN8 is a prime example of this innovation process.
“DP World has been a pioneer [in the region],” continued Al Mutawa.
“We’ve started this [TURN8] because we need to think about how the world is changing and how we can adapt ourselves to this change.
“Also, how we can cultivate the culture of innovation within our own corporates, and then Dubai and then the UAE.”
Al Mutawa spoke while 12 tech start-up founders from TURN8’s Fall 2014 class were preparing to pitch to regional and international investors at the Demo Day.
DP World launched TURN8 in April 2013 as a seed accelerator programme aimed at seeking ingenious ideas that can be refined and brought to market through a 120-day seed accelerator.
It has delegated the day-to-day management of the accelerator to Innovation 360, a Dubai-based innovation management firm, founded in 2008 by Kamal Hassan who aimed to help regional enterprises and governments improve their innovation strategy, execution and leadership.
Although his ‘real’ job was supposed to be a researcher and an associate scientist at the University of California in San Francisco, or as he explains a “lab rat”, Hassan spent two and a half decades supporting and occasionally financing SMEs in Silicon Valley.
When the MENA region started looking for entrepreneurial solutions seeking to diversify its economy, Hassan returned from the US to launch his Dubai-based innovation and entrepreneurship think-tank, the Innovation 360 Institute.
Drawing on this vast start-up-related experience in both Silicon Valley and the UAE, Hassan told StartUp on the sidelines of the event that for innovation in the region to flourish, the private sector would need to open its doors to entrepreneurs.
“The opportunities are there but corporates have to understand that the way forward is not to build innovation in-house but to actually do ‘acqhire’ [the neologism created from a combination of the words acquire and hire],” he said.
“To acquire and hire is a model pursued by corporates which are looking for talented entrepreneurs. They acquire their start-ups at a very interesting valuation but they know that in the long run this is the best way.”
Originally coined by Rex Hammock, a US entrepreneur, in 2005, the term quickly picked up traction when it was noted that tech companies such as Google, Apple or Nokia were purchasing start-ups primarily to hire their founders.
Facebook has been the largest performer of talent acquisitions with the latest being its purchase of WhatsApp, a mobile messaging service, for $22 billion (£13.7 billion) in cash and stock. As part of the deal, WhatsApp co-founder and chief executive Jan Koum has joined Facebook’s board.
“Today, a start-up in the US can easily sell to a big brand name. It’s easy for them to go and build relationship with big corporates because these corporates are looking for innovations. They know that now they cannot build everything in-house,” Hassan continued.
“If you look at all the big corporates [in the US], they all have venture arms. We don’t see that here, with the exception of DP World and few others.
“Today, if a start-up or an inventor wants to go to talk to a corporate, there are a lot of restrictions on selling, procurement models are not really advanced.
“We need to create a pull system which allows start-ups to come up with businesses knowing there is a market for them.”
For that reason, the TURN8 programme begins with an online and event-based international scouting campaign, followed by a 120-day long training when the chosen start-up founders are invited to Dubai, given workspace and mentoring, and a maximum of $30,000 to develop their ideas.
Reaching the post-accelerator stage with a business-grade investment plan, the start-up teams are then assisted on their quest to obtain funding from various individual or institutional investors. In the meantime, TURN8 starts preparing for another bunch of teams.
Since the inception, the cycle has repeated three times graduating 32 teams. All of them gather at The Cribb, a workspace which was established by TURN8 and i360accelerator in Al Quoz Industrial Area 1.
With its 1,800 sq ft lounge area, a ,2000 sq ft playroom, a 900 sq ft training room, and the availability of i360’s community of mentors, The Cribb has turned into a popular social hub for budding entrepreneurs.
“Better than a master’s degree in business,” said Khalid Al-Jaaidi, co-founder and CEO of Vidium, a Dubai-born free mobile video messaging service, when asked to describe his experience with TURN8 just a few minutes before his pitch.
“Practice trumps theory, and TURN8 has supported us from day zero, and guided us through turning a great idea or an innovation into a business,” he added.
With a number of recent research studies revealing that almost 50 percent of occupations existing today will be completely redundant by 2025, Hassan pointed out that an adequate education on entrepreneurship had still been missing in the region.
“With the exception of certain Arabic countries, most universities are not producing entrepreneurs, they are still concentrated on subjects that produce good workforce but not entrepreneurs,” he said.
“We need to do this because that’s the solution for unemployment and not producing more employees.”
Since Al-Jaadi has pursued his innovative idea, which is to allow mobile users to get genuine first-time reactions to their video messages, secured the support of TURN8 to help him nurture it from a pre-early stage to becoming an early stage start-up, you would expect his post-accelerator journey to be plain sailing.
The fact that his start-up is entering the promising mobile messaging over-the-air market, which is estimated at a total revenue of $45 billion with 2.5 billion users by 2017, might be a reason more to expect increased investors’ interest.
However, there are challenges, as highlighted by Al-Jaaidi.
“I’d say the challenge comes from supporting the ‘early’ stage itself,” he said.
“We have VCs ready for the growth stage, which is a lot less risky and more about exploding, and we have incubators for pre-early.
“The ecosystem is missing people who are serious to back the early stage. It’s a risky stage that many investors shy from.
“Many start-ups are missing the middle link, the investment round, the partnership, the traction that makes or breaks everything.”
Hassan agreed that the biggest challenge in the market related to start-up investment, and said: “We still have very few VCs. Angel investment is also coming up but it’s also weak, and they are not educated yet on how to make angel investment. We need more of all of that.”
Focusing on the volatile start-up market is also a long shot for the regional banking industry whereas, as Hassan started explaining, the banking system in Silicon Valley is playing a vital role in incentivising start-ups.
Founded in 1982, Silicon Valley Bank (SVB), a US-based high-tech commercial bank, started by collecting deposits from businesses financed through venture capital to expand into banking and financing venture capitalists themselves.
Later on, the bank added services to keep the clients as their company progresses from the earliest stage, when the founders are using seed funding or bootstrap cash, to working with them through all of their growth stages.
And the results speak for themselves - out of KPMG’s list of 50 top start-ups in 2014, half were SVB clients.
“We have start-ups that are as good as the ones in the US. What is lacking is the ecosystem to actually take them to the next level. We need to put them on the global stage,” he said.
When asked how a speed-paced start-up culture fits into the region’s traditionally more conservative and family-oriented business mind-set, Hassan explained that spending decades in building just one company might be outdated in today’s innovation-driven economy.
He said: “Why don’t we allow hundreds of people to build companies and then acquire them and merge them into something that can last as well?
“There are difficulties to understand that around here. That’s why everybody is talking about family businesses. They’ve built them since the 50s and they are still sitting on them.
“It’s great money, but what does it do to diversify economy, resolve unemployment, and cultivate innovation? It’s just making one individual wealthy.”
While Hassan hoped that the next bunch of TURN8 entrepreneurs would focus on robotics, the ‘internet of things’, healthcare, and business to business automation – identifying them as “needed in this market” – Al Mutawa concluded by reiterating DP World’s vision:
“Bringing all those minds in Dubai, growing them into start-ups, and hopefully one or two of those will become the next Google or…It will be something that has happened in Dubai since it’s not just about buying and selling, it’s also about creating knowledge.”