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Sun 27 Oct 2002 04:00 AM

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Online entrepreneurs thrive despite dot-bomb

The potential for striking out alone and setting up an IT-orientated business still exists. Evidence of this comes from a number of sources, including the recently launched Dubai chapter of The Indus Entrepreneurs (TiE) Group.

I|~||~||~|Despite the end of the dot-com era, the global recession and the IT spending cut backs currently afflicting the Middle East, the potential for striking out alone and setting up an IT-orientated or online business still exists. Evidence of this comes from a number of sources, including the recently launched Dubai chapter of The Indus Entrepreneurs (TiE) Group. The original chapter was established in 1992 by a group of Silicon Valley-based sub-continental businessmen. Today, the not-for-profit organisation boasts 10,000 members spread across 11 countries and 35 chapters, each of which seeks to provide an environment in which people looking to set up their own businesses can learn and interact with successful entrepreneurs.“Even if you are bitten by the entrepreneurial bug, there are very few places where you can go for advice. The books available on the subject are largely theoretical and banks have very little time to help people develop ideas. This is why we created TiE — it is a place where entrepreneurs can meet, network and get support,” explains Mahesh Murthy, president-elect of TiE Bombay & CEO of Passionfund.Boasting a number of high profile members, including the founders of Novell and McKenzie, TiE spends most of its time mentoring up-and-coming entrepreneurs rather than giving them money. “However, funding is often discovered as a result of this,” says Murthy.Although venture capital is scarce in the current economic environment, the president-elect says it is still a good time to be developing ideas and getting a start-up off the ground. “If you look at the biggest companies in the world, they all started in times that were not boom times. HP, Intel and Microsoft were all founded [by entrepreneurs], but they did not start during a boom time. One of our messages is that this is a good time to start a business,” Murthy says. “Entrepreneurship will never die and now is as good a time as any to get involved. Those people that are serious about being an entrepreneur will be the ones that succeed,” he adds.||**||II|~||~||~|Apparently, the Middle East is as good a place as any to begin a business in today’s economic climate, especially if it is an online initiative.“Nobody maintains the sanctity of geography in the online world and there are lots of cases of world leading internet companies coming out of non-G7 countries. It is all about having an idea and having the requisite infrastructure to support it. There is a phenomenally good infrastructure here [in the Middle East] that people can take advantage of,” says Murthy.Furthermore, TiE is hoping that the influx of talent into the Middle East, which is being encouraged due to the dearth of local talent, will help create entrepreneurial momentum. “Just think of the immigrants that went to the US and made their fortune there. I think this area of the world can be exactly the same. A lot of people come to the Middle East to better their prospects because there is the opportunity,” adds Murthy.However, the caveat to this belief is the need for originality. “In the online world we don’t need yet another portal or search engine. Because the Middle East is part of the global market, these needs are already served by others. However, by the same token you have the opportunity to start something here that addresses a global audience because there is no passport control on the internet,” says Murthy.Entrepreneurs that fail to deliver something new are undoubtedly in for a tough time, as the first three or four companies into a niche market tend to tie up the bulk of the available revenues. This leaves late entrants to scrap for the crumbs.“If anyone mentions something as a trend, then it is already dead and done. In any niche there will be three or four companies that will take 90% of the value of the sector and if your company is not one of them then it will struggle,” explains Murthy.TiE recommends that entrepreneurs searching for funding have to look outside of venture capitalist funds because they are now reluctant to invest in start-ups. “After the dot-com bubble burst, the venture capitalists decided that they couldn’t invest in start-ups, so they moved upstream and invested in publicly traded companies instead,” explains Murthy.Evidence of this trend in the local market comes from the recently launched Estithmaar Ventures, a joint venture capital company formed by Dubai Government and Deutshce Bank. Rather than investing in start-ups, the fund will target mid-to-late stage technology, media and telecommunications companies around the world with its AED182 million war chest. “[Targeting] late companies means you’re not taking an excessive R&D risk,” says Dr. Shary Ahy, CEO of the new fund.With a lack of venture capital available, Murthy says entrepreneurs have to take a ‘bootstraps approach’ to raising money. “Because venture capitalists have pretty much vanished we are promoting the bootstrap approach and encouraging people to find real money and work up from the bottom,” he explains.This means being realistic in the amount of money actually needed to set up a business. Murthy says US$100,000 is a more realistic investment figure than the US$10 million windfalls that characterised the dot-com era. “Once you have a product and a successful company then you can take the US$10 million investment. If you take this at the beginning then you are not going to learn the discipline of creating a product and taking it out to the market. We are talking about a ‘back to basics’ approach to entrepreneurship,” he adds.Murthy says this ‘back to basics’ approach can range from persuading friends and contacts to invest in your idea to selling the family silver. After all, Murthy says, “unless you are willing to risk your capital then why should a venture capitalist risk theirs?”||**||

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