Krypto Labs MD Dr Saleh Al Hashemi says the appetite to support early stage start-ups in the UAE is there, but not enough platforms exist to facilitate that development
"Sometimes people don't know what they're missing. They're missing Krypto Labs."
With 45% of SME owners in the UAE citing finance as one of their main challenges in 2016, Dr Saleh Al Hashemi is right on point.
The managing director launched the 2,600sqm incubator in eco-development Masdar City in September last year, in association with global investment group Abu Dhabi Financial Group (ADFG). The purpose-built space is designed to support start-ups in any industry, from any corner of the world, and aims to invest in three or four concepts a year.
As part of its programme, Krypto Labs runs three contests every year and gives up to $250,000 in funding to the winner. As a result of the contest, finalists are often well-placed to attract funding by other organisations as they grow.
But it's not just cash that is on offer. Its facilities and services range from 3D printing to on-site mentorship, some of which is taken on by Dr Al Hashemi himself. “I do a lot of tours myself, because if you want to develop something, you have to be on the ground 24/7. I’m a very hands-on leader. There is no other way to do it,” he says.
Krypto Labs joined a rather small pool of incubators and accelerators, including FinTech Hive, Wamda and the Khalifa Fund for Enterprise Development, in trying to solve an ever enduring problem in the UAE: a frail SME ecosystem, with venture capitalists who prefer to put their money in proven concepts and banks that are often too scared to provide support.
In 2016, Aramex founder and Wamda chairman Fadi Ghandour compared investment in early stage start-ups to infrastructure such as roads and buildings. Speaking at the Arabian Business Digital Forum, he urged investors and banks to take risks and support concepts in their infancy.
“The risk takers, the angel investors, are the heroes who build ecosystems. Nobody talks about them. We have to talk about the $200,000 investments. It’s like you want to have adults without having a baby first. You need to go to school before you become an adult. To feed the ecosystem you need to accept failure and risks,” he said.
While Dr Al Hashemi believes there is enough of an appetite to support early stage start-ups in the UAE, he claims it is platforms like Krypto Labs that are missing from the equation, explaining that few private companies are willing to invest in the building of the ecosystem which the country, and region, so desperately needs. “It’s not about making money. I don’t make money from rent, for example.
I barely break even. We make money from investments. We want to see deals happen and to help make deals happen. If you look at other incubators, most of them do not go for the tough part, which is creating the full ecosystem for investors and start-ups. It’s a global market. I don’t care if the idea is from the UAE, Bahrain or the US,” he says.
Another missing piece of the puzzle is regulation, which makes it difficult for all companies to move across markets. Uber, for instance, is continuously fighting to get approved in cities across the GCC. Dr Al Hashemi, however, finds this to be a natural evolution of new and disruptive technologies. “Today, a lot of sectors have been disrupted, and regulations usually come in after. For example, the drones industry did not exist. Once it came into action, it started to be regulated,” he says.
The sectors, and concepts, worth investing in are those that have the potential to touch a billion lives. Drones are one of those concepts, thanks to their potential to disrupt a number of industries including logistics, agriculture, transportation and security.
While there is plenty of room for more investments in more ideas in the UAE start-up ecosystem, the country witnessed impressive investments in 2017, when it saw the majority (70 percent) of investments in the MENA region. It also achieved record investments of $560m in SMEs in the same year, according to data platform Magnitt, with investments up 65 percent from 2016. The funds included $150m in ride-hailing app Careem, $90m in streaming service StarzPlay Arabia, $41m in courier firm Fetchr, $20m in payment solution Paytabs and $12m in travel search engine Wego.
A common mistake among entrepreneurs looking to become the next success story is “wonderful ideas in the wrong market”, says Dr Al Hashemi. “I met an entrepreneur who makes drones for firefighting, which is a brilliant solution for a problem in the market. The drones are big and powerful enough to hold a fire extinguisher and put out a fire. But imagine the execution. How much energy and time would the drone require to fly up and down a burning building? A lot of entrepreneurs don’t consider the market enough. The more you know about the market, the more you can make an idea that fits,” he says.
Part of changing that mentality comes from changing the education system, which the MD argues rewards students for passing, while not exposing them enough to failure and risk taking. “I used to have a fear of failure. It’s the system. Without knowing it, this mindset sculpts you to a certain extent. It’s hard to break barriers when you have a system in your mind based on how you were raised.”
Dr Al Hashemi catches a glimpse of his reflection on the screen of his mobile phone, where in the background, a quote reads, “You only fail if you stop trying”.
He pauses and continues, “Self-reflect and ask yourself if what you are doing is right. The human mind is not used to asking these questions, because it takes effort. You get used to one way and you say, ‘This phone is good, I don’t want to change’. It’s like being used to one way of driving. You don’t want to try another.
“I was very afraid of failure, but I turned out to be someone different; by questioning, observing and being honest with myself. Get out of your comfort zone. There is nothing wrong with saying, ‘I didn’t do it right’. There’s nothing wrong with learning from a guy who is 20 years younger and asking, ‘What did he do right?’”
Dr Al Hashemi, who is also the CEO of tech firm Algorythma and chairman of Integrated Securities and Integrated Capital PJSC, has got a number of things right, including restructuring several state-owned commercial enterprises during his time at Abu Dhabi’s Executive Council and opening numerous innovation and research centres within oil giant ADNOC.
Leaning across a glass table in one of the incubator’s contemporary meeting rooms, he also seems to have Krypto Labs down to a science. And for the sake of the UAE and the region’s start-up ecosystem, he deserves to be a very big success.