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Tue 16 Nov 2010 01:44 PM

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Taking the plunge

The region’s first ever conference for entrepreneurs was a hit, but can the momentum be sustained in light of the sector’s tough environment?

Taking the plunge
Abraaj Capital CEO and founder Arif Naqvi said there is no pan-regional movement — on line or offline — dedicated to regional entrepreneurship to date.
Taking the plunge
Amr Abdullah Al Dabbagh, governor and chairman of the Board of Directors, Saudi Arabian General Investment Authority.

Despite a tough environment the appetite in the Middle East for start-ups is strong, judging by the buzz at the first Celebration of Entrepreneurship conference in Dubai.

Each day saw more than 1,500 business enthusiasts journey to the event in Dubai’s Madinat Jumeirah Conference Centre. Unlike a traditional conference, guests listened to speakers in the “passion corner” rather than on the traditional stage, and sat on beanbags and networked at the Connect Café. In fact, organisers Abraaj Capital, the region’s biggest private equity firm, termed the event an “anti-conference”, saying it was more of a festival than the standard set up. And they weren’t lying. About ten speakers were on at any one time, as well as live music and art installations, while attendees were advised to ditch the suit in favour of more casual attire.

But, behind the presentation and all the gizmos and gadgets there is a more serious message about the importance of entrepreneurship and the need to increase the number of small to medium sized businesses in the region.

Funding, or the lack of it, is a major problem for entrepreneurs looking to set up in the Middle East. According to Saqib Rashid, a member of the investment team at Riyada Enterprise Development (RED), a member of Abraaj Group, private equity is under represented in this part of the world. “It accounts for about one percent of GDP, while it’s seven percent in the US. So there’s a general under investment, which I think is a hindrance to the growth of SMEs,” he told Arabian Business on the sidelines of the conference.

To date the private equity market has largely ignored smaller deals, which he says Riyada, as a fund dedicated to SMEs, is trying to fill. “We saw the opportunity from a commercial perspective and thought that there was a need for SMEs in this region,” he says.

That’s not to say funds don’t exist. Initiatives like the Khalifa Fund and the Mohammed Bin Rashid Al Maktoum Foundation in the UAE and the Centennial Fund in Saudi Arabia have been set up by governments to help budding entrepreneurs.

“It’s not a question of are governments doing anything,” Rashid says. “It’s a question of how can they accelerate what they are doing to have more of an impact.” So an event like the Celebration of Entrepreneurship, which has gathered hundreds of business leaders, venture capitalists, government officials, bankers and budding entrepreneurs in one place, has to be commended.

The event saw the formal launch of RED, a $500m investment platform exclusively dedicated to supporting SMEs across the Middle East and North Africa region as well as Turkey and Pakistan. The fund targets individual investments of between $500,000 and $15m and will focus primarily on profitable SMEs in need of capital and strategic support to grow.

The first day also saw the launch of Wamda, an interactive online portal dedicated to developing entrepreneurship in the region. Wamda, which means “spark” in Arabic, has a library of video, audio and written content to help entrepreneurs grow their business as well as connect the region’s entrepreneurial mentors with mentees using the ‘MentorMatch’ function.

“To date, there is no single pan-regional movement — online or offline — dedicated to regional entrepreneurship,” said Arif Naqvi, founder and CEO of Abraaj Capital. “An enabling environment is the most important factor in supporting entrepreneurship in developed economies. We need an entire ecosystem at work: good regulation, accessible finance, mentors, an engaged academic sector, incubators and so on.”

This idea of mentoring is an important one for Wamda and this support framework is something that the region lacks. To make MentorMatch work the site has partnered with the Mowgli Foundation, a UK-based non-profit organisation whose mission is to harness the power of mentoring worldwide.

“Mentorship is an important component in nurturing successful entrepreneurs and developing human capital,” the organisation’s founder Tony Bury, says. The organisation has already helped support a number of regional entrepreneurs in Syria, Lebanon, Palestine and Jordan.

“We are absolutely passionate about mentorship at Abraaj. Not just because it is a worthy cause but because it makes great business sense,” says Tom Speechley, Abraaj Capital partner and CEO of RED. “We want our entrepreneurs to develop through the experiences of others that have gone before them. This is especially important in the SME space, where entrepreneurs need all the help they can get to transform their businesses into market leaders.”

Also part of the Wamda package unveiled at the conference is an angel investor platform through which budding entrepreneurs in need of seed capital can apply online. Angel finance is a relatively new concept in the Middle East where friends and family financing is much more common, investors say. Usually already successful business people, Angels invest sums under $100,000 in start-ups, providing seed finance.

“It’s not institutional capital, it’s closer to friends and family because they are investing their own money, so their requirements are a little bit different. It’s a crucial source of funding that in this region needs to pick up in a big way,” Farhan Zaidi, principal Abraaj Capital told guests during a session called Finance 101 for Entrepreneurs.

Long term US angel investor Cal Simmons, who has personally invested in more than 30 early-stage companies and who also co-wrote the book ‘Every Business Needs an Angel’, told guests how to attract this type of funding.

“Angel investment is a critical part of the puzzle. In this part of the world angel investment is less of a path to success,” he says. “For the investor it’s risk/reward — they are taking more risk, but if the business succeeds they will get more reward.

“To have success getting angel investment the explanation of the opportunity has to cover the upside and the downside. You have to convince us that the exposure is limited,” he says. “I have changed my strategy of how I look at a deal. I was only looking at the upside, but now when people come to me I’m much more interested in being told how they are going to protect my investment.”

The mood around the conference floor was definitely optimistic, with guests excited by using the interactive device called ‘Spotme’ which allows guests to send messages to other participants or swap business cards electronically. It also let you select certain speakers who you wanted to find and would vibrate when they were in your vicinity.

The speakers’ list was 200 names long and included names from across all segments of the business community, including Adel Ali, the CEO of Sharjah-based low-cost carrier Air Arabia, Mike Cassidy, Google’s director of product management, and Fadi Ghandour, founder and CEO of Aramex. It even featured fourteen-year-old Abdulrahman Al Zanki, regarded as Kuwait’s youngest entrepreneur.

Murshed Mohamed Ahmed, CEO of Yebab.com, a portal specialising in providing wedding services in the UAE, said he went to the conference to learn how best to grow his business. Setting up his website two years ago, he said it was a “dream”. “Everyone has a dream. This was a challenge where I turned my internet passion into a website,” he says.

Funding has not been such a problem for Ahmed, and he did not need investors to begin with. “You try to be frugal and we tried to be creative,” he says. “We did a lot of barter deals and sponsored events. And convincing people to sponsor events is not easy, so that was one of the biggest challenges.”

However, more networking and mentorship opportunities are more important for him as he looks to expand into Saudi Arabia and Egypt next year. “Mentorship, relationships, networks, opening doors and resources that might not be available are very important,” he says. The company partnered with National Net Ventures (N2V) in August. “We want to expand to other countries and this partnership is very important in that,” he says.

Behind the event is Abraaj Capital, which has raised close to $7bn and distributed almost $3bn to its investors since its inception in 2002. The firm, which is based in Dubai and manages seven funds — four buyout funds and Riyada Enterprise Development fund, ASAS, an income-generating, sale-and-leaseback fun, and a real estate fund, is well placed to take up the mantel of promoting entrepreneurship in the region.

The success of the initiative, however, lies with individual people and businesses. As HE Sheikha Lubna Bint Khalid Al Qasimi, the UAE’s Minister of Foreign Trade, told attendees during the first day’s opening address: “Unless you have a positive attitude you will never make it.” No truer words have been said.

mcjs168 9 years ago

COE 2010 could have been a great platform for some governments to listen to entrepreneurs and understand what some of the more fundamental issues are around setting up a business in the region, they go far beyond funding - it was a shame that this debate did not happen. It would have been great to have heard from the region's leaders that at least they recognise a need for change in bankruptcy laws, local agency laws and immigration laws - If these three fundamentals can be loosened; expatriate entrepreneurs will feel they have scope to innovate without fear of punishment for taking a risk, the opportunity to own their business outright and an ability to invest their money, time and ideas in a place they might one day be able to call home.