Dubai's Strategy for Building and Retaining Startup Momentum through 2020
Catch our latest webinar to understand Dubai's strategy for building and retaining startup momentum through 2020 and beyond. This week, MAGNiTT CEO Philip Bahoshy speaks with HE Khalfan Belhoul, CEO of Dubai Future Foundation (DFF) to discuss how to strengthen the UAE startup scene.
Check out the full discussion, and watch the Webinar below:
They explored several topics, including:
How DFF has adapted to the change in environment and working remotely
HE Khalfan believes it has its pros and cons - you can spend more time with your family, but you are also sitting in one place for long periods of time. You can multi-task effectively from home and technology can help towards this. Although, as fortunate as you are to have a quiet, small space, meetings do tend to happen one after the other.
He also believes that the level of creativity can be lost through working remotely. There is no 'shoulder-rubbing' type of interaction at home that happens through a physical working environment. The random meetings and discussions that happen in the office or over coffee can end up being very impactful when it comes to the creativity of a business. This is lost when working from home; there are also solutions of having online community gatherings, but they don’t replace the physical interaction.
HE Khalfan shares that they are blessed to have the platform, infrastructure, and productivity and that things are running smoothly at DFF.
What some of the key high-level findings were in the whitepaper report that was published by DFF
Philip shares that a vibrant ecosystem was beginning to develop in the UAE, with over 60% of funding last year allocated to UAE-based startups. However, the current challenge has created a difficult environment for these startups and SMEs.
HE Khalfan says that the whitepaper clearly made their recommendations at the government level more streamlined and structured; it is based on key recommendations. The purpose of this exercise was to aggregate all the recommendations and efforts. He says that we are in a tough time at the moment globally, where everyone is trying to find the most innovative solutions for startups. The top priority in every country right now is the health of its people and second, potentially being the health of its economy.
When it comes to the report, there are mechanisms of financing that have been discussed, so for example, how the government and different lending or equity or financing mechanisms can support the ecosystem. We are not talking about typical SMEs which are struggling but we are also talking about the Fourth Industrial Revolution - tech-driven innovations that are most probably in a riskier situation as they have less tangible assets and their ideas are disruptive, with high growth rates and high burn rates at the moment. Those startups are at risk globally, therefore the idea of the report is to discuss what kind of funding mechanisms there are to asses or support the ecosystem.
He Khalfan shares that they a now in a phase of assessing all the recommendations received, and are in a situation where they are digesting everything and are aggregating all the contributors towards those efforts. You see stimulus packages coming in, funding mechanisms and you see different service providers and people offering reductions in rents. The idea is 'how can we consolidate all the efforts, see where they fall, and do they really reach the tangible level where the startups can feel it and appreciate it?'.
The biggest issue for example, in the USA, they are in the fourth phase of a stimulus programme right now. With the trillions that they have been deploying, you talk to companies and startups who haven’t seen any of that. So it is important to ensure that the community gives us feedback on what is tangible and what isn’t. We want to voice what we are doing, but we want to continuously listen because we learn from the people who are on the ground - what are they feeling, what needs to be changed? We are blessed to be in a country where agility, change and acceptance from leadership is there.
Initiatives that are being put into practice that can support startups in managing the cost of staff, keeping them in employment, or even supporting them in moving to other companies without the costs of visas, transfers, and so on
He Khalfan refers back to the report, saying that there is one recommendation that says, 'we need a startup champ'. They are looking for DFF to be the focal point for the current situation to ensure that everything that is related to the challenges is funneled to them and they can push those ideas to the relevant parties. He says that it is very important for them to, in order to not get those fragmented offerings, to really ensure that there is a place where startups can actually connect, understand and look at all the complete offerings - whether it is what happens to talent, the funding perspective, where are we with deals, and where are we with rent.
He says that no one can deny that none of this can work without talent. The idea can be great, but you would rather work with an A person and a B product because it is all about the talent and the entrepreneur.
The first way to keep and retain talent is to maintain or give them hope in the idea that they are driving. His first hope is that the entrepreneur that is driving the idea will continue with it until he sees light at the end of the tunnel. He would rather first ensure that they have the right funding, support, and mechanism to thrive in the business that they have been running.
If the Dubai Future Fund has been deployed and if Venture Debt is part of the discussion
Philip shares that there are lots of discussions about now being an opportune time to bring in venture debt as a mechanism and as a tool to support startups, particularly high growth tech startups that can complement that with a potential fundraise.
HE Khalfan tells us that the fund was announced earlier this year, and that the governance and high-level oversight for the fund are in place, as well as the steering committee, the investment committee, and the leadership for the fund are being built. The asset allocation strategy is 95% there, and its percentage allocation of what goes where when it comes to matching schemes vs co-investments vs fund of funds vs direct and indirect - all of this is in good shape.
Due to what has happened at the moment, they are looking at whether they have a role to potentially explore, playing around with the mandate to have it more COVID-19 driven. The ticket size of the fund won't be sufficient enough to create the stimulus programme and if they want to diversify allocation, it doesn’t mean that the whole billion will go to a grant or stimulus programme, because you will need to diversify to grow and reach the strategy that you have for the fund.
HE Khalfan proceeds with they still want to have a role in this, similar to what they do in the Dubai Future Foundation where they have converted all of their projects to be COVID-19 driven right now - through the reports or through the accelerators which have been connecting startups to solve issues of ventilators and masks. The allocation is there, the governance is there, getting the executive team on board, and finalising the asset allocation strategy and fine-tuning it is there, but the plan is to start deploying this year.
In terms of Venture Debt, the best vehicle he shares is the Mohammed Bin Rashid Innovation Fund. They have a mechanism of debt and they are in discussions to see what kind of initiatives there are to accelerate this effort specifically in the times that it is much needed in the ecosystem.
Read a 101-guide to venture debts.
If we are seeing more coordinated efforts to support growth tech startups that don’t need to be in offices with regards to license renewals, visas, and real estate. And if there are any policies or initiatives that will be trying to address this
HE Khalfan explores that this is the drive to the new normal of a post-COVID-19. When people ask 'when are we going to get back to normal life?', the new life will no longer be like what it used to be; we need to accept this.
Adaptation is key. If you look at malls, for example, we know that retail will change, spaces in malls will change, due to the introduction of e-commerce that has been accelerated as a result of this current crisis. We knew that e-commerce was inevitable, but now it has accelerated. This will change even in the physical space of malls, they will probably be more experiential.
We need to adapt, it is inevitable for us all; not just startups, but also government entities. We need to revisit the amount of real estate we need and the purpose of it. Do we really need dedicated office space post-COVID-19? Will the office space be dedicated to gatherings that inspire creativity, and create solutions? Does this mean that our real estate will reduce? The discussion at the entrepreneurial side to reduce costs and increase their value will need to be discussed at the highest level. The most important asset you have is the talent, and you want to make it as easy as possible for talent to thrive. If they can produce as much, if not more from home, then repurposing the real estate for other valuable and beneficial reasons, should be discussed. HE Khalfan is confident that things that are valuable for the entrepreneur are a learning curve, and the impact of the importance of those challenges have been more visual in challenging times like COVID-19.
How DFF can support startups who have pivoted to cater to this new reality, to showcase their new solutions to the ecosystem
HE Khalfan opens up about working on a programme that’s more of an accelerator programme for startups that have pivoted and come up with new ideas. This will highlight how they can support startups and link them up with different government entities. He discusses that they have realised the value of this programme through aggregating all their entrepreneurs in their business unit which has a massive network of startups. When COVID-19 first became apparent, they communicated with all of their startups and tried to understand how they can contribute to the challenge. Focusing on those that are pivoting right now is important. You can focus on startups that have failed and celebrate that failure, as all entrepreneurs know that failure is a learning curve for them to pivot. Right now, the pivot rate has most likely been increased, therefore we need to leverage the talent. The asset is the person and not the idea, the idea can always change.
Other topics included, tips for startups that are looking to set up in Dubai right now, if the UAE is looking to support SMEs by providing long-term, low-interest loans to allow them to get out of the financial crisis, how to attract and retain talent in the country, steps that are being taken to prevent a mass exodus, if DFF could create a salary fund, and much more.
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With Mawdoo3, Jamalon, and HyperPay raising a combined $33M in total funding in 2019, it was a record year by funding for the Jordanian startup ecosystem. Learn more about one of MENA's oldest ecosystems in our 2019 Jordan Venture Investment Report.