Download Dubai SME Template

Getting Business Finance
- Getting Started: Incubation,
Investors (Angel) and the Role of
Government
Alexandar Williams,
Director or Strategy & Policy
Moving Forward - The New Economic Imperative
“Better” path
→ Productivity
Output
(economic
growth)
“New” path
→ Innovation
Need to move to
new growth path
“More” path
→ More labor
and capital
Moving Forward: a
different economic
development path
From “Bigger” to “Better”
Dubai’s current
situation in key
sectors, e.g.
• Real estate
Reaching optimal scale
Reaching minimum scale
• Decreasing returns for each
additional unit of labor and
capital
• Increasing macroeconomic
challenges (demographics,
environment,
infrastructure)
→ Rising cost of growth
Inputs
(Labor and capital)
2
Vision, Mission, Roles & Core Initiatives
Incubation,
Idea Lab, Entrepreneur
Capability Development,
YEC
Corporate Governance,
Access to SME Financing,
Ease of Doing Business ,
IP
Seed
Dubai SME 100,
Gov. Proc. Prog.,
YBL
Groom
Advocate
Dubai as a Global
Center for
Innovative SMEs
Roles
Mission
Foster the development of a
flourishing entrepreneurial
culture and a competitive
SMEs sector to support
Dubai’s economic
development
Vision
Entrepreneurship
& Entrepreneur
Development
SME Sector and SME
Firm Development
(Groom Dubai’s Top
SMEs)
3
Ideation and IncubationThe Dubai SME process
The life cycle of Entrepreneurship
Development, Firm Creation and
Funding Stages
$
Understanding the process of firm
creation and exit view
Expansion/scaling
Pre-IPO
- viable
- Market interest
- Heading to IPO or M&A
- high growth
- head count
- multiple cycles
- market acceptance
Start-Up
Seed
Idea/Concept &
Discovery
-Bright idea
- Experimental
- Research
- Business Plan
-Proof of Concept
-Legal entity
- Founders=mgt team
- Minimal/Zero revenue
-Slow growth
- evolving market
acceptance
- customer tests &
acquisition
-Validation of
product/services
-Support functions
- Administration
- Marketing
-Revenue growth
-Broadening customer
base
TIME
7
$
4 Expansion/Scaling
Understanding the Needs
at each stage
3 Start-Up
2 Seed
1 Idea/Concept
& Discovery
-Prototyping/POC
- Project Management
- Premises/Incubation
- Mgt training
- IP support
/advisories
-Corporate & secretarial
- financial
-First hires
-PR & networking
-Business development
- Potential IP valuation
- customer acquisition
-Commercialization
support
-Recruitment
- business development
- Market access
- business model
iteration
- IP validation
- customer acquisition
system
- international market support &
access
- branding
- diversification strategies
- training
- fund raising
- financial governance
- technology licensing
TIME
Varying levels of government enablement (direct & indirect)
8
The Enterprise Development Financing Process
Stage in
Cycle
Type of
Funding
R&D
Proof of
Concept
Start-up
Seed
Early
Growth
First
Round
Accelerating
Growth
Second
Round
Sustaining
Growth
Maturity Growth
Development
Capital
Replacement
Capital/MBO/MBI/
Development
Capital
Public Sector (e.g., matching funds)
Founder, Family, Friends
Source of
Funding
Business Angels
Corporate Venturing
Venture Capital Funds
(source: WIPO)
Public listing/IPO
SME Investment – Risk Continuum
Angel market addresses the investment gap between love money and serious
money
High
Founder,
friends &
family
Business Angels
Level of
Investment
Risks
Assumed
by
Investor
Venture Capitalists
Corporate VC
Equity
Markets
Commercial Banks
Low
Seed
Start-up
Early Growth
Established
(source: WIPO)
The Enterprise Risk Financing Schema
Efforts made
by financiers
Cash flow
Risk
Time
Private
Investors
and
Business
Angels
Innovation
Seed Capital
Funds and
Public
Funding
Idea
Start up
Market Introduction
I
Commercial & Savings Banks
Corporate
Fund
& Venture
Capital
Growth
Maturity
Transfer
Angel Investing
Who are business angels?
Individuals who invest their own monies locally into unquoted
companies, usually at their seed to start-up phase. Besides cash,
they also make available their experience, know-how and
networks of contacts.
It is not cheap money, charity or grant. A return on investment
is expected at some future point.
Key role is to bridge idea to a formal business organization.
Define the products and business model.
Well rounded expertise (experienced entrepreneur –turned
BA). Is part of the team.
What are business angel networks/clubs
“organizations” who bring business angels in contact with
quality deal flow
National federations and associations
Umbrella Organizations at national or regional level for the
networks, enabling exchange of good practice and
supporting professional standards (e.g., EBAN)
Importance of Angel Investing

Primary source of risk capital and support for start-ups in a number of
countries. It is frequently overlooked as angel investors are often not
visible.

Primary drivers of a flourishing start-up/entrepreneurial ecosystem

Angel investment is a powerful source of financing for highgrowth potential start-ups.

Angel investors tend to be less sensitive to market cycles than venture
capitalists
What is the Entrepreneur looking for in Angel
Investors?
Money to start, grow idea into a business
Expertise and advice on execution
Experience in a particular domain knowledge (finance, investment,
Industry verticals – Digital Media, F & B, Logistics)
Contacts and networks with other resources such as financiers,
consultants, buyers, procurement executives, suppliers, key
talents
Time and Commitment to develop the entrepreneur, the team
and business
Credibility and trust to see the business develop
What the angel investor is looking for in
the entrepreneur?
 Passion, ambition, industriousness, self-discipline, decisiveness,
self-confidence, and tenacity of the entrepreneur and his team
 Domain knowledge, numeracy, understanding of risks (to de-risk
the business), sense of urgency, and a belief in Kaizen
(continuous improvement)
 “Chemistry” with the team yet maintaining a “tough love”
relationship
 Preference for start-ups with mentors & advisors (culture of
openness and listening to external views)
 An executable idea, backed by a sensible & solid business plan
Entrepreneurial Finance Lab Psychometrics
EFL utilizes a proprietary psychometric application process that incorporates an
entrepreneur’s attitude and outlook, ability, business acumen and character to
identify high-potential, credit worthy entrepreneurs.
Ethics & Character
Intelligence
Risk
Business Skills
Attitudes & Beliefs
Some Challenges for BAs in ME
Lack of good data & information on the activity
Lack of awareness & understanding of BA concept
Still risk – averse culture, but gradually changing
Many wealthy individuals prefer to invest in art, real state etc.
Financial sustainability of BAs (some co-funding/matching funds from
government required)
Up-to-date and enforceable company and share ownership laws on transfers,
exits, etc.
Lack of a strong university-private sector- government linkage, low R & D
commercialization experience
Still Nascent but will evolve gradually
Need to highlight more success stories
Role of Government- Foster a Conducive Environment
SUPPLY
Bringing more investors
DEMAND
Quality deal flow
MARKET
Impact and sustainability
Educating investors about
opportunities in the SME
space
Investment readiness of
start –ups/ SMEs (incl.
sector specific)
Support sustainable and
professional BANs
Co-investment/matching
funds
Teach entrepreneurship
and access to finance very
early on in schools
Case studies with relevant
Angel Stakeholders
Investor readiness
capability development
Operate incubators and
Tech Parks; open R & D
labs to entrepreneurs to
test products
Co-organize Local BA/VC
forums
Set up mentorship
platforms and programmes
Co-organize with private
sector a platform for deal
flow connection
Ensure rules and
regulations support the
investment and exit
process
SME Financing in the Dubai / UAE Context
Supply Side Factors
(Disincentives for lending)
Demand Side Factors
(disincentives for borrowing)
No Tax
Benefit of
debts
Information
available about
the industries
Psychological
factors
Trading focus need of
finance
Start Ups &
SMEs
Be Bankable
Banks &
Short planning
horizon
Quality of
financial
information
Costs of
information
verification
Speed of
getting
finance
Asset light
businesses
Underlying Structural Factors
Legal Framework
Information Infrastructure
Skip-Risk
Auditing Environment
Nature of Economy
Preferred Source of Funds for Business Growth
Sources of Additional Capital in the past
Sources of additional capital in future
Family &
friends
6%
Did not need
29%
Personal Money
38%
Friends &
Family
8%
Additional
Partners
11%
Bank Finance
14%
Personal
Money
25%
Bank Finance
41%
Additional
partners or
investors
28%
Be Bankable.org (to be launched in 2015)
Launching a website to enable SMEs prepare themselves for accessing
bank finance.
Guide SMEs through a step-by-step process to approach banks for finance
An SME using BeBankable.ae will be able to prepare a bank finance application
and also self-assess readiness for banking
SMEs can learn more about banking products, services, processes and
documentation to confidently negotiate the best suited financing options
Guide SME owners to qualified auditors (Good / Bad Balance Sheet, Auditing
Contract, How to select an Auditor)
Be Investable Initiative (to be launched in
2015)
Initiatives /pogrammes to be launched (over next few years)
- Undertake Dubai SME Equity Financing Study (started)
- Set up Dubai SME Angel Investor Directory Network/platform
- Dubai SME “Accreditation” programme for Dubai – based Angel
Investors
- Guidelines for angel investors in Dubai/UAE context
- “Build your equity story” programme for entrepreneurs
- Business Valuation and value drivers programme
- Diagnostic tool kit to assess entrepreneur readiness for BA
Investing
- Case studies of BA in the UAE/Region
Initiatives /pogrammes to be launched
- Conferences/Seminars/Workshops/Roundtables on Angel
Investing
- Training course on Angel Investing
- Mentorship programme
- Pitching competitions
- Dubai Best Start-Ups 50 List
- Dubai Angel Investor Awards Recognition
Thank you for your
attention