Alexandar Williams, Director or Strategy & Policy

Getting Business Finance- Getting Started: Incubation,

Investors (Angel) and the Role of

Government

2

Output(economicgrowth)

Inputs(Labor and capital)

Reaching minimum scale

Dubai’s current situation in key sectors, e.g.

• Real estate

Reaching optimal scale

• Decreasing returns for each additional unit of labor and capital

• Increasing macroeconomic challenges (demographics, environment,

infrastructure) → Rising cost of growth

“More” path → More labor

and capital

Need to move tonew growth path

“Better” path → Productivity

“New” path → Innovation

Moving Forward: a different economic development pathFrom “Bigger” to “Better”

Moving Forward - The New Economic Imperative

3

Vision, Mission, Roles & Core Initiatives

SME Sector and SME Firm Development

(Groom Dubai’s Top SMEs)

Entrepreneurship & Entrepreneur Development

Advocate

SeedGroom

Foster the development of a flourishing entrepreneurial culture and a competitive

SMEs sector to support Dubai’s economic

development

Mission

Dubai as a Global Center for

Innovative SMEs

Vision

Roles

Dubai SME 100, Gov. Proc. Prog., YBL

Corporate Governance, Access to SME Financing, Ease of Doing Business ,IP

Incubation, Idea Lab, Entrepreneur Capability Development, YEC

Ideation and Incubation- The Dubai SME process

The life cycle of Entrepreneurship Development, Firm Creation and Funding Stages

7

$

TIME

Start-Up-Support functions- Administration - Marketing-Revenue growth-Broadening customer base

Understanding the process of firm creation and exit view

Idea/Concept & Discovery-Bright idea- Experimental- Research- Business Plan-Proof of Concept

Seed-Legal entity- Founders=mgt team- Minimal/Zero revenue-Slow growth - evolving market acceptance - customer tests & acquisition-Validation of product/services

Expansion/scaling - high growth- head count- multiple cycles- market acceptance

Pre-IPO- viable- Market interest- Heading to IPO or M&A

8

$

TIME

3 Start-Up-Recruitment- business development- Market access- business model iteration - IP validation- customer acquisition system

Understanding the Needs at each stage

1 Idea/Concept & Discovery-Prototyping/POC- Project Management- Premises/Incubation - Mgt training- IP support /advisories

2 Seed-Corporate & secretarial - financial-First hires-PR & networking-Business development- Potential IP valuation - customer acquisition-Commercialization support

4 Expansion/Scaling- international market support & access- branding - diversification strategies - training - fund raising - financial governance - technology licensing

Varying levels of government enablement (direct & indirect)

The Enterprise Development Financing Process

Source of Funding

Proof of Concept Seed First

Round Second Round

Development Capital

Replacement Capital/MBO/MBI/

Development Capital

Type of Funding

Public Sector (e.g., matching funds)

Founder, Family, Friends

Business Angels

Venture Capital Funds

Corporate Venturing

Public listing/IPO

R & D Start-up Early Growth

Accelerating Growth

Sustaining Growth Maturity Growth Stage in

Cycle

(source: WIPO)

SME Investment – Risk Continuum

High

Seed Start-up Early Growth Established Low

Founder, friends &

family Business Angels

Venture Capitalists Corporate VC

Equity Markets

Commercial Banks

Level of Investment RisksAssumed byInvestor

(source: WIPO)

Angel market addresses the investment gap between love money and serious money

The Enterprise Risk Financing Schema

I

Innovation Seed Capital Funds and

Public Funding

Commercial & Savings Banks Private Investors

and Business Angels

Time

Idea Start up Market Introduction Maturity Transfer Growth

Corporate Fund & Venture Capital

Cash flowEfforts made by financiers

Risk

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)

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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 high-growth potential start-ups.

Angel investors tend to be less sensitive to market cycles than venture capitalists

Importance of Angel Investing

What is the Entrepreneur looking for in Angel Investors?

Money to start, grow idea into a business

Time and Commitment to develop the entrepreneur, the team and business

Contacts and networks with other resources such as financiers, consultants, buyers, procurement executives, suppliers, key talents

Expertise and advice on execution

Credibility and trust to see the business develop

Experience in a particular domain knowledge (finance, investment, Industry verticals – Digital Media, F & B, Logistics)

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

Risk

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 & CharacterIntelligence

Attitudes & Beliefs Business Skills

• 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

Some Challenges for BAs in ME

Role of Government- Foster a Conducive EnvironmentSUPPLY

Bringing more investors

DEMANDQuality deal flow

MARKETImpact 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

Quality of financial

information

Information available about the industries

Costs of information verification

Supply Side Factors (Disincentives for lending)

No TaxBenefit of

debts

Demand Side Factors (disincentives for borrowing)

Psychological factors

Trading focus -need of finance

Short planning horizon

Asset light businesses

Legal Framework

Underlying Structural Factors

Information Infrastructure Auditing Environment

Skip-Risk Nature of Economy

Banks &Start Ups & SMEs Be Bankable

Speed of getting finance

SME Financing in the Dubai / UAE Context

Personal Money38%

Bank Finance14%

Additional Partners11%

Friends & Family8%

Did not need29%

Sources of Additional Capital in the past

Bank Finance41%

Additional partners or investors

28%

Personal Money25%

Family & friends6%

Sources of additional capital in future

Preferred Source of Funds for Business Growth

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