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Alexandar Williams, Director or Strategy & Policy Getting Business Finance - Getting Started: Incubation, Investors (Angel) and the Role of Government.

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Presentation on theme: "Alexandar Williams, Director or Strategy & Policy Getting Business Finance - Getting Started: Incubation, Investors (Angel) and the Role of Government."— Presentation transcript:

1 Alexandar Williams, Director or Strategy & Policy Getting Business Finance - Getting Started: Incubation, Investors (Angel) and the Role of Government

2 2 Output (economic growth) 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 to new growth path “Better” path → Productivity “New” path → Innovation Moving Forward: a different economic development path From “Bigger” to “Better” Moving Forward - The New Economic Imperative

3 3 Vision, Mission, Roles & Core Initiatives SME Sector and SME Firm Development (Groom Dubai’s Top SMEs) Entrepreneurship & Entrepreneur Development Advocate Seed Groom 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 Corporate Governance, Access to SME Financing, Ease of Doing Business, IP Incubation, Idea Lab, Entrepreneur Capability Development, YEC Incubation, Idea Lab, Entrepreneur Capability Development, YEC

4 Ideation and Incubation- The Dubai SME process

5

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

7 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 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)

9 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)

10 SME Investment – Risk Continuum High SeedStart-upEarly Growth Established Low Founder, friends & family Business Angels Venture Capitalists Corporate VC Equity Markets Commercial Banks Level of Investment Risks Assumed by Investo r (source: WIPO) Angel market addresses the investment gap between love money and serious money

11 The Enterprise Risk Financing Schema I Innovation Seed Capital Funds and Public Funding Commercial & Savings Banks Private Investors and Business Angels Time IdeaStart upMarket IntroductionMaturityTransferGrowth Corporate Fund & Venture Capital Cash flow Efforts made by financiers Risk

12 Angel Investing

13 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.

14 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) 14

15  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

16 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)

17 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

18 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 & Character Intelligence Attitudes & Beliefs Business Skills

19 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

20 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

21 Quality of financial information Information available about the industries Costs of information verification Supply Side Factors (Disincentives for lending) No Tax Benefit 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 InfrastructureAuditing Environment Skip-RiskNature of Economy Banks & Start Ups & SMEs Be Bankable Speed of getting finance SME Financing in the Dubai / UAE Context

22 Preferred Source of Funds for Business Growth

23 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)

24 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

25 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

26 Thank you for your attention


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