What Did Investors Say During The Global Technology Forum 2010? (The Complete Report)
(This the second and last full post by Amir Kabbara about the he Global Technology Forum, he is an entrepreneur and ArabCrunch Ambassador in USA, Amir is originally from Lebanon and now working with Microsoft in Seattle. (PS: if you are interested in becoming ArabCrunch Ambassador in your City or country, please email editorATarabCrunchDOTcom your bio.)
Global Technology Forum 2010 event on March 18th was a phenomenal success. It was a great learning experience, which was provoked by the tech industry’s leading players including Arab based and Silicon Valley Venture Capitalists (VCs) and organizations and distinguished Arab entrepreneurs and executives. The event was hosted by the Plug and Play Tech Center and was successfully organized by Youssri Helmy and Dina Ibrahim of TechWadi. As stated by TechWadi, their goal was to promote “a new initiative to form partnerships with Silicon Valley and dramatically accelerate the growth of both – in MENA as well as other emerging markets.”
Saeed Amidi, Plug and Play CEO, and Hazem Abdelazim (PhD), ITIDA CEO, started out by talking about their incubation efforts both in Silicon Valley and the MENA region. Abdelazim (PhD) talked about Egypt’s efforts to foster technology innovation through incubation.
The event was followed by 6 main panel discussions:
MENA: Investor perspectives on tapping new world of opportunity
- Silicon Valley: VC trends and transplantation – how can the model work in the MENA region?
- President Obama’s Global Technology and Innovation Fund: How you can make a difference
- Success stories from MENA and Silicon Valley
- Spotlight on a new generation of Arab entrepreneurs
- Building blocks: Creating the new ecosystem
In Each panel, there was a high level of audience engagement and a lot of passion towards the Arab region. Attendance number was around 200 attendees and everyone was there for a unified purpose of ‘making it right’. Each set of speakers had their own opinion and insights on how to successfully transform the region from its current shape to a more vigilant state where it is able to become a global technological player.
Being based in MENA, the first panel of MENA investors talked about their current initiatives to help trigger entrepreneurship and technological innovation in the region. All of these organizations have their own goals and ways of fostering entrepreneurship. I won’t be covering that in this post, but everyone can read about these companies. Here are the links so be sure to check them out (Ideavelopers; IV Holdings; Sawari Ventures; Riyada Enterprise Development; Intel Capital META; Dubai Silicon Oasis Authority). The more interesting part of the panel’s discussion was about 1) Dubai’s investment strategy and 2) the barriers that are currently hindering the region.
Mohamad Alzubi of Dubai Silicon Oasis explained in details what makes Dubai an attractive market to foster and launch startups. In 5-10 years they were able to utilize the capital they have built over the years to transform Dubai through effectively utilizing the capital for IT Investments and Infrastructure. More than $1B has been spend on such investments.Not only did the government use capital to spur up start-ups but they also adjusted their laws to attract companies as well as VCs.
Other speakers said that the smartest tech people are in Lebanon, Egypt and Jordan. These three countries have natural entrepreneurs that are well skilled and capable of starting something if they were given the right opportunities. Countries like Dubai who have the capital need to use that capital to invest in these three countries’ entrepreneurs; “right now the capital is in one place and the entrepreneurs are in another, a reallocation of resources needs to happen to make this right”. As one speaker said, “Successful companies are the ones that are starting up in countries like Jordan and Lebanon since they are able to access a vast majority of highly educated and skilled workforce and then move to a country like Dubai for their regional Head Quarter when they want to expand further.”
Emile Cubaisi, managing director of IV Holdings, had a different opinion about Dubai’s $1B investment to build the current infrastructure. He said that if you look at other Arab countries, they have smart and skillful people that are able to change the lives and improve upon the people around them, with a $1B, millions of people can be helped and many of the region’s problems can be solved. He mentioned that IV Holdings has been able to do a lot with a smaller amount of money but did not get the chance to give examples of that.
The consensus among the majority of the speakers was that the region is at an early stage and needs to build up the basics including 1) The education system – to gear it towards entrepreneurship, 2) The right infrastructure to aid those entrepreneurs and 3) the IT investments including capital to fund the entrepreneur’s needs to be allocated in the right way.
All the MENA VCs also talked about the vast amount of opportunities that currently exist in the region for entrepreneurs. The panel of VCs was debating whether it is a good idea to ‘copy’ a foreign idea and just implement it in the Middle East or create something that can compete in foreign markets. There were mixed views about that, some were proponents of building products that can compete globally and others were satisfied with the ‘copied product’ that can be tailored and localized for the market needs.
In general, the opportunities in MENA were briefly touched upon at a very high level. One member in the Audience, Mohamad Arabo who works in the Windows Phone Division in Microsoft brought up a good point, he said “I have been working in Microsoft for a while… as a techie and I enjoy being one… I am hesitant to move back because there isn’t real development there (compared to the US)… it will mean the end of my tech life… I need to see real, viable and concrete opportunities before moving.”
Arabo also talked about his attachment to his culture and to the Middle East. He said that he is willing to help out with growing the opportunities for techies in the region, but from the US, until the opportunities are clear. As a side note, Windows Phone recently released their SDK for app development. If anyone is interested in developing for the Windows Phone, Mr. Arabo mentioned that he would be interested in helping out or answering any questions.
Back to our main topic, many Silicon Valley VCs had similar opinions about the Arab world. They like the idea of investing in the ArabWorld however they want to make sure that they invest in the right opportunities. All the US based VCs agreed that they haven’t seen that right opportunity yet.
Maha Ibrahim (PhD), General Partner in Canaan Partners, mentioned that the MENA region has smart and skilled people as well as entrepreneurs but when a VC invests, they want 10x returns and they haven’t seen that in Arab countries yet. Arab countries don’t have the correct structure yet, it is still too hard for a company to go IPO and there are not many acquisitions in the region.
Countries in the Gulf tend to acquire companies abroad but not in the Arab world. Silicon Valley VCs will put in more investments when the exit strategies for companies are clear and when the 10x returns are there. Khaled Nasr, Partner at InterWest Partners, had a few suggestions for Arab start-ups. He said that the start-up should start and establish itself in the Middle East, when it is successful there then the CEO should come to the US and open an office and try implementing the idea. Investors will invest in the US start-up that has operations in the Middle East. This is exactly what “Israel” and India do, and they have been extremely successful with that model.
Next, Ronaldo Mouchawar, CEO of souq.com, and Hisham Haddara (PhD), CEO and founder of Si-Ware Systems talked about their own experiences while starting and establishing their companies. We also heard some of the young and bright Arabs talking about their successful stories in the corporate world. These wese extremely interesting and detailed so we will keep it for another post since this is getting too long and there is a lot more to talk about J
Both Maha Achour (PhD), CTO and cofounder of RAYSPAN, and Belgacem Haba (PhD), CTO of Tessera, talked about their technical companies that are mainly monetized by the licensing business model. They both mentioned that “licensing technologies can be very difficult for early start-ups; it is also very difficult to compete in manufacturing and system integration. You need to have a great technology, be the first to the market and successfully implement an IP licensing model, innovate, protect, reduce practice, commercialize and enforce the IP. You also need to target a billion+ market if you are monetizing through royalties; you need to scale them.
Try solving existing problems and keep a vigilant eye on university research. Dr. Achour also mentioned that in order to raise funds for your start-Up, secure your first customer and focus on bringing the highest return on the investment. Dr. Achour started in 2006 with 6 employees, funding from initial founders savings and convertible debt then was able to raise $13 Million from Khosla ventures in a matter of days.
Dr. Taher El-Gamal, CEO, IdentityMind, had an interesting story about how he started the company. He was having a conversation started with 3 different people in a coffee shop. They found something completely broken with what is happening in security and fraud. They have the expertise in security and can eliminate fraud and make $2B out of it so they simply started a company 6 months ago to do that. Dr. El-Gamal was able to find the opportunity: 1) E-commerce growing to $250B annual, 2) Online fraud is on the rise 1-2%, 3) existing solutions are not solving the problem and 4) Total Market Size: Fraud + False positives + processing costs. These four points were enough of a justification to his team that they need to start the company and take advantage of the opportunity.
Dr. El-Gamal mentioned 5 keys to a successful start-up:
- Domain knowledge – excellent team
- Ride a wave – don’t try to create one, “companies that ride the wave are more successful then ones that try creating the wave.”
- Market first then technology.
- Identify friends and enemies, “which companies do you want to partner with and which do you want to compete with?”
- Distribution strategy early.
Last but definitely not least, Bassel Ojjeh, the CEO of nPario and the lead investor in ArabCrunch Group, announced the Public release of ArabCrunch.NET. He talked about the importance and value of having ArabCrunch through a case study done on SourceForge and how ArabCrunch helped expose unfair blocking and helped stop it .
The entire day has been about VCs and entrepreneurs talking and giving their opinion about the MENA region. One of the biggest aspects of the conversations was mentorships in order to help educate and improve entrepreneurs have the skillset that the successful foreign entrepreneur has. Ojjeh was able to use ArabCrunch.NET as a point in case examples of helping entrepreneurs from all over the world connect and help each other make their dreams successful. ArabCrunch.NET is building the new eco-system to foster entrepreneurship. Ojjeh also got the chance to show us a video, the movie Nemo in Arabic, created by a Syrian animations company that is on the path to become the Pixar of the Middle East.
Mr. Ojjeh also mentioned his own observations about MENA:
- Tons of ideas and passion.
- Strong technical caliber.
- Solid infrastructure.
- Successful example (Maktoob/Admob)
- Weak Mgmt bench.
- VCs passive (VCs need to be more proactive and need to help entrepreneurs and mentor them through all the stages)
- Little angel investing structure.
- NGOs and GOs are ineffective.
- Lessons for engaging.
- Milestone based investing (6 months)
- Heavier engagement with Management.
Identify the Operational CEO. Really key whether it’s getting someone from US to move over there and knowing who should be the operational CEO (someone who can execute not just the idea creation) and Create a G&A staff (if you are going to do this… HR, IT, legal etc.)