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[January 19, 2014]
Big day for tech start-ups [National, The (United Arab Emirates)]
(National, The (United Arab Emirates) Via Acquire Media NewsEdge) Potential investors will hear their ideas with successul entrants in line to be funded A After 120 days intensively developing their start-up ideas, the first 10 teams taking part in Dubai's Turn8 business accelerator programme will tomorrow pitch those concepts to 60 potential investors.
This represents a test not only for the entrepreneurs but for Turn8 because the event's demo day model is an unfamiliar concept for Gulf investors.
First, most of the Turn8 teams are developing tech businesses – not the typical real estate, retail and tourism ventures among UAE start-ups. Second, none of the businesses have a track record of trading, making them high-risk.
Third, local financiers generally prefer making investment decisions behind closed doors, not in an auditorium full of their peers.
This makes the event quite a challenge for Kamal Hassan, the chief executive of i360, the company that runs the incubator programme.
"Kamal has [not only] been brave enough to get investors together who don't know one another but also taken the next step to [introduce] SMEs that are outside the regular scope of investment," says Yousef Hamza of Envestors, a business angel network. "This is a necessary part of the [business] ecosystem. No one else is touching what he is doing, which is the micro part of developmental stages." The original and most successful start-up accelerator is Y Combinator in California. Dropbox, Airbnb and reddit are some of the companies it helped to start.
Demo days are invite-only and hugely oversubscribed. Companies that graduated from Y Combinator since it launched in 2005 now have a value of US$14.4 billion, founder Paul Graham tweeted this month.
Demo days typically work like this: teams have 10 minutes to make their pitch. This is followed by questions, requests for clarifications then networking. It's during this time investors approach the teams and either make a funding offer – in exchange for equity – or arrange a follow-up meeting.
"At events like this, when you see something you like you basically go for it," says Karim Samakie of Oasis500, a start-up accelerator and investment fund in Jordan, who will be at tomorrow's event.
His fund is worth $10 million and typically invests $30,000 to $500,000 in ICT companies.
"We are constantly scouting for good quality entrepreneurs to invest in," he adds.
Turn8 was launched by the ports operator DP World last April as a way of fostering innovation in the UAE. It brought in i360 to manage the programme.
The selection team sifted through 400 applications, interviewed 46 teams for interviews and finally selected 10 teams to attend.
The teams include Asly, which has devised an SMS system to identify counterfeit products such as medicines; KinTrans, which is developing software to translate sign language into audible words; and LocaMath, which has invented an interactive app to make it fun for children to learn mathematics.
While tech businesses may be unfamiliar and considered high-risk to many local investors, they have the potential to grow rapidly and become profitable.
"I love technology products because the sky's the limit with them," says the Dubai-based angel investor Mahmood Fazal. "Especially in a market like the Middle East, where the internet is big but not huge but there is the potential for [growth] to be huge." Mr Fazal typically invests $5,000 to $10,000 in start-up companies and plans to listen only at tomorrow's demo day because it is his first. "But if something looks really awesome then we'd like to talk to the guys behind it and see how we can take it further," he adds.
Mr Hamza, however, is going with the intention of making an investment.
His firm typically funds businesses between $200,000 and $1m and he is a fan of the demo day model.
"It allows investors to benefit from the questions and the industry knowledge of all the other investors in the room," he explains.
He is looking for "short, succinct, confident" pitches.
"It doesn't have to be the greatest idea," he says. "It's basically [about] assessing the management team and whether they can come across as being able to pull off what they are saying." As well as learning business skills such as putting together a business plan, the teams have also had their presentation skills tested. Each pitch will start with a short video detailing a problem the teams wanted to solve and the product or solution they devised to address it.
Each team will also have a booth in which to meet investors during networking time.
"We are pulling a lot of networking tricks so teams can network with investors and hopefully close deals on the spot," he says.
So, could Turn8 be the Y Combinator of the Middle East? We shall see.
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