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This article is a part of the 2022 edition of Entrepreneur Middle East’s annual Follow The Leader series, in which enterprise head honchos from the region talk strategy, industry-specific tactics, and professional challenges as they lead their respective businesses to success.
“Do they have a vision, or is money the only interest?” In his role as the CEO of Dubai Cultiv8, this is one of the questions that Arif Alawi likes to ask entrepreneurs that seek support from the Dubai-based investment fund. Evaluating a startup’s founding team on everything from their vision and passion to their experience and skills, Alawi and his team at Dubai Cultiv8 also consider a bunch of other factors. Those include the solution’s differentiating factor in a competitive market, revenues and earnings, client acquisition costs, or its lifetime value (“How much can the company expect to profit from a customer?”). Also, the Dubai Cultiv8 team looks at the company’s business plan, growth strategy (“We project five years into the future- when will this project hit break even and become profitable, and how much time will it take?”), scalability, and exit plans.
The questions Alawi poses offer a glimpse into the mindset with which he leads the charge at Dubai Cultiv8, an initiative of the Mohammed Bin Rashid Fund for SMEs, an entity established by H.H. Sheikh Mohammed bin Rashid Al Maktoum, UAE Vice President and Prime Minister and Ruler of Dubai, in 2012. Dubai Cultiv8 itself was launched in 2018, and has been chaired by H.E. Abdulbaset Al Janahi, CEO of Dubai SME, an integrated division of the Emirate’s Department of Economic Development. Alawi describes Dubai Cultiv8 as a Shariah-compliant investment firm that offers “cutting-edge solutions for investors,” all of which is regulated by the Dubai Financial Services Authority. “We define ourselves as an investment arm providing two services: advisory services (providing expert advice, structuring the company, raising capital, formulating business plans and financial models, and guiding through each stage), and investing in companies through fund creation,” he explains.
Alawi also adds that his enterprise is behind the Dubai Cultiv8 Technology Fund, a US$100 million fund focusing on investing in growth-stage technology companies, either located in the UAE or abroad, that aim to shift their operation wholly or partially in the country. As the UAE’s first public-private partnership in the venture capital sector, Alawi points it to being a key advantage for the firm. “Most companies are privately owned by families, individuals, offices, or ex-bankers, but we are differentiating and positioning ourselves as a niche incubator,” he notes. “We clear the way for SMEs to enter and grow in the UAE market without financial pressure.”
For Alawi, whose career trajectory has seen him launch multiple investment and asset management firms across the GCC, as well as play leadership roles at various financial enterprises in the region, he seems to be especially well-suited for his role at Dubai Cultiv8- and we can confirm this as he tells the story of how he came to be associated with the enterprise. It started with a conversation he had with Dubai SME’s Al Janahi in 2017, when he was engaged with the latter’s enterprise as a strategic advisor for special projects and startups. “My thoughts were that if the initiative wants to support SMEs that are contributing to the UAE economy, we have to focus on local as well as international startups,” he recalls.
“Local SMEs already form around 90% of companies, especially in Dubai. Out of 100 ideas, there are only two or three ideas being acquired by venture capitalists or angel investors. After presenting the idea, we established an investment arm- any concept with a potential for growth, we would support and invest in, rather than just financing it. This way, we also got transparency of the cash flow. This is where the idea for Dubai Cultiv8 came from. Local SMEs who need financing go to Dubai SME, and those who need investment and business advice come to Dubai Cultiv8, so, we complement each other, and, together, we don’t miss out on any SME that needs help.”
As the CEO of Dubai Cultiv8, Alawi is responsible for developing the entity’s overarching business plan, while also ensuring it encourages and attracts international entrepreneurs to set up and expand their businesses in the Emirate by offering relevant funding and services. Of course, along with that, his role also includes recruiting talent across the world to position Dubai and the UAE as the go-to hub for investors and entrepreneurs. “Contributing to the UAE government’s goal of launching and assisting companies to stimulate economic growth has been a highlight of my career at Dubai Cultiv8,” Alawi states.
But what does it take to be part of Dubai Cultiv8’s portfolio? “Our investment philosophy is to focus on companies established in the UAE and have plans to expand worldwide, as well as companies who are based elsewhere, but wish to expand into the GCC, notably the UAE, with operational branches,” replies Alawi. The overall aim eventually, Alawi states, is to attract more businesses to develop in the region and attract talent globally, while creating job opportunities for both locals and expats in the UAE. And Dubai Cultiv8 is certainly doing its part- the firm has so far invested in seven different companies, with two headquartered in the US and having a base in the UAE, while the other five are based in Dubai. Its portfolio includes startups like UAE-based car sharing company Udrive, New York-headquartered online ethical investment platform Wahed Invest, and Dubai-based last-mile delivery startup Fodel.
Looking at the current state of the MENA entrepreneurial ecosystem, Alawi believes that the UAE has definitely emerged as a preferred location for new businesses in the MENA region. According to him, the sectors that have potential for further investment include e-commerce, fintech, healthcare and wellness, payment gateways and wallet solutions, and gaming platforms. Alawi adds that he and the Dubai Cultiv8 team are also considering nascent industries, and says “We have our eye on crypto, which is growing fast, and has many platforms here for it to grow. The NFT business is [also] just growing here; we started with digital artists, but in the future, it will take over the world.”
And for those of you seeking guidance to grow your respective businesses, Alawi has plenty of practical advice to share as well. First off, he says, develop a clear marketing and sales strategy. Plus, he tells entrepreneurs to ask themselves, “If you’re thinking of expanding and selling the company one day, there should be exponential growth in clients. Is the product scalable overseas?”
Other tips include attempting to increase customer retention through after-sales support and loyalty programs, as well as to develop strategic partnerships with service providers. Seek like-minded people around you, he adds- participating in networking events is a good way to do that, for instance. “Founders should look for guidance right from the set-up,” he says. “Once you have an idea, meet with an expert for guidance on how to develop the business. Often, I’ve seen people develop ideas and pitch them, but there are several gaps.” At the end of it all, he says entrepreneurs should just remember one thing: “Start small, and grow slowly.”
Related: Follow The Leader: Dima Ayad, Founder, Dima Ayad, And DAC Communications
The Not-To-Do List: Dubai Cultiv8 CEO Arif Alawi lists mistakes entrepreneurs make when approaching investors
1. Overvaluation according to market trends “An investor is not just looking at market trends, but also at the startup’s growth possibility. Some SMEs state that the company will grow 1,000% in one year, but this isn’t possible in every market and industry and for certain products.”
2. Lack of a clear vision “Bringing in funding involves many people. Without a plan of how many people a company needs during different periods, one runs out of cash fast, and in future rounds, the investors will see the cash flow and refuse to invest.”
3. No clear market understanding “People come in with a great idea, but they don’t know who their clients are. Are they focusing on B2B or B2C? Everybody cannot be your target market. Hence, without the client base, an accurate valuation cannot be formed either.”
4. Selecting wrong partners “Many tend to focus on capital only, without considering the ramifications of the wrong investment. Nowadays, companies don’t need $1 million in funding; $200,000-500,000 is enough to grow until the next round.”
5. Giving away too much of their company “If a founder doesn’t have anyone to support the business, they may give up 60-70% of the company, and once they progress to the next round of funding, they end up with 2-3%, and then, they won’t have enough power to direct the company based on the initial vision.”
6. Running a one-person-show “Some projects are started by a single person who believes in their product, but doesn’t believe in the people around them. The founder may not be recruiting the right people, and they are doing everything from marketing and sales to pitching to investors themselves. They don’t know when to bring in investors and at what valuation.”
7. Not having an advisory board “Often, technical experts who have little to no knowledge of business create a business, but they don’t know how to sell it and at what price, or how to effectively sell shares of the company. They don’t have financial or investment advisors or experts to guide them on the strategy around them, and they are also unwilling to give outsiders a stake. You need an advisory board to guide you, and enhance the value of the company and brand.