Dubai: Internet entrepreneurs who know a lot about technology but little about media and marketing need all the help they can get before launching a new start-up web enterprise.
And even after following all of the rules and clocking 20-hour days to get a new IT company off the ground, there is no guarantee the enterprise will survive in the mercurial virtual business climate of the web.
Scores of fledgling internet business types swamped a free "Speed Up Your Startup" workshop hosted by the ArabNet Roadshow and Dubai Internet City to learn the ropes from a panel of experts.
Aware that not everyone can afford the time or money to travel to the group's ArabNet Digital Summit 2011 show in March in Beirut, ArabNet Roadshow officials have taken the message to eight cities in the Middle East since October with a mission to "train and inspire young entrepreneurs across the region".
ArabNet Roadshow said the workshop was about helping startup hopefuls to "evaluate their ideas and build a business case, understand their legal options and the fundraising process, learn about growing their business and get a perspective on the hot trends in the web sector".
Panel speaker Rabih Blair, co-founder of Tandem, a Dubai consulting and fundraising firm, told the workshop there was a typical cycle for entrepreneurs that always started with the idea.
"It's important to identify the strengths and weaknesses of the idea itself," Blair said, noting there were critical steps to success with building a business case such as identifying the service, the market, competitors, building a team, revenue streams and cost structure.
Using a start-up example to illustrate the steps, Blair said that a new book exchange website designed for students would first identify the benefits users would get from using the product, and in this case, cheaper used books versus pricier, new ones.
Potential customers
Research would show that 10 per cent of the UAE's population could mean there were 600,000 post-secondary students as potential customers to help build revenue streams to help the operation.
"With an internet start-up, the reality is that you won't see advertising revenues for a while until you build up a base," Blair said, suggesting alternative revenue streams need to shore up the new business.
To keep costs down, he advised that start-up owners do as much as possible in-house and tap into less expensive publicity tools such as social media marketing on Facebook and Google to help keep the bottomline in the black.
Sally Soubra, a lawyer with Laitham and Watkins, told the workshop there were three types of companies that could be formed in the UAE as a legal entity, each having their advantages.
The most common was the "limited liability company", in which an investor must find a local sponsor who owns 51 per cent of the LLC. Share capital is Dh300,000 in Dubai and half that in Abu Dhabi.
A second type was a free zone entity in which "you can have 100 per cent ownership" but "unfortunately in a free zone you have to lease space… that's a cost," Soubra said. A FZ company minimum share capital with DIC is Dh50,000.
Start-up entrepreneurs could also register for what's called a Cayman Island exempt company which was also tax free, she said, and cost $2,600 (Dh9,551).
Saqrib Rashid, senior vice-president with Abraaj Group, said his firm started in 2000 with a $115 million fund which has grown a decade later to $6 billion by investing in companies that are past the seed stage and are ready to take the next step.
In 2004, Abraaj Capital helped finance Arab internet web portal Maktoob, which in the 1990s offered the first Arab e-mail service. Abraaj purchased 40 per cent of the company for $5 million. "We know it had more than just Jordan potential, it had regional potential," Rashid said. "We had never done investment in Internet space before."
Abraaj helped bring in Tiger, a US hedge fund, and Maktoob was eventually sold to Yahoo for tens of millions of dollars. Rashid said Abraaj is always on the hunt for other promising tech hopefuls, reiterating it's not seed companies they want to explore but "companies that have demonstrated some traction."
Gideon Simeloff, head of Ibtikar, twofour54, said his company searched to "invest specifically in media" with a view to building a sustainable media industry in Abu Dhabi.
The firm provided growth capital in the seed capital stage as well as to help with content and creative projects, he said.
"We're looking for promising companies to turn them into regional leaders," Simeloff said. "The web is a hot sector for us."
That said, Simeloff said that of every 100 proposals the firm received perhaps one idea eventually was strong enough to gain ground, mature and succeed. "What we are looking for is a strong idea — it can be that simple," he said.
However, the idea must demonstrate a consumer need, must be able to be monetised and scaleable. "It has to be able to be executable," he said.
Jasem Ali, regional director of digital development, Omnicom Media Group, said the future of web start-ups was firmly moving to handhelds with predictions that by 2013, mobile devices will outpace PCs.
Estimates suggest there will be 10 billion wireless devices globally in two years.
"Two years back, we weren't checking our mobile phones to check football scores," Ali said.
In the UAE, we were "living in one of the most densely populated countries for mobile penetration in the world," he said.
Ease of access through mobility combined with the decreasing cost of electronically reaching out to the masses will only boost demand for more internet-based e-services, Ali said.
User growth ripe for web startups
The market is ripe for new web startups if the latest internet figures for the Middle East are any indication.
According to Internet World Stats, as of June 2010 the Middle East recorded user growth of 1,825 per cent in the past 10 years as compared to 432.1 per cent growth in the rest of the world.
Internet World Stats figures showed there were now 63.2 million internet users in the Middle East, out of the total 212.3 million residents in the region. Internet users in the region represent 3.3 per cent of the 1.9 billion people in the world now connected to the internet, out of a total population of 6.8 billion people.
