On startup investments, trick is not to fall for valuation hype: GII’s Pankaj Gupta

Dubai: There’s one rule that investors should follow when it comes to taking an interest in startups and such ventures. Don’t pay more than what they are actually worth.

So, if any venture looks a bit overvalued, then avoid. “That’s why we didn’t take an active role for 18 months – because the MENA tech venture space looked extremely overvalued,” said Pankaj Gupta, co-CEO and co-founder of Gulf Islamic Investments, based in DIFC and with a portfolio that straddles multiple sectors, multiple geographies. (GII’s investments include luxury projects in London and Europe, digital startups in India, and a dental services firm in Saudi Arabia.)

"In that period, we turned down options on a few tech ventures in MENA, because those valuations were blinded by hype. It has cooled down a lot now."

Private equity and venture capital sources have in the recent past said that there is a lot more of circumspection going on before funds are placed at the disposal of these ventures. Those entities that show potential – and what it takes to turn that into future profitability – are still getting ample backing.

Eureka! winners

GII on Friday announced the four winners of the ‘Eureka! GCC 2023’ competition, based on those ventures that come up with the most convincing pitch about their business model. (Hulexo was the winner and picked up $25,000, with Exirio placed second runner up ($15,000), CrossVal ($10,000) and Gesture Talk ($5,000).

So, what does GII look for?

“The startup founders should come up with an idea that has a good chance of finding success – and preferably within a certain timeframe,” said Gupta. “We are not captivated by talk about digital disruptions and all that. The idea should be seen to deliver. Say, in two years or so.

“The other thing we look for is how well that business’s founder(s) co-opt specialists for the other parts of their operations, whether that’s on the finances or the tech part of it. There has to be some proof.

“Clearly, in most cases, a startups’s owner will not be able to do all of the heavy pulling on his/her own. He has to have the teams (even a small one) around to make it all happen. Whether that’s through offering equity is the founder’s decision to make, but we need to look at a bigger picture.”

More than an elevator pitch

Apart from the release of funds, mentoring is the big thing these days when it comes to helping out startups. That’s what GII and Gupta hope to do with the winners of the Eureka! Competition.

“If you ask me whether Eureka!’s got an overlap with an elevator pitch, I would say yes – and no,” said Gupta. “We want to elevate this to more than the business startup owner trying to convince us his/her idea will succeed. We are creating a proper support framework, with mentoring, creating cohorts, and more.

“Ultimately, we will need to be convinced about the business model they are having. That’s why this is more than a pitch.”

This year’s Eureka! Processed over 20 submissions, from which 10 finalists were selected. And then whittled down to the four winners.

“If the business model works from the start, the rest of it falls into place,” said Gupta.

That includes funding opportunities too, but with conditions.