How Enabling Future Is Viewing MENA’s Entrepreneurial Culture

Taking three new early stage startups in its umbrella; closing nearly four deals in the last three months and going aggressive in identifying startups that make a difference to the society — for Enabling Future, it has been a very busy year.

The investment firm has increased focus in topics such as blockchain, agritech, fintech and in particular the crypto-space through its ties to Crypto Valley in Switzerland, the hub for quality ICOs worldwide. “We see a lot of potential in bringing this experience to the UAE in the near future, which has all requirements for becoming a future world leader in the crypto-space, said Hubertus Thonhauser, Managing Partner, Enabling Future.

Hubertus Thonhauser

Mr Thonhauser and Co-Founder Saad Umerani lead the firm that provides entrepreneurs with early stage capital and active support. The company has managed to build an international portfolio with its local capabilities, with the partners becoming members to various international investors networks. “Both myself and Saad Umerani have strong international professional backgrounds and experience. Through our previous work, we’ve established connections in four continents and became members of different international investors networks,” he said.

It is through these networks that the company aims to bridge the gap between regions and enable the transition of international startups to the GCC market and vice versa. “We have an ambitious and global approach and we coach the founders of the startups we invest in to be open to other markets than the ones they are initially based in,” informed Mr Thonhauser.

An example of this initiative is the addition of two startups based out of USA and Pakistan to its portfolio. Thrive Market is an American e-commerce membership-based retailer offering natural and organic food products at reduced costs, while Cowlar is a Pakistani startup (selected by Y Combinator, San Francisco) which offers smart collars for dairy cows.

Focus On Real Time Problems

The role of entrepreneurship is changing and now many startups are proposing sustainable solutions for real world problems in the field of digital healthcare and urban farming. “The most fascinating aspect of entrepreneurship is the impact it can have on the world in a very short period of time. Entrepreneurship and social entrepreneurship are a mindset. Entrepreneurs and investors should be well advised to respond to huge secular trends, like healthy nutrition, clean energy, financial inclusion and decentralization, just to name a few of the major global issues that impact us on a large scale,” expressed Mr Thonhauser.

From an investor viewpoint, Mr Thonhauser says that impact investments, in average, achieve higher returns due to large values proposition, loyal customers and employees, leading to higher CLV (customer lifetime value) and lower CAC (customer acquisition cost).

Mr Umerani and Mr Thonhauser identify startups and invest in those that solve a real problem rather than just producing a gadget. “Saad and I have different personalities and together we apply both an intuitive and analytical evaluation. The founders-teams professional background, their way of thinking and their analysis of the market and competitors are essential to us. After this first step, we apply a thorough methodology and an extensive checklist developed over time and constantly updated to look at past performance and future plans,” he said.

Tech First

Almost all the startups with Enabling Future have a strong tech component in the solutions they propose. Entrepreneurs are using technology and naturally integrating it in their solutions, making it more a means rather than an end goal. “If you take the example of UAE startup Alem Health, it provides telemedicine and AI based radiology solutions designed and optimized for frontier markets. At the beginning, the software developed was the key component. However, the implementation of their service in a specific market required the development of a hardware product. The transition came naturally to them because their focus remained on the end solution, not on the type of technology used to implement it.”

Similar case if that of blockchain where its use is becoming more diversified, expanding beyond the financial industry. “The reason is blockchain and cryptocurrency are responding to greater needs: cutting out middlemen and toll-takers, improving security, decentralizing services, financial inclusion of the unbanked and creating a level playing field among stakeholders,” explained Mr Thonhauser.

The startup ecosystem in MENA is changing but it still lacks enough angel investors due to the limited number of exits in the region. “It’s an evolving ecosystem, driven by passion, ongoing networking, support from the community, leadership and vision from the government, especially as far as the UAE is concerned. The ecosystem can use a larger number of solvent angel investors with entrepreneurial background, who provide education throughout the process and are able to provide smart money. The region needs a more stable position granted not only by big acquisitions, but also by smaller exits, of below USD 50 million which constitute over 80 percent of the tech-company exits even in the US,” he said.

Shift In The Entrepreneur Mindset

According to Mr Thonhauser, the changing mindset of the entrepreneur is an opportunity for the region. More entrepreneurs are taking the risk, which is the pre-condition for any startup ecosystem. “International programs such as Dubai Future Accelerators and accelerators such as 1776, Techstars or 500 startups will help to develop and educate the ecosystem. We observe a lot of ambition and passion, driven usually by new, exciting ventures and industries such as crypto-technologies, space travel etc. In addition, there are new ways of VC funding made through token-sales, although it takes a lot of skill to identify real and sustainable business opportunities in the booming Crypto space.”

While there is an opportunity, there are challenges too. “The biggest challenge – besides the need for more angel investors – is too much focus on what is visible to everyone and less focus on the white zones. Entrepreneurs and investors need to look behind the hype and understand which are the less explored areas of a space and understand the business potential,” concluded Mr Thonhauser.


E-commerce startups in the Middle East search for their identity.

With its acquisition of Dubai-based online retailer Souq for $580 million, Amazon is building a regional logistics powerhouse.

Souq may add a handful of local fulfillment centers to Amazon’s arsenal, but that investment can only add fuel to the fire in the $4.9 billion and rapidly growing Middle Eastern e-commerce market.

As Amazon grows its presence in the Middle East, the region’s e-commerce startups need to differentiate and focus to maintain their footing in a rapidly evolving market.

But at the end of the day, none of this is really new. The best e-commerce startups in the region have been focused on mastering a single defensible market for some time.

Rather than competing with Amazon, savvy founders realize that the Middle East offers unique opportunities for products that are designed for specific markets.

Startups that can offer goods tailored to substantive, yet niche, customer segments will see growth as agility continues to dominate scale in these verticals.

Meanwhile, without differentiation, more horizontal plays like Noon will struggle to find their edge against Amazon —the US’s Jet.com being something of an M&A-driven aberration.

At Enabling Future, it’s our job to find the white space, regardless of what decisions big tech companies make. And one of the most exciting areas for growth we see is in B2B e-commerce.

To sell to other businesses, you need to painstakingly build up corporate relationships.

But in return for the effort, you gain a moat around your business that can’t be quickly bought with money. And the high volume and regular cadence of purchases doesn’t hurt either.

OfficeRock.com, a Dubai-based commerce startup backed by Wamda, Jabbar Interest Group and Enabling Future, is executing this thesis for the online sale of office supplies.

The company is experimenting with B2B sales tactics for furniture, paper, equipment and more. This is more than a sales decision, it’s a strategic investment to build the tools and operations necessary to interact with corporates.

“THERE HAS BEEN A LOT OF TALK ON B2C BUT NOT B2B, WHICH IS TWO TIMES THE SIZE OF B2C GLOBALLY,” CHRISTOPER QUEITSCH, FOUNDER OF OFFICEROCK.COM EXPLAINS. “IT’S A LOT MORE COMPLICATED WITH CREDIT APPROVAL PROCESSES ETC, SO IT’S IMPORTANT TO BUILD THE TOOLS AND OPERATIONS NECESSARY.”

Stepping back from B2B, plenty of other startups are working to excel at sales in specific verticals.

Namshi.com is executing at a similar level in the fashion space and Trolley.ae is making inroads for grocery. Online retailers that can aggregate formerly inefficient, decentralized, brick and mortar stores into a single one-stop shop hold a particular advantage.

Brandless is following this aggregation model with its own generic spin to keep costs low.

There’s also a strong cohort of startups looking to democratize e-commerce to narrow the advantage of tech giants.

Startups like ClueTap are building tools that will allow up and coming merchants to compete without needing to forge their own payment and logistics solutions from scratch.

This is a big deal for a region where 50% of sales are still done with cash on delivery.

With ClueTap, sellers can quickly create their own online store and advertise with Google and Facebook. The startup has demonstrated traction in tough markets like India and the team is looking to expand into the Middle East in the near future.

And the best part about this approach is that ClueTap can actually work side-by-side with Amazon, enabling small merchants to list their own products on the site.

“WE DO NOT COMPETE WITH THE LIKES OF FACEBOOK, EBAY OR AMAZON,” ASSERTS HEMANG KAPUR, FOUNDER OF CLUETAP. “WE SEE OURSELVES MORE AS COMPLEMENTARY TO THEIR CORE BUSINESS.”

Details play a big role in the success and failure of e-commerce startups. Serious players need to have strong sales teams and robust product catalogs. But they also can’t forget to treat customers right and invest in intangibles like user-friendly online interfaces.

At the end of the day, Amazon and Souq are more market makers than market breakers. If anything, the consolidation only makes existing white space more clear. And what ultimately fills the void will be of as much value to investors as it will be to Amazon.


When It Comes To Your Market, Size Does Matter: The Smaller the Better

Today's entrepreneurs are obsessed with large markets, but it's the smaller, untapped ones that investors are hot on.

In almost every pitch deck, I come across the following story: “Our market size is approximately $100 billion annually, and if we capture just 1% of that market, we will have $1 billion in revenue.”

Entrepreneurs believe that having a large market makes their company fail-proof, makes their idea worth more and makes the investors feel that the business is less risky. However, it’s quite the contrary.

Seasoned investors, in fact, like small, untapped markets that are growing fast. In those niche markets, startups have an immense opportunity to shine and make a mark.

In larger markets, it is almost impossible to compete, and the barriers to entry created by the existing players are usually underestimated.

One of our portfolio companies that have managed to do this well is Protein Bakeshop; it is the first company in UAE and India to make healthy, freshly baked items for mass retail.

The company started two years ago to cater to a niche market of healthy eaters. The healthy food market is comparatively small, but experiencing a tremendous growth, and as the market grows, the business continues to grow with it.

People are realizing that products like Oreo are not good for them or their children and they are looking for the next best alternative. Protein Bakeshop is capturing the market by offering exactly that.

Other examples of this phenomenon are companies like Facebook, which started with a niche market of Harvard Students only and then expanded from there. They managed to capture 60% of the market in 10 days. Amazon is also a good example; they started by selling only books online, a niche market segment, before going into other items.

Businesses can also gain a lot of value by either creating their market or expanding an existing one.

One way in which business can do this is by bringing value to something that was of no value before: AirBnB is a great example.

AirBnB simply brought value to your apartment when it was unoccupied, something that was of no value to you before.

As an entrepreneur, make sure you are focused on solving one small problem but solving it like no one else has before, this is the key to a good business model. If you are actually good at what you do, your business will organically expand from there.


Envisioning Potential: The Methodology Driving A Venture Capital Investment

As a venture capital firm headquartered in Dubai, there are a couple of things that make our organization, Enabling Future, stand out from its peers in the industry here. Firstly, we are not solely focused on the MENA region- we are actively exploring investment opportunities in the US, Europe or Asia. 60% of our investments have been made in companies outside the region. We are affiliated to six investors networks in the US, Europe, Australia, and MENA, and this enables us to be exposed to different startups and advisors or experts from a variety of industries, to keep an open mind.

We are often asked what remains constant in our investment approach, or what connects the startups that we invest in, and the answer to that is we have a very strong methodology in choosing startups that offer solutions to real life problems. At the moment, the partnership has a portfolio of 12 companies, valued in total over US$1 billion. We chose these startups through a process which has become our own, and it’s worked really well for us so far- here’s an explainer for the same.

In terms of our methodology, we have developed a structured assessment process, consisting of checklists, which we adapt according to the development stage of the startup, and which we also constantly update based on our learning. At first, it’s very important to understand the knowledge level, the professional qualities, the level of commitment and the dynamics of the founding team. For us, the founding team is key. After all, down the road, say, in three years’ time, the company will look very differently from what we discuss in the first meeting.

We are data-driven investors, and as a result, we like to see how the founders are going to stir the company forward, and develop their strategy applying financial metrics and KPIs. What we want to know and see is the founding team’s way of thinking and capabilities. We want to see that the people whom we are talking with have the capacity to anticipate changes needed, and to implement them. Due diligence is, of course, very important, but, sometimes, one meeting with an entrepreneur is often enough to decide if we want to work with them.

For example, in the first few minutes of meeting Stuart Oda, the founder of Alesca Life, a startup that offers urban farming solutions, we knew we wanted to work with him, purely because of his knowledge and passion for what he does. Secondly, we evaluate the startup’s perspective on the market. Are they solving a problem, and are they the best at solving the problem they are tackling? And do they have the potential to gain a monopolistic position in their segment?

At this moment, it’s very important to leave your personal interests aside. You cannot make assumptions about what works or what doesn’t without putting yourself in the shoes of the customer. Having a structured mindset is essential- we reach out to advisors or experts from the specific industry of the startup, and we try to understand the challenges, distortions, opportunities of the market and the size of the addressable market.

For example, one of the most successful businesses that we invested in was Babil Games- despite not being gamers ourselves, we knew that it was a very interesting segment, and we understood its potential. This is thus an important part of our process: we try to understand if there is any real competition for the solution that the startup has designed, how big is the market, and what is the long-term potential. We like startups that are driven, passionate, and can envision and build the world of tomorrow, today. This is connected to the reason why we like to read science fiction: it gives you a sense of how the world will look like in the future, and it enables the mind to be creative and imaginative, and not reject revolutionary ideas that might seem out of the ordinary.

During the early stages of the company, we often act as constant sparring partners to the entrepreneur, while also being facilitators to their growth through our international network. At the same time, our role changes once the company reaches later stages with new lead investors joining. For instance, in the case of Babil Games, Hubertus was involved in a double role, as investor and co-founder, being involved in all corporate matters, until the negotiation terms of the exit. In post-Series B companies like Thrive Market, with valuations north of $500 million, we became passive investors, although still maintaining a healthy relation with the founders and some lead investors.

One thing we really care about is the way Enabling Future operates after the investment has been made. We want founders to know we are one phone call away, and that they are not in this by themselves. Founders usually tend to get lonely in hard times, and these are the times they need to talk to their investors and regain their confidence. That is the most exciting part, being supportive and watching the startup transform and grow. The best thing a VC firm can do is be good to the founders of the startups they are investing in. We are very supportive, we make connections, we give advice, and we are there if they need us.

As for the road ahead, we have a flexible structure that allows us to take the best of both worlds, angel and VC investments. One of the key things we think about while investing in startups outside the region is that we can plan a strategic role in bridging the gap for these companies to the Middle East. We like to discover companies such as OfficeRock, and see their potential and relevance for the Middle East market, and then support their growth. We don’t have a specific mandate; we can do the deals we want to do. We are going to continue looking for teams who are driven by passion, empowering startups that aim to solve problems. By doing this, we want to build our credibility, as well as a successful track record of exit strategies.