Crack it with incubators

The Life: Business incubators, which provide management guidance and space to young businesses in exchange of seed money and a share in a successful company is one of the tools budding entrepreneurs in the UAE have to further their business ambitions. Angel investors and networking sessions are among the other tools.

Kamal Hassan, the owner of Innovation 360 Consultancy in Dubai, plans to launch his accelerator in November. AVS Kumar

Most small businesses need someone to hold their hands as they face the harsh realities of life.

Until recently, such guidance was hard to find but that is changing.

At least two new business incubators - Silicon Oasis Founders and i360accelerator - will offer networking and seed money in exchange for equity in successful companies. They are expected to launch in Dubai by the end of the year.

"We need more incubators to create grassroots enterprises," says Manoj Nakra, the executive director of Dubai SME.

Budding entrepreneurs can turn to business incubators for guidance and office space to grow their business. Angel investors and networking sessions are other support mechanisms.

But there are still challenges.

"[The] economic value of such business centres are measured on the basis of the graduation rate of new companies," Mr Nakra says.

Figures from the National Business Incubation Association in the United States show incubators in North America helped start-ups to create US$17 billion (Dh62.44bn) in revenues in 2005.

Dubai SME provides Emirati entrepreneurs with office space and helps with networking, pricing of products and services, customer acquisition and development of cost structure. The entrepreneurs pay a monthly rent of Dh1,000 for three years and another Dh1,000 a year for a licence. The businesses are supported until they "graduate" as self-sustaining.

Dubai SME's Business Village in Deirahouses 42 entrepreneurs. The 10,000 square feet space is expected to double by the end of the year. In the past decade, the centre has helped to launch more than 350 enterprises. The agency is now creating a pre-incubation space called Idea Lab to hone business propositions.

Dubai SME also supports expats with incubation services but not space. The team provides its services free and calls it "virtual incubation".

To assist expat entrepreneurs, Kamal Hassan, the owner of Innovation 360 Consultancy in Dubai and one of the organisers of StartupWeekends, plans to launch his accelerator in November.

The i360accelerator will place entrepreneurs with companiesin Jordan, India, Singapore and the US for short periods of mentoring.

Mr Hassan hopes to shortlist 20 such ideas every two-month cycle.

"We are rooting for graduation of 20 per cent of the ideas per cycle," Mr Hassan says. "We will make money when we sell the business plans and will also own equity in the new company."

Apart from these initiatives, venture capitalists and angel investors help entrepreneurs with seed money. But some of them feel there are not enough in the region.

"Most 'alleged' venture capitalists promote themselves as such but they will partake in a few undertakings," says Amir-Esmaeil Bozorgzadeh, the managing partner at Conovi, an online start-up in Dubai.

To overcome the difficulty, Mr Bozorgzadeh suggests casting a critical eye on one's own business plan and evaluating the risks and weaknesses before presenting it to a potential investor.

Also, there are at least nine formal groups in Dubai that helpwith networking for customers or partners. TiE Dubai arranges "free or sponsored events to highlight success stories, role-model events and speakers who inspire [and a platform on which] to meet like-minded and supportive mentors, possible co-founders and business partners," says Prashant Gulati, an angel investor who provides free mentoring.

Literal translation is a hurdle.

"We find it challenging to communicate the meaning of 'business incubation' in Arabic," Mr Nakra says. "In Arabic, the word 'entrepreneur' is understood as 'investor', whereas an entrepreneur 'creates' enterprises through persevering effort using more resources than investment."