Renuka Gunjahalli, Founder, Jupiter Business Mentors, speaks to AME about how startups that are not mentored die before they even take off, and the risks surrounding a business set up…
How do you evaluate the startup/entrepreneurship mentoring scene in the region, particularly the UAE?
SMEs now contribute 30% to UAE‘s gross domestic product (GDP), at par with the oil and gas sector. Statistics have revealed that over 40,000 new companies are being formed in the mainland and various free zones however, these companies are unfortunately short-lived as they don’t have access to quality mentors to guide them through the process.
While the UAE government in association with free zones and mainland chambers provide free mentoring or business advice and are trying their best to empower entrepreneurs, we see that the level of commitment from mentors as well as the mentees is not at its best, and hence not helping start-ups flourish. Another constraint is that there might not be mentors for all skill sets that an entrepreneur would need to be geared up for when he takes on the mantle of a business owner.
Business mentoring requires a 360-degree approach, wherein we take the learnings from traditional mentoring landscapes and adapt it to the specific demands and advancements of today’s society; opening up avenues of development and learning on a consistent basis. By experience and with recent studies, we have noticed mentored businesses are capable of increasing their company revenue by 83% compared to just 16% revenue growth reported by non-mentored businesses while 30% of non-mentored businesses don’t survive past the first 24 months and 50% of those may not make it past five years.
Business basics have to be understood correctly by entrepreneurs and having an experienced business mentor helps with this.
How important is the right advice/mentorship for new startups? Even for established startups, how critical is the right advice at the right time?
The most important advice for new startups is to first evaluate their business idea objectively before embarking on an entrepreneurial journey. I would personally advise startups to reach out to the mentor even at the pre-startup phase in order to bounce ideas to an experienced ear, get it evaluated, conduct a need assessment and then actually begin investing in the business. Three critical aspects to a pre-start up would be getting the idea evaluated by an industry expert, conducting market sizing and need assessment and preparing a business plan before you embark on your journey.
Even for established startups, it’s extremely crucial to have some external perspective from an experienced mentor because during the course of business, over a period of time, the startups tend to fall into the comfort zone and let the business run the ways it’s being run. There’s no harm to it but then at some point businesses start experiencing the burn out and stop growing. No matter what business you are in – it’s important to keep innovating and re-inventing yourself and your business.
What are some of the main industries/sectors that startups tend to focus on, in the region and the UAE? Why?
Some of the evergreen sectors in any part of the world are – food and beverage, education and entertainment. In UAE as well, these sectors form major contributors in the startup arena.
The current trend in this region is more inclined towards implementation of technology like Artificial Intelligence, Blockchain technology and other form of automations. While this is the general trend, what businesses need to take note of is how many of the current customers in the market are going to be spending on purchasing these products and services. Market need and assessment will be a major factor to determine this. In order of sectoral growth, Food and Beverage, Lifestyle and Entertainment, Health and Fitness, Education and Skill Development and Technology based service companies are the five categories are the growing sectors in the startup space.
When setting up a startup, what are some of the risk factors that entrepreneurs should keep in mind?
The major risks that an entrepreneur has to be aware of are cost of operations, dynamic market situations, change in consumer preferences as customer loyalty needs to be earned and can be shifted to different brands, competitors or new entrants with better products or services or better pricing and demotivation due to loss of capital invested. So, it’s important to start right, tread the path cautiously while embarking on a new journey.
How about capital? How can startups attract the funds needed to kickstart their ventures?
Capital varies with the type of venture the startup wants to be in. Some can start as small as AED 50,000 (if it’s a professional services start up) or can go up to AED 1 million if it is based on a brick and mortar trading business model. Idea funding in the UAE is still not very mature unlike other jurisdictions like Silicon Valley or other places where there are several angel investors and startup funds to provide risk capital.
While there are some developments taking place in this region, the numbers are few and very few ideas have been funded for originality. Typically for homegrown startups it takes about 2-3 years to reach out to investors and attract investment. Startups can attract funds initially by bootstrapping themselves and presenting viable ideas to their family and friends first. Once the idea starts gaining traction – then it can be presented to the investors for funding.
What is the best advice you would give to an entrepreneur looking to begin a startup in the region?
Study-evaluate-plan-execute, this would be my advice to budding entrepreneurs. Do your homework thoroughly and assess the market and financials before you embark on your entrepreneurial journey.