Once A Dubai Startup, NIKAI Group Now Supports A New Generation Of Entrepreneurs With Dubai Startup Hub’s Market Access Program
It’s not every day you hear about a multimillionaire investor’s team paying a surprise visit to a startup’s office in a different country as part of their evaluation process. But when Dubai-based global conglomerate NIKAI Group sifts through pitches from startups seeking funding, the company takes its due diligence very seriously.
The NIKAI Group, founded by former Indian diplomat Paras Shahdadpuri, is one of four large enterprises participating in the second edition of Dubai Startup Hub’s (DSH) Market Access program.
As the entrepreneurship initiative of Dubai Chamber of Commerce and Industry, Dubai Startup Hub’s Market Access program aims to bridge the gap and facilitate deals between startups, SMEs, and leading companies and government entities in Dubai. Startups and SMEs from across the globe submit ideas and solutions that solve key challenges faced by prominent companies- like NIKAI.
And when it comes to evaluating proposals by startups, NIKAI’s Vice President – Sales and Strategy Karthik Moorthy, who has been charged with identifying the right investment opportunities for the company, makes it clear that he and his team are out for real solutions that will boost the business. “When we do our due diligence it’s more hands on, it isn’t just looking at reports or Excel sheets.”
For example, when NIKAI received a proposal from a startup in Egypt in the field of shipping logistics, Moorthy and his team hopped on a flight to Egypt to talk to others in same business. He also sought the help of local domain experts in Egypt to study and evaluate the proposal.
“We also paid a surprise visit to the business at the address they had mentioned. The intention was not to take them by surprise, but to actually do real time due diligence,” he says.
Moorthy insists thorough due diligence is crucial to identifying whether or not a business plan is robust and worthy of funding.
“60-70% of proposals that we shortlisted fell through because most of them were looking at largely a further round of funding with a very fancy proposal, which covered layer A and layer B, but as you started drilling down, it fell apart.”
“Our intention at Nikai is to be a strategic partner for startups that provides not only the relevant funding, but also the local expertise, and access to the markets within the UAE. Given Nikai Group’s presence in the field of electronics, logistics, food retail, and staffing, the market access that it can provide for right startup ideas is truly its trump card as a strategic partner.”
What do startups need to do?
For any startup in search of backing, and especially from NIKAI, Moorthy is a stickler for three things: “I would ask them to be very clear about purpose of business, defining the (investor-startup) relationship rightly, (and showing) a long-term commitment to the UAE.”
Moorthy stresses that startups need to study the local market better.
“In most of the pitches that we come across, the startup quotes their experiences in their country and try to copy-paste, and end up saying ‘This is what I want to launch in Dubai.’ But my question back to them is: ‘Have you actually found out what is needed in Dubai?’”
In one instance, Moorthy says he received a startup proposal for a bus pooling service. “The first question I had was that in Cairo, it could work, because it’s congested, and there’s a large population, and you need it because there’s no space on the roads. [However,] do we need this in Dubai? Have you done your research for Dubai?”
As a company that’s built from the ground up in Dubai over the past 30 or so years, NIKAI is adamant about working with only those companies that are committed to their vision for the Emirate.
“Your commitment to Dubai, and your vision for Dubai, should be bigger than your appetite for business, because if that’s in place, the appetite can keep increasing- and the funding can happen,” Moorthy says.
He adds that founders need to go beyond the fancy ideas and fantastic presentation skills to show whether there’s a rock-solid foundation beneath the surface of the idea.
“And then if you are looking for strategic investors, be willing to not only share your idea, be also willing to share ownership,” he says. “You can’t have a scenario where you will say I will retain 80%, but you want someone to pump in more than a million dollars, and then you say I will give you 20% share. Why would anyone do that?”
Look at the now first
In Moorthy’s experience, most startups try to woo investors with a five-year plan, and big talk of future success scenarios.
But the former regional sales manager and marketing head at Samsung advises founders to focus more on the present when pitching their plans.
“Focus on what is immediately needed for the first year… Because most of these startup ideas eventually end up in a make or break scenario within the first 12 months,” he says. “Mostly I see funding for the first year with no deliverables. If they can be more robust, and they can tie down the nitty-gritty to the last mile in the first 12 to 14 months, that would give more confidence to the investor.”
He adds that investors also prefer detailed plans that show realistic timeframes for returns, even if they’re for longer period of times.
“Let’s not look at one- or two-year horizons, because most people give a valuation and a business plan of one year break-even, three years in profits, and in five years, valuation tripling. But it doesn’t happen like that in the real world!”
Sectors of interest
As part of Market Access, NIKAI is looking for products and services in the areas of technology, digital transformation, blockchain, logistics, education, and healthcare.
To quote an example in the education sector, Moorthy says that NIKAI would be very interested in ideas that “can transform conventional learning to smart learning” and “after school programs that go beyond the school curriculum.”
In the healthcare arena, NIKAI is looking at services that give back to the UAE community.
Moorthy explains: “Today’s diseases don’t come from deficiencies, they come from lifestyle and stress or depression. These are not identified symptoms from 10 years back and so today every industry needs to evolve. We would like to be part of those industries where we can help the community around us. Future successful businesses are not going to come from products, they’re going to be about services and how you can adapt your services to the lifestyle needs of the society around you.”
NIKAI is also looking for logistics solutions that can save costs and create efficiency, as well as creative aggregation ideas for warehouses that could work without actual ownership of spaces.
“For example, how can someone become a large aggregator of warehouse space management, without actually owning a warehouse? We have more than 500,000 square feet of warehouse space, but now, can we get into the sector without actually owning those warehouses, where we can probably sub-lease, and be a single point of contact?”
To be clear though, NIKAI’s interest in startups isn’t just about investment though. It’s driven by its chairman Shahdadpuri’s vision to continue building a legacy for his future generations and to contribute to Dubai as part of the Emirate’s successful growth story.
“Mr. Shahdadpuri is clear- he wants to build a business that’s in vogue over the next couple of decades from now,” Moorthy says. “And that can only happen if the idea is new. Established businesses are not going to come up with new ideas. Google was not Google 20 years back. But today is the next invention going to come from the established brands? Probably not. It’s going to come up from one of those budding start up entrepreneurs who is going to think big.”
Moorthy also notes that NIKAI’s founder too has gone through the building blocks that a startup business now needs to.
“To put it in Mr. Shahdadpuri’s words, he tells me ‘This is how I’ve been, and I understand what someone with a great idea can go through, when he doesn’t have someone to back him.’ That’s why we want to work with startups.”