New Kids On The Block: Silicon Valley-Headquartered Plug And Play Partners With Abu Dhabi Global Market
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For those of us who have been watching the Middle East entrepreneurial ecosystem for a while now, it wouldn’t be a stretch to say that the region has seen a surge in the number of accelerators and incubators in the recent past. These have included homegrown concepts like Bahrain’s FinTech Bay, Kuwait’s Savour Ventures, and the UAE’s Fikra Labs, to name a few, but there’s also been an interest showcased in the region from international players in this space, such as 1776, 500 Startups, and Techstars. And now, there’s new kids on the block to add to this latter group of entities: Silicon Valley-headquartered Plug and Play has partnered with the Abu Dhabi Global Market (ADGM) in the UAE to set up its own signature fintech innovation program, which is set to go live in the third quarter of 2018.
At this moment, at least some of you may be wondering: what is Plug and Play anyway? Well, here’s Plug and Play EMEA Managing Partner Omeed Mehrinfar with the answer to that. “Plug and Play is many things,” he says. “We’re the most active venture capital in the world. We’re the largest startup accelerator in the world. And we’re the largest corporate innovation platform in the world.” Sure, there are a lot of superlatives in that response but Operations/Communications Director Ashlene Ramadan has the figures to back those statements up. “To add on to Omeed’s points; when some people ask us why we are defined as the biggest in the game, there are a few points,” she explains.
“Firstly, the order of magnitude of startups we source and accelerate globally every year. Just last year alone, we’ve accelerated 426 startups across 14 different industry verticals. This was a 33% growth from our 2016 numbers, because of the new sectors, corporate partners, and locations we’ve been adding to our operational roster. Secondly, as a venture capital, we’re also the most active in the world for the past three years in a row. In 2017, we invested in a total of 262 investments internationally across our 28 different offices within that single year. As for being the largest corporate innovation platform in the world, from having serviced around 40-50 Fortune 500s about four years ago, today that number is just under 300 corporate partners, with a goal of reaching 400 by end of this year.”
Plug and Play’s growth into what it is today was led by its founder and CEO Saeed Amidi, who, interestingly enough, once owned a Persian rugs store in Palo Alto, California. His customers included some of the most influential people in the tech world, and that was how Amidi got interested in the venture capital space. He was soon funding startups in Silicon Valley- one of the companies he backed was PayPal. “Through his newly found passion in the tech scene, Saeed founded Plug and Play in early 2006,” Mehrinfar explains. “Saeed created Plug and Play in the Silicon Valley initially as a massive co-working space, whereby startups would rent offices, and our founder would then keep close tabs on startups he saw potential in, and leverage his extensive network of venture capitalists and corporate executives to scale their businesses even further, while strategically deploying angel investor capital into them. This was the original thesis that led us to be a first-mover in the corporate innovation scene back in the day.”
And this corporate innovation platform remains one of the key features that sets Plug and Play apart from the others in this field. “With regards to our operations, Plug and Play has two primary constituents that we prioritize in our innovation platform; the startups and the corporates,” Mehrinfar notes. “On the startup’s side, our primary service is to scale their businesses leveraging our massive corporate network through our structured accelerator programs we run internationally. We operate across 14 different industry verticals, a few of which are fintech, retail, automotive and health 2.0, and in each vertical, we work with corporate partners who are industry leaders in their respective field. The startups work alongside corporations, such as Mercedes Benz, BNP Paribas, Deutsche Bank, and Carrefour, to land piloting or commercial opportunities."
"On the corporate side, we’re an augmented resource to work alongside their existing innovation KPIs, and to leverage our accelerator programs for three primary value offerings: one, business development/licensing opportunities with our global network of top-tier startups and entrepreneurs; two, investment opportunities, as many corporates and government agencies are beginning to structure venture arms, or invest more proactively off their balance sheets into startups and technology, and three, acquisition opportunities; although this is the least common, we still see this time-to-time. A recent example includes one of our portfolio companies, Tenor, that just announced their acquisition by Google 2-3 weeks ago; so, we’re constantly striving for allowing our startups reach a successful end game, whether it be a merger, acquisition, or IPO!”
Mehrinfar and Ramadan say that the Middle East ecosystem has been in the eyes of Plug and Play for a few years now- the entity was just biding its time in terms of finding its right partner in the region, which ended up being ADGM. “When assessing a new location, it’s important to find an innovative and global partner that shares the same vision and KPIs as we do,” Ramadan notes. “And given ADGM’s track record over the last couple of years with launching the first-in-the-region fintech regulatory regime, its regulatory laboratory, as well as it being recognized as the top fintech hub for MENA with an extensive list of value offerings tailored for startups, venture capitalists, accelerators, and corporates, it was a natural choice for us to develop an innovation platform here in Abu Dhabi. That also being said, the UAE is ripe for innovation, especially in fintech. Governments, regulators and corporations know that fintech is here to stay, and don’t want to be left behind.” But Ramadan makes it clear that in the long-term, Plug and Play’s outing in the Middle East isn’t going to be restricted to fintech.
“Over the next few years, we’re looking to grow to other verticals that we are currently exploring,” she says. “These could range from health 2.0, energy to even supply chain and logistics, which are already established verticals at our Plug and Play HQ in Silicon Valley. The opportunities for growth are huge, to enable us to empower corporations and entrepreneurs.” Mehrinfar adds, “As we look to gain more and more corporate partners in our fintech and additional platforms in the years to come, we will be drawing in foreign talent and know-how that will look to have a base in the region, if they gain the right business opportunities. By way of expanding their physical presence to our region, these entrepreneurs will hire, train, and educate local talent by way of their foreign knowledge and experience. On a macro level, even if the foreign startups eventually get acquired or liquidate, that leaves a pool of trained talent that will take their newly gained skill sets and apply them for future endeavors; whether they start their own startup after that, or go back into the corporate world.”
Mehrinfar doesn’t hold back in his praise for ADGM and what its team –which includes Richard Teng, Wai Lum Kwok, Vishal Sacheendran, among others- are doing in the UAE. “The typical trend in the technology field is that the regulator tends to lag behind the innovator,” he notes. “What is unique in the case of the GCC region, and specifically ADGM, is that the regulator is actually the one promoting and investing into the growth of the innovation sector, in our case for fintech. We’ve structured our partnership into phases. This initial phase will be to set up a multi-corporate fintech innovation platform, and to onboard leading and forwardthinking financial institutions that operate in or in regional proximity to Abu Dhabi, to act as corporate partners. We’ll be sourcing startups based on these corporate partners’ pain points and technology interest areas, shared by their respective business lines and innovation teams."
"Once the startups are sourced, go through our screening processes, and are voted in by the corporates, they’ll enter an extensive accelerator program focused on matchmaking the solutions with potential opportunities to scale their products here in the region. We’ll be sourcing for startups locally and out of our different international hubs, that have a proven track record of scaling with major enterprises, to help them scale even further, especially in the MENA region. More so than being a free program for our startups, where we don’t take equity or charge them for any of our services, they also gain regulatory mentorship and support by ADGM’s RegLabs. The regulatory resources and know-how the ADGM team have provided for fintechs can help secure them to be regionally compliant to expedite their business development cycles as they enter the GCC, and the larger MENA region.”
It should become clear here that the Plug and Play team have big dreams ahead for their time in the Middle East- and a part of the reason for that can be attributed to the fact that while they are both American, Mehrinfar and Ramadan have strong personal ties to the Arab world. Mehrinfar is half-Bahraini and was born in Manama, while Ramadan’s parents are both originally from Lebanon. The Middle East is thus a region the two are, in a way, familiar with, but it also offers a load of opportunities for an entity like Plug and Play- though there are plenty of inherent challenges in the ecosystem as well. “The Middle East, for a very long time, was an environment where people were worried about the concept of failing,” Mehrinfar says. “The typical conception was that if you entered into a business as an entrepreneur and failed, you were effectively perceived as a failure. This misconception was not just prevalent in the Middle East, but in countries such as Singapore and in regions going as far as South-East Asia."
"Today however, there’s been a 180-degree flip. The new wave of the millennials in the region are so driven, and eager to develop and innovate. The hunger is there, we’ve already seen a few success stories such as Careem and Souq.com. The number of major league startups can increase in the region by way of, one- major players in the government and private sectors to provide resources for these entrepreneurs to gain exposure, especially to outside, and more developed ecosystems, we’re already seeing this to a certain extent developing. Two, would be by decreasing the disparity between the number of startups and the amount of venture capital funding available to startups here in the region. In the US, venture capital funding accounts for 0.3% of the country’s overall GDP. Here in the GCC, that number is just below 0.03% of the overall GDP. By having more funding available to local entrepreneurs, we would be able to empower them to gain the appropriate know-how and hire the needed talent from abroad (if needed), to be able to scale them to an international playing field.”
According to Mehrinfar, the lack of funding options may be what’s stunting the growth of the Middle East entrepreneurial ecosystem. “Although attitudes have shifted with the population, and there are many prospective entrepreneurs (emphasis on the prospective), the lack of capital available for regional entrepreneurs has made the leap of jumping into an innovative endeavor limited to those who come from financially comfortable backgrounds (not that it’s a bad thing), because even if they can’t secure funding they know they have a cushion to fall back on. There is so much talent out here in the region right now that are going unnoticed, even from my own network of friends from my childhood, I’ve seen some of the most brilliant and ambitious people I’ve ever met, but by way of the fear of not having a fallback option, because funding is so scarce for entrepreneurs in the region, they end up more comfortable just staying within their comfort zone of a 9 to 5 job. Therefore, in short, attitudes in the region towards entrepreneurs has shifted for the better. There is a lot of hunger and talent, what is lacking (but improving) is the know-how and developing resources for entrepreneurs, as well as the funding. As the ecosystem continues developing, these issues will organically resolve themselves.”
Of course, Plug and Play’s model could see it help resolving some of the inherent problems in the ecosystem, Ramadan notes. “In addition to bringing in foreign talent, we’re also looking to source MENA region talent that we can train, educate and expose them to other markets, whereby they’ll be exposed to fellow entrepreneurs that are competing at a global scale,” she explains. “Being able to provide entrepreneurs the right exposure can motivate them and enlighten them to be able to tailor their products, based on the competitive landscapes abroad. This would augment the expectations of delivery of value for many local entrepreneurs. They’d be able to take advantage of this exposure, and take it back to the region to further enhance the competitive landscape.”
At this stage, with the Plug and Play ADGM program set to launch later this year, are there any specific traits they are looking for in startups and entrepreneurs that will be a part of this initiative? “For our accelerator program, we’re looking to attract early to growth stage startups, since their product need to be enterprise ready for our corporate partners here in the region,” Ramadan clarifies. “A few of the focus areas include wealthtech, insurtech, cybersecurity, AI, and chatbots to name a few. But in the end of the day, it all comes down to the interest areas of our clients whom we specifically source startups for.”
And in case you’re wondering what’s in it for the entrepreneurs, Mehrinfar is on hand to answer. “Startups that we accelerate or invest in will immediately become part of our international community of startups,” he says. “The immediate value startups will derive out of our ADGM partnership include, free office space, software perks (Microsoft Azure, Amazon Web Services, Temenos, etc.), discounted professional service vendors, access to our investor and mentor network, to name a few key points. Keep in mind our primary value offering to these startups will be to support them finding champions within major enterprises that will look to partner and work with them. Even after the accelerator classes end, we usually follow the motto that, ‘once you’re a Plug and Play startup, you’re always a Plug and Play startup.’”