Hub71 and Modus Capital recently held an in-depth information session to deep-dive into the first collaborative venture builder in the MENA region, Ventures Lab. The session was moderated by Kelsey Warner, Future Editor at The National, with the panel featuring Modus Capital’s Managing Partner, Kareem Elsirafy, and Hub71’s Nader Museitif, Head of Products and Business Development.
Ventures Lab is a new venture builder program launched by Modus Capital and Hub71, empowering current and aspiring entrepreneurs from around the world to turn transformational ideas and early-stage startups into sustainable and scalable startup business ventures based out of Abu Dhabi in the UAE.
The discussion explored how the groundbreaking partnership came to fruition, why Abu Dhabi was chosen as its melting pot, who should apply for the builder, and what successful applicants can expect from the program including funding and equity expectations, among other topics.
Key takeaways and questions answered:
What does Venture Building mean and is it different to starting a business?
Kareem: The main difference is if you’re going to start a business, you’re going to need resources and that’s what being a startup is, its resource management – financial, human capital management. How do we strategically deploy those resources to see incremental growth?
Venture building provides those resources and gives guidance on how to leverage them in the most efficient way. These are the nuts and bolts. It’s about taking that 70-80% of systematic processes, knowledge and frameworks and so on, and applying it to multiple contexts.
We are here to de-risk as much as possible; we de-risk for investors by supporting entrepreneurship and we de-risk for the entrepreneur themselves, so founders can have that comfort knowing that there is a well-versed team that has done this before.
We are the subject-matter experts in Venture Building and you are the expert in your industry. We bring the co-founder commitment and we look for that to be reciprocated, so the commitment level from the founder is critical.
What is the main criteria when applying for Ventures Lab?
Kareem: Applicants should have something well-defined in terms of an idea. We are not here to help you figure out or create an idea. We’re taking ideas and creating businesses out of them. Problem, solution, and understanding of the market is critical and should be defined prior to applying.
Companies that are mature and are revenue-generating have different problems. Modus could deploy resources to those that have been in marketing for 3/4 years and have a 30 person team, but that’s not where we’re going to provide the most value as they likely already have a strong foundation.
Such companies would need more high-level strategic advice and other programs at Hub71 may be a better fit.
Can you share details around the timings and deadline for the application? When will the program start?
Kareem: Ventures Lab is a rolling application and does not have an open date or close date. This gives founders the flexibility and option to make decisions later in the year.
We take around 1 week to respond to all applicants on whether they have been accepted to the next phase and 2 to 3 weeks from an application being submitted to the final interview with our selection panel (unless there are exceptions and outliers for additional information). We’re committed to over-communicating with applicants and letting them know as soon as possible. The hands-on support starts from the early application phase.
Will Modus or Hub71 be reading the applications?
Nader: Modus will do the work to screen and understand applications and evaluate from a tech perspective to see if there’s a fit with Hub71 and its community. It’s important for us to build a community of committed, dedicated and promising founders that share knowledge and interact with each other.
What are you looking for from applicants to set them apart and have an edge?
Nader: Applicants need to have founder DNA, have passion for what they are proposing, and understand the challenges they will face, but are willing to roll up their sleeves to get down and dirty to tackle challenges, build products, build the team, inspire teams, and grow a sustainable successful culture.
Kareem: If you are considering Ventures Lab, then apply; don’t let fear hold you back, there is no right or wrong. If you think you have a concept or an idea that is valuable to businesses and consumers, then definitely apply.
We are looking for a level of commitment, a certain amount of expertise in certain industries, and those who already have a north star of what they are trying to solve for. The best startups are ones that solve problems. We can help you figure out what the solution is and develop that solution/idea as a product, business model, strategy, and as a piece of tech, but those are the core foundational elements.
What industries will be accepted to Ventures Lab?
Kareem: We are industry agnostic, but the one sector we can’t provide a lot of value in is hardware. If the core product is a hardware product or has a major dependency on hardware that has to be produced, this is outside our area of expertise.
Fintech, Regtech, Enterprise Saas, Direct to Consumer, Edtech, Medtech, and so on, are where we can provide value-added. Think about where tech can be a value-added for a core business. This could also be a traditional business that wants to expand by adding a layer of tech to contribute to its commercialization.
Why is Hub71 ready to bring Ventures Lab into an ecosystem that has been under construction for the past few years?
Nader: Our mission is to build a tech ecosystem and vibrant community of founders and entrepreneurs, helping to build those companies and allowing them to thrive out of Abu Dhabi and Hub71. We’re looking to equip those in the early-stage, who have expertise in particular subject matters, and want to launch a business with the tools, team, and skill sets needed to start their journey and allow it to be de-risked from day one.
If you’re a first time founder, you may not know how to develop an app or website or how to fundraise, so this platform will help to get you on the first step of the ladder, build an MVP, and go to market.
Once the initial 9 months end, we will support the continuation of your journey by leveraging our community, corporate engagement, accelerator programs, and more to ensure success throughout.
Will accepted applicants have access to office space at Hub71? What other incentives are offered?
Nader: The incentives program is a separate program at Hub71 and everyone is open to apply, but it has a separate criteria. During the program, founders can work out of Hub71 and be here physically.
At any point in time, when founders come in, establish startups, and go through the milestones at Ventures Lab, they can at any time apply for the incentive program and be considered. We would love to see the continuity between Ventures Lab and other Hub71 programs.
Kareem: Throughout the program, we provide tailored, hands-on operational expertise. Post program, founders have an opportunity to raise funds through our $80M Venture Fund, which would provide follow-on funding to companies to ensure there is continuity in financials and in turn operational resources they need to continue that growth journey.
We can’t be your co-founding team forever and you need to build an internal team at some point, so we also build a talent pipeline for each company who are vetted by us and can be good teammates for the startup.
We can assess them from a skill-set perspective, but it’s up to the founders to figure out if they are a culture fit and if they align with the vision of the company, but we do support in that transitory phase at the end of the program.
Do you have to be physically present at Abu Dhabi?
Nader: Ventures Lab is running in Abu Dhabi and Hub71 and so we would love for the engagement to happen here. If you’re building a company and want to establish a license and set up, ADGM is where we operate and is the jurisdiction, so you can set up an ADGM license and investments will be within that entity.
Kareem: Companies should be based out of Abu Dhabi and Hub71, but can be operating in other markets. You can set up in the UAE and expand out to other countries and MENA markets. This is all in the growth potential of a company; start local and grow international so it’s not limited to companies who will only operate in Abu Dhabi, but you need a willingness to set up there.
Do all successful applicants receive $450K during the program?
Kareem: Yes, this is the financial commitment that goes into each company during Ventures Lab.
Not all companies make it through the entire program, so in the beginning, we have the R&D/consumer insights/validation phase and there is an earmarked amount of money that goes in to do the testing – this is the first and biggest risk we take.
After that, if we determine at an inflection point that it’s a go and we continue on, there is another tranche of money that comes in that goes towards the MVP/marketing/adspend/branding and so on, taking that product out and iterating on it in the market.
There is a post-9-month addition founders have the option to opt in to, which is the sprint to Series A. That is an additional 250K that goes in to pay founders salary, further resources, adspend, salaries to mobilize internal teams, and ultimately becomes the segway.
Not all founders will capitalize on this; after the initial 9 months, some founders may be confident to take that continuity and continue the growth of the company on their own.
What will a normal day be like for a Ventures Lab participant?
Kareem: It will be a combination of looking at the micro e.g. what are my tasks for the day to get that incremental growth?
But then taking a step back and also looking at the macro. One thing that is critical to the startups success is the balance and connectivity between what you’re doing everyday and your end goal.
What does that look like as far as operational expertise? It could be sitting down with a designer or product manager and looking at the features that will be built on a product, looking at user journeys, and prototypes.
Looking at the macro will be more strategy-focused. If you want to target a particular industry and it is very consumer marketing heavy, we have to build a digital marketing funnel that requires ad spend and building out a financial model. Questions such as, how much money will you need to raise when you exit? will also need to be reviewed.
Modus is just one of many investors that will be looking to invest in these companies. Ultimately, between the micro/nitty-gritty and the macro strategy is where people will be living.
How can Ventures Lab attract local talent and build a broader range of diverse startup founders in the UAE?
Nader: 50% of startups at Hub71 were startups that launched in UAE and other 50% launched in wider MENA, the US etc. This clearly reflects the UAE’s diversity and nationalities.
For Ventures Lab, we want to enable entrepreneurs to set up companies and encourage Emiritais who have a passion for entrepreneurship, giving them a platform for support. We are also actively looking to support females and get them into the space. We want to create that path for them, allowing them to consider building in a safe and de-risked manner.
What commitment from the founders should there be financially? And what are the equity expectations?
Kareem: Founders don’t have to contribute anything financially, except for bringing time, effort, and sweat to the table. We put in the cash and sweat equity which is funded by investors.
As far as equity, it’s tailored to each company. If you have an MVP that has been out in the market for a few years, you’ve got traction, are still early stage, need to clean up your product to get it hyper-focused on the industry, but haven’t taken in any institutional money and need support to raise funds, this will require significantly less equity e.g. 5-7%.
On the other spectrum, if you have an idea, no capital has been raised, and haven’t produced an MVP, like a traditional co-founding partner, equity can be somewhere in the 15-20% range, but it’s ultimately tailored to what each company needs.
What outcomes are you hoping for from successful graduates of Ventures Lab?
Nader: First and foremost it’s about the founder, you don’t need to have all the answers and business plan ready before you apply.
We will help you create certainty in the uncertainty that is found in the earlier stages. We want to see successful companies starting and growing from the program and big problems being solved, with tech talent thriving.
Kareem: We want companies that can solve problems and go on to create value in the market. If you create value, the financial returns will come.
Ultimately, value is in the people, we invest in people. Know that what you will find with Ventures Lab is a major ecosystem and the nitty-gritty who know how to build companies. The team is going to partner with you to help you create that value. We will invest in you, in the company, and build amazing ventures together.
Check out the full discussion by watching the information session below: