Mubadala is an investment company with $232bn worth of assets under management and also a backer of Abu Dhabi’s Hub71 ecosystem for growing tech companies.
Ibrahim Ajami, head of ventures – Mubadala Capital, spoke to Verdict, and shared his insights on what he looks for in startups, and how to secure funding at every stage, for every sector.
Which is more important to investors, a good idea and business model or good leadership?
It’s often said that you invest in people, not companies, and certainly for us, it’s vital to partner with people that we want to be in business with, so I’d have to say both a strong business model and a trusted leadership team are equally critical factors for a business to attract investors. When we make an investment, we’re forming a long-term partnership with the company’s management team. Especially in the early stages of business growth, the insight, expertise, and passion of the founding team are often the magic ingredients for success, while at a larger scale, trusted corporate oversight and skilled management are vital for long-term sustainability.
At the same time, value creation is our priority, and so we analyse all our investment opportunities for a clear, realistic growth plan based on a distinctive value proposition. It’s the combination of both elements that creates a winning formula.
What do you look for when assessing an investment?
At Mubadala, partnership is at the centre of our investment approach, so we are always looking for mutually beneficial opportunities where our involvement can generate real value. Both financial and societal returns are intrinsic to the long-term value we create. Beyond capital, this also means that we consider how an investment partnership will contribute to the UAE’s development and progress as part of our decision making.
We look for investment opportunities where bringing our expertise to bear can really be the critical factor in accelerating a company’s growth trajectory while forming a sustainable long-term partnership.
Our aim is to make Abu Dhabi a world-class innovative ecosystem with initiatives like our MENA fund which is already supporting some exciting startups based within Hub71, or through partnerships that attract global businesses to Abu Dhabi.
What single thing could entrepreneurs do to make their business more attractive to potential investors?
It may sound obvious, but the one thing that entrepreneurs must possess when hoping to attract investors is a solid business plan. Venture capital firms are looking for businesses which they can help grow, and then at some stage exit. It is therefore no good just relying on what the business has achieved to date. There has to be projections about the possibilities for the startup over the next three to five years. The more detailed and accurate these models are, as well as the suitability and sustainability of the business proposition itself, the more likely the entrepreneur will be to attract investment.
How hard is it to assess innovative new technologies?
Innovation is all about trying to do something that no one else has achieved before and partnering with companies that are trying to push the boundaries of our collective progress, which is incredibly exciting. Mubadala has always been a leader in the technology and innovation space, and we are always looking for interesting opportunities to enter pioneering new areas, with investments in ambitious companies like Waymo, Recursion and Reef.
Getting accurate valuations in the current climate, let alone what’s coming down the tracks in 2021, is of course a challenge for evaluating business performance and investment opportunities, but we are still seeing opportunities.
What are the key metrics that management teams fail to measure most often?
While every industry has specific metrics that management teams must be aware of, there are some general parameters that all entrepreneurs should consider when looking to grow their business. The metrics management teams use most often to assess, manage, and communicate their performance are typically focused on financial measures, particularly revenue and profitability.
One issue that is common for startups management teams is that they are so focused on developing a quality product or service that they forget to keep track of basic aspects of running a nascent business, such as cash flow and cash burn rate. In the early days of a company, maintaining control of your cash is a fundamental principle.
What lessons are there to be learnt from the corporate world for tech startups?
Smaller businesses should look to big corporates in a similar sector for tips and ideas, as well as ascertain where gaps may lie to which they can exploit. One of the first areas that can be replicated is embedding strong corporate governance. You should treat corporate governance not as a burden, but as an investment in an asset that will help you to upscale your business over time.
What are the advantages for investors within Abu Dhabi?
With the region’s best regulated financial centres – Abu Dhabi Global Market (ADGM), an award-winning international financial center, has rapidly become one of the world’s most desirable destinations for foreign investors.
ADGM is regulated by the Financial Service Regulatory Authority (FSRA) and is the first financial institution in the Middle East and North Africa to directly apply common law in its entirety, ensuring the highest level of investor protection. Furthermore, Abu Dhabi enjoys political stability, one of the largest reserves of oil in the world, and a diversified economy that has attracted some of the world’s largest multinationals.