Gulf Trip: Day One/Two

Toronto-Dubai

The first thing you need to learn about doing business in the Gulf Region is that the weekend in the United Arab Emirates begins on Thursday evening, and folks return to work on Sunday morning. Which means the new direct 12 hour flight to Dubai departs at 9:40 p.m. on Friday night, getting you to Dubai at ~7:00 p.m. local time on Saturday (factor in the 9 hour time difference), with barely enough time to hit the pavement the next morning.

The next thing you need to do is settle on a week to travel. The UAE holiday calendar is quite different than what we are used to in North America, and then there’s the weather to consider. Temperatures in July and August top 50 celsius, which means that many folks leave town. If you can stand 50C, which I’m told by Canadians who live in the UAE is neither possible nor worth testing, the chances of finding anyone at their desk are slim. Between the weather and the lunar calendar, there are less than 40 weeks a year when it might make sense to venture forth.

Although the business relationships between Canada and the UAE are growing, tonight’s flight appears to be full of people using Dubai’s International Airport as a hub, in the same way that London Heathrow and Frankfurt serve Europe and beyond. The Canadian and UAE airlines tussle about slots, and I can see why; only 15 people from a 777 collected their bags with me at the carousel, the rest had gone off to the transit lounge I suppose. The flight is definitely full, but on this night India seems to be the ultimate destination of many of my fellow travelers.

To prepare for a trip like this, you will find the internet almost useless. Most large institutions and firms in the UAE and Kuwait don’t have websites, and if they do they are quite opaque as to mandate, areas of focus and team members.

My goal was to get six or eight good meetings with local funds and institutions, with the full knowledge that this first trip was a fact-finding mission. I figured that if I committed to go each year for five years, I might develop enough insights over time to be able to discern what our firm and portfolio companies could offer the region, and vice versa.

I knew just a single person in each of Dubai and Abu Dhabi, and not a soul in Kuwait. To stay I didn’t know where to start is an understatement. There is no online Yellow Pages with “Venture Capital”, “Pension Fund”, “Sovereign Wealth Fund” (SWF) or “Fund of Funds” listing. Nor is there a Blue Pages that helpfully outlines the various overlapping government agencies.

After a couple of weeks I got some leads, and by mid-August I had arranged two and then three meetings at two different large institutions. I invited Sunil Sharma of the Canadian Venture Capital and Private Equity Association to come along. He is by trade a career Foreign Service officer, and the federal government wisely lent him to the Association on a secondment about a year ago to help the CVCA build relationships with other centres of risk capital around the world.

Sunil’s last posting was as our Consul General in San Diego, so he had a good appreciation for the types of things that are involved in the business of venture capital. His infectious interest in growing the Canadian economy, particularly the innovation component that is the key focus of Canadian venture capital firms, would rub off on anyone.

As the weeks passed, we built a program that focused on three locations. Abu Dhabi, Dubai and Kuwait. It isn’t that Bahrain, Oman, Qatar and Saudi Arabia aren’t crucial to any fact-finding mission like this. But the cost and time involved made it impractical to bite off any more than these three destinations; at least this time. After hitting three cities and three different hotels in less than a three day period, foolishly packing an early Canadian cough/cold with me, even this modest effort seemed overly ambitious. Now I know why I was never asked by the Party to travel on a 50 day national election campaign.

By mid-October, we had a decent combination of booked, tentative and “target” meetings. Some people were polite to respond with “thanks for the offer but we don’t invest in funds”, or “I’m away that week but one of my colleagues will see you”. Others were silent, which might have more to do with their email spam filters than their inclination.

No one really seems to like voicemail in the Gulf, so you are forced to either hope that your emails got through, or that the more traditional approach of a faxed letter will hit the right desk. In fact, faxes are encouraged by many. Perhaps it seems more formal than a ping from a RIM, which of course it is.

You could certainly try the “friend of a friend” approach, which works perfectly well in North America. But in the Gulf, you’ll be mildly lucky if you find the “friend of a friend of a friend” strategy proves useful.

You can’t ask your fellow VCs or Private Equity funds who you should meet, after all, since LP contacts are treated with the same confidentiality as ones’ marital sex life. The other angle would be to find contacts via “shared portfolio” companies. But, with no “shared” portfolio companies in the Gulf, as you’d invariably have in North America with Canadian or U.S. private equity and VC players, it really is a tall order to find even the wrong people in the wrong firms, let alone the right people at the right places.

That being said, we were able to put together a decent roster of meetings over the first three days, with at least a half day still available in each of the last two days for the names of folks that we came to learn of once we were in situ. You have to be comfortable striking out with a few of your meetings being “tentatively confirmed”.

The concept was pretty much foreign to me, but there seems to be a category of meetings in the Gulf that aren’t “tentative”, but they aren’t yet “confirmed” either. Perhaps the assistants mean they are tentative, and it depends on how their bosses’ day is going. Or maybe they mean the slot in his calendar is open, but she hasn’t yet had a chance to see if he actually wants to meet you. You hope that it means “if you’ve come all this way to see us then we’ll fit you in”, but with hundreds of emails each week from a variety of funds and companies in search of Financial Pollyanna, I doubt the mere fact that you’re coming to the Gulf carries any water anymore.

Upon arrival in Dubai, you are greeted by a new, bright, even magnificent new International Terminal. At the Jetway bridge are eight young men from the subcontinent lined up with eight wheel chairs at the ready. You can just tell that they were waiting before the plane reached the tarmac. There’s also a paramedic with a stretcher laden with a defribulator and a stuffed knapsack, ready to cure any potential ailment that might have arisen during the flight. I noticed neither passengers in need of a wheelchair, nor anyone in medical distress; but the team was ready just in case.

Although we took off 30 minutes late (it didn’t seem as though the flight crew were in any rush to leave Canada), we arrive 40 minutes early courtesy of Boeing’s 777-300ER and a good tailwind.

The Customs experience was perhaps a telltale sign. The robed male agent asked where I lived. When I told him, he said he just got his papers (at least I think that’s what he said) and did I think he should go to Toronto for a visit? I said yes. He asked if it was “cold there”. It was, in fact, with a premature four inch snowfall that hadn’t yet left, either, I replied.

Two of his colleagues wandered over, all interested in what we are talking about. A discussion ensued about wearing winter coats and if they’d really work if it was -3C. We agreed that he should give it a try. He had forgotten which airport code Toronto used (YYZ), so it was helpful that I had three customs agents to wave me through. The stamp in my passport says I must depart within 60 days, so there’s little chance I’ll be able to put any roots down before my presence in the UAE is no longer of a legal nature.

One bit of advice: bring your UAE currency from home. I Googled the rate online before I placed a currency order with a downtown Toronto entity, and it looked to be about C$0.33/dirham. Make sure you shop around in Canada on the exchange rate. One quote I got was for $0.39 per dirham (they’ll buy at $0.31, for one of the best spreads of any currency trade on the planet), a second was $0.36 and a third was $0.356. The problem was I’d already placed the order with the first bunch. When I found out I was being hosed, I refused to take it; we are talking about an international financial institution, not some poor guy in a glass-enclosed box next to the McDonalds on Yonge Street at Temperance. To make matters worse (ie., they know they overcharge) this same international financial institution called me the next day and offered to match the midpoint of other players on Bay Street. The simple fact that I winced caused them to drop the price from $0.39 to $0.358; we are not talking about buying a used car here, but it sure felt like it.

The arrival and baggage area in Dubai is certainly as clean, bright and tasteful as anything you see in the world of airports. The four story ceiling is supported by gently lit Corinthian Columns, and there are several sheds of new Red Emirates-marked Maclaren-like baby strollers provided for the courtesy of arriving passengers with infants or small children. To deal with weak operating margins, Air Canada has ditched their pillows. Yet Emirates Airlines provides strollers for passengers who are so small they don’t even pay to travel!

Emirates Airlines is the official airlines of the Emirate of Dubai (Ethiad is based in the capital Abu Dhabi, another of the six Emirates of the UAE, and is the “National Carrier” of the Nation as a result). Does it sound like Air Canada and Canadian Airlines 15 years ago?

Started in 1985, I’m told that no more than US$10 million of equity has been invested to date in Dubai’s airline, and that its the most profitable in the world. Labour costs are extremely low relative to the industry, according to one local businessman. The cost of an Emirates airline employee is 5% more than their annual salary, he says, when other airlines spend 150%. You need not wonder who is currently flying three massive Airbus 380s between Europe and Dubai; the answer is obvious.

When you collect your bags, they are usually put through an xray machine before you can leave the secure area. Interestingly, Western security services only worry about what we take onto a plane. Here, they also want to see what we’ve brought into the country.

Outside the building, there are easily 40 identical dark blue Volvo V70 station wagons with the Emirates logo tastefully acknowledged on the passenger doors. Idling patiently in a long, tidy row. It appears that everyone who pays a certain price for their airfare gets a free ride home from the airline. When I learn about Dubai traffic, you can understand why Emirates Airlines doesn’t want you have your positive memories of the Trans-Atlantic flight erased by the Los Angeles-style rush hour that grips Dubai from 4pm until about 930 p.m. five nights a week.

Within minutes, you can spot 30 skyscrapers. They shout: Welcome to Dubai.

MRM