Dubai Techno Park (DTP), the Dubai Government’s technology initiative, announced earlier this month that it has agreed to base the first Asia Gulf Horizons Fund Technology Centre at its premises.
The free zone will also sponsor the launch of the KTIC Jasper Asia Gulf Horizons Fund in Dubai, top executives said. Dubai Techno Park is a technology initiative managed by Dubai Ports World.
Jasper Capital, a UK-based financial and fund services company with operations in Dubai, Abu Dhabi and other parts of the Gulf, is the architect behind the design and establishment of the fund.
“The goal of the fund is to produce high returns for investors through acquisitions and profitable growth in the Asian, European and Gulf markets,” Jonathan Holley, Managing Director of Jasper Capital told Emirates Business in a wide-ranging interview.
What is the Asia Gulf Horizons Fund and how will it be related to Dubai Techno Park?
The Asia Gulf Horizons Fund is a GCC-focussed fund with technology centres based in different locations within the region.
The fund is sponsored by Dubai Techno Park, which is a technology initiative launched by the Dubai Government and managed by DP World.
The sponsorship is not just in terms of funding, but the vibrancy in finding people, finding the right partners and just overall receptivity for companies coming into the region.
The fund, which has a size of $300 million (Dh1.1 billion), will be sponsored entirely by Dubai Techno Park and will be managed by Korea Technology Investment Corporation (KTIC), a private equity management company. The KTIC has about 22 years of experience, including over 100 initial public offerings (IPOs) of Asian technology companies.
What will be the fund’s strategy vis-à-vis Techno Park?
The ultimate goal of the fund is to produce high investment returns for investors through acquisitions and profitable growth in the Asian, European and Gulf markets.
Dubai Techno Park knows that the long-term success of its’ mission is best served by private investment supporting the development of ambitious, profitable technology companies and it’s an honour they have sponsored our fund, which will help to set the stage for creating that result for Dubai.
What will be the function of the Asia Gulf Horizons Fund Technology Centre?
The centre is a part of the fund’s strategy to create these incubator centres in key locations. There will probably be a second and maybe a third such centre, though at the moment it is more likely that there will be a second one, but not in Dubai.
The centre will act as an incubator for foreign tech firms from Asia and Europe to tap the resources and opportunities in the Gulf through partnerships.
Basing the $300m fund in Dubai Techno Park will result in approximately 10 to 15 Asian and European technology companies establishing research, development and commercial operations in Dubai over the next two years.
What kind of tech firms will you be looking to attract with this initiative?
The companies in Techno Park will be focussed on the life sciences, information and telecommunications technology, environmental technology, energy, water and infrastructure, and industrial sectors all of which are considered essential to Dubai’s long-term technology development plan.
This will also be the largest private equity initiative to be launched in the GCC overall with the aim of driving technology development and commercialisation.
What is going to be the role of Jasper Capital and KTIC respectively in the fund?
We at Jasper Capital have designed the model of the fund, based on our previous experience with similar initiatives in other parts of the world like Switzerland.
The Dubai initiative draws on our experience from the Internet Capital Group (ICG), a technology fund group which survived the extremely challenging technology environment during and after the dotcom boom.
The Dubai model is similar in that it targets early-stage tech companies and incubates them in a simplified and cost-effective way. The focus is top line, on partnerships and on co-investments. The ICG initiative helped create about 80 companies and it is still doing very well in the United States.
As part o the ICGE, the focus was acquiring and building on-demand software companies that drive business productivity and reduce transaction costs between firms.
From its inception, the ICG has built a strong management team, deep industry expertise and a powerful network of partner companies. So we are the architects of the Asia Gulf Horizons Fund.
The fund will be entirely sponsored by Dubai Techno Park and will be managed by the Korea Technology Investment Corporation (KTIC). Given KTIC’s vast expertise in Asian tech firms and their track record of over a hundred successful IPOs makes them an ideal choice for the Dubai initiative.
Given that you are, in a way, the architect of the fund, what are the aspects you looked at in zeroing in on this fund model?
Well, I think the ICG model is the smart way of growing companies in the region. So, what I did is I took that and I looked at Asian tech driving a lot of construction here, a lot of natural resources and infrastructure.
KTIC, on its part has been closely following the developments in the region through their relationships within the region and they have identified, the next big technology player here. But they are not just going to come here because we think there is opportunity. You need to help them.
Also you need to go into a private equity and return on investment standpoint. You need to know what’s the best balance, what are the right sectors and what’s the right place.
That’s where we come in. We think we can be a good judge of what’s the best balance. It’s not an exact science, but a lot of lessons learnt from previous initiatives like the ICG.
Techno Park was the perfect partner for the incubator model, because they had sectors that aligned with KTIC’s expertise, they had the sponsorship benefits that these firms needed and they didn’t want a public solution.
Everything they (Techno Park) wanted to do was intended to be privately fuelled versus a sovereign push. The KTIC Jasper initiative coincides with other tech initiatives by the Dubai government, vis-à-vis the Dubai Institute of Technology, the Nanotechnology Village and a few other things.
What will be the holding period of this $300m fund?
It’s going to be five plus two plus an option for two. So that’s five years with bottom extension for exit of two years with a potential for two more.
The reason we’ve done that is that with the joint ventures that are set up here, you don’t know what the timings are going to be. Plus, the capital markets here are a little nascent than some of the other Asian markets where most of the IPOs happen.
So, generally, we are looking at five plus another two years as the fund’s holding period.
What is the internal rate of return that you will be targeting?
We are looking at an IRR of 20 per cent and above. Historically, KTIC has been able to achieve more than that.
Isn’t a lot of the commercialisation incubation you are talking about bordering on venture capital?
Well, its incubating a commercial area. You could sit there and say it’s pure venture. I would say half of ICG’s portfolio was all venture.
The other half was commercialisation incubation, which is to take technologies that have proven markets and put them somewhere they can get a head start because of the nature of the market and take on the risk factors that unless you are well versed to the market, may not go.
Originally, we were going to call it incubation. A lot of people said that’s going to sound like venture. A lot of companies that KTIC is going to be investing or buying or positioning are medium-sized.
They have a top line, they have a product. What you will need to do is a little bit of developmental work for the region and culture. What they need is the efficient way to springboard into the market without having to figure it all out, because the risk factors could kill off some of these small and medium-sized enterprises.
So, the technology centre removes those blocks and focuses on the right product, localises it and gets the right partner. That’s the focus.
Jonathan Holley is responsible for leading Jasper Capital’s Asset Management sector. In this London- and Dubai-based role, he handles Jasper Capital’s private equity investing, investment fund product management and dedicated-client investment company operations.
Holley brings with him 20 years of experience in transaction and operations advisory, private equity fund general partner investment experience, portfolio company value enhancement and divestiture positions.
Prior to Jasper, he was Managing Director of Berlin-based Contraco Capital, a private equity fund services and advisory company in the Eastern European, Asian, Swiss and GCC regions.
He was a founding team member of Internet Capital Group Commerce and served in various roles, notably as Vice-President, Strategic Initiatives, and Vice-President, Global Marketplaces.
Before launching ICG Commerce, Holley was the Operational Advisory Practice Leader, US Middle Market Consulting for Ernst & Young, as well as a Project Manager for Andersen Consulting’s Logistics Strategy Practice in the US and Brazil.