Come into my garage

Hewlett-Packard’s Garage programme offers each startup two million dollars worth of leased tech equipment and services, plus access to a VC network with millions at its disposal.

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By  David Ingham Published  February 1, 2001

Relieving the startup's burden|~||~||~|Hewlett-Packard is offering Internet startups up to $2 million worth of technology and services on preferential terms with no down payment. Startups selected to join the HP Garage programme also receive the marketing support of HP and have access (again on favourable terms) to a sizeable support network or ‘ecosystem’ of lawyers, consultants and venture capitalists.

“This money is used towards financing the technology burden of Internet startups,” says Haroon Moolla, programme manager, HP Garage DotCom Financing. “They pay us back over a two year period, at very flexible rates.”

The programme is not limited to early stage startups, although its primary focus is on trying to ease many of the burdens that ultimately overwhelm those fledgling companies. Technology, Moolla says, can eat up 40% of a startup’s finance in the early stages.

What the Garage programme offers is up to $2 million of technology credit per startup, with no down payment required and repayment over a two year term. That means that valuable venture capital money can be focused on the development of marketing and personnel.

In fact, Moolla says that several venture capitalists, which can’t yet be named, are aligning with HP. “Our VC partners want to spend money on marketing, brand creation, R&D and recruiting the best people,” says Moolla. “They don’t want to spend it on technology, so HP complements them.”

Moolla says that between them, its VC partners have up to $650 million at their disposal. Joining the Garage programme opens the door to that venture capital network. Moolla insists that Garage programme members also won’t be pressured to take funding from Ebticar, the venture capital joint venture between HP and Chescor Capital.

As well as technology and contacts, the programme also gives startups access to the Hewlett-Packard brand. When a company in the HP Garage programme launches, HP, a company that now turns over around $50 billion per year, will be there at its side.

When HP has roadshows, members of the programme can be a part of it. There will be space allocated to the startups on the Hewlett-Packard corporate Web site. Startups will also have access to the Hewlett-Packard reseller network. “We’re giving startups market traction, letting them use the HP platform to better sell their services,” says Moolla.

Tempted? The criteria for joining the Garage programme aren’t complex but they are clear. Companies entering must typically be registered in Dubai, although not necessarily in Dubai Internet City. The company needs to have at least a first round of financing or capital from an alternative source already in place.

The company’s cash burn rate relative to the idea’s viability and the potential for profitability are also looked at closely. Then of course, the ability and experience of the management has to be considered.

A wide range of third parties are brought in, Moolla says, to assess business plans. The list includes law firms, business consultants, venture capitalists, incubators, business specialists inside Hewlett-Packard and contacts at Red Herring, a respected New Economy business magazine.

Analysis is comprehensive, with a lot of international precedents used for reference. But Moolla insists that this is not a limiting factor on the startup’s plans. “It carries a lot of risk for HP, but we’ve got the appetite,” says Moolla. “We’re serious about the Internet startup business.”

||**||Startups must simply have solid plans|~||~||~|Overall, ideas just need to be thought-out, viable and under the guidance of a solid team. “There’s not a lot that we’re looking for,” says Moolla. “If we believe in the idea, the management team, that they can execute, and if the financials look promising for the investor and ourselves, we’ll take the decision to invest.”

Business to business ideas are a primary area of focus for the Garage Fund, Moolla says, particularly those focused on vertical markets. The attitude towards business to consumer plans, he says, is “cautious.”

He likes the look of wireless technology and content providers. He’s also a believer in the idea of application service providers (ASPs), companies that rent out software to businesses over secure Internet connections.

Since the programme formally began in the Middle East on November 1, Moolla has received over 30 applications from startups. Around two thirds of those, he says, went back to the drawing board and of the remainder at least five look to have legs.

Three of the plans are likely to be formally announced in coming months and two more may follow a little later. Of the five that are in the advanced stages of evaluation, one is in the area of finance, one is a business to business offering for smaller businesses, another is in the area of telecommunications, one is a vertical marketplace and another is described as a very innovative idea related to advertising and marketing. The first startup inside the Garage programme could go live by the end of February.

Why? You might ask why HP is taking on the Garage programme at a time when dot-coms are going under at an alarming rate. Moolla insists that HP will find the most viable dot-com business plans, plus in terms of marketing the programme is vital for HP in the region. “If we get in on the ground floor with startups in their early days, in the long term we achieve the affinity we’re looking for,” says Moolla. “The result of that is incremental revenue for HP.”

Moolla was able to get the backing he needed for the programme following a visit to the region by Langh-Ann Pam, the founder of the whole HP Garage initiative. She took part in the Dubai Internet City E-Challenge and had meetings with key individuals. As a result of that positive impression, she gave the OK to the project.||**||

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