Making a funding case for Mideast start-ups

Young entrepreneurs and start-ups are continuing to inject positive energy into local markets, contributing to the socioeconomic growth. When adequately enabled, these start-ups can increase business opportunities, create jobs, sustain innovation and contribute to the overall growth and wealth in the country.

Support for these start-ups can come in various forms of investments — from growth equity capital models, private investors to government-backed lending and much more. A new economic landscape is created by start-ups based on a culmination of factors, including technology, innovation, and demand for a new way of business engagement.

It is not surprising that many Middle East and North Africa (Mena) start-ups anchor their business on what they know best — digital technology — and making it among the most popular factors for economic growth in the region.

Successful starts-ups have managed to spearhead innovation and generate economic growth — a powerful incentive for businesses and governments. The emergence of entrepreneurs across the Arab World looking to grow their own business is a refreshing occurrence, bringing new hope to an emerging region.

According to Wamda, a regional accelerator platform, more than a dozen start-ups have estimated valuations of more than $100 million (Dh367.3 million). From Egypt in North Africa down to the UAE, aspiring business owners often engage in securing funds and setting up shops to help them start their own enterprises.

While technology start-ups are becoming increasingly popular, many of these businesses can improve certain aspects within the health care, education, transport, banking and finance sectors. Nearly 50 per cent of young people interviewed by Strategy& and Google believe that IT should be used to improve quality, access and costs of health care systems in the region.

In health care, for example, there is a cohort of Mena start-ups creating scalable and cost-effective solutions that address critical gaps within the health care system.

The energy injected by this universe of entrepreneurs continues to fuel growth in a region already thriving with small- and medium-sized enterprises, always considered vital to national economies.

Data from the World Economic Forum (WEF) reveals that the region will need to create 75 million jobs by 2020 — 40 per cent more from what it has created in 2011.

Fortunately, it is these entrepreneurs that can help create jobs, sustain innovation, and contribute to wealth creation. Governments have increasingly invested and prioritised the needs of entrepreneurs through programmes and partnerships with the private sector. Saudi Arabia and the UAE are allocating funds for starts-ups and SMEs to encourage and catalyse economic activity.

As the region becomes a hot spot for entrepreneurs, it is also gaining the attention of international investors. Wamda reported that around $815 million was invested in Mena startups in 2016, with investors’ appetite for deals soaring by 560 per cent year-on-year in terms of the number of investments.

Yet, despite the importance of start-ups, most still struggle to get seed money, find mentors, and navigate government bureaucracy. Beyond the political turbulence plaguing the Arab world, some of the common challenges include a lack of talent and adequate risk capital.

The need to create and promote a strong ecosystem is critical to the growth of the region — making it necessary for investors and private equity to facilitate capital access for small businesses.

Mujeeb Rahman is chief operating officer at Bebuzzd.

Worldly Wise

Mujeeb Rahman Special to Gulf News