Tuesday 04, April 2017 by Jessica Combes

Arab start-ups lead new generation of tech-savvy enterprises

Nearly 500 start-ups opening businesses and seeking funding are spurring a new round of entrepreneurial boom across the Arab World.

This comes as more young executives take on the new roles of business owners or managers, according to a new report titled The Future of Arab Startups: Challenges and Opportunities in a Connected World. The report published by Orient Planet Research, an Orient Planet Group venture, was released on the side lines of Step Conference 2017 in partnership with STEP Group and Utalenta.com.

“There is consensus among all sectors of society–government, private, and civil society–that supporting entrepreneurship is key to addressing unemployment and other social issues, which could open up huge opportunities for the youth and present modern-day solutions to the problems we face today. The report reveals how several successful regional start-ups are inspiring the young generation to run their own business, which is a very refreshing development in a region that has been facing many political and economic challenges,” said Nidal Abou Zaki, Managing Director, Orient Planet Group.

From Egypt in North Africa down to the UAE in the Arab Gulf, aspiring business owners engage in setting up businesses and securing funds to help them start their own enterprises. The report presents the challenges and opportunities for start-ups in the Arab World and their increasing role in spurring the growth of small- and medium-sized enterprises (SMEs) in the region. It explores the various types of support start-ups receive from the government, private and social sectors in order to succeed, as well as their increasing attractiveness to global companies as platforms for expansion in the region.

“The start-up movement is very much alive across the region and is being led by a younger generation of Arabs looking for profound change in society. The release of the report proves to be both timely and strategic as it puts forward the importance of start-ups and the role of digital transformation in opening up huge opportunities for growth. It also significantly highlights the growing interest of government and private sector to invest in these entrepreneurs, particularly the really innovative businesses which have the potential to reach larger markets. It is a birds-eye view of what is happening on the ground,” said Ray Dargham, STEP Group co-founder and CEO.

The report noted that Millennials or the young generation born from the 1980s, as well managers working in companies are keen to open their own business as they prefer to work independently and achieve a good work-life balance, rather than get tied-up into a routine job.

It also highlighted that access to digital technology plays a crucial role in the recent growth and success of start-ups in the Middle East and North Africa, with many of the leading successful start-ups in the region supported by high internet penetration and mobile phone ownership in some Arab countries such as the UAE, Qatar, Lebanon, Egypt and Saudi Arabia. The massive interest of young entrepreneurs in digital technology as an ideal platform to start up a business is visible in key events in the region, such as the inaugural Tech Start-up Movement which was launched at the latest version of Dubai’s GITEX where more than 450 start-ups participated.

The report also found that private investment funding for key start-ups has been consistently growing, having reached USD 750 million from 2013 to 2015 and up to USD 870 million in 2016. Most companies that closed funding deals last year are start-ups that have e-commerce -based or internet-related services, with the UAE having the most number of deals.

Start-ups are also increasingly attracting international investors, including impact investment groups looking to develop cutting-edge enterprises that can be scaled up at the global level. Some of the region’s most popular start-ups including Souq.com, Careem and Fetchr are 2016’s biggest deal makers. Government funding through SME funds has also become increasingly accessible for start-ups with up to USD 22.5 billion being provided by huge markets such as Egypt, the report added.

The report further revealed that across MENA, about 116 organisations directly provide support services to start-ups. They comprise venture capital investors, incubators, accelerators, platform providers for business plan competitions, online resources, social venture capital firms, and business networks.

Abou Zaki added that certain challenges continue to hinder many start-ups from succeeding such as lack of business planning among new entrepreneurs or disinterest among job seekers who prefer government posts over entrepreneurial positions. Fortunately, many young Arabs are realising the importance of being independent and learning to raise their own business. This is a very important momentum that government and private sector investors should not miss to support as the young generation will soon be key drivers to economic growth in the region.

  

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