Getting more Qatar start-ups to the finishing line

Qatar has one of the highest rates of 'entrepreneurial intention' in the world, but new ventures have historically struggled to get off the ground. The CEO of the biggest business incubator in the Middle East is working to change that
By Sarah Townsend
Sat 19 Dec 2015 01:35 AM

It has been just over one year since Qatar Business Incubation Center (QBIC) opened its doors to budding entrepreneurs as part of plans to diversify the oil-rich state’s economy.

To date, around 40 start-ups have made the 20,000 sq m facility on the outskirts of Doha their home, as they receive two years of funding and advice needed to become fully functioning enterprises.

As they work to grow their ventures, QBIC staff are riffling through at least 700 other applications from entrepreneurs keen to hatch and expand their ideas.

If selected, individuals will each receive a grant of up to QR300,000 (just over $82,300) to help cover the preliminary costs of setting up a business — including product development, customer research and the legalities of becoming incorporated. The centre also offers training, mentorship, networking and investment opportunities and, crucially, rent-free office space in a country where it is illegal to register a business against a residential address.

QBIC — a joint venture between Qatar Development Bank (QDB) and not-for-profit the Social Development Centre — is the largest business incubator in the Middle East and has been mandated to create the next QR100m ($27.4m) companies in Qatar.

It is not a modest challenge, but, in an interview with Arabian Business, QBIC’s CEO Aysha Al Mudahka says there is no sign that the country’s rising tide of entrepreneurship will subside.

“Our mission is to inject new investment into the economy by helping entrepreneurs to achieve their dreams,” she says.

“It is too early for me to say that QBIC has changed the whole landscape of starting a business in Qatar, but it has certainly helped fuel a trend.

“Now, QBIC has been acknowledged on social media and within the start-up community as one of the main places to be; we’ve had 700 applications so there is a lot of demand.”

Opening the centre in September 2014, Abdulaziz Bin Nasser Al Khalifa, QBIC chairman and CEO of QDB, said: “With the launch of QBIC comes a new milestone for entrepreneurship and the Qatari economy.

“I believe we are witnessing a transformation, providing entrepreneurs the resources needed to turn dreams into reality.”

QBIC has been gifted a total budget of more than $27m from the bank and Social Development Center to help it fulfill entrepreneurs’ needs, it announced when it launched.

And it forms a significant chunk of Qatar’s National Vision 2030 — the government’s strategy for shifting away from economic dependence on oil revenues and towards SMEs as a driver of future growth.

According to the Global Entrepreneurship Monitor’s 2014 Global Report, published this year, 50.4 percent of adults in Qatar say they plan to start a new business within the next three years — one of the highest rates of “entrepreneurial intention” in the developed world.

The report also claimed that 16 percent of adults in Qatar are engaged in “total early stage entrepreneurial activity”, meaning they are in the process of starting or running a business in fewer than three years.

However, only 3.5 percent of adults in Qatar said they own and manage an established business, according to the report, suggesting that those “early stage” entrepreneurs face barriers to achieving long-term commercial success.

QBIC, of course, is one attempt to address this, and Qatari banks have separately begun to launch zero- or low-interest loans and equity funding aimed at SMEs. QDB’s Al Dhameen programme provides several financing options for SMEs, including guarantees for 85 percent of facilities costs for new SMEs and 75 percent for existing ones, and QR15m of credit.

To date, QDB has granted approximately 375 loans to SMEs and supported around 250 SMEs through a total QR3.5bn of financing, Al Khalifa has claimed. He told delegates at an “Empowering SMEs” event hosted by Doha Bank last September: “Al Dhameen is part of QDB’s efforts to promote the economic diversification of Qatar and enhance the private sector’s contribution to the country’s GDP.

“The programme helps SMEs with insufficient credit or collateral overcome a common obstacle by enhancing access to lending through a strong network of partner banks.

“We believe SMEs have a crucial role to play in Qatar’s future development and the realisation of Qatar National Vision 2030.”

For Al Mudahka, there is little doubt that the sector is a priority for the Qatari government and QBIC is filling an important gap to nurture SMEs during those crucial first two years.

“Entrepreneurship is a new career choice the government is supporting,” she tells Arabian Business. “It is creating and promoting all these new opportunities — funding, incubation space like ours — to encourage people to consider it as a viable path.”

QBIC’s model of practical support and advice is based on US entrepreneur Eric Ries’ ‘Lean startup’ methodology developed in 2011. Ries believed too many start-ups begin with an idea for a product they think people want. They spend lots of time and money developing and perfecting that product without ever showing it to prospective customers, and suffer when the product fails to garner sufficient demand.

Instead, he argued, start-ups could reduce market risk through experimental, early-stage product releases that meet a specific identified need, and adapt that product over time. 

Al Mudahka explains: “You don’t need a detailed business plan to get started. What you need to do is approach potential customers, get feedback on your basic idea and create a minimum viable product based on the customers’ validation.

“So instead of forking out lots of money on a feasibility study and so on, you cut this process short and create something out of nothing, as soon as possible.”

QBIC invites entrepreneurs to submit an application via its website. It then conducts interviews with them to assess whether they are in the very early stages of their venture — in which case they are put through the Lean product development programme — or have already completed that stage and are ready to be placed directly into incubation — which essentially means starting to operate their business out of rent-free desks at the centre, receiving the funding and other support on offer.

During the ten-week Lean programme, entrepreneurs learn how to develop their concept and pitch it to a crowd of investors, entrepreneurs and others that form QBIC’s special ‘incubation committee’.

This is followed by a three-month “dating period”, says Al Mudahka, during which time the start-ups target prospective customers and adapt their idea until they are ready to operate.

Rent at QBIC is free for the two-year incubation period — “how lucky are they?” says Al Mudahka — but she says ventures will only progress to this stage if they have achieved certain milestones related to customer demand and proved they have a marketable idea.

“Some people think have they have a good idea when they initially do customer validation but then after three months it seems the product or service is not working in the market.

“We actually save time for those companies, as we give them the chance to test the market and see how it goes rather than working for a year on a product, investing loads of money, and then finding out later that it doesn’t work.”

Among the 37 start-ups at QBIC are sportswear manufacturer Oryx Lifestyle; perfume brand S.Ishira; MetFame, which creates promotional videos for social media channels, and Embrace Doha, which runs tailor-made cultural awareness tours for companies and individuals.

Although they represent a range of industries, Al Mudahka says QBIC seeks to grow sectors that are “aligned with the country’s vision”, such as tourism, infrastructure and technology. “Qatar is moving towards a knowledge-based economy and there are certain pillars of its economic vision that we know we need to concentrate on,” she states.

Earlier this year, the organisation partnered with Qatar Tourism Authority (QTA) to create QBIC Tourism, a tourism-specific incubation hub within the main facility. Entrepreneurs seeking to run events, cultural programmes, sports competitions — anything that will encourage people to come to visit Qatar, Al Mudahka says — will receive industry-specific advice from QTA in developing their idea.

QBIC last month entered into a similar agreement with national telecoms provider Ooredoo to develop ‘Digital and Beyond’, a 251 sq m tech-focused incubator also located within QBIC.

Under the one-year agreement, which includes the option to renew every year, Ooredoo will form a committee to evaluate and select “disruptive” ideas for how digital technology can be used to improve public services.  Ooredoo will provide seed funding to select businesses but the amount on offer will be decided on a case-by-case basis.

“Ooredoo wants to offer its own expertise to entrepreneurs and also build its capacity for innovation,” Al Mudahka says, adding that an estimated 35 percent of QBIC applications are technology-related.

Yet she is frank about the challenges start-ups face, citing the high cost of setting up a business in Qatar — commercial licences cost between QR1,000 and QR3,000 depending on the sector, although the government is waiving the QR1,000 company registration fee for start-ups — high rents of around QR20,000 per month in Doha, and non-existent bankruptcy legislation to help struggling businesses.

“If an SME is struggling there is no process to help them restructure, they would just fall apart,” she says. “They write off everything they have, as there is nothing to protect them.”

The fact that home-based businesses are illegal in Qatar is another barrier for start-ups. “At the moment there are quite a few people operating businesses from their homes  — I’m not sure of the exact number but it’s enough that should they be legalised. It would encourage home businesses to register and they would have the opportunity to scale up.”

Although QBIC does not do any targeted lobbying, she says it regularly communicates its recommendations to government, including the suggestion that “a virtual office is enough”. A QDB spokesman tells Arabian Business the bank has submitted a paper to government that provides a definition of home businesses and discusses how banks can support the sector.

“If it wasn’t for QBIC it would be very difficult for start-ups,” Al Mudahka continues. “There are lots of legislative issues to navigate that don’t make it easy for people to start a business here.”

She also points to cultural challenges: “Other than the rules and regulations, we need to shift people’s attitude towards starting a business.

“It’s still not the preferred type of life path; it’s not the priority for many Qataris. I mean, the priority is really to get a job and be stable, so mindsets need to change.”

She lauds educational programmes such as INJAZ Qatar, of which she was executive director before joining QBIC in July 2014 and which forms links between schools and local companies to encourage children to become more business-minded from an earlier age.

There is a long way to go, but Al Mudahka is confident that Qatar is taking the steps required to stimulate the nascent sector.

“It’s important that everyone — whether it’s businesses, start-ups, schools, us, the government — works together to promote entrepreneurship rather than in silos because there’s a bigger mission to what we are trying to do.”

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