What kind of entrepreneurial ecosystem do we need? As someone who was an entrepreneur (I bought my company from its founders for AED10 million and then sold it to the staff when I left to become a professor). I am keenly interested in how to ensure that entrepreneurs thrive. The GCC has a proliferation of startup companies, and entrepreneurship is encouraged and supported in every country.
While the UAE, in particular, has been called the ‘Silicon Valley of the Middle East,’ it would be fair to say that all GCC countries can boast a flourishing startup landscape, a thriving investment community, and resources, including workshops, incubators, mentors, and co-working spaces.
Yet there remain gaps in the ecosystem, and in this column, I want to address three of them in particular – one financial, one cultural, and one about talent. Financial challenges are well documented, and talent shortages also, and I will return to these later.
Firstly, I want to suggest that the unwritten and largely undiscussed challenge to creating an entrepreneurial ecosystem might be a cultural one. Is failure as acceptable in the Middle East as it is in Silicon Valley? When businesses there fail, is it put down as experience and a natural by-product of experimentation? Or considered failure?
I believe that to develop a true entrepreneurial ecosystem, we need to build a true risk appetite and an acceptance of failure. ‘The Fearless Organisation’ by Amy Edmondsen suggests that open discussion of ‘failure’ leads to fast learning and innovation. I know this from my experience of starting an incubator at Heriot-Watt University in Edinburgh. We set it up in 2018, and one of our first incubees was a young man working as a researcher in our engineering faculty.
In his spare time, he wanted to start a business, and he had this idea of creating a tool-tidy kit that would allow people in small houses to use their kitchen table for any experimentation they might be doing, and then their tools could be tidied away to allow the family to use it for their evening meal. This kit kept tools out of the way of small children.
After less than a year, my entrepreneur realised that creating a tidy-up for home-based inventors might have a very small market, and he let that business ‘fail’ and pivoted. Learning from his ‘failure,’ he deliberately sought out something with a large addressable market, and his next venture was to create a portable flat-packed solar energy device used to heat water in small areas from private European swimming pools to small dwellings in sub-Saharan Africa. It has gone on to large-scale production and distribution.
Having a culture that sees early business failure as a learning opportunity would be one way to improve our entrepreneurial ecosystem even further. Another would be to have a more plentiful supply of equity financing that is easily accessed through well-signalled routes.
At first sight, despite surveys claiming that startups find it hard to access funding, there does not seem to be an issue. Angel investing is getting more and more established in the GCC. According to a 2022 report by the Ministry of Economy, the UAE has emerged as the most attractive market in the region, registering AED4.3 billion worth of venture capital for startups, a new record for the country.
The report revealed unprecedented regional and global investor participation across markets, with UAE, for the first time exceeding the $1 billion mark in startup venture capital. As of December 2022, there are 377 venture capital funds in the UAE.
The UAE does not have a monopoly on angel investing in the GCC – Saudi Arabia and Bahrain’s leading early-stage investors group OQAL connects innovative and pioneering startup founders with seasoned angel investors to develop leading enterprises that contribute to the welfare of the economy and society.
Riyadh Angel Investors is an example of an early-stage investor comprised of individual members. But we need more like this, and I would single out Adjuvo in the UK, set up by Mark Foster-Brown, as an example of the kind of angel network that I would like to see in the UAE – Adjuvo say that their 120 members invest ‘with purpose, passion and skill’ and we would like individuals across all the GCC countries to do that in our region.
Above all, the GCC entrepreneurial ecosystem needs to attract signature global investors to thrive – look at Sequoia and General Atlantic, neither of which have offices in the GCC. However, they do in southeast Asia and India. We need them here!
Finally, I would like to see greater development of talent. We turn out engineers, doctors and accountants here in the GCC, but entrepreneurship education is not as developed as it needs to be if we are to fulfill our potential as an economic powerhouse. I look to Babson College in the US as an example of a university focusing on entrepreneurship education, and I am encouraged by their role in the development of MBSC in Saudi Arabia.
Equally, we need to attract and develop people who can work in universities to support the successful commercialisation of intellectual property, which is essential if we want to drive innovation.
Ecosystems of any type are characterised in two ways – they are complex, and they are interactive. Through mapping our entrepreneurial ecosystem, we can identify the gaps and help to plug them. Accepting failure, widening angel investing and focusing on talent are gaps we can all help fill.
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