The complicated nature of regional markets makes it more difficult to grow a business in MENA as opposed to other regions
Regional businesses which manage to scale in MENA will attract global investors, according to the managing partner at Wamda Capital.
Speaking at the Arabian Business StartUp Academy in December, Khalid Talhouni said it is much more difficult to scale a business in the region, due to the complicated nature of its markets, as opposed to scaling one in other countries.
“The [MENA] region is not the easiest place to operate. If you want to scale a business, particularly a consumer business, you have to operate in multiple markets at the same time. You can’t be a UAE-only business. You have to be in Saudi as well and operate simultaneously on the commercial side - so selling your products and service across these markets. You also have to arbitrage talent across the Levant or Egypt, where there is a lot of talent at a much more cost effective price,” he said.
“So you need to figure out how to operate in a complicated market, but once you do, you are in such a great position to own the market footprint in the region for your respective business. And that makes you incredibly attractive for global player,” he added.
Talhouni warned, however, of missing elements in the infrastructure, which make it harder to scale in the region.
“It’s not easy. It’s much harder to do that here. There is a lot of soft infrastructure missing here,” he said, referring to world class research universities, grand financing, government-backed research programmes and talent.
The managing partner also warned against adopting a “protectionist, zero-sum mentality” when it comes to local versus global ownership, stating that the market needs to focus on growing local companies regardless of who owns them.
“We shouldn’t adopt this protectionist, zero-sum mentality that either local companies or someone else is making money. If profits are extracted elsewhere, that’s beside the point because we’re also free here to invest in public companies on the New York Stock Exchange or any other exchange. What we need to focus on is growing local companies. It doesn’t matter who owns them in the end, and whether they exit locally or globally is a separate point,” he said.