Thomas Lundgren, the legendary founder of furniture brand THE One, certainly knows how to keep himself in check. Walking up the stairs at his home, the walls are adorned with framed copies of rejection letters he received from banks and investors when he was starting out and looking for funding.
Reaching the top step and you are greeted with a framed 2006 cover of Arabian Business with the strapline ‘The Crazy One’, crowning the Swedish entrepreneur’s rise above his distractors laid out in the steps below.
Lundgren’s story is similar to that of our latest cover star, Ralph Debbas, the CEO of W Motors, who was hit with his fair share of scepticism when he approached banks and investors about manufacturing multi-million dollar supercars in the Middle East.
“We were criticised a lot when we started,” he told us. People even asked him ‘who are you to compete with Lamborghini or Ferrari?’
Like Lundgren, some of Debbas’ harshest critics were in the banking community. “There’s no need for you,” bank executives told him when he approached them. “There’s no way we’re going to invest in a company like this one.”
At least the bank officials didn’t laugh in his face, which was the experience of Trefor Murphy, the CEO of Dubai-based recruitment firm Cooper Fitch, when he approached a local lender three years ago for financial support for a management buyout of the company he was working for at the time.
“The woman actually sniggered when I mentioned overdraft,” he told attendees at the recent Arabian Business Startup Academy during a keynote discussion. “Go away, trade for two years, come back and we will consider giving you a bank account,” he added.
Three years later, he still doesn’t have a business bank account, but he does have a successful company, having gone away and traded, like the bank told him, and increasing revenue by triple digits, doubling headcount and putting in place plans to expand into Saudi Arabia and Europe.
So have the banks now become welcoming? “You better believe it, we’ve grown at 147 percent. I’m looking forward to when that international bank comes calling so I can tell them where to go,” Murphy says with glee.
But the issue at the core of all these stories is no laughing matter. How can businesses, whether it is furniture, supercars, recruitment firms or any SME, survive and grow if the financial community doesn’t show any commitment towards supporting them?
The motivation is already there at the top from the government, as we found out during a later session at last month’s academy. Expo 2020, which will be one of the biggest events in the Middle East when it starts in October 20, 2020, has shown its dedication to the plight of small companies.
“So far, we have over 26,000 registered suppliers from one hundred and fifty countries wanting to do business with Expo. 75 percent of those companies are actual SMEs,” Tina Ghanem, director of Expo 2020’s Online Marketplace (OMP), told us, adding that 56 percent of the number of contracts awarded so far have gone to SMEs and the event is on target to achieve its goal to see 20 percent of the budget land in the hands of small firms.
Two years ago, Egypt, the Arab world’s most populous country, introduced legislation ordering 20 percent of the value of all bank loans to be given to SMEs. It was estimated that the initiative would result in a $25 billion cash injection into the local SME economy.
SMEs are the backbone of Gulf economies but they will only flourish if they are nurtured and supported with funding. Yes, some may fail, but in order to reach the heights set by the likes of Careem and its $3 billion headline-grabbing exit, the region’s banks need to be mandated to be more supportive. Maybe then there will be more framed Arabian Business covers and less rejection letters.