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Mon 13 Jul 2020 10:51 AM

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Government support needed for Middle East start-ups, say experts

Many founders and investors believe that the impact of the Covid-19 pandemic may last as long as two years

Government support needed for Middle East start-ups, say experts

Recent statistics from start-up data platform Magnitt found that a significant majority – 77 percent – have yet to benefit from government support since the pandemic began.

A majority of investors and start-ups in the Middle East and North Africa have seen plans derailed as a result of the Covid-19 pandemic, with some experts expecting that the impact that may last as long as two years.

Recent statistics from start-up data platform Magnitt, for example, found that 58 percent of investors are looking to delay exits, with lower valuations affecting 42 percent of start-ups in investors’ portfolios.

Additionally, the report found that a significant majority – 77 percent – have yet to benefit from government support since the pandemic began.

“Start-ups are massive job creators, so support for start-ups and SMEs is always going to be important, not just in this period,” said Prince Khaled bin Alwaleed, the founder and CEO of KBW Ventures.

As an example of how government support can help, Prince Khaled highlighted one of his portfolio companies, Singapore-based biotech firm TurtleTree Labs.

“[It] received considerable support from Enterprise Singapore,” he said. “This allowed for an expansion of operations during the pandemic, when most people were contracting operations and scaling back growth and product plans. I think it’s a great example of how start-ups with promise can benefit from a public sector boost.”

Fadi Ghandour, the executive chairman of Wamda Capital, said that governments in some countries have “stepped up” to support hard-hit start-ups and SMEs, although more can be done.

“There have been some programmes, but nothing earth shattering. Salary protection programmes, furlough programmes, cash-flow supporting programmes did not happen,” he said. “That’s where governments can step in.”

“Governments should look at this as an investment,” he added. “If these companies stick around, they build businesses, employ, become consumers and eventually pay taxes. This is not a charity. It’s an investment in the long-term.”

Returning to pre-pandemic levels?

Statistics from the Magnitt report show that both founders and investors anticipate the crisis to continue for a considerable length of time, with almost 25 percent of founders expecting the crisis to continue at least through the fall of 2021.

Fadi Ghandour, however, said he expects that the impact of the pandemic will be felt for an even longer period in the MENA region, although he also believes that it will help the ecosystem “come of age” in a new, digital landscape.

“The new normal is digital,” he said. “I’m super optimistic….but this is going to take another two years, for habits to form. But the world is going to change.”

In the short term, Ghandour said he expects there to be an exodus of start-up talent, which in turn will create an opportunity for new talent to be brought in.

“In the short term, there is going to be a lot of pain. People will go, there might be some exodus. There’s been a lot of hurt,” he said. “But, in my view, this massive experiment of shut downs and testing the internet, will show everyone how essential it is to be digitally enabled. This generation of people will build the next economy.”

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