The Middle East has not traditionally been associated with entrepreneurial endeavor but as many of its countries face the need to diversify their economies it may be time to take heed. Micro, small and medium enterprises(MSMEs) account for up to 45 per cent of employment in emerging economies and up to 33 per cent of GDP, with the numbers significantly higher when taking into account the contribution of SMEs operating in the informal sector, according to World Bank unit the International Finance Corporation. In higher income economies SMEs contribute nearly 64 per cent to GDP and 62 per cent to employment. But the market still remains a challenging one, particularly for digital start ups looking for funding, according to Juan Jose De La Torre, VP Strategy & Corporate Development at digital media company Intigral. “What we find is banks are not open, while angel investors are more inclined to focus on brick and mortar traditional businesses where there is a clear asset and less risk,” he says. Set up costs too are high in some countries, as Philip Boigner, director of technology investment at Dubai Silicon Oasis Authority notes in the MENA Private Equity Association 3rd Venture Capital in MENA Report. “Most entrepreneurs are non-UAE nationals and hail from many different countries in the region and internationally. Due to this fact and legal reasons, startups elect to set up in one of the many free zones. The results are expensive business license fees, potential required office space, and restrictions on the number of visas available.” Sawsen Ghanem founder of Dubai- based e-commerce site Maya’s Closet and Active PR, can testify to the difficulties in starting up a business in the emirate, both with regards to free zone legislation and dealing with the local banks. “They would ask me questions about the business that were more suited towards a standard business, not an e-business,” she says when recalling her experience in opening an account for Maya’s Closet. “They also insisted on a nonsensical condition for them to open the business account – a sum of over Dhs5 million. How does that make sense when you are talking about a startup, and an online one at that?” Yet despite these hurdles many believe the Middle East has great potential for digital start-ups and e-commerce. “It’s actually one of the more unique markets out there,” says Wassim Kabbara, industry head of retail for the Gulf region at Google. “If you look at the role of digital, we have around 120 million internet users and the potential for really expanding the commercial web is there.” Google highlights that while much effort has been put into building the Middle East into a travel hub or a services hub, something that is lacking is a knowledge hub, or knowledge-based economy. To help the region achieve this goal the internet giant has involved itself with a number of start-up aiding initiatives. The most recent of these was ezstore.me, a joint scheme with online transaction specialist Paypal, logistics company Aramex and website builder shopgo which provides an e-commerce website solution for businesses. “We understand that we cannot do it alone, so for the most part we partner with people in the industry that can help us to lead more high impact initiatives,” says Kabbara. Another initiative, afkar.me, is being lead by Saudi Telecom Company and All Asia Networks joint venture Intigral to foster and develop the entrepreneurship ecosystem in the region. Intigral has been inviting applications from startups from which 10 will be selected to take part in a start-up weekend. The X-Factor-style process will help these 10 fine tune and develop their product ideas before presenting them to a panel of judges. From there three will be selected for a nurturing programme in which Intigral will inject $20,000 into each startup, without taking any equity, and provide them with an entrepreneurial curriculum of coaching, mentoring and lectures over three months. Once the product is ready it is then added to Intigral’s service portfolio using a revenue-sharing model, with the entrepreneurs, Intigral’s telco customers and Intigral itself taking a share.
