Highlights: GCC Startups: What are their challenges and opportunities?

The startup community in the GCC have reported revenue generation, fundraising, burn-rate, regulatory requirements and choosing the right industry as being the most significant concerns. Moderated by Hala Bou Alwan, Founder, HBA Consultancy & HAD Consultants, Co-Chair of the Entrepreneur Committee, Capital Club hosted a panel discussion to better understand the ground realities of the startup ecosystem in the region. Guest experts were Biancka Gracias (BG), Partner, ICLO; Suits & Advisors; TiE Dubai, Nicolas Nakache (NN), Founder & CEO, Blue Heritage Consulting and Lutece Art De Vie and Roberto Croci (RC), Managing Director for Microsoft start-ups Middle East & Africa.

HBA: What kind of challenges do startups face?

RC: There are a common set of challenges that startups face, such as access to capital, communicating the right story to investors, finding mentors. But sometimes, founders can try to raise too much money too early and that’s a ‘speed trap’ and not the right thing to do. There is capital availability, but it’s important to raise ‘smart’ money by conducting due diligence around your strategy and getting the right investors who will not only give you funds but also their expertise.

Another challenge is ‘go to market’ and acquiring customers. If you don’t do this in the right way or soon enough, you might not get your evaluation and investors could lose faith. However, there are sixty different free zones and three financial jurisdictions just in the UAE, and then you have cross border payments issues, so the MENA region is not easy or straightforward to navigate and scale quickly.

Next is the challenge of access to talent, especially in the regional pool, which requires technical skills or specific expertise which might found globally. And finally, understanding what specific technology your startup requires is important, rather than trying to get all that is trending.

BG: Often startup founders are not sure about some legal aspects, such as Intellectual Property issues, understanding what contracts are needed and the laws of the different jurisdictions. It would be prudent for them to find an advisor or mentor to plan a long-term strategy for their business.

NN: It is important to find professional advisors who know the nuances of this market, because you can’t transfer learnings from elsewhere easily in this business environment. Feasibility studies and benchmarking is essential, but access to information is a challenge here.

HBA: What key information do startup founders need?

RC: As a founder, identifying your key stakeholders, your users and customers is essential. Who would be the support network and mentors here? In more mature ecosystems, there are more established processes and places that the founders would naturally find because the ecosystem is at a stage where there is abundant help. The ecosystem here is evolving rapidly but we are not there yet – where the full support system for startups is easily available.

HBA: What about regulations?

BG: Though the business ecosystem is maturing, regulation is still evolving and has to catch up. The advice for startups is to find out which law applies to your business at any given time. Furthermore, there are federal and local laws that might differ.

HBA: What are the solutions for startups?

RC: Microsoft works with tech startups, helping to build the correct and relevant tech architecture that can scale, be secure, open and integrate third party services. Due to Microsoft’s enterprise clients, we are able to build a meaningful link between corporates and startups, with the vision to build a connected ecosystem, which helps them with access to markets. On the other side, tech startups can bring great solutions to large corporates who are struggling to adapt to relevant digital transformation requirements. It is a solution where everyone benefits, with startups bringing innovation to corporates and they in turn give business to startups.

Another important aspect is in regard to investor readiness which prepares startups for the next round of funding, connecting them with venture capitalists, angel investors or family offices. Furthermore, startups need a strong community support system, where founders can share and learn from each other. And finally, startups need to scale and grow, which often requires their teams to find technology solutions, skilling to go to market, become enterprise ready, better monetary management. Many startups fail due to people-related issues, so the value of interpersonal relations and company culture are often underestimated.

HBA: Who are the different partners for startups?

RC: One of the biggest challenges is making the startups collaborate with the corporate partners and most projects fail because these two players don’t know how to work together. They are quite different at every level – their culture, processes, agendas, stakeholders, expectations…So how does one enable co-creation? Furthermore, we have knowledge partners who can complement our relationships with startups and help them with legal or negotiations processes. And finally, we have ecosystem partners, such as incubators, accelerators, government, community hubs, VCs, investors and family offices… all the players are there but we have to connect the dots to tap into the right resources at the right time.

HBA: From a legal perspective, how do you help startups in their journey?

BG: As legal advisors we conduct mentoring sessions, in collaboration with the Founders Institute, TiE Dubai, Khalifa Fund and Abu Dhabi Women’s Council. The aim is to bring more awareness to the founders about the complex legal issues that startups have to deal with.

HBA: What does the digital economy mean for startups?

RC: Digital transformation is more about how you look at the problems and reimagine the future and as an organization – build an ambidextrous organization that is exploiting the core business at the same time looking at future opportunities.

BG: One of the key outcomes of remote working and the digital economy is learning how to become more efficient. There is a mindset shift and instead of having five meetings, you can now have ten meetings in a day, since you don’t waste time in traffic or chatting over a coffee.

NN: An entrepreneur needs to be agile and remain competitive, always ready to provide a new service or product to potential clients. The laws are also evolving, and the opportunities are increasing.