Supporting Startups To Drive Middle East's Digital Economy Innovation

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Every Middle Eastern city, be it Amman, Doha, or Dubai, is aiming to become the next Silicon Valley, creating an environment that can drive the digital economy.

A scene from a SAP Startup Focus Event in 2016.

The region already hosts a strong entrepreneurial culture. 90% of businesses here are small- and medium-sized, complemented by robust higher education, multinational companies, and government support for SME's.

Faced with the twin challenge of 100 million young people entering the Middle East and North Africa labor market by 2020, and a rapidly changing business environment in the digital transformation era, many countries are encouraging startup incubators and accelerators to support innovative companies.

In Dubai, global technology company SAP recently hosted the second Startup Focus event in order to support further technology innovators with ideas pertaining to big data, predictive or real time analytics. The first startups, which enrolled into the program as a result of the launch event last year, have now started to complete the validation stage and got successfully incubated by SAP's Startup Focus Program.

As 83% of Middle Eastern startup funders plan to deepen or expand activities into other countries, particularly the UAE and Saudi Arabia, incubators and accelerators can exchange and localize best practices from the Startup Focus Program, which has supported over 3,400 startups in 57 countries so far. Here are a few pointers in this regard:

1. Identify innovative startups Instead of supporting startups that only mimic successful ideas such as mobile apps for hailing taxis or delivering groceries, incubators and accelerators should be bold in taking risks and supporting visionaries.

For example, when SK Solutions developed sensor-based anti-collision software, SAP identified this startup as a potential game-changer. Originally specializing in construction crane safety, SK Solutions grew from being incubated in SAP's Silicon Valley offices, to now moving to Dubai and looking to disrupt industries with driverless cars, warehouse drones, and connected ports.

Related: Price Points: Six Steps To Valuing A Tech Startup

2. Help build teams and prototypes Like assembling a football team, startup founders should not go at it alone. One recent survey showed that two-thirds of startups lack technical staff, with three-quarters citing the high cost.

Accelerators and incubators should support networking opportunities that can help the startup visionaries build the team that best suits their business needs, including the right technical, financial, sales, and marketing talent for strategic planning and decision-making.

Once a team is built, incubators and accelerators should help startups with training, developing a prototype, and validating it. Startups that are part of the SAP Startup Focus Program, for example, benefit from technology support in developing their promising solution based on SAP HANA cloud platform as well as assistance in the go-to-market of their production-ready solution.

3. Finding financial backing With nearly half of Middle East startups relying on friends and family for financing, incubators should be clear and transparent about the equity stake that they take in startups, which is sometimes as high as 20%.

While seed capital is easy for Middle East startups, with 76% receiving investment of US$500,000 or less, only about two-thirds, 68%, receive a second round of funding, according to one recent industry survey.

In response, incubators as well as accelerators should help startups navigate the complex regulations in the government and finance sector, and connect with venture capitalists and angel investors who can advise on business plans and support further.

4. Communicating success and enabling the next round of funding An incubator's journey does not end when a successful startup lands a second round of funding. Incubators should continue communicating their startup's success to media, partners, and mentoring networks.

For example, startups being part of the SAP Startup Focus Program are featured in marketing and public relations materials, social media, and at regional and global events.

With events like GITEX Technology Week in Dubai putting the region's startups in the spotlight again, Middle East incubators and accelerators need to expand across the region to support entrepreneurs reach their dreams, and enable the world's next disruptive startup to come from the Middle East.

Related: The Middle East Is Ripe For Technology Entrepreneurship