Eight Points Of Reference To Help Grow The MENA Startup Ecosystem
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The 2016 edition of Entrepreneur Middle East’s Enterprise Agility Forum, presented by du, discussed a variety of topics relating to the entrepreneurial ecosystem, with the main themes being on how corporates can support startups better, how SMEs can grow into new markets, and how burn rates need to be managed after an influx of funds.
While it may seem that these topics are only linked by the theme of entrepreneurship, I would argue that they are connected on a more fundamental level. If these factors are not achieved correctly, then they are symptoms of a startup ecosystem that has not adequately prepared its stakeholders to work in a collaborative and productive manner. Indeed, these are symptoms of a startup ecosystem that is still struggling with the idea of creating and scaling a culture of change.
What do I mean when I say “creating and scaling a culture of change?” After all, doesn’t every city, country, region and startup ecosystem have a unique set of problems that require specific homegrown solutions? Yes, this is true. However, I am not suggesting that they should adopt one set of global “standard operating procedures” to overcome their socio-economic and cultural problems. What I am suggesting is that we globalize the thought processes that have been used to produce the “ecosystems of success” that exist in other countries.
So, what’s the big difference between focusing on globalizing the thought processes, versus the outcomes? Well, in my opinion, there’s a huge difference. When you only focus on achieving the outcomes of a successful startup ecosystem, you spend too much time trying to replicate objectives that are unrealistic or irrelevant for the immediate needs of your startup ecosystem.
On the other hand, focusing on sharing successful entrepreneurial thought processes allows emerging startup ecosystems to organically create policies and KPIs that align with your own development level and value systems. We all know that change is inevitable, but there are ways that we can try to ensure that the change that does occur is in our favor, and that is why I am a huge proponent of creating and scaling a culture of change. Or in other words, sharing cultures that promote a Socratic approach to the way we develop our respective startup ecosystems.
According to the 2016 BNP Paribas Global Entrepreneur report, it is estimated that the average millennial entrepreneur will start a business at the age of 27, and will launch an average of eight businesses in their lifetime. On the other hand, their predecessors, the baby boomers, started their first business at 35, and launched an average of four businesses in their lifetime. These statistics prove that young entrepreneurs today are ready to start, fail and exit businesses more than ever.
Thus, emphasizing the need for all the stakeholders in our startup ecosystems to integrate cultures of change in their business practices, so we can start to make this concept a part of the DNA of our global ecosystems. Here are eight steps to developing this culture of change that we can start implementing in our Middle East ecosystem today:
1. Changing the culture of how corporates and startups relate to each other
When people think of the relationship between startups and corporates, they usually think of it as being one defined by contention and bitter competition. However, this doesn’t have to be the case. In fact, I would even argue that corporates and startups need each other to thrive.
While corporations have the money to innovate, they lack the agility. On the other hand, startups lack the money to be innovative but they possess the agility to do so. Thus, highlighting a natural synergy that unites these seemingly disparate business entities. So, how can we start changing the way that startups and corporates view each other? According to J. J. De La Torre, Digital Transformation Leader at IBM MEA, the first step is to getting more corporates involved in the “startup conversation” and ecosystem.
By attending startup events and participating in two-way dialogue (emphasis on the two), both corporates and startups can begin to explore how each party can add value to each other through a collaborative and creative process of co-creation. On the other hand, corporates can also get more involved in the startup ecosystem by collaborating with more accelerators, incubators and co-working spaces. But why would a corporate want to do that?
Well, as Tarek Ghobar, Startups Services Manager at 1776 Dubai, highlighted during the forum, these spaces are where the startup ecosystem gathers to exchange ideas, expertise and experiences. So, if corporates feel the need to become more relevant in the ongoing conversations, they need to get involved in these spaces so they can offer the strategic mentorship, partnerships, financial support, software and hardware that entrepreneurs need to thrive in the market.
2. Changing the culture of how corporates support entrepreneurship
Once we can get corporates and startups to view their relationship as a symbiotic one, the next challenge is to change the way that they offer and receive support. However, in multinational companies, where changing the standard operating procedures needed to make this happen is very difficult, changing this reality starts to feel like an impossible task. Unfortunately, in most countries, corporates have operated with little competition and their standard procedures have set the tone for business in their ecosystems for decades.
That being said, times have changed and corporates are no longer the sole trendsetters in the business world. Now, SMEs are disrupting ecosystems and finding new ways to validate business models, generate revenue and recruit talent. So, if corporates want to stay relevant they will have to streamline their outreach and support efforts, so they don’t lose out on valuable investment opportunities in the startup ecosystems.
Consider du’s recent investment in, and collaboration with Lebanese startup Anghami- this is a great example of what we need to see more of in our startup ecosystems. As du’s Head of SME Marketing Abdelrahim AbuSedira indicated at the Enterprise Agility Forum, the telco’s efforts in catering to the SME sector shows how corporates are slowly changing their attitudes toward investments in entrepreneurship, which is ultimately also giving them new ways to connect with their existing and future customers.
3. Changing the culture of how startup ecosystems develop entrepreneurs
Over the past couple of years, entrepreneurship has been marketed as a young and “sexy” pursuit. When we say the word startup, we usually picture nerdy-looking hipsters developing a new social media app in their parent’s garage, as they eat kale and drink organic açaí berry smoothies.
While I am a huge proponent of bold fashion statements, creativity and healthy eating habits, I am less enthusiastic about the culture of random innovation that the “sexy” startup marketing has promoted throughout the world. Not all startup concepts have to address a basic need, but if we hope to promote diversity in the MENA region’s economies, then we should encourage more entrepreneurs to address the problems and gaps in our current business ecosystems.
Eman Al Mahmoud, Programs Manager of Sheraa (Sharjah Entrepreneurship Center), shared a perfect example of this during the Agility Forum. In order to solve a problem it was facing in its day-to-day operations, Air Arabia, Sharjah’s low budget airline, decided to forego the usual corporate route of hiring consultants, and instead issued a challenge to startups to come up with solutions for their issue.
By creating this contest, not only has a corporate like Air Arabia created a space for collaborative innovation to occur, it has also created a unique opportunity for entrepreneurs to create a business solution that addresses a real, local problem, thereby guaranteeing entrepreneurs at least one customer, and potentially more.
Not every startup in the MENA startup ecosystem has to address a critical problem in the Arab world. However, if we foster more opportunities for entrepreneurs to tackle the world’s biggest challenges, we could definitely start a trend of hitting two birds with one stone.
4. Changing the culture of how startups scale their operations globally
Whenever I talk about the challenges that face development in the MENA region, I always try to remind people that the Arab world is made up of 22 countries and each country in North Africa, the Horn of Africa, the Gulf and the Levant reflect very different cultures, especially when it comes to consumer behavior.
So, when an entrepreneur is thinking of expanding into another country, sometimes even to another city in the same country, they have to be well prepared for such an endeavor. As Mai Medhat, co-founder and CEO of Eventtus shared with the Agility Forum’s audience, startups need to scale their business in stages.
While the scaling process might look different for every startup, it is vital for an entrepreneur to spend the first few months (or even years) learning about their industry, and improving their service or product before expanding to new cities and countries.
By adopting a “global thinking, local testing” growth model, not only do entrepreneurs give their startups the chance to pivot and grow, they also allow themselves to do so in a “safe environment,” since they can relate to their consumer base and they understand the obstacles and the players in their business ecosystem.
This will thus allow entrepreneurs to develop, experiment and refine standard operating procedures for national and global expansion that meet the specific needs of their business model at home and abroad.
5. Changing the culture of how startups globalize their teams
Once a startup has established a strong presence in their “home market” and created “brand-specific standard operating procedures” they are ready for the next step in initiating growth. According to Omar Soudodi, Managing Director of Payfort, this will involve recruiting and hiring talent in the market where a startup intends to “set up shop.” This is especially true for a startup offering new solutions, like Payfort, because regulatory and legal frameworks vary from country to country, and bureaucratic processes can be lengthy and problematic.
After all, no one can know everything about every market, so what better way for an entrepreneur to cover all their legal, financial and cultural bases than to localize their startup team, and hire people who have an inherent understanding of the ecosystem that an entrepreneur is looking to expand to? Although it might be daunting for an entrepreneur to decentralize the decisionmaking process when they expand at first, it is necessary for the continued growth and prosperity of the business.
As long as a startup’s in-country team has a thorough understanding of the company’s value proposition, core values and work culture, they should be encouraged to implement any measure that will make the startup more relevant to the consumers where it operates. At the end of the day, brand consistency is not undermined by differences in the way a startup operates from country to country, it is reinforced by the underlying values that allow its global teams to adapt and provide a quality service or product to their customers.
6. Changing the culture of how our youth are educated and trained
During the Agility Forum, Hala Alturki, CEO of Kwn Education, said that though reports suggest that only a fraction of the Arab world’s digital potential has been tapped, youth in the MENA region aren’t embracing these opportunities as much as they should, because they are still chasing jobs that won’t, well, exist in a couple of years. However, this is not the only problem facing our youth.
In many countries across the Arab world, the educational culture still heavily relies on rote learning, where teachers are teaching to the test and students are merely perfecting their test-taking skills. As a result, Arab youth continue to suffer from a lack of digital training and critical thinking skills, especially in the Arabic language.
Having said that, Kwn Education is making an effort in systematically reimagining the culture of education in the MENA region, by providing online STEM education in Arabic to individuals and institutions in both the public and private sectors.
But Kwn Education isn’t the only startup out there looking to transform the potential of youth in the MENA region. Jean-Michel Gauthier, co-founder and CEO of InternsME, is also trying to empower youth in the MENA by helping them find employment that fulfills them personally and professionally.
Although Gauthier was specifically addressing startups in the audience when he said, “You shouldn’t expect people to just want your product, you should talk to businesses and see how you can add value and change your offering,” this message is not so different from the one that InternsME tries to inculcate in its users on a daily basis.
Not only is this powerful shift in attitude streamlining the recruitment process for employers and job seekers alike, it is also empowering young people to be fully and positively engaged in their respective communities and economies.
7. Changing the culture of how start ups value and spend money
When an entrepreneur first starts their business, spending money on anything feels painful, because they are usually self-funded or they are receiving small capital injections from the three F’s: family, friends and fools. Once the entrepreneur has more confidence in their product and team, they will start looking to raise funding rounds, which they usually view as the solution to all their problems.
However, this is almost never the case. As Dany Farha, co-founder and CEO of BECO Capital emphasized during the Agility Forum, “planning and patience are important in the fundraising process, because closing investment rounds can take a while.”
Consequently, not only do entrepreneurs need to make sure that they are dedicating the right amount of time, money and manpower to the fundraising process, they also have to make sure that they have a solid plan for how they intend to use that money once they’ve got it. After a startup closes its round and secures its funds, this is when a different, dare I say, more problematic issue arises.
When an influx of funds comes in, many entrepreneurs become tempted to abandon the agile ways they operated during their bootstrapping days, and they stop scrutinizing the way they spend money. While spending habits and funding allocations might vary from startup to startup, it is vital that a startup makes responsible spending habits a core part of its culture.
According to Kunal Kapoor, founder of The Luxury Closet, the first step to establishing this culture is to never allow your team to underestimate any cost, no matter how big or small, because extravagant spending doesn’t guarantee a better customer experience.
The second step, according to Dr. Christiane Schloderer, Founding Partner of Athena CFO, is to be clear on the outcome of every expense, and never fail to question every spend on whether it is necessary. Whether your parents are giving you money to buy new equipment, or you’re preparing your startup for an IPO, you should always be vigilant about the fiscal culture you develop in your startup, because it could be what makes or breaks you.
8. Changing the culture of how investors invest in entrepreneurship
Not only do entrepreneurs have to change their internal cultures towards financial spending, they also have to change the nature of the relationships that they develop with their investors. That being said, changing this relationship shouldn’t be the sole responsibility of the entrepreneur.
Investors should also take it upon themselves to develop more enriching and mutually beneficial relationships with entrepreneurs. For example, when Tamer Bazzari, founder of Genero Capital, is looking to invest in an early-stage startup, he spends a lot of time asking them questions and getting to know them. But that’s not all he does. Once Bazzari decides to invest in a startup, he also actively seeks to mentor them and establish a good relationship with them.
Some may ask: “Who cares if I can WhatsApp my investors about my hopes, dreams, or the poor life decision I made for my startup?” Well, you should, because an investor should never be seen as just a “startup ATM.” Many investors have a wealth of knowledge about various industries and business ecosystems and entrepreneurs should use this knowledge to help them scale their startups.
They also have a wide network of national and international business contacts and partners, which can help entrepreneurs add new elements to their customer experience or, eventually, become future investors.
Entrepreneurs can also use investors’ commentary and feedback as a “sense check,” like Jon Richards, co-founder and CEO of compareit4me, does when he wants to understand how an objective observer views the progress of his business. Ultimately, you get what you put into a relationship. So, the more an entrepreneur tries to share and learn with an investor, the higher the “ROI” for both parties. Now, that’s a win-win situation.