Three Myths About The MENA Entrepreneurship Ecosystem
Grow Your Business, Not Your Inbox
You're reading Entrepreneur Middle East, an international franchise of Entrepreneur Media.
There are many success stories coming out of the MENA region’s entrepreneurship ecosystem, and it can be quite inspiring to hear and see what these innovative startups are doing in different spaces, and how they are transforming industries before our very eyes. This is all well and good, but can we step back, and take a realistic look at the ecosystem? To do this, we need to first address some misconceptions, so as to get to what the ecosystem really needs.
MYTH #1: You need lots of creative and innovative people
Innovative and creative minds are great, they can lead to some lifechanging and paradigm-shifting ideas. However, and it is a big “however,” an innovator may not necessarily be a good business manager. Someone with a great idea or tech superpowers can establish a new business, but they may lack the management skills needed to take it to the next stage, and turn it into a profitable business. There must be hundreds of great ideas or technological developments that have been forgotten, just because of poor management that led to a failed business. The enterprise I lead, the Innovative Startups and SMEs Fund (ISSF), has identified this as a major issue that startup entrepreneurs need to come to grips with. Yes, you may have a great idea, but do you have the skills and mindset required to transform it into a business? That’s why we work with the ecosystem to ensure that the management training component is being invested in, and that these entrepreneurs have access to capacity building programs to give them the skills they need, and ensuring they are establishing proper processes and good corporate governance standards in their startups. Investment readiness needs to be considered for all entrepreneurs.
MYTH #2 :There are so many startups, which must be a good thing
While it may be encouraging to see that many people are heading down the entrepreneurship path, the number of startups does not correlate to a healthy and sustainable economy. The truth lies in the quality of these startups, and their ability to turn a startup into a stable money-making institution.
Are these micro-businesses growing in a healthy manner? Will they last beyond one year, and go through the growth stages? A large number of these startups with underprepared founders may actually have a negative effect on the economy by creating unstable job opportunities with no future prospects, spent capital, and investment on ideas that never mature. The ISSF believes this gap can be primarily addressed by investing in incubators and accelerators, to ensure they are creating a foundation of solid startups and capable entrepreneurs, who even if their business doesn’t ultimately succeed, they, as entrepreneurs, have the resilience to try again.
MYTH #3: The biggest challenge for entrepreneurs is funding
Funding may be a struggle, but the number one thing entrepreneurs struggle from in the region is attracting and retaining talent. More specifically, hiring sales and management types, as opposed to those with technology and technical expertise. Startups are competing with large corporate employers with bigger budgets, they have less experience in the HR field, and are under pressure to do more with what they have, requiring new hires to take on much more responsibility than at a larger organization. In certain economies where there are 90% micro and small enterprises, the level of experience in the market may also not match the particular growth aspirations of startups. The ISSF is not only directing investments toward training programs for young people entering the entrepreneurship ecosystem as part of a startup team, but we are also advocating professionals who have experience in the market to work for startups, instead of traditional corporate or government jobs, whether through mentoring, board membership, or in advisory roles. As a startup company evolves and grows, its value is very often related to the ability of the entrepreneur to build resilient and competent management and managerial systems.
As companies grow and evolve, this is where institutional added value is built. Without this, the entrepreneurs and existing shareholders sacrifice institutional value, which means that the consecutive capital raising rounds erodes the entrepreneur’s shareholding. There are many other areas we can talk about such as human capital development, capacity building, education, financial literacy, the roles of funds and accelerators, but by tackling these three misconceptions first, we can begin to approach ecosystem investment in a more holistic way. We need to start looking beyond creating a lot of startups, and focusing on their quality instead. We need to have more capable managers and businesssavvy individuals who can lead startups from the idea phase to the institution stage. We need to create an ecosystem that attracts talent away from the traditional “dream jobs.” How can this be done? A harmonious ecosystem, with all its parts working together, is needed as opposed to the silo approach that we are currently on. This means that every single component, from the startups to the accelerators, from the funds to the government and infrastructure, are in lockstep and collaborating. This also means investment across all the ecosystem components. Funds that invest in other funds, accelerators, incubators, services, education in addition to the startups. Working and communicating in a structured manner creates a shared responsibility and accountability in an ecosystem that if all parts are working together, can be greater than the sum of its parts.