Business Leaders Place Confidence in the Middle East Tech Sector [Report]

by Nina Curley, January 28, 2013

Business leaders in the Middle East and North Africa showed the largest increase in confidence in the technology sector in 2012, says McGill Consulting Group, in a report released today advising that the economy in the Middle East and North Africa is “on the brink of an entrepreneurial revolution.”

While these results, drawn from the YouGov McGill Consulting Group Business Confidence Index, may seem unsurprising to us here in the tech community, McGill took a look into the factors causing business leaders to place their confidence in tech entrepreneurs. Perceptions do matter when it comes to continuing to support change. 

  • Three primary factors shifted perceptions: poor job market performance, low barrier to entry in the sector, and to an increase in those seeking financial independence, said MCG Managing Partner Nader Sabry. 
     
  • Entrepreneurship is on the rise globally as well. 36% of the more than 21 million employees of the Fortune 100 are going to become entrepreneurs in the next 3 years, creating businesses that will need $190 billion in seed startup investment, says McGill.
     
  • A ventured backed entrepreneur has a greater chance of success globally (30%), while a first time entrepreneur has an 18% chance of success. 90% of new products fail.

  • The support for tech startups and entrepreneurship in the Middle East is growing, as events like Startup Weekend, Wamda’s MixnMentor, Arabnet, The MIT Arab Business Plan Competition, Google’s Ebda2, Du’s The Entrepreneur, and various hackathons have launched or expanded this year. 
     
  • Global tech companies also continue to support Arab entrepreneurs. LinkedIn opened an office in Dubai this year and Google continues to run its Google Days event in Egypt, Jordan, Lebanon, Dubai, and Saudi Arabia. 

Challenges and Goals

While optimism is on the rise, the report also point to challenges that tech entrepreneurs will have to overcome:

  1. An ingrained fear of failure. The social stigma of failure is too strong.  It prevents innovation and risk-taking.  A of leap-faith isn’t something encouraged socially.
     
  2. Barriers to exit.  The ecosystem is yet to see a stream of exits. Deal flow is low, regulatory barriers to high and policies are too soft in supporting startups.
     
  3. Defragmented capabilities. The alignment of business and technical skills is still limited.  Finding regional talent with competitive global skills is tough.  

McGill’s analysis also squares with our experience at Wamda; these issues face almost every startup founder we’ve interviewed. We would add to that the difficulties finding early stage capital, for which they increasingly turn to family and friends, early stage vehicles like Wamda Capital, and crowdfunding platforms like Kickstarter, Sprowd, Yomken, and Aflamneh.

McGill also points to entrepreneurs’ ability to find alternatives for funding, and the need for entrepreneurs to focus on issues beyond capital:

• Partnerships with suppliers and other collaborators

• Customer integration

• Design relevant, targeted and simple value propositions

These elements are universal; Kyle Wild of Keen IO also points to similar ideas in his advice on Writing Your Demo Day Pitch.

McGill’s report also points to a few examples of entrepreneurs in the region that have bootstrapped their way towards scaling their products: Butterfleye, Dermandar, TwitMail, Gradberry, Forsetna. “We were looking for genuine grassroots startups that were trying to fight the fight,” says Sabry.

Ultimately, however, most startups have faced these challenges; has yours? 

 
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