6 challenges facing Saudi entrepreneurs [Opinion]


6 challenges facing Saudi entrepreneurs [Opinion]

The future is wide open. (Image via Realty Today)

We have all read articles about what’s wrong with the entrepreneurship support culture around the world.

We have learned which models work and which don’t. We’ve seen what churning can do, how unicorns are born and why investors are looking at emerging markets.

At the same time, we in Saudi Arabia face issues that are unique to certain markets that tend to stand out. In my last article, Misreading Saudi Entrepreneurship, I touched on the 40+ incubators in the Kingdom and mentioned that I’ll be discussing them in more detail.  

To dive right into it, I’d like to share my discoveries of some of the core issues faced by Saudi entrepreneurs today, and how we need to address these issues.

My objective is not to point fingers; but rather highlight real everyday issues entrepreneurs in KSA are facing within the ecosystem. Many of the incubators, accelerators and funds are friends of mine and I completely respect the journey they have embarked on to support this wave of entrepreneurship in the Kingdom.

Challenge #1 - The private sector isn’t doing enough

Over 50 percent of all the incubators in Saudi Arabia have some form of government affiliation. That may sound like a great thing, but it also highlights the level of passiveness on behalf of the Saudi private sector.

It seems the private sector here forgets that the American economy was built on the backs of entrepreneurs supported by some form of incubation or support entity. Giving out money and/or office space just isn’t sustainable. More efforts in knowledge building and information transfer are needed if entrepreneurs are ever going to receive significant value from the private sector.

Challenge #2 –Entrepreneurs need help from experienced entrepreneurs who have succeeded and failed

Most people working in incubators and accelerators in KSA are employees rather than entrepreneurs.

While they are all qualified to do their jobs, here’s where the value of what our entrepreneurs are getting gets diluted. Employees and entrepreneurs have very different mindsets. One is risk averse, afraid of failure, and works solely for a set salary and an incentivized bonus. The other is living a typical entrepreneur’s life where everyday is filled with risk and challenges at every corner.

An employee who has earned a degree in entrepreneurship is an asset. An employee who has never failed, or has no intention of sharing the risk is not the kind of person that should be providing support to our entrepreneurs today. Entrepreneurs need mentoring from those who have ventured down roads where others were hesitant.

Entrepreneurs need help and support from those who have been there. (Image via Arabnews)

Challenge #3 – 'Wantrepreneurs' are ignored

If your pitch is horrible, your business plan is all over the place, and your numbers are approximations, then chances are you’re probably not going to get admitted into an incubator or accelerator and you won’t secure funding.

There are many 'wantrepreneurs' in Saudi Arabia that expect to be spoon-fed in building the core skillsets to becoming effective entrepreneurs. Without such skills, we can expect poor performing accelerator events, weak growth in new ecosystem networks, and a lack of interest from the private sector.

Not many entities today provide such support so early on in the ambitious journey and those who do end up turning down thousands of aspiring entrepreneurs that apply every year. This is a gap that needs to be filled immediately to sustain positive results.

Challenge #4 – For the last time, SME’s and startups are not the same

It has become almost comical how some entities continue to categorize startups with SMEs.

According to the Saudi Arabian Ministry of Commerce and Industry, an SME is a 50 to 500 employee operation that generates at least 10 million Saudi riyals ($2.6 million USD) a year. A startup is usually an operation that has less than 20 (and that’s on the large side) and hasn’t developed enough traction.

SMEs tend to be very precise and sustainable about how they operate, fully aware who their customer is and what need their product/service addresses. Startups, on the other hand, tolerate risk more; look to build growth quickly and work hard to remain relevant in the minds of its customers.

This affects how support is mobilized and deployed, and why many entrepreneurs end up having an unfulfilling experience. Banks don’t acknowledge anything smaller than an SME. Private debt financiers have a one-size-fits-all approach to anyone asking for money.

Entrepreneurship support entities must clarify these differences. The decision to build a startup or an SME is one that will shape that entrepreneur for the rest of his or her life.

Challenge #5 – Knowledge economy or bust?

Everything starts with culture. Culture moves, empowers, and inspires people to create, build and hack a better world with their ideas.

However, importing proven operations and talent to work in Saudi Arabia without first building and harnessing a locally sustainable culture makes the long run tough.

Saudi culture is generally risk averse. As KSA is an emerging market, it would be easy to assume that the youth here face challenges similar to those in markets such as Mexico, Indonesia, Nigeria or even South Africa. We are all too aware of the need to become knowledge economies and shift our reliance from natural resource industries, but alienating all other sectors won’t help, especially when they too, are lacking necessary skills and mentoring.

Challenge #6 – There is no proper Kingdom-wide coverage

The Saudi ecosystem is made up of smaller ecosystems that don’t have much in common apart from market dynamics and target demographics.

Some incubators are doing a fantastic job at building a stronger national presence, such as Badir Incubator, which has bricks and mortar operations in five cities and has a consistent, sustainable model to assist startups. But the lion’s share of incubators enjoy the comfort of their own cities.

Jeddah, Riyadh and the Eastern Region ecosystems operate very differently from each other, making them isolated from one another in many areas. This increases the difficulty with which entrepreneurs can collaborate or access the national market.

What do I believe we need more of to address some of these issues?

If only elevating a startup ecosystem was as easy as throwing money at it. (Image via Aaswat.com)

Integrated collaboration

Every support entity has its own specialty. Recognize why you are in this business and remember that it was always about helping people to help themselves. Saudi Arabia has three main thriving ecosystems with plenty of gaps in between that need to be bridged. Silos need to be eliminated.

Better media coverage

There are entrepreneurial success stories all around us. They happen every week in every city in the country, yet we know more about what’s happening in Silicon Valley than in our own backyard. We need more spotlights on stories here to promote the ecosystem and of course the people that make it all happen.

Grassroots activities

Give more than you receive. To have an effective ecosystem, we need effective entrepreneurs, and to have them, we need to ensure their core skills are in place. This means we need more content creators and providers to understand the local culture and speak a language that is relevant, inspirational, and exciting. Just like qualifying employees, ecosystems need qualified entrepreneurs irrespective of how good or bad their ideas are.

A culture of hustle and grit

It is no secret; the fate of MENA economies will be determined by the health of their labor markets.

According to a 2014 World Bank report, MENA markets need to create close to a 100 million jobs by 2020 to keep unemployment rates as is.

Entrepreneurship isn’t new to the region, but the culture of support for it is. To sustain a culture we need the right attitude and characteristics. We need to master core prerequisites, like the art of the hustle or the power of grit. We need to stay hungry.

Even before the Arab Spring the clock began ticking for the region to create the highly needed jobs, and today, markets like Egypt, Algeria, Saudi Arabia and the rest of the GCC have a leading role in creating the majority of those jobs.

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