Middle East's High-Tech Entrepreneurs Attract Global Attention

By Wright, Gilly | Global Finance, April 2015 | Go to article overview

Middle East's High-Tech Entrepreneurs Attract Global Attention


Wright, Gilly, Global Finance


Playing to its youthful strengths, the Middle East has enormous high-tech potential but still has room to grow. By Gilly Wright

The acquisition of Kuwaiti food takeaway platform Talabat by German ecommerce group Rocket Internet for $170 million in February 2015 capped a 12-month period that saw increased interest in the acquisitions of Middle Eastern digital companies, including acquisitions by Japanese and French companies of popular local start-ups.

Omar Christidis, founder and CEO of ArabNet, an events and media company focused on the Arab digital industry, believes that as the Middle East becomes a bigger and more interesting market for global giants on the hunt for new growth opportunities, they are being faced with a build-or-buy situation. "For Middle Eastern entrepreneurs able to capture the market here, this presents a very attractive buy opportunity for such global businesses."

Across the Middle East there are a tremendous number of start-ups, and Christidis says the character of each city is reflected in the start-ups focused there. "You find younger, more creative entrepreneurs in Lebanon-people focused on music, design and fashion. In Egypt you'll find hardcore technology entrepreneurs- there's a really strong development center in Egypt with a lot of talented developers. In Dubai we are seeing the oldest entrepreneurs, on average-the guys who have left industry to start companies. These are some of the most promising entrepreneurs, as they have industry experience, they have credibility in the market, they understand how business is done, and they have a network of people who they can immediately leverage."

Because it is the largest market in the region, things happen on a more localized level in Saudi Arabia, and Christidis says it is the market that everyone is trying to tackle. He highlights successful multichannel network/online video space companies, such as UTURN and Telfazl 1, for developing a niche inside of Saudi Arabia, which suffered from a lack of available, relevant, locally produced content. Other successful companies include Anghami- the leading streaming music service in the Middle East; Sawerly, a Saudi Arabian market place for photographers; and Dubai's Mini Exchange-for parents to sell their children's outgrown clothes.

FUNDING THE FUTURE

Ahmed El Alfi, the founder of Sawari Ventures in Egypt, says that the region's VC and tech funding at all stages is still substantially below that of Western markets. "It's exponentially improved over the past few years, however it is still very difficult. But it was almost nonexistent five years ago and there were only one or two VC funds in the region seven or eight years ago."

El Alfi would like to see private, public and development institutions all play a part in improving the region's high-tech ecosystem. "The private sector should definitely take the lead because innovation doesn't happen without taking risks and the private sector is the best one suited to evaluate and take risks," he says. "Governments must participate and support by giving a proper regulatory framework and in some cases some of the seed money, as has happened in some other countries. Finally, financial institutions that are focused on development should do the same [through] investment funds."

Governments actively promoting startups include Jordan, where the high-tech sector has grown from $560 million in 2000, to a $2.2 billion industry today. Jordan's capital, Amman, is home to more than 600 tech companies, some 300 of which are start-ups. Kuwait, meanwhile, has invested $7 billion to support an SME input system called the Kuwait National Fund for SMEs Development, while in Lebanon, a central bank initiative, Circular 331, has dedicated $400 million to invest in domestic start-ups. …

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