Many young entrepreneurs have their sights set on Silicon Valley considering that it is a powerful innovation hub. There was a time that this was indeed the case. However, while the United States takes the cake, there are many other innovation hubs that have shaped up in different regions across the globe.
For the Middle East and North Africa region (MENA), the entrepreneur-investor ecosystem has come a long way, points out Hasan Haider, Venture Partner at 500 Startups. “There is no need for startups and entrepreneurs to always go to Silicon Valley. They should focus on the region as they would not only an edge but also be a part of building themselves in the ecosystem,” he observes.
We have seen today that most of the funding is coming from the region, but there is still lack of participation from traditional investors. “Investors in the region are very cautious. These are traditional investors who mostly invested in real estate and construction and for them investing in startups in a challenge. We need more traditional investor in the startup space,” explains Mr Haider.
Stating that the challenge the system faces is the gap in the funding and investor side. 500 Startups is working on advising investors who want to set up their Venture Capital funds along with accelerator programs to show investors what the startups are doing, to get the knowledge out to a broader audience to build the ecosystem.
Elaborating on the role of investors in the ecosystem, Kamal Hassan, General Partner at Turn8 says that investors should not be solely participants. “Venture Capitalists cannot just wait for applications and the startups to come to them. They will also need to take the step forward, to reach out to the startups to grow and cultivate the ecosystem.”
Constraints In Investments
There are still many barriers to investments in the region. Mr Hassan lists three of these:
#1. There are not enough innovation centers to produce innovation in the region. There is lack of infrastructure to give the much needed support.
#2. We do not have buyers of innovation. For e.g. a corporate to adapt or use an innovation should be facilitated by the government. Such innovation models are seen as competition.
#3. Investors mostly want proven models and this is why they prefer copycats which has been seen in the past.
Accelerators should be building innovative technology, great business models, robust teams to make their foundation strong.
“We get to see regional startups setting up base in the region. Because we have these constraints does not mean that there is a problem in building global tech startups but we don’t have the infrastructure to sustain such startups, which is the challenge,” concluded Mr Hassan.
The speakers were speaking at Step Conference 2016 held in Dubai.
