Start me up: new policy

Entrepreneurship is a vital ingredient in shaping the world’s economic recovery. Vision examines how government policy is nurturing global startups

From New York’s Silicon Alley to London’s Silicon Roundabout, South Korea’s technology-focused Daejeon metropolis to Berlin’s burgeoning startup scene, countries worldwide are witnessing the germination of entrepreneurial habitats. What start as local networks of like-minded individuals grow into the advisory systems, financial resources and accelerator and incubator programmes necessary to turn regional businesses into worldwide phenomena. One only need consider known successes such as Manhattan-based microblogging platform Tumblr, which now hosts more than 139.4 million blogs, or London music website Last.fm to witness the global impact of once-tiny internet companies on the world stage.

And yet, while the entrepreneurial spirit exists internationally, governments around the globe have very different approaches to nurturing it. Among the most active has been Switzerland, whose Commission for Technology and Innovation has funded a survey of their national startup ecosystem to eventually aid networking and analysis through the Swiss Start-up Monitor.

Colleges can provide a breeding ground for startups and many US universities foster growth through entrepreneurial hubs such as MIT’s Martin Trust Center for Entrepreneurship

Perhaps unsurprisingly, the US has the best environment for entrepreneurship among the G20, according to a recent Ernst & Young study. Colleges can provide a breeding ground for startups – it’s no accident that Stanford is so close to Silicon Valley – and many US universities foster growth through entrepreneurial hubs such as MIT’s Martin Trust Center for Entrepreneurship or the Harvard Innovation Lab. The US ranked third in the Ernst & Young survey on entrepreneurial education and training.

Outside the classroom, alternate programmes such as the Thiel Fellowship advocates a hands-on experience. Launched by PayPal co-founder Peter Thiel in 2011, the fund supplies students under 19 with US$100,000 to leave school and work on their company.

MENA success

The Middle East is one part of the world that is increasingly producing startups and engineers who are changing lives in the region and beyond. “You have rising middle classes everywhere, and you have people creating innovation everywhere,” confirms Chris M Schroeder, long-time entrepreneur, CEO of HealthCentral and author of the book, Startup Rising: The Entrepreneurial Revolution Remaking the Middle East, a title which catalogues the entrepreneurial ecosystems that are forming across the Middle East.

The region has already produced its own success stories, including Fadi Ghandour of logistics company Aramex, who has gone on to create the mentoring initiative Injaz al-Arab, and Samih Toukan, founder of Jabbar Internet Group, who sold the Arabic internet engine Maktoob to Yahoo for US$164m in 2009. “[Toukan] immediately persuaded one of his investors, Tiger Global, to help build Jabbar, which is now funding really scaleable startups,” Schroeder says.

Success stories breed more success: Toukan has since helped advise in the Amman, Jordan-based accelerator Oasis500 (Ghandour sits on its board). Founded in 2010, Oasis500 aims to invest US$30m in 500 companies across the Middle East by next year, offering approximately US$31,000 in cash, mentorship and workspace for tech startups in exchange for 15-20 per cent equity stake in each company.

With offices in Cairo, Egypt, and having recently expanded to Jeddah, Saudi Arabia, Flat6Labs is another major regional accelerator. Founded in 2011 by Sawari Ventures, an Egyptian venture capital firm, it acquires 10-20 per cent in the company of a participating team in exchange for US$10-20,000 cash and a three-month acceleration cycle. Beirut also boasts a few similar services, including one called Seeqnce, which launched its first programme last year, and Berytech.

Within the UAE, a host of select accelerators and incubators have launched in recent years. Dubai’s SeedStartup has been offering accelerator tools since its 2011 launch. It invests US$20,000-US$25,000 per company, taking a 10 per cent equity stake, providing three months of mentorship. “Dubai is way ahead in the region in terms of providing a better business environment and clearer laws,” explains Aman Merchant, co-founder of The Hub, a workspace and mentoring experience for entrepreneurs set to open soon in Dubai. Dubai-based online shopping site Namshi has raised a whopping US$34m from investors including JP Morgan and German fund Rocket Internet.

Fellows of the Thiel Foundation

“Certainly there are lots of people funding angel rounds,” Schroeder says. “Now I think there’s a huge need for the Series A round: in the States, it would be US$3-5m; for them, it’s US$1-2m.”

Funds such as the Dubai-based private equity firm Abraaj Capital and Saudi Arabian Internet holding group N2V are becoming key investors in regional startups, while tech summits such as ArabNet and Wamda’s mix-and-mentor events promote the entrepreneurial ecosystem.

Enabling environment

Furthermore, government initiatives are also shifting to match the private investment. Dubai’s Sheikh Mohammed bin Rashid Establishment for Young Business Leaders recently launched the small and medium enterprise initiative to nurture young business. Its programmes include a young entrepreneur competition, and SME connect, a networking resource from entrepreneurs. It will also provide a business incubation centre through its Idea Lab, as well as a small seed fund.

The region also looks to be gaining greater international support. In May 2013, the International Finance Corporation announced a US$374m fund to support small and medium enterprises in MENA, to be matched by local investments.

“Things have changed at a very high speed since 2008, when I started my entrepreneurship career,” says Ahmad Zahran. Zahran founded Infinitec, which raised US$500,000 on Kickstarter to develop the pocket TV, and now splits his time between San Francisco and Dubai working on the company. “Based on what I’ve seen so far, I’m highly positive that this will become one of the top entrepreneurship regions in the next 10-15 years,” Zahran says.

And Zahran’s observations are reflected in the International Finance Corporation’s Doing Business 2013 Index, where Dubai improved its rank to number 26.

“It’s not just one thing: such as policy, platform or money. You need to have the whole environment to build the entrepreneurship ecosystem,” says Merchant.