UAE a top place to nurture entrepreneurship
SOURCE: Khaleej Times
Around 84 per cent of youth express that they aspire to start their own entrepreneurial venture in the near future.
The world is gripped with global pandemic outbreak of coronavirus and markets have seen carnage be it stocks, commodities or currencies, but that has not deterred the venture capitalists (VCs) to proceed with their plans in the UAE.
The nation has proved to be a test bed for entrepreneurs, who bring in innovation to boost growth and development. A recent survey by Injaz Al Arab and Oliver Wyman disclosed that Mena youth working in the private sector has healthy inclination towards entrepreneurship in the UAE.
More than 2,400 youths between the ages of 16 and 36 from 17 Mena countries participated in the survey. The report shows around 84 per cent of youth express that they aspire to start their own entrepreneurial venture in the near future and the entrepreneurial mindset is strongest in North Africa at 87 per cent.
"For young people today, it is extremely important that they are well equipped with skills, knowledge, and sense of entrepreneurship to enter the workforce," Akef Aqrabawi, chief executive at Injaz Al-Arab, said.
It is critical to capture the perspective of the youth and assess what they require to bolster the private sector of the future. "We see a healthy inclination towards entrepreneurship, and a clear idea of what factors can facilitate lifelong learning. These are both indicators of their perception of the private sector, which is key to sustainable economic growth of their countries and the region. The youth are a key driver in the realisation of economic stability, and we are proud to support Injaz Al Arab in helping the youth to fulfill their economic potential," Jeff Youssef, partner at Oliver Wyman, said.
With strong support from the government, VCs in the region and in global markets are committed to support the UAE's youth and the ecosystem creating a safe-haven for all the stake holders.
"During these times of economic uncertainty, it is absolutely crucial for VCs to be resilient and maintain a balanced approach towards new investment decisions, and a more active portfolio management role," Shane Shin, founding managing partner at Shorooq Investments, said.
Shorooq focuses on fintech platform and software sectors and the region has been extremely active on fintech platform. "As the leading seed stage VC born out of UAE, we remain firm and committed to our great ambitions for the country and the region. We are proud and humbled to have been an active member of the exponentially evolving startup ecosystem. We plan to accelerate what we do - find, support and enable the next wave of amazing founders and problem solvers, creating a lasting impact in the UAE and the region," said Shane.
"It may be recalled that some of the most famous companies in the world now - Airbnb, Uber, Square, Slack and Dropbox - were started in the middle or right after the 2007-2009 financial crisis so period of uncertainty can also be a great fertile ground for entrepreneurship and innovation," said Walid Hanna, founder and CEO, Middle East Venture Partners (MEVP).
On the global scale, while there was a 16 per cent funding decline from third quarter to fourth quarter of 2019, still there is a higher number of VC investments in terms of deals versus previous years, according to CBInsights, KPMG, and PwC. Crunchbase reported that in 2019, $294.8 billion went into approximately 32,800 deals in various stages. This shows that VCs are still very much active all over the world.
North America is still the highest in deal volume but it's starting to even out, with investors in Asia also leveling the playing field. 2019 also saw a continued diversification, sector-wise, with fintech and Artificial Intelligence (AI) in the lead.Other sectors include food delivery which is also reflective of what's on the rise here in our own backyard.
The Mena region saw a 31 per cent growth in number of deals in 2019 to 564 VC deals across technology sectors. Total funding for the year was at $704 million. In terms of technology sectors, the majority of deals were made in fintech, e-commerce, delivery and transport, IT solutions, health-tech, foodtech, edtech, and consumer services, among others. UAE saw the most funding, followed by Egypt and KSA closely, according to Magnitt.
Factors causing market volatility are temporary
There is no doubt that financial markets will rebound soon as the factors causing market volatility are temporary, said Arif Saiyad, chief executive officer at ASA Ventures.
"Markets and economies by nature are cyclical so it's important not to disrupt the inherent fundamentals of performing economies, such as the UAE," he said.
The silver lining for venture capital currently is that as a result of the current volatility, people and governments are taking note of oncoming changes in the global system, whether it is fintech, e-commerce, manufacturing, AI or robotics. These changes are quite likely to determine the value that economies are able to create in the future so it's important to carefully consider the impact, scale and speed of change when looking at opportunities in the local and international markets.
"I believe the UAE could emerge as a strong contender of the most attractive destinations for starting tech-oriented businesses. There are certain aspects that work in favour of the UAE and there are some that need to be developed further to attract more startups from Asia and Europe. VCs can facilitate the development of the UAE as a startup hub by working closely with government and creating systems that are lacking in other major economies within the region," added Saiyad.
UAE is building healthy entrepreneurial ecosystem
Top US VC investor, 500 Startups claims to have 150 investments in Mena with more than 30 alone in the UAE. "At 500 Startups, we expect to write more than 300 checks globally this year, so we're not changing our pace. There are many examples of iconic companies that are founded and funded during a time of market volatility," Courtney Powell, chief operating officer, 500 Startups, said. "Great investors will stay focused on continued investment and support of portfolio companies," she added.
The 500 Startups was the most active global early stage VC for two years in a row. In terms of sectors, the VC was most active in software, consumer goods, recreation, fintech and media. "Our position has not changed. We have been actively investing in startups in the UAE for seven years, helping to build a healthy entrepreneurial ecosystem, and we will continue to do so in 2020.
"We have deep partnerships here. Abu Dhabi Financial Group is an anchor investor in our flagship global fund which invests in the top companies from our regional funds around the world. It's an exciting to be an early stage investor in the region," Powell added.
Most famous firms were founded in middle of crisis
A top industry executive said all stakeholders should adopt necessary measures to protect from the coronavirus.
"Uncertainty is high everywhere with the Covid-19 outbreak and as a result, we're witnessing big disruptions in travel, hospitality, supply chains and offline commerce. We urge everyone in the ecosystem and beyond to keep safe and take any precautionary measures needed," Walid Hanna, founder and CEO, Middle East Venture Partners (MEVP), said.
"The B2B startups - those selling to other businesses - will start to observe longer sales cycles if travel remains restricted. Companies will have to adapt by selling more remotely and that may impact the growth rates temporarily. Note on the other hand that other sectors (like online healthcare/education, e-commerce, streaming..) are expected to grow as people try to minimise in-person presence during this period. For instance, Duolingo in China has 100 per cent user growth in China in February because of school closures, the stock prices of Zoom and Netflix are doing well," he said.
"We believe that sectors like fintech, mobility and logistics are particularly promising and will help shape the future of the UAE," said Hanna.
Do you want to know the exact valuations by stage in the UAE, along other key trends? Access our full UAE Venture Investment report HERE