How to fund the growth of the region’s entrepreneurs

How to fund the growth of the region’s entrepreneurs

“Developing an angel investor pool in the Middle East will create more opportunities and will strengthen regional economic growth” said Ramesh Jagannathan, Managing Director of startAD when introducing his article for Arabian Business weekly dated March 16, 2019.

Here is his opinion.

How to fund the growth of the region’s entrepreneurs

Financing the angel investment market in Africa, Asia, Europe and America is estimated to be worth $50bn
We live in an exciting age for entrepreneurs. Fuelled by governments in the Middle East, the desire of transforming to an entrepreneurial based economy and boosting investment into building a healthy start-up ecosystem is high-up on the agenda. While there are sufficient funds to fuel potential start-ups in the ecosystem, the risk averse nature of venture capital (VC) firms mean they tend to concentrate their investments in later stage start-ups with crisper valuations. In a mature ecosystem, less than 1 percent of start-ups receive VC funding, and in emerging markets, this number drops by a factor of two. As VC investments continue to move towards more mature start-ups, there is a widening void of funding for early stage start-ups. The effect is not as severe in mature ecosystems as in an emerging ecosystem for a number of reasons.
Angel investors have traditionally filled this void. For example, in the US, annual angel investments of $24bn are being made in over 64,000 start-ups. In fact, 74 percent of all Silicon Valley investments are from entrepreneurial angels, who were previously a founder or a CEO of their own start-up. The phenomenon of “founders funding founders” highlights the organic nature of the process, that they are “local” and have a deep understanding of the entrepreneurship ecosystem and play a vital role in building the ecosystem. This deep knowledge helps to mitigate some of the risks that come with ambiguous valuation of early stage start-ups. More than 60 percent of the angels become active mentors of the start-ups they have invested in and generally take a board seat. More than half of them have a technology background.
By 2030, 88 percent of the next billion people joining the middle class will primarily come from India and China
Having the “right” angel investor tends to de-risk the entrepreneurial process and increases the start-ups’ success rate in raising funds in future rounds. Angels generally see 11 percent of their portfolio producing positive returns.
On the other hand, in emerging ecosystems, there is a dearth of previously successful entrepreneurs, thereby creating a “catch 22” situation. The time scale of the process to build a sustainable entrepreneurial ecosystem is made more acute by the fact that 67 percent of start-ups fail at some point in the process due to inability to raise a subsequent round of financing. The paradox is this: to have a healthy, sustainable entrepreneurial ecosystem, one needs a significant pool of high quality start-ups to cater to a large consumer middle-class and angel investors who have been successful entrepreneurs, preferably within the ecosystem. In other words, while having significant individual or group (eg syndicates) wealth is necessary, they are definitely not sufficient to build a robust ecosystem in an emerging economy, if the wealth is not “hard-wired” to local entrepreneurial experience. Ecosystems are organic in nature.
In India and China, this enigma has been resolved. While the pool of technology talent in these two countries has always been immense, due to the absence of middle-class, post WWII saw a significant “brain drain” from India and China to the US and Silicon Valley. The exodus of the “cream of the crop” from India, especially from the Indian Institutes of Technology (IITs), was unstoppable after the 1970s and from China since 1979, when the Chinese government started to send its best and brightest students and scholars to the US to catch up with western science and technology. By 1990, about 33 percent of all scientists and engineers in Silicon Valley were from India and China. Of these. 71 percent of these Chinese and 87 percent of these Indians arrived after 1970.
Going forward, by 2030, 88 percent of the next billion people joining the middle class will primarily come from India and China. We are now seeing a significant reverse “brain drain” of Indians and Chinese engineers, scientists and investors back to their homelands. About 80 percent of those returning hold graduate degrees in science, technology or business. China now boasts a sound angel investment culture, and while it’s still in its early stages in India it is gaining steam rapidly as the VC infrastructure is getting foundationally strong.
Turning our focus now to the UAE, and the GCC countries, the opportunity to “ride the wave” of India and China’s global tech dominance is crystal clear. But there are still gulfs to cross, such as the absence of a large, local technology talent pool. Without a disciplined and informed state-of-the-art process that dovetails to a VC infrastructure – by leveraging the local societal sensibilities and strategic inter-governmental alliances – the strength of access to large sums of local capital could quickly become our Achilles’ heel.
By all the ingredients for a master recipe to create a dominant UAE digital economy are in place and we need to diligently prepare, suit up and ride the long wave
Peter Thiel, co-founder of PayPal, discussed the role of governments in stimulating entrepreneurial ecosystems and compares the strengths of funding (supply side) versus founding based (demand) policies. Thiele recommended supply side policies as a mechanism to catalyse growth. However, in emerging economies, we could describe it as a “many body problem”.
We need to stimulate the process of accelerating the flow of global start-up talent into the ecosystem through the UAE.
Besides the government, this process should embed the local competency private sector stakeholders, such as in aviation, energy, transportation and logistics and finance industries. The Venture Launchpad programme at startAD is a classic example that shows significant promise.
Simultaneously, we should educate the regional angel investors about the mechanics and rigors of angel investment in digital start-ups and democratise access. The annual Angel Rising Symposium, now in its fifth year, brings the best minds from around the globe to discuss the best practises that are regionally relevant. The third piece of the puzzle is about building local capacity. StartAD and Khalifa Fund are partnering together to build the acceleration ramp to the global digital economic highway through programmes such as Ibtikari and Pitch@Palace.
All the ingredients for a master recipe to create a dominant UAE digital economy are in place and we need to diligently prepare, suit up and ride the long wave, leading the MENA region.

Advertisements
Entrepreneurship space in the Arab  world

Entrepreneurship space in the Arab world

Zawya #sme posted this article dated 13 December 2018 after conducting a series of interviews with many stakeholders in the Arab entrepreneurship space to gauge their views on the opportunities and the challenges that they face.

The image above is of a technology start-up firm used for illustrative purpose. Getty Images/Caiaimage/Agnieszka Olek

Special Report: Entrepreneurship in the Arab world: the opportunities, challenges, the stakeholders and the funding environment

By Yasmine Saleh, ZAWYA

Governments across the Arab world have been spending money on consultants to set up incubators and other tools to help those with business ideas create new firms and scale them, as more private sector jobs will be needed to provide employment for a young and fast-growing population.

But how successful are these, and what are conditions like for those brave souls who take a plunge and quit their jobs to start their own businesses? Are there enough opportunities, how hard is the journey and which track should the Arab entrepreneurs take to achieve their goals? And what happens if they fail?

Over the past three months, Zawya has conducted a series of interviews with many stakeholders in the Arab entrepreneurship space to gauge their views on the opportunities and the challenges that they face.

The Data

There are two major annual reports into the funding for start-ups in the Arab region carried out by Dubai-based research and funding platforms. One, carried out by Arabnet in collaboration with Dubai’s Mohammed Bin  Rashid Establishment for SME Development (Dubai SME), looks at the investments in the digital space across 11 countries in the Arab world.

The second, by Magnitt, a Dubai-based start-up platform that provides entrepreneurship research and data, looks at funding from angel to growth capital stages in 16 Arab countries.

  • According to the Arabnet/Dubai SME report, the number of active investors in the market increased by a compound annual rate of 31 percent between 2012 and 2017, from 51 in 2012 to 195 last year. It said around 40 new funds were created between 2015 and 2016 and around 30 new funds between last year and May 2018. Of these 30 new funding institutions, around one third are based in the UAE, while one quarter are based in Lebanon.
  • A majority of the investors are based in four Arab countries: The UAE hosts 32 percent, Saudi Arabia 17 percent, Lebanon 13 percent and Egypt 10 percent.
  • The investor community is almost equally spread between early stage funders such as angel investors, seed funders and incubator programmes, and later-stage venture capital, growth capital and corporate investors.
  • According to Magnitt’s report, 318 start-up funding deals were made in 2017, up from 199 in 2016. However, deal volumes for the first nine months of this year declined 38 percent to $238 million, from $383 million achieved in the same period last year.

The Opportunity

The start-up success stories in the region are growing, with the best-known so far being Dubai-based Careem and Souq.com.

Careem, which started in 2012, is a local ride-hailing app which has been through many rounds of venture funding, with the most recent $200 million fundraising completed in October bringing its valuation to over $2 billion, according to a Reuters story, citing an unnamed source.

Souq.com was founded in 2005 by Syrian entrepreneur Ronaldo Mouchawar and was sold to online retailer giant Amazon for $580million, according to documents filed by Amazon in April 2017.

Egypt was home to one of the region’s first incubators, Flat6Labs. It was founded in Cairo in 2011. It was deemed a success and later opened branches in Tunisia, Bahrain, Saudi Arabia, the UAE and Lebanon.

Mirek Dusek, the World Economic Forum’s deputy head for geopolitical and regional agendas, told Zawya in a telephone interview in September that the increasing interest by investors in the start-up scene is driven partly by governments, but also by local, private sector interests.

“We have a different picture than from five to ten years ago and that picture has changed dramatically because of the involvement of the family businesses, the traditional long-standing family firms that we have seen in the Arab world are now setting up venture capital arms and also sovereign entities, PIF (the Pubic Investment Fund) in Saudi Arabia or elsewhere are increasingly active in this space.”

 “Sovereign entities, particularly through sovereign wealth funds are setting up arms that are specifically targeting SMEs or start-ups in their home economy… This is quite healthy as long as it does not crowd out other competitors,” he added.

 The Pubic Investment Fund (Saudi Arabia’s sovereign wealth fund) is an investor-partner in ecommerce platform Noon, which was founded by UAE-based businessman Mohamed Alabbar.  The portal was launched late last year with an initial investment of $1 billion.  

Abu Dhabi’s Mubadala, a state-owned investment company, has pledged $15 billion to the $100 billion Softbank Vision Fund, a tech fund run by Japanese technology company Softbank in May last year, while Saudi Arabia’s PIF was the fund’s biggest investor, with a $45 billion commitment.

According to the Arab Competitiveness Report 2018 released in August, “research has shown that countries and regions characterized by higher entrepreneurial activity tend to have higher growth rates and greater job creation, the main pathways through which to grow the global middle class”.

The report, which was compiled by the International Finance Corporation (IFC), the World Economic Forum and the World Bank, added: “Global experience shows that entrepreneurship stimulates job creation in the economy, as most new jobs are created by young firms, typically those three to five years old.”

Saudi Arabia, the Arab region’s biggest economy, needs to create 1.2 million jobs by 2020 to reach its unemployment targets, Reuters reported in April, quoting an official in the Ministry of Labor.

The unemployment rate for Saudi nationals stood at 12.9 percent of the population in the second quarter of 2018 – the latest for which figures are available.

Anass Boumediene, one of the founders of Dubai-based eyewa.com, an online portal that sells spectacles and contact lenses that expanded to Saudi Arabia last year, said the region still lags behind others with regards to the size and type of support provided by governments to start-ups.

“What needs to be improved in the region is governments’ involvement in fostering entrepreneurship. In Europe, Asia, or the U.S., governments are a lot more active in supporting entrepreneurs, providing access to simple and cheap legal frameworks for startups and VCs (and) government funding in the form of grants, loans or equity to both startups and VCs, and other ecosystem-building infrastructure facilitating access to talent and technologies,” he told Zawya in an interview in September.

Aysha Al-Mudahka, the CEO of Qatar Business Incubation Center (QBIC), told Zawya in a phone interview in September that it is important both for start-ups and investors to feel they have “the consent of the government”. This will make “the private sector feel comfortable to invest in start-ups, especially in the Arab world, as that will lead to better regulations and support for start-ups.” 

QBIC is a government-backed incubator, co-founded and solely owned by Qatar Development Bank.

Read more on the original Zawya publication

Some countries are far more unequal than others

Some countries are far more unequal than others

Three reasons some countries are far more unequal than others

By Sandy Brian Hager, City, University of London

The picture above is of Hyejin Kang / Shutterstock

Why do the richest 1% of Americans take 20% of national income, but the richest 1% of Danes only 6%? Why have affluent British people seen their share of national income double since 1980, while over the same period, the income share of wealthy Dutch hasn’t budged?

Technological change and globalisation act as powerful forces for income distribution, but these market processes cannot alone account for the continued range in top income inequality in different countries. After all, some of the most technologically advanced and globalised countries, such as Denmark and the Netherlands, are the ones that are the most equal.

To explain why some advanced capitalist countries are more unequal than others, we need to look beyond the market and explore the role of politics and power in shaping distributive outcomes.

Want to have a more equal society? In a critical review of recent research, I’ve found that the formula is surprisingly simple: tax the rich, vote for left-wing parties, implement electoral systems of proportional representation, and empower trade unions.

1. Tax levels

One key political factor is government policy, especially taxation. Countries that have made the biggest reductions to their top rates of income tax have seen the largest increases in top income shares. For example, in more equal France, the top rate in 2010 was only 10% lower than it was in 1950. Meanwhile, in the more unequal US it was 50% lower. At the company level, CEO pay tends to be much higher when the top income tax bracket is lower.

Tax policy plays a pivotal role in explaining top-end income inequality. But policies do not emerge out of thin air. These variations in the policies that influence distributive outcomes at the top result from social power relations, which have been shown to shape the evolution of top-end income inequality over time.

2. Politics

The formal political arena is one site where these power relations unfold. A recent study by Evelyne Huber, Jingjing Huo, and John Stephens studied the income share of the top 1% in postindustrial democracies from 1960 to 2012. They found that centre and right-wing governments in rich countries are consistently associated with increases in top income shares. Meanwhile, policies of left-wing governments generally reduce inequality at the top end.

The institutional design of the political system also matters. Electoral systems of proportional representation tend to favour left-wing parties, while systems that are led by majority rule favour right-wing ones. Certain institutional features, such as having presidents and bicameral legislatures encourage gridlock and empower special interests to block progressive policy reforms.

There are questions about the extent to which the institutional story can be generalised, but as Jacob Hacker and Paul Pierson show, it is crucial in explaining the spectacular rise of the super-rich in the US.

3. Trade unions

In addition to left-wing parties, strong trade unions act as a power check on top income shares. Unions can align with left-wing parties and push for egalitarian policies. Within the firm, unions can bargain to increase their wages and reduce the amount of revenue going to executive compensation and shareholder dividends.

One academic study found that unionisation decreased the compensation of top US executives by 12%. Another found that in US industries with higher levels of union membership, the gap between executive and non-executive pay was narrower. In the numerous cross-national statistical studies that I surveyed the rate of unionisation is one of the few variables consistently associated with lower top income shares.

Prompted in many ways by the pioneering efforts of Thomas Piketty and his collaborators, the study of top incomes has made remarkable progress in the past decade. But there is still room for further exploration.

The study of top incomes tends to be US-centric. There needs to be more in-depth analysis of the experiences of other countries. We need further research that investigates who the top 1% are in different countries, and how their political preferences compare to other segments of the population. We also need to explore in much greater detail the racial and gender dimensions of the income hierarchy in different countries.

Given the compelling evidence that living in highly unequal societies destroys our minds, our bodies, our relationships, our communities, and our planet, this is something we should all take seriously. The better the grasp we have of the causes of top-end income concentration in different countries, the more effective we will be in assessing what, if anything, can be done to slow or even reverse it.The Conversation

Sandy Brian Hager, Senior Lecturer in International Political Economy, City, University of London

This article is republished from The Conversation under a Creative Commons license. Read the original article.

Strategies for Adapting to the New World

Strategies for Adapting to the New World


The forum of leading global policymakers of the developed and emerging countries in recent years has addressed several strategic themes that challenge Algeria today. These included and were not limited to issues such as the 4th Industrial Revolution, Climate, Migration, Energy and the impacts of terrorism. In Strategies for Adapting to the New World, Prof. Klaus Schwab, president and founder of the World Economic Forum, said: “The 4th Industrial Revolution refers to the fusion of technologies, especially in the digital world, which has significant effects on the political, economic and social systems, it will be a matter to establish a system of common understanding of this industrial revolution”.  We shall see such varied themes as to how our lives are to be changed by this Revolution, how business structures will be modified by the new technologies and how rapid technological change will revolutionise work such as what is the future of financial services, how to restart the global economy.  Debates about the possible impact of intelligence on defence systems and the future of fuel energy on climate change will take a different meaning.  Facing the New World Revolution in 2020 through 2040, including the development of Artificial Intelligence and digital transformation, Algeria has so much to do in the political, security, social, cultural and economic fields of adaptation strategies, if it wants to avoid its marginalisation.
For François-Xavier Sambron, Government institutions and businesses spend a lot of time and energy managing tasks daily, whether it is prioritising, planning over time or overseeing routine workloads.  Although familiar, this exercise is nonetheless complicated and ineffective, while efficiency implies breaking down its tasks. In this context, according to this author, we have six digital impacts that revolutionise the function of a political and economic manager, see “My Business-Digital” – February 2018.
First, in traditional management, the manager’s power resided primarily in his ability to distribute or maintain information. This situation is reminded to us by the famous adage that “information is power”.  Today, it derives its legitimacy from its ability to link and interconnect collaborators and services among themselves, and its ability to synthesise and sort through the profusion of information received to extract the essentials. This method is exceeded because the “New Generation” manager gives priority to sharing and transparency, looking for above all to empower its employees by opening doors and guiding them in the right direction.  By greatly facilitating the flow of information within the company, digitalising is both the primary trigger and contributor to the so-called collaborative management.
Secondly, the manager has to be-first a developer of collective intelligence, a leader, a facilitator, thanks to the information is now widely shared, like not the one who knows but the one who pulls his team.  He is the host of a team that seeks to fulfil its objectives by taking maximum advantage of the resources of the company, Putting Interacting with different skills to create value.
Thirdly, the vertical authority based on the hierarchical organisation of the company and the status of the collaborators gradually gives way to a horizontal authority based on the knowledge, competence and reputation of each. The company is now governed by two Forms of authority that act in parallel, one falling within the processes and priorities defined by the management, the other translating the competence of each collaborator. In this context, the manager must rebuild his power horizontally both to communicate and to identify skills, to value them and to organise them and contrary to the past, his leadership is no longer expressed vertically but Horizontally.
Fourth, thanks to the digital revolution, the manager now has a wide variety of tools that allow him to send the right message at the right time to the right collaborator. Whether it is via messaging (instant or not), social networks, collaborative platforms, sending SMS, etc.  Besides, the multimedia capabilities of these different means of communication (audio, video, animation) Facilitate the dialogue and encourage the feedback of the collaborators.
Fifth, for the effectiveness of an organisation, new tools such as collaborative applications, project management solutions, business or administrative workflows, etc., make it possible to set and share priorities and objectives, and to ensure the detailed planning of the tasks to be performed as well as the progress of the latter. At the level of the activity monitoring, the digital usually provides many elements of measurement used in its evaluation as to the identification of its malfunctions. The introduction of quantifiable indicators (productivity, costs, quality, deadlines) enables monitoring of the activity over the water and the rapid initiation of corrective actions in case of discrepancies. Thanks to this continuous supervision, the manager is now in a capacity to steer his team finely as each of its members and to follow up the fixed course.
Sixth, technologically, the digital transformation of a company takes place primarily regarding the human resource, pillar of management, making it necessary to accompany all the collaborators in a transition of which they will be the main actors.  In this context, the manager occupies the first role to engage his team in this significant project and encourage each employee to take their place in front of Explain the merits of these changes, reassure the collaborators about their future and value the role of each in this mutation.
In conclusion
Political, entrepreneurs, researchers, ordinary citizens, we all live today in a society of electronic communication, plural and immediate that compels us to make decisions in real time.  The control of time being the primary challenge of this century, any inadequacy of these mutations would further isolate the country.  It, therefore, needs an adaptation strategy in the face of new global and energy changes with the advent of the Fourth Economic Revolution that will be based on digital, technological news, green industries with an energy mix between 2020 through 2040.  As the world advances, artificial intelligence and digital revolutionising both international relations, the management of States, institutions, businesses and relationships that are personal, many leaders could need a Cultural Revolution (an upgrade) to adapt to the arcane of the new economy. The majority of organisations must move away from the utopian patterns of the past of the years 1970 through 1990 and be ready at the dawn of a veritable planetary revolution.  Emerging countries have no future if they do not promote good governance and the knowledge economy, which must adapt to these new mutations, the two fundamental pillars of the development of the 21st century.  For Algeria, the 2016 – 2018 World Economic Forum report is far from the country’s vast potential has a lesson nevertheless to be learned; that is the balance sheet is very mixed despite the importance of public spending.  Furthermore, and according to an OECD report, Algeria would spend twice as much to have twice as many results as compared to similar countries in the MENA region.
Algeria suffers from a closed business environment that is believed to be resolved by legislation when it comes to tackling functioning of a business company: a bureaucratic financial system and an inadequate socio-educational system together land transactions, for instance, tend to be causing high costs.  There is still much work to be done, referring to political, social, cultural and economic factors to liberate creative energies, to attract the real creators of local and international private wealth confronted with the bureaucratic burden and the lack of visibility and coherence of socio-economic policy. This implies a specific strategic objective, adapting to the new World at least ten years and another governmental, institutional organisation around essential ministries and large regional eco-poles. Some would still choose the wrong way in their economic policy, which could lead the country to a stalemate and considerable financial losses, by ignoring the new global mutations.  It is thus, necessary to go for a new model of consumption, because of the significant strategic error of reasoning at the global level in a linear consumption model, and not continue to live from the illusion of the material age.  This would urgently require some cultural change of all business leaders.  I would draw the Government’s attention to the non-coherent current policy that may lead the country to accelerate its foreign exchange reserves’ depletion, without however sorting out the real problems of the country’s development. It is all about the technological and managerial accumulation within the framework of the values of financial capital as only one way to avoid monetary illusion.

ademmebtoul@gmail.com

Arab women outnumber men in pursuing university degrees, but . . .

Arab women outnumber men in pursuing university degrees, but . . .

This article was written by Kelly Ommundsen, Community Lead, Digital Economy and Society System Initiative, World Economic Forum and Khaled Kteily, Founder and CEO, Legacy posted on the World Economic Forum of July 21, 2018, does bring to the fore only what has been happening throughout the MENA region’s diverse youth. Urbanised as never before, these are in increasing numbers educated and open onto the world. And a fact that is more and more obvious on the ground is that Arab women outnumber men in pursuing university degrees, but . . . . how is this fact affecting the rest of the region’s populations?
The Brookings back in 2015 noted in its website that “Echoing the trend observed globally, women in the Arab world outnumber men in pursuing university degrees.” However, it added that “For Arab women, hard-won progress in education has not earned them the economic progress they deserve. Although young women seek and succeed in tertiary education at higher rates than young men, they are far less likely to enter and remain in the job market. Understanding and tackling the barriers that hinder women from working would unlock Arab women’s potential and yield significant social and economic benefits to every Arab State.”
It remains however that according to the World Bank, “Thirteen of the 15 countries with the lowest rates of women participating in their labour force are in the Middle East and North Africa (MENA), according to the 2015 Global Gender Gap Report (2015). Yemen has the lowest rate of working women of all, followed by Syria, Jordan, Iran, Morocco, Saudi Arabia, Algeria, Lebanon, Egypt, Oman, Tunisia, Mauritania, and Turkey.”
“So, why is women’s participation in the workforce so low in MENA, especially when the education rate is at parity for girls and boys, and especially when, often, the girls outperform the boys?”
Here is the WEF’s article that covers that segment of activities as helped today by all the ‘smart’ technological advances of recent years.

The picture above is of The Arab Weekly’s Greater opportunities but entrenched stereotypes for Arab women in data science captioned as Sunshine sector. Lina Daouk-Oyry, assistant professor of organisational behaviour at the American University of Beirut, moderates a panel. (The American University of Beirut Conference)


How women are transforming the Arab world’s start-up scene

Palestinian entrepreneur Samar Hijjo developed an app for women during pregnancy.
Image: REUTERS/Ibraheem Abu Mustafa

It may surprise some to learn that one in three start-ups in the Arab World is founded or led by women. That’s a higher percentage than in Silicon Valley. Women are becoming a force to be reckoned with on the start-up scene across the Middle East. Because the tech industry is still relatively new in the Arab world, there is no legacy of it being a male-dominated field. Many entrepreneurs from the region believe that technology is one of the few spaces where everything is viewed as possible, including breaking gender norms, making it a very attractive industry for women.
Despite many challenges, including societal pressure on women to stay at home, a digital gender gap, and structural disadvantages in fund-raising and investments, female entrepreneurs are finding new and creative ways to overcome barriers to entering the workforce and starting their own business.
Key to these efforts has been their ability to leverage the internet and engage through online platforms to reach new markets. They are able to work from home if they wish. As Saadia Zahidi argues in her book Fifty Million Rising, these digital platforms allow women to be unimpeded by cultural constraints or safety issues, and they lower the implicit and explicit transaction costs of transport, childcare, discrimination and social censure.
Finding how to tap into this valuable resource of highly educated women could be a game changer for the region. Given the market power of women’s increasing participation in the workforce, which by 2025 could add an estimated $2.7 trillion to the region’s economy, the growing trend of women in start-ups could be transformative for the Middle East.
Unlocking the potential of female start-ups
The rise of women in the Arab world starts early, with girls outperforming their male peers in school. In Jordan, girls do better than boys in school in nearly all subjects and at every age level, from grade school to university. When it comes to STEM subjects (which include skills critical to launching and running a start-up in the Fourth Industrial Revolution) several Arab countries are among the global leaders in terms of the proportion of female STEM graduates. According to UNESCO, 34-57% of STEM grads in Arab countries are women, which is much higher than in universities in the US or Europe.
Despite the fact that many Arab women are thriving in school and graduating with advanced degrees, this success has not necessarily translated to the job market or the start-up world. Many women are instead staying at home, whether from choice or because of cultural, social or familial pressures. In fact, 13 of the 15 countries with the lowest rate of female participation in the workforce are in the Arab world, according to the World Bank.
Restrictive laws in many countries across the region put women who wish to join or start their own businesses at a disadvantage. These include prohibitions against women opening up a bank account or owning property, limited freedom of movement without a male guardian and constraints on interactions with men who are not in their family, as well as further cultural and attitudinal stigmas.
In fact, even women who do start a company face structural disadvantages. On average, female-led start-ups receive 23% less money than male-run firms, and are 30% less likely to have a positive exit, according to the OECD.

Changing the ecosystem, one woman at a time

To close this gap, the entrepreneurship ecosystem needs more women. One data point makes this clear: venture firms with one or more female partners are twice as likely to invest in a start-up which has women in the management team, and three times more likely to invest in a company with a female CEO.
This is also true for female founders. Female-owned businesses hire more women (25%) than their male counterparts do (22%), according to the World Bank. Female-owned firms also employ a higher percentage of women in managerial roles, helping women to climb up the ladder, compared to those who are only hired for lower, unskilled positions. And women-led businesses are hiring more workers in general. In Jordan, Palestine, Saudi Arabia and Egypt, firms run by women are growing their workforces at higher rates than those run by men.
Womena is an investing platform based in Dubai, dedicated to encouraging gender diversity and inclusion in tech. It believes that in order to increase the number of female tech entrepreneurs, you need to build networks of women that can help support one another to grow and thrive. Role models are also important, such as HE Sheikha Lubna Al Qasimi, who studied computer science before opening one of the region’s first B2B marketplaces. She is best known for being the first woman to hold ministerial posts in the UAE, as Minister of Economy and Planning, Minister of State for International Cooperation, and then Minister of State for Tolerance.
Womena co-founder Elissa Freiha also believes that investing time, energy and money into female entrepreneurs will pay huge dividends.
“Women from the Arab World need to fight. The struggles they face in society, in their communities and sometimes even in their families create an amazing resilience that makes these women incredible entrepreneurs. If given the right platform, these women can become the business owners and leaders for the future of the region.”

Go digital, young woman

Digital represents a key opportunity for women in the region to solve technical and societal challenges. For example, Egypt-born Rana El Kaliouby is the co-founder of Affectiva, which has developed cutting-edge AI technology to help computers recognize human emotions based on physiological responses and facial cues. Meanwhile, Loulou Khazen Baz founded the Middle East’s first freelance marketplace, Nabbesh, as a way to help tackle the region’s youth unemployment. She has been recognized as one of the World Economic Forum’s 100 Arab Start-Ups Shaping the Fourth Industrial Revolution.
As Zahidi writes in Fifty Million Rising “If the narrative of American expansion was ‘Go West, young man’, the new narrative for up-and-coming women in the Arab World may well be ‘Go digital, young woman’.”
Evidence points to this being the case. Nearly 60% of women who are not currently employed believe that flexible hours and working from home, full- or part-time – which going digital can enable – would help them find work, showed a study by Accenture. The digital economy is also opening up opportunities for women looking to get back into the job market. The same study points out that more than 60% of women who have left and want to rejoin the workforce have entrepreneurial aspirations to start their own business.
Crucially, studies from the US demonstrate that gender pay gaps are lower in industries where there are more flexible work arrangements. Moreover, women who gain ICT skills increase their wages by 12%, which is higher than equivalent gains in men’s salaries. With a large market potential, a low amount of resources needed to get started, and productivity efficiencies enabled by technology, digital opens up a whole new world of opportunities and possibilities.

Paving the way forward

Many incredible women across the region are paving the way forward, such as Joy Ajlouny, who recently helped close a $41 million Series B funding round for UAE-based Fetchr, or Gaza Sky Geeks, the first tech hub in Gaza providing mentorship to start-ups with a focus on women. But there is still a long way to go. The digital gender gap in Arab states remains at 17.3%, down from 19.2% in the last four years, according to the ITU. Women are still a minority across the entire start-up ecosystem.
But as more women throughout the Arab World start their own businesses, break down gender barriers and push through the glass ceiling, these pioneers become an example for other women. They inspire them to imagine what’s possible for an Arab woman in the Fourth Industrial Revolution.

Read more on 3 striking trends shaping start-ups in the Middle East

 

The views expressed in this article are those of the author alone and not the World Economic Forum.

Innovation & entrepreneurship ever-increasing role in the MENA

Innovation & entrepreneurship ever-increasing role in the MENA

BIZTECH AFRICA in an article on a forthcoming Smart Cities Summit to be held in Algiers towards the end of this month introduced it as innovation & entrepreneurship ever-increasing role in the MENA region being at the fore-front of development. 

It reads thus:

Innovation and entrepreneurship play an ever-increasing role in growing Africa’s emerging technology ecosystem. According to research by the GSMA Ecosystem Accelerator, over the past two years alone, Africa has seen the number of innovation hubs double. Whilst the big 3 cities – Nairobi, Lagos, Cape Town – have been dominating the Sub-Saharan growth narrative, the next wave of incubators are arriving from new ecosystem cities in North Africa. And the cities driving this growth, Casablanca, Cairo, Sousse and Algiers, are serious about generating sustainable operating models in the fast evolving ICT landscape to overcome core business challenges around viability, future-proofing the business and most importantly, producing continuous success stories.

Funding in North Africa is shifting from relying on public spending

According to the Disrupt Africa Tech Start-ups Funding Report 2017 , funding in African tech start-ups surged 51% to reach $195 million in 2017, as compared to figures of the same period in 2016. When it comes to funding, the majority of Africa’s tech hubs are grant funded by Governments and foundations, however there has been a growth of social ventures and a trend toward for profit and self-funded endeavours to fast track growth.

Rabeh Arezki, Chief Economist for Middle East and North Africa Region (MNA) at the World Bank stated, “When it comes to sustainable funding, African tech hubs tend to focus on demand-driven service models that solve problems and support the specific needs of an ecosystem. To succeed, a modern innovation hub needs to pinpoint a niche in growth areas and deliver that proposition. Key areas ripe for development are start-ups looking at improving Internet infrastructure, payment systems and education. These are the types of businesses we see succeeding.”

Eric Chan, Digital Investment Expert, Xona Partners remarked, ‘What’s important is that we are seeing the gaps in infrastructure that impact technology development, digital entrepreneurship, and innovation closing. What’s powerful is that technology hubs are facilitating the development of that infrastructure. A lot of hubs are driven by forward thinking, young entrepreneurs who are looking to improve their skillset. The hubs are filling those skill gaps which will only continue to progress the development of the local ecosystem in a positive way.’

Algiers has been claiming a highly favourable investment climate and hosting major regional events like the upcoming Global Smart Cities Technology and Investment Summit on June 27-28 2018, where 4,000 smart city leaders from around the world will discuss how smart technology and ecosystems, smart data and sustainability and the Government’s role in stimulating new technology are changing the landscape. Founder of Smart City Algiers, Fatiha Slimani said “Algiers smart city project is in a way our commitment to develop our city based on principles of durability, sustainability and innovation. We’re trying to find solution to what we call – the cascading technology trap – where technology moves way faster than policy makers’ decision making.”

Whilst awaiting this Algiers Smart Cities Summit, we would propose an article’s of Construction Week 2 imbedded videos posted on June 16th, 2018 on what is going on mostly in the Gulf region of the MENA’s east sprinkled with some news arising from Africa.

Smart city concepts are gaining traction in the Middle East.

A study by Report Buyer states that smart city initiatives are gaining traction in the Middle East and Africa (MEA) region due to increasing rates of urbanisation that have been placing pressure on city services. According to the United Nations, the urban population in the region increased from more than 20% in 1960 to about 45% by the end of 2015.

Read Is the Middle East home to tomorrow’s smart cities?