Complex Made Simple

Is Saudi becoming the preferred haven for regional start-ups?

In recent years, the MENA region has not been a stranger to startup success stories. Names like Souq and Careem have become household names in a region that was not exactly known for being a lively hub of tech and IT startups.

Enter Majed Al Tahan, entrepreneur and innovator. Living abroad at one point, his entrepreneurial senses were quick to identify a glaring market need in the GCC: the lacking online grocery shopping market.

Writing for Entrepreneur, Al Tahan highlighted the critical moment that defined the future of his soon-to-be business: The opportunity to work with a local supermarket chain.

Soon, what started as an idea had sprouted into a fully-grown digital technologies business, offering online marketplace services to brick and mortar retail companies looking for a commercial online presence.

One would not be remiss to think he would have turned to the UAE as a starting place for this endeavor.

But, it was Saudi where this success story flourished.

Al Tahan’s business’s name? AYM. And the supermarket chain whose business deal launched his company into success? Saudi-based Danube Supermarket, which was forecasted to create up to 1000 news jobs through this new e-commerce app.

In an exclusive, AMEinfo spoke to Fadi Alawami, an entrepreneurship expert and SME consultant who echoed this sentiment, providing insights on the startup eco-system in Saudi.

Support for startups has increased

“We’ve recently seen the launch of many initiatives by the SMEA (Small and Medium Enterprises Authority, Monsha’at in Arabic) to promote this startup ecosystem,” Alawami explains.

The startup ecosystem in Saudi Arabia is no longer the same one that existed just a few years ago. Among the many sectors that Crown Prince Mohamed Bin Salman’s ambitious Vision 2030 plan has bolstered, the startup community has been one of them.

Alawami explained how the Kingdom has been taking active measures to establish a larger number of support organizations that offer new SMEs a myriad of services. Most of these have been government-owned, or semi-government owned, such as Saudi Aramco’s Wa’ed, or Riyadah, who provide startups with more access to funding than ever before.

Recently, however, there has been a rise in the number of privately owned support organizations, showing a willingness from the private sector to nurture their younger members.

“Private companies need to take an even bigger role in supporting their younger counterparts, as many of these large private corporations started in a similar place like these new SMEs,” says Alawami.

Multibillion-dollar company Google started in a garage after all, and so did $1 trillion Apple.

Startups have also been looking to crowdfunding as a means of raising capital. Recently, the Capital Market Authority has granted licenses to two companiesto create equity crowdfunding platforms. This, in his opinion, ensures that funding is much more secure.

Saudi infrastructure is ready for startups

Dubai and the UAE have traditionally grabbed the lion’s share of the startup scene in the region.

Most of those newly founded companies were in fact started by expats looking to fill a need in the market.

This includes many Saudis who launched their business from the Kingdom or the UAE, but had to eventually operate from the UAE to sustain their companies.

Nowadays, however, with the abundance of support and funding available to them in Saudi, businesses have reversed trajectories.

“Many Saudi SMEs are staying in the kingdom while many UAE startups are moving operations to Saudi ,” Alawami noted.

READ: Big or small, companies need to think “like a startup”

From Eureka moments to survival mode

Alawami explains that today’s drive to go into business springs from a need to survive harsh economic situations, and not by following the natural course of how a business is born: Through Eureka moments.

“The inspiration behind business ideas stopped being the main cause behind them about 3 or 4 years ago”.  

 “ many of the people launching startups don’t have jobs, so they decide to start their own business. This is why they need support from more experienced people, not just the government, or other support bodies.”

Entrepreneurship out of necessity, rather than luxury, brings with it even more risks and responsibilities to consider, especially if the businessperson in question has mouths to feed.

This is where he believes mentors come in.

READ: 3 crucial things SMEs need to thrive, not just survive

Startups need mentors, not just advisors

Is mentoring the same as advising? Not according to Alawami. He said that while advising is an important part of supporting SMEs, mentorship plays a more crucial role in their development especially in the startup phase.

“Advisors focus on the bigger picture. They give recommendations and instructions to deal with a business’s larger issues. They are often experienced in specific fields, and often hold titles such as Marketing Advisors, Finance Advisors or Manufacturing Advisors.”

Advisors focus on the cold, hard facts. Yet, Alawami thinks this is not enough. 

He clarifies that mentors focus on the entrepreneur, guiding and coaching them, regardless of the problems they’re facing. “It’s because the mentor cares to help the entrepreneur overcome all of their current challenges so that in the future they would be able to stand up and face these difficulties alone.”

“We as mentors focus on the personality of the entrepreneur, regardless of what firm they are trying to run. There are so many challenges to take into consideration, whether it is the entrepreneur’s family or even their self-confidence. There are many aspects to address.”

Indeed, these mentors offer guidance with a human approach, one that is pivotal to the success of a business. 

However, Alawami does give a warning: “Many programs are popping up offering mentorship to startups. Many of these ‘mentors’ don’t have the experience to be tutoring someone else, or they’ve never been an entrepreneur themselves before.”

He does, however, end on a positive note: “In the end, if we bring in the right mentors, the startup community in the Kingdom could see even greater growth and success.”

Indeed, if Saudi continues its wave of support, it could nurture a very prosperous startup sector that will make the country a venerable and ideal location for conducting business in the region. The seed is sown, as Saudi already has the largest economy in the Arab World. All they need to do now is to make sure it flourishes.

READ: Partner in UAE law firm advises SMEs on avoiding cashflow problems