Entrepreneurship will be the foundation of the region's post-oil economy over the next 50 years, requiring major investors to be “bold” and “patient” in funding start-ups until they succeed, the Sharjah Entrepreneurship Festival 2021 heard on Monday.
Entrepreneurship is a “mindset” and creating an entrepreneurial society means supporting people who have ideas on how to do things better across the board from early stage start-ups, to corporations and governments, according to a panel of government officials, venture capitalists and entrepreneurs.
“The ecosystem is bubbling,” Fadi Ghandour, executive chairman of Wamda Capital, said. “If we think of the post-oil economy 50 years down the road, then you need to think of entrepreneurship as an infrastructure … these are the people building the future of our countries really, not only our economies.”
Small-and-medium enterprises are the backbone of the UAE economy, with the government introducing economic support packages to help business owners weather the Covid-19 pandemic. It has also taken measures to create a more attractive environment for foreign investment by easing visa rules, liberating company ownership rules and updating laws.
The UAE aims to become home to 20 unicorns, or start-ups valued at more than $1 billion, by 2031 as part of a public-private partnership programme launched earlier this month to attract and expand SMEs.
Asked about the gaps in the entrepreneurship ecosystem, Mr Ghandour said that funding remains “essential” and “critical” to fuel the growth of businesses.
He urged investors to be patient until start-ups begin to make money, which could take at least five to seven years.
“I can't emphasise enough the issue of patience; it takes time to show the difference on the ground when you're solving problems and so you need patient capital with you,” he said. “Companies will take time to be profitable.”
“The issue of venture funding is about risk, it's about patience, there's no hit and run, you will not make your money overnight,” Mr Ghandour said.
Investors should not to focus solely on high revenue-generating start-ups and unicorns because businesses require large capital injections in the early stages of development, he added
“Don't look at the anomalies, it's not about the outliers, the big ones,” he said. “There are angel investors now but not enough, we need more of them and we want to prove to them that you can make money.”
A lack of regional investors in Series B funding rounds is leading entrepreneurs to spend time knocking on many doors to receive backing rather than spending time on building their businesses, he said.
“There needs to be a bold move by some of the big players, I won't name any names, to say 'we're gonna make Series B funding'," he said, noting that global investors tend to participate in the later-stage Series C funding to back regional start-ups.
“I tell our national funders in the region, not only in the UAE, to step up,” he said. “This is our ecosystem, invest in it, don't wait for the big boys from outside to prove that we have an ecosystem. The ecosystem works, it's happening.”
Mr Ghandour also urged family offices in the region to invest in start-ups and digital infrastructure.
“Stop being way too conservative because this will benefit you at the end of the day,” he said.
Magnus Olsson, the co-founder of ride-hailing giant Careem, said the infrastructure supporting entrepreneurs from banking to telecoms to regulations has improved over the nine years since the start-up's inception in 2012.
“A lot of the basic infrastructure … has improved so that entrepreneurs today can focus on the one problem they're solving and not having to build the rails for everything underneath,” Mr Olsson said. “The mindset has changed, nowadays it's a bit of a rock star situation versus being a sort of a crazy loony type of situation.”
The UAE has offered entrepreneurs the opportunity to keep their businesses running during the Covid-19 pandemic at a time when other parts of the world were in lockdown, Ahmad Al Falasi, Minister of State for Entrepreneurship and SMEs, said at the event.
The UAE's Entrepreneurial Nation programme, launched on November 10 to attract and expand SMEs, will help businesses transition from one stage of growth to the next via partnerships with the private and public sector, Mr Al Falasi said.
“It will help ensure the progression of entrepreneurs along different phases of the growth cycle.”
The UAE has succeeded in attracting and fostering talent to further develop the SMEs sector with the aim of making the country their preferred destination, particularly during the remote work trend triggered by the pandemic, the panel said.
Najla Al Midfa, chief executive of Sharjah Entrepreneurship Centre (Sheraa), emphasised the importance of believing in entrepreneurs before they reach the success phase.
“Everybody loves to celebrate a dreamer after they succeed, but who will celebrate them in the early days? Who will celebrate them when sceptics are calling them crazy?” she said. “In a world of doubters, let us be the first believers.”