The region is unlikely to produce the next Facebook or a billion-dollar digital media company, but a more realistic aspiration is to produce a US$300 million online success, according to Khaldoon Tabaza, the founder and managing director of iMena Holdings, a regional accelerator.
“The Arab world in general and the GCC specifically has entered a hyper-growth phase in online business driven by the increase in internet users, however this demand is not being met by sufficient supply,” Mr Tabaza said in an interview at the Abu Dhabi Media Summit.
“We have an ecosystem that is in the very early stages of development characterised by lack of skills that is not only scarce, but also expensive.”
Flat6Labs, which opens its Abu Dhabi office on Wednesday and began accepting applications on Tuesday, is more hopeful. It is expecting 300 applicants in the first six months and has set aside $10m working capital in partnership with twofour54 to foster start-ups in the media and technology sector.
“Last year we were looking at expansion in the UAE market, twofour54 was a perfect fit focusing on digital and media start ups – that falls in their mandate,” said Ramez Mohamed, the chief executive at Flat6Labs. “We are giving start-ups $50,000 for seed capital and we provide them with training, networking and connecting them with investors.”
Since its inception in 2011 in Egypt, Flat6Labs has funded 63 start-ups. It also has an office in Jeddah and is looking to expand farther into North Africa, the Levant and Turkey.
“There is a skills shortage but it is essential to work in a very integrated way with the community,” said Nina Curley, the managing director of Flat6Labs Abu Dhabi. “I’ve had several talks with universities who are describing the challenges that students face and think about building actual companies. We need to develop students, existing employees and companies so that they can bridge that gap.”
There is no short-term solution to the problem, however, according to industry figures.
“Do we have the capabilities required for the growth? No, it doesn’t exist, however we have all the elements that are required – motivated and productive youth” said Jayant Bhargava, vice president of the consultancy Strategy&. “Once we’re able to provide those skills, the ability to work on most advanced tools, that will build up capabilities of the digital market.
The region’s start-ups are in need of education, institutional support, knowledge-sharing and financing, Mr Bhargava said, before a digital success on the scale of Facebook or Twitter can emerge.
While there is no shortage of investors in the region, many are still reluctant to invest in the technology sector and prefer the real estate, oil and gas and financial markets.
Within the tech sector the greatest growth prospects are for gaming, according to a report from Strategy&.
“To create a billion-dollar company, you have to have something that is scalable globally,” said Mr Bhargava. “The Middle East is not only a consumer market, it is emerging as a development hub for gaming. Out of all the pockets of digital media, gaming is the one.”
According to the report, the regional gaming market is worth $1.6bn and the average online gamer in the region spends about $20 on games each month, in line with more developed markets.
“In a decade from now the gaming market will be very close to the size of the TV market,” said Mr Bhargava.
thamid@thenational.ae
Follow The National's Business section on Twitter
