Startup Rising by Christopher M Schroeder
Startup Rising by Christopher M Schroeder

Start-up culture is alive and kicking



In a region where politics and oil tend to overshadow everything else, the vibrancy of the start-up culture in the Middle East may not be immediately obvious.

It wasn't to the American entrepreneur, writer and investor Christopher Schroeder who was amazed to discover when he attended the "Celebration of Entrepreneurship" gathering in Dubai in 2010 how much entrepreneurial activity was happening in the Arab world.

That realisation prompted him to look at whether the Middle East has the potential to produce its own Silicon Valley. He set out to answer this question by visiting and interviewing entrepreneurs in Egypt, Jordan, Lebanon, Dubai and Saudi Arabia. The result is his book, Startup Rising.

Yes, there are challenges, Mr Schroeder finds. But Middle Eastern entrepreneurs are fortunate to have a "three-fold hurricane-force wind" at their backs. First is the technology that offers an even playing field (no more "wasta"), transparency and inexpensive access to capital and markets.

Second is the generational benefits of investors who have a higher tolerance for risk having already bought into the Bric countries. The third is the "changing market dynamics, growth and opportunity" in motion.

Additionally, the Arab Spring uprisings strengthened the resolve of young people to throw off their parents' complacency, to step up, and to have greater self reliance. Mr Schroeder starts out by talking to some of the more established Middle Eastern entrepreneurs including Fadi Ghandour of Aramex and Samih Toukan of Maktoob.

He then seeks out some of the younger "upstarts" who have created e-commerce business and replicated businesses that have been successful in the West; who have founded businesses to provide the services that governments have failed to; who have created something truly innovative and global.

The author then identifies three sectors where he believes there is real scope for innovation in the Middle East: mobile technology, solar technology and social networking. Another important chapter covers the start-up ecosystem: those who invest, who help entrepreneurs connect and those who mentor.

Along the way, Mr Schroeder notes the interest of some of the biggest tech companies - Yahoo, Google and LinkedIn - in the region. Startup Rising is a quick and enjoyable read. The message repeated by those he interviews again and again is that success will breed success. His own conclusion is that those underestimating the entrepreneurial spirit of the Middle East do so at their own peril.

Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.

Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.

Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.

Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.

“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.

Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.

From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.

Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.

BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.

Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.

Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.

“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.

Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.

“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.

“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”

The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”

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Pupils in Abu Dhabi are learning the importance of being active, eating well and leading a healthy lifestyle now and throughout adulthood, thanks to a newly launched programme 'Healthy Lifestyle'.

As part of the Healthy Lifestyle programme, specially trained coaches from City Football Schools, along with Healthpoint physicians have visited schools throughout Abu Dhabi to give fun and interactive lessons on working out regularly, making the right food choices, getting enough sleep and staying hydrated, just like their favourite footballers.

Organised by Manchester City FC and Healthpoint, Manchester City FC’s regional healthcare partner and part of Mubadala’s healthcare network, the ‘Healthy Lifestyle’ programme will visit 15 schools, meeting around 1,000 youngsters over the next five months.

Designed to give pupils all the information they need to improve their diet and fitness habits at home, at school and as they grow up, coaches from City Football Schools will work alongside teachers to lead the youngsters through a series of fun, creative and educational classes as well as activities, including playing football and other games.

Dr Mai Ahmed Al Jaber, head of public health at Healthpoint, said: “The programme has different aspects - diet, exercise, sleep and mental well-being. By having a focus on each of those and delivering information in a way that children can absorb easily it can help to address childhood obesity."

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Date started: May 2021

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