Arabian Gulf countries must overhaul intellectual property and patent regulations if they want to encourage innovation and research culture in universities, according to an influential American venture capitalist.
“It’s my understanding that in universities [in this region], in most cases any intellectual property is, in most cases, completely owned by the institution,” said Trevor Loy, managing partner at Flywheel Ventures.
The Silicon Valley-based venture capital fund, focuses on seed stage and early stage companies active in digital services, infrastructure technology, energy technology and water technology.
“This is very different from the situation in the US. It varies by institution, but in general the inventor owns the intellectual property and then pays a royalty fee or grants a minority stake back to the institution they were in at the time.”
UAE patent applications rose 19 per cent year-on-year to over 1,700 in 2015, Mohammed Al Shehhi, undersecretary for economic affairs at the Ministry of Economy, told the World International Property Organization in Geneva last month.
The UAE government earlier this year announced plans to set up the International Centre for Registration of Patents as part of the National Innovation Strategy.
Mr Loy, who is also a lecturer in the department of management science and engineering at Stanford University, said that the UAE’s new bankruptcy law, due to come into effect next month, will be crucial for encouraging start-up culture in the country and attracting venture capital firms.
“Historically a lot of businesses that have come here, as well as other markets such as China, have come via offshore vehicles,” he said.
“That’s fine in the early days, but you can’t build a sustainable economic ecosystem when much of the money, capital and legal infrastructure is somewhere else.”
“The new law is an important building block that’s going to encourage businesses and investors to come onshore and commit to the market for a longer period, which is particularly crucial for venture capital investors.”
Mr Loy spoke to The National ahead of a keynote address at Boostmena, a tech innovation and venture capital event in Dubai, organised by local venture capital firm Beco Capital.
He urged local venture capitalists to build a venture capitalist ecosystem that fully embraces the dynamics of the Middle East, and to not just copy models used elsewhere.
“No successful venture capital and start-up ecosystem is built by directly copying the Silicon Valley model,” he said.
“They’re built on the assets and the dynamics in play in their own region with inspiration from Silicon Valley, but not trying to adopt it wholesale. If you just try to move it from one place to another, you lose all the assumptions on which the equations were derived.”
Middle Eastern start-ups face a series of challenges in their attempts to attract venture capital from outside, said Mr Loy, including perceived geopolitical unrest and relatively low visibility internationally compared with other start-up enclaves.
Nonetheless, the region holds several attractions for international venture capitalists, not least a large digitally savvy youth population.
“In the Middle East you have a fairly sizeable population base that has a fairly consistent cultural linguistic commonality across the region,” he said.
“People underestimate how important that is. In the EU, for example, there’s often difficulties for start-ups moving from one country to the next because of significant cultural and linguistic differences.”
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