Challenges in entrepreneurship

The entrepreneurship landscape in the region is booming. There are bigger investments, more startups, more innovative ideas and more courageous entrepreneurs. “It is an exciting time to be an entrepreneur in the MENA region,” as Mike Butcher, Editor At Large at Tech Crunch, said while moderating the panel on ‘Entrepreneurship and Investing in MENA’ at ArabNet Beirut 2014, Forum Day 1. The panelists included Annie Hazlehurst, Founder and CEO at Faridan; Henri Asseily, technology venture capitalist; Ihab El-Fouly, Co-founder at Tamkeen Capital; Numan Numan, Managing Director at 212; and Stephanie Holden, Head of Strategy and Business Development/Head atMBC Ventures, MBC Group.

The lively discussion on the stage recognized the rapid growth in the entrepreneurship scene and expressed some excitement. However, the seasoned players in the field spoke of difficulties and obstacles that are still holding the market back from reaching its potential.

1. Lack of funds
Despite the notable growth in investments, funds invested in start ups are still small. Talented entrepreneurs still struggle with raising funds and gathering interest in their projects. SME’s have even bigger problems with raising growth funds after starting, having to limit their capacities below their potential.

2. Lack of a robust ecosystem

The ecosystem for entrepreneurship in the region is still struggling. Businesses and entrepreneurs are faced with mundane, unforeseeable obstacles because they don’t have an fully-functioning ecosystem that they could rely on for support of the talent. Almost all the time, there’s a link, or more, missing from the chain.

3. Scale of markets
Start ups in the region operate in relatively small-scale markets. Companies that are looking to monetize on ads, for example, are faced with how narrow the market is. Competition among startups is making the problem even worse, preventing them from expanding to newer markets in the region.

4. Lack of cooperation

Cooperation among start ups and SME’s can provide grounds needed for overcoming many obstacles. It could help with marketing problems, provide larger markets, bridge gaps in the ecosystem, and, more importantly, secure a much better access to information, which would be a huge step forward for entrepreneurship in the region.

5. Regulatory systems
Regulatory systems in MENA are still very from business friendly. Setting up a company in Beirut or Amman might take as long as a month, whereas starting a business in USA could happen in 24 hours. Struggling with regulations, in many cases, drains entrepreneurs’ energy and time, and make investors reluctant to support ventures.

6. Political turmoil
The unstable political situation in the region is a bigger factor in investors’ hesitation to enter the market of entrepreneurship. That only applies, however, to investors who don’t know the market well. Investors with experience in the region trust the ability of entrepreneurs to work around political hardships. The regulatory obstacles mentioned above, according to several panelists, are a bigger problem.

7. Poorly trained entrepreneurs

Entrepreneurs in MENA don’t lack talent or innovation, but they lack training on different aspect of business. Great ideas may not raise funds due to bad pitches. Start ups with huge potential may shut down because of inadequate management. Training and mentoring is a very important component missing from the entrepreneurship ecosystem.

8. Weak planning

Most entrepreneurs in the region make the mistake of raising funds just enough to start, whereas any startup should have enough funds to survive for 18-24 months—the time usually needed for turning up a significant profit. Entrepreneurs in MENA tend to make another big mistake; they raise funds for what they have today when they should raise funds for where they want their start up to be in a year or two.

Solutions

Having these hardships and obstacles, among others, does not mean there is no hope. New initiative, such as circular 331 by the Central Bank of Lebanon and the approval of assigning 7 billion US dollars to invest in start ups in Kuwait, are a great boost to the entrepreneurship landscape in the region.

The panelists stressed on the importance of cooperation among investors, entrepreneurs, start ups and SME’s and called out for transparent co-investments among incubators and accelerators.