Sparking Up the Startup Explosion

Gasia Trtrian, Mar 02 2017

Startup ecosystems are now indispensable for major cities. Today, bigger cities in MENA like Dubai, Casablanca, and Beirut all have substantial ecosystems: They’re home to thousands of Venture Capitals, Incubators, hacking spaces and entrepreneurs.

Startups are growing exponentially, yet 7 out of 10 startups are being met with failure in 10 years’ time. Despite this, venture capital is on the rise, especially in MENA and startups are now receiving more funds than ever. According to research by MAGNiTT, a platform for startups, MENA startups have received over $870 Million in investments in 2016, an all-time high, over 4 times the amount of investments in 2015. Moreover, the MENA region today is seeing the fastest growth of entrepreneurship in the world, according to the Global Entrepreneurship Index.

Many factors have acted as key players in driving this explosion in the startup scene, and include:

Lower Costs of Building Startups
The drop in capital needed to launch a startup has acted as a catalyst for the startup explosion. While it used to cost millions to build a startup, today, it only costs thousands. This has made the startup business more accessible to the general public that did not have the large sum of money needed previously.

This drop in capital has also caused a shift in the approach to funding. Because startups require fewer funds, companies realized they could now invest smaller sums of money in several startups and buy shares, instead of investing too much in one startup. With the decrease in the size of the risk scale, the initial hesitation to invest has been eliminated. This in turn has increased the number of investments being made, while decreasing the portion per investment.

Abundance of Outsource
The broad availability of outsource has abolished the need for private servers which were previously crucial for startups. High-quality Internet connections that are indispensable for startups have become abundant and affordable, with companies offering packages for businesses. This additional cut in costs has given entrepreneurs a highly needed boost.

Affordability of Services
With the increase of professionals in computing and coding, prices of services have gone down. This has financially enabled entrepreneurs to code their ideas into working startups.

Establishment of Ecosystems
The establishment of ecosystems for startups has been indispensable for growth. A city that has plenty of co-working spaces, accelerators or incubators, media, funding, support units, research, education, and offers training has a strong ecosystem. This creates the ideal setting for startup proliferation and accelerates growth and expansion, all the more sparking up the explosion.

Shift in Attitude
What has finalized the stage set for the expansion has been the cultural shift in attitude towards startups and entrepreneurship. A few years ago, being an entrepreneur was not regarded as a ‘real job’, especially in the MENA region. Startups weren’t deemed important because the public didn’t believe they could amount to the high valuations they have today.

This has changed, and people now look at entrepreneurship as a means to achieve things limited by employment. Across 60 economies around the world, around 70% of working-age adults now perceive high status for entrepreneurs. This encourages innovators to move past their fears of judgement and failure and move towards building their dreams thus, boosting the number of new startups.

 

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