I’d like to start my first post of 2015 on a topic that I believe will become a recurring theme in the tech ecosystem across the MENA region, and something that is a sore point for me… We need to support our local startups now more than ever if we are to build a profitable and sustainable startup culture and ecosystem in the Middle East.
It frustrates me when I see MENA consumers and enterprises supporting International players over our local tech startups, who have a similar product offering (and sometimes an even better one) but do not have the deep pockets as those larger incumbents, making it a huge challenge and barrier for our local entrepreneurs to be successful. When I look at other economies, particularly places like China, Brazil and parts of Europe, I discovered something about their entrepreneurial ecosystem which makes them breed many local success stories, and something which the MENA region should learn from and emulate. Take Baidu vs. Google in China for example, where Baidu managed to maintain and even grow its market share when Google tried to compete locally. Chinese consumers and businesses supported Baidu so much so that Google dropped its market share for search from 12% in 2010 to 1.7% in 2012 and moved offices from mainland China to Hong Kong. The Chinese government has also created policies that make it difficult for International players to come into the market, allowing their local startups to prosper long enough to provide protection when Internationals arrive. These protectionist policies are something which should be in place in the MENA region, especially since the regional ecosystem is nascent and needs government involvement and support in the short-to-medium term to ensure the creation of a successful environment for local entrepreneurs, and drive employment and economic prosperity.
I’ve seen many amazing local entrepreneurs who have developed innovative ventures based on “localizing” replicas of successful International models. They have managed to learn from their users and build tailor-made applications and products that fit the local market. We should be proud of these companies and entrepreneurs, and support them in order for our ecosystem to succeed. Without them, we will have an empty ecosystem that is dry of innovation and engrossed in the fear of failure.
One of our portfolio companies, RoundMenu, is a local startup that has done exactly that. It has built an innovative and localized restaurant model and has undergone many pivots as it learns more about how its users use the platform, and what its merchants are looking for. The pivots has made them develop a unique platform based on social discovery, with a scalable business model driven by phone calls and bookings/reservations.
Another great example is Careem, the taxi app developed by McKinsey consultants who saw an opportunity to become the Uber of the MENA region. They have their own product development team that has developed a unique mapping system that works amazingly well with the iOS (something which I can’t say for Uber), and they have employed a great customer service team to ensure that customers have a point of contact at all times and are taken care of in their time of need. Unfortunately, there is always a threat from competition, and Uber and EasyTaxi have entered the market as well, both being large International players with significant funding behind them.
Finally, another one of our portfolio companies, Duplays, has recently launched Playpass, a tool for local activity organizers to manage and market their activities to local consumers. It has also built a unique platform based on years of experience developing the Duplays website, and are now competing with the likes of MINDBODY Online, a service based in the USA. MINDBODY Online serves global customers, but does not provide the local support and customization that Playpass offers, and I hope the local activity owners will adopt Playpass when they look for tools to help manage their activities.
In conclusion, these local ventures need to be supported so that we can breed more local success stories, more innovation, more accomplished and experienced local entrepreneurs, and more exits in a young ecosystem that needs it. Let’s hope 2015 is the year for giving our startups a chance and supporting them as they grow their fledgling businesses into ones that hire local talent, innovate and provide their customers with an amazing and customized offering.