A vast majority of the Gulf countries are at the forefront of economic diversification. This diversification has led to a change in the locals’ attitude towards the public sector.
And the two ways, that has happened, are – reducing the overwhelming dependence on it for the growth of the economy and seeing it as the only attractive employment option. Although the seeds for the change in mindset were implanted way back in the latter half of 2014, due to the oil price volatility, it’s only in the past year or so that things have really started taking a different shape. “Oil wealth proved to be a safer avenue and people, understandably enough, were not prepared to look beyond it. And just like the other Gulf regions, even Kuwait experienced this xerox copy of a scenario, until sometime back.”
But the rising cost of living, fluctuating health of oil and streamlined ways to start up, are among a whole host of other reasons that have given a much-needed impetus to Kuwaitis to look beyond traditional business landscapes. Even the government of Kuwait has taken no time to recognize the potential startups have, and how they can affect the overall economy of the Middle Eastern country. Programs such as the National Fund for SME Development have been put in place by the government to support the country’s entrepreneurs. Let’s talk about the pointers where Kuwait lags and how it’s addressing them.
Culture is often the biggest barrier to innovation. Lack of a culture which can work on the lines of the popular saying “Necessity is the mother of invention/innovation” often proves too big of a challenge to counter. Until and unless the culture doesn’t pave the way for innovation, a startup ecosystem can never thrive. And building such type of a culture is the toughest job. Because culture cannot be defined by one single person or one single organization, it often takes years, if not decades, to build a conducive startup environment. The stigma that often surrounds unemployment, company shutdowns, or even bankruptcy, is one of the major enemies of a startup culture. What people fail to understand is that these things are not permanent failures but only temporary shortcomings. This not only makes people less inclined to challenge the status quo but it also makes them less risk-averse – something which is an absolute must-have for entrepreneurship.
The second hindrance is something we cannot stop talking about, with respect to Kuwait (and maybe for the entire Gulf region as well).
The Funding Aspects.
A growing innovation hub needs a constant flow of cash. And this is not something the local government has a lot of control over. The solution lies in Venture Capital and Angel Investing. Startups cannot succeed if they don’t have access to funds. And because Kuwait is yet to experience a lot of solutions that startups can cater to, there’s a very wide scope of building things, which might be available in a San Francisco or Bangalore but aren’t there in the Gulf region. (You can take Souq and Careem for examples.) The other aspects of a conducive funding atmosphere include lesser regulations, availability to raise higher funding rounds and proposition of big companies acquiring small startups. Until and unless these factors are not facilitated, Kuwait might continue to grapple under the mere hopes of being a startup hub. A report published last year in Entrepreneur.com says that in the entirety of the Middle East region, Kuwait accounted for only 4% of the investment deals.
The pace of evolution
But things have started to take a better shape and not all is lost. Not just yet. The current ecosystem of Kuwait is a work in progress and if all the stakeholders work together, accomplishments will not take long. And there are indeed some startups, that have proved this correct. Two Kuwaiti exits in the name of Rocket Internet’s acquisition of Talabat for $170 million USD in 2015 and Delivery Hero’s acquisition of Carriage for a reported $100 million USD in 2017, are both among the top startup exits, in the whole of Middle East yet. It is deals like these that show that Kuwaiti entrepreneurship is much more than just a feel-good effort. And this is clear indication that Kuwait’s startup ecosystem is progressing. Angel investment firms and startup incubators are helping online businesses in Kuwait to gain a foothold in the market with streamlined funding aspects and mentorship programs. Two particular firms – Sirdab Lab and Arzan Venture Capital, have been extremely active in their pursuit of shaping the entrepreneurial ecosystem in Kuwait. The former has its roots right in Kuwait while the latter, with offices in Kuwait and Dubai, has till date funded 12 companies (as per the website) in the whole of MENA region.
Other factors include interconnectedness with other MENA countries, ranking among the top 50 smartphone penetration economies, and the emergence of some high-profile online business in Kuwait, such as Tap Payments & Boutiqaat.
What does the future hold?
The one thing which keeps coming up regarding the Middle East is its vast young population. And this is, if not more, than equally true in Kuwait’s case as well. The country has more than 50% of the population under 30 and as such, a vast majority of tech-savvy people. What’s more interesting to know is that nearly two-thirds of them will have a smart device in their hands, by the end of this decade.
This means that not only the smart devices and internet penetration is going to rise, this young Kuwaiti population will have a lot of avenues to learn from and feed their curiosity. It’s quite well-known that a lot of immigrants also reside in Kuwait. Now, the government might not be too happy about this, but from an entrepreneurial point of view, and because we know that more than half of the Fortune 500 companies were built by either immigrants or children of immigrants, it certainly is a prospect to cheer. When people from developed economies make Kuwait their abode, they bring with themselves newer technologies, enhanced problem-solving approaches and better product building skills.
Also, the Dubai based research group Magnitt has projected that more than $1 billion of venture money will be raise in the next year, in the MENA the region, out of which, Dubai and Kuwait will be the major beneficiaries. Even the local government is advocating the entrepreneurial mindset, which is evident from its recent agenda of transforming the country into a financial and cultural hub, by 2035, via 164 strategic development programs. The government is also in talks to increase the Foreign Direct Investment (FDI) limit to 300%, which could be a really big impetus to the oil-dependent economy.
In the language of the Venture Capitalists, it usually takes an average of 7- 8 years for startups to reach a maturity stage, where they become ready for exits. Now, because we know that let alone Kuwait, the entire Middle Eastern the region did not know the meaning of startups and entrepreneurship a decade back, it can be said that the startups and small business in Kuwait still have a long road to trace, in order to position themselves as attractive proponents for either more rounds of funding or direct exits.