When you think of Silicon Valley what do you think of? Maybe you think of Elon Musk going to space or Peter Thiel searching for immortality. Maybe you think of scrappy entrepreneurs using breakthrough technologies to change the world. In Silicon Valley, entrepreneurs benefit from networks that provide insider information, venture capital, human capital, mentorship, and support resources galore. It has a sprinkling of hippie counterculture in there to encourage outside-the-box thinking.
Now what do you think of when you think of an emerging startup ecosystem, such as the one in Dubai? What is Dubai’s brand as a startup ecosystem? What kind of startups come out of here? I’d argue Dubai has some advantages to leverage:
- A headquarters for the Gulf region: The UAE’s macroeconomic conditions and lifestyle make it an ideal hub for the region’s entrepreneurs to flock to. Dubai’s reputation makes it the most trusted source of capital, customers, and talent in the Gulf region. It is a dynamic, global city that people want to buy from and be in.
- High barriers to entry: A lack of available data makes insider information and insider relationships far more valuable in the Gulf. Access to these is a barrier to entry for outside competitors. Licensing is difficult here. You can look at this as a negative, but you can also realize that an entrepreneur who understands how to handle this process and has their setup taken care of has overcome a high barrier that is hard to surmount. Next, there are certain industries which have built in barriers to entry. They are best launched locally.
- Hidden billion dollar markets: There are about 50 million people in the Gulf with a GDP per capita of about $40,000 per year and unique consumption patterns. Knowing how to cater to these unique consumption patterns gives a local edge. There would have to be some major cultural shifts before there could be a pan-Arab brand and each Gulf country requires its own licensing, so “scaling regionally” looks different. Think of it more as franchising your startup to different, similar markets. Investors should bear this in mind when honestly assessing the scalability of a startup. That being said, these 50 million people consume transportation, housing, energy, healthcare, clothes, credit, etc.
- An access point to other hidden billion dollar markets: Much of the developing world is within arm’s reach from Dubai. A startup that solves bottom-of-the-pyramid problems can have the managerial and technical talent it needs in Dubai and keep a close relationship with regional offices.
- Tech early in its lifecycle/user experience could be improved and localized: There’s a lot of interest in incorporating technology into business practices and there are many activities that are done inefficiently due to the fact that people are still adopting startups that were in the 90s/early 2000s wave in the US (e-commerce, marketplaces, portals, etc). In other words, there is low-hanging fruit (these are unlikely to be unicorns, but that’s for another post).
Startups in emerging ecosystems have major opportunities where they can be competitive by specializing where they have competitive advantages. At the same time, there are enough resources for ecosystem builders to develop down one vertical where there are significant, existing advantages which make it make sense to focus on a specific market. Look at London and fintech. Or Tokyo for robotics. A startup should be where it has the highest chances of success and in some cases that’s Dubai.
Questions related to startup success are overlooked in startup education available now because this education is created from Silicon Valley experiences most of the time. Based on the emerging ecosystem advantages and disadvantages, I’ve outlined questions a founder starting in an emerging startup ecosystem should answer in assessing feasibility in addition to the basics. This can also be used by investors interested in startups in emerging markets:
- Does the industry I’m in have built in barriers to entry that make it unattainable or unattractive to international competitors?
- Does it have built in barriers to entry against local competitors simultaneously?
- How can I capture value and scale as a tech startup despite the need for a localization element?
- Does the user experience resonate locally? Is the technology too complex for the adoption stage?
- Does my startup cater to a hidden billion dollar market, as defined by the unique regional consumption patterns, and/or by advantageous access to other markets (i.e. for Dubai, developing world)?
- Can I scale through the challenges of scaling in the region? Think of scaling like franchising. For my business, do these challenges put me in a stronger or weaker position in the face of competitors?
A few of my favorites that answered these questions well are:
They cater to local problems, are scalable regionally, and use technology to beat out old systems currently in place. These are the types of startups which will build the startup ecosystem in Dubai and give it a respected brand.
Successful startups are being built here now and will be built in Dubai in the future. The ecosystem has a lot to offer and I look forward to seeing it evolve and grow.
DM me if you want to talk investment or startup growth strategies.