With a mentor to back you, starting a business can be easy even in a slowing economy, say management experts
Being your own boss will always sound like an attractive idea when it first comes to mind, but the road to successful entrepreneurship — and calling your own career shots — is one strewn with potential obstacles.
Finding a niche in the market to capitalize on, securing funding, gaining recognition and trust, and being capable of dealing with uncertainty are all challenges that existing and potential entrepreneurs in the UAE share with those around the world.
And the financial slowdown sparked by slumping oil prices can exacerbate many of them.
But shifting economic plates can also create the gaps from where opportunities emerge — those where new and innovative thinking can flourish.
While the UAE’s entrepreneurship culture may be less well established than those in the US and Europe, experts believe that, even in uncertain fiscal times and with banks reining in their lending, its youth may hold advantages — if those considering launching a start-up are fully prepared for what lies ahead and know where to find the backup they will need.
Catherine Bentley, Chief Marketing and Experience Officer at Innovation 360, a Dubai-based innovation management firm that underpins the Turn8 seed start-up accelerator, describes the Emirates’ ecosystem of entrepreneurship as being in its “toddler years”.
“The UAE’s start-up scene is walking, but definitely still learning.
"Starting and developing a start-up has a moving set of requirements, but what is vital is finding accelerators [that] offer mentorship, investment and connection with investors, as well as access to knowledge resources and networks.
"And the UAE is offering other vital parts of the ecosystem, enabling partners such as supportive media outlets, competition, co-working spaces and showcasing forums.”
Bentley explains that a successful UAE start-up must have several pieces in place: early adopters who are willing to be first customers, financing, and skilled human capacity.
However, she adds, the region has its drawbacks in this regard. While essential components such as company registration, visa issues, and protection of intellectual property are undergoing the process of institutionalization, the pace poses problems for entrepreneurs.
“Talent, especially technical and experienced talent, is difficult to find and retain,” she says.
“Many high-quality developers, technical innovators and potential co-founders work with large multinationals or government bodies and hesitate to take the plunge into the risky start-up life.
“The right investors, corporate and otherwise, are forming a community. Many are extremely knowledgeable in foreign markets, yet that knowledge needs to adapt to fit the UAE’s start-ups and their diversity.”
Bentley does, however, believe that the emergence of regional funds means co-investment momentum is growing, describing this as potentially “the secret source of funding for UAE-based start-ups”.
If this is a sign of support for UAE entrepreneurs, Chris Roebuck, a visiting professor of transformational leadership at Cass Business School London, believes they may already have more back-up for a start-up than they realize.
“Entrepreneurs around the world are focused on being successful and need an environment that makes their lives significantly easier so they can concentrate on achieving what they can achieve.
“So any distraction from what they need to do to make their business successful needs to be minimized.
“In the UAE, they are probably in an environment that is friendly to them in a way that does not exist in Europe or the US, where entrepreneurs do not have the breaks they need.
The UAE government has recognized entrepreneurs need support to generate business. Because of Dubai’s size and the foresight of its leaders, its government is more aware of the issues that entrepreneurs face and doing something about them.
In a Western country that is much larger and has a creakier system, the ability to respond to or even be aware of issues affecting entrepreneurs is more difficult.
“My view would be that, although they might not know it, because their only reference point is their own environment, entrepreneurs in the UAE actually have a better environment than many across the world.”
However, Roebuck sounds the cautionary note that UAE entrepreneurs, regardless of the support and encouragement they may receive, will still have to overcome the same barriers and tackle the same concerns as their compatriots in innovation everywhere else, pinpointing regulatory matters, securing funding, and finding the right premises, among others.
“But I think the evidence is quite clear, from everything I know about the UAE, that there are elements of support — be it around funding, premises, or other elements —which do make their life easier,” he says.
The economic climate is, of course, out of the hands of the entrepreneur, and this illustrates one of the key dangers to successfully founding a start-up: controlling the uncontrollable.
Roebuck, who has held a number of senior positions at global banks, believes there is “inherent concern” about the economy of Dubai and the UAE, mirroring that of the global economy as a whole.
“I think entrepreneurs are nervous about what the future holds and that nervousness is both economic and political, because these factors interact. Political issues can impact on economic confidence, but the picture is not necessarily that bad.
Data from China suggests 55 per cent of people are positive that the economy is going to rise again and there is a base of confidence, but I think everyone is holding their breath for when it is actually going to start.
“From the entrepreneurs’ perspective, it is a case of ‘we are OK, holding our own, waiting for things to pick up, we know they will, but we are a bit nervous about when’.”
Roebuck also points to studies showing only about 5 per cent of start-ups fail because of entrepreneur error.
“For the vast majority who fail, the failure is forced by customers not paying on time, causing a cash flow issue,” he says. “Many of those not paying on time are major organizations.
“When entrepreneurs do fail, the next issue is the likelihood that they will give it another go. And, again, that is down to support and the regulation, social and legal aspect of the failed entrepreneur.”
At the same time, Roebuck cites evidence that 95 per cent of entrepreneurs who fall short the first time succeed in their second attempt, having learned from what they did wrong.
But, he says, it is not just a matter of finance and commerce — entrepreneurs in the UAE have to be aware of the pressure to succeed, the financial headaches and daunting to-do lists that come with launching a new business, as well as the odds of survival.
Last year Forbes revealed that nine out of ten start-ups fail, hardly a confidence boost for any budding UAE business owner, especially against the current economic backdrop.
Roebuck says starting a business in even a favorable climate is a big decision — one where you may be effectively risking the roof over your head.
“People are genuinely worried that they have committed themselves to something that will impact them and their family, so the level of nervousness is higher. They are worried as it is [about] losing their job with a corporate entity.
“This begs the question of whether an environment exists to support entrepreneurs, allowing them to achieve goals without putting what they own on the line.”
Amir Kolahzadeh knows what it takes to be an entrepreneur, having launched a successful start-up in Dubai three years ago.
“I believe the UAE is a fantastic incubator for start-ups,” says the Managing Director of cybersecurity firm ITSEC, adding that the country has people from different backgrounds and a vision to help those with conventional start-ups reach their goal and vision quicker.
“However, the UAE has its own set of unique challenges such as a lack of a proper bankruptcy law, which prevents higher-risk start-ups.
“My top tip is to fund companies with solutions and products that can be localized; a traditional service or product with a bit of localization will have far greater acceptance than just one size fits all.”
By Jennifer Bell | Special to GN Focus