The Middle East and North Africa regions are home to a rising tech startup scene. Those regions do not have a lack of ambitious and innovative entrepreneurs that are well prepared and readied to disrupt things for the better. Like entrepreneurs everywhere, the ones in MENA face the all-too-familiar challenges of securing seed funding and hiring the right talent, and then there are the challenges unique to the region. What type of issues do MENA entrepreneurs find the most difficult to overcome? Read on to learn more.
Held Up by Bureaucracy
MENA entrepreneurs do not necessarily lack funding resources, as the investors are seemingly there to pool their money in order to ride the tech wave throughout the region with the thriving younger population. However, by ranking very low on the World Bank’s Ease of Doing Business rankings, it certainly doesn’t scream “growth” for the region. Moving or expanding to other countries in the region are severely hindered by strict regulations, making it difficult to expand. While stakeholders would certainly enjoy expansion, it would have to pass regulations and be approved by the various governing bodies.
Lack of Financial Literacy and Training
Nearly everywhere in the MENA region, financial literacy and training options are very limited. Entrepreneurs who want to launch small businesses may find themselves without access to viable talent. Therefore, MENA startups usually have to adopt unorthodox tools to get off the ground. It’s not uncommon for entrepreneurs to rely on online resources to get things done, whereas traditionally, a local employee would have performed the task. Entrepreneurs and decision makers may have to tap into virtual freelance talent, which might be located overseas, that can help entrepreneurs get started with their business. Though it’s not necessarily impossible to overcome the constraint of a viable workforce in the region, it can be quite difficult for a cash-strapped new venture maneuver around it.
The demand for online services in the MENA region can be limited due to low internet use. While people stay connected to the internet mainly via their various mobile devices, online shopping is not as widespread as it is in the West. This limits the target audience for MENA entrepreneurs. When the market is narrow, the profit margin may also follow suit. A related problem of narrow markets is fierce competition. Multiple startups may end up competing for a small customer base. While competition usually breeds innovation and improvements within a market, there are times it can have an adverse effect as well. You could very well scare away promising startups from emerging in the market to begin with.
Narrow markets also stifle the ability of an online business to drive ad revenue. Offering free goods or services and monetizing on ads entirely has been a highly successful business model for some notable startups in the West, but this Facebook and Google-style business model is hard to implement in the MENA region due to smaller-scale markets. Though there certainly are companies that have successfully tackled this issue. For example, the popular e-book business Abjjad makes money off ads embedded in the e-books customers download for free, and have been quite successful at it.
Intellectual Property Protection Issues
There’s a widespread fear among MENA entrepreneurs regarding intellectual property protection. Some governments, though not all, lack adequate IP enforcement that startups are often highly reliant on. IP theft can also become an additional headache for new e-businesses struggling to get off the ground. Entrepreneurs in the region are vocal about adopting strong IP enforcement models for businesses on a local level. This does require government support, which can vary depending on which country the online business is headquartered in.
Lastly, a pervasive problem MENA entrepreneurs face is that of political turmoil in the region. With several areas in the region experiencing civil unrest, it’s difficult for entrepreneurs to predict the impact political crises may have on their businesses. Some countries are more affected by political unrest than others, but instability equally affects the region as a whole. Then again, experienced investors and businesspeople are quite capable of getting a venture off the ground even amidst unrest. MENA entrepreneurs may face more severe challenges than their counterparts in Europe, East Asia, or North America, but that doesn’t mean the future of startups in the region is any less promising.