Arab governments need better support for startups
Venture capital firm calls for more SWF investment, better regulation for startups
The start up sector in the Arab world needs better government support and proper funding from sovereign wealth funds (SWFs), according to BECO Capital, a regional Venture Capital firm that invests in technology start-ups.
Dany Farha, CEO of BECO Capital, said that governments need to encourage more investment in start-ups, and introduce more supportive legislation.
"In the last 400 years, we missed the major five technological revolutions; the industrial revolution, steam engines, steel and electricity, automotive production and now IT since 1971," Farha said. "This is our opportunity to leapfrog into the next phase of development if we all realise the importance of this tech revolution that is happening around us and support it. We should back the sector with capital and easier and fast-tracked regulation.
"The technology sector is vastly underfunded in our region and local regulations do not encourage or support start-up funding or even early stage funding."
Farha was speaking at the 8th MIT Pan Arab Conference on growth and sustainability in the evolving landscape of the region. He pointed out that in the United States, five per cent of public company dividends are invested in technology start-ups, which is low by all standards. In the Gulf Cooperation Council (GCC) states, this figure is estimated to be much lower at a mere 0.15% of the listed companies' dividends, with the UAE faring slightly better at 0.59%, or four times that of the GCC, of its public companies' dividends invested in start-ups.
"Investing in the tech sector should become a matter of strategic importance and governments need to encourage their SWFs to channel funds towards our regional emerging Titans and to offer them special VIP handholding to form true strategic partnerships. This will fast-track these companies to become public and quickly cultivate our ecosystem. We are not talking about government hand-outs here but about developing a new asset class for investors in order to propel the next generation of start-ups," he added.
"Governments should realise the importance of this tech revolution that is happening around us and support it wholeheartedly. They should back the sector with capital and easier regulation. Keeping locally-bred, world-class start-ups that will become the next technology titans in our ecosystem will create a virtuous cycle of entrepreneurship and innovation."