Lingering oil prices equal start-up boom
Start-up investor expects tech breakthroughs due to oil price slump and weak economy
BECO Capital, a regional venture capital firm, predicts entrepreneurship and VC activity in the Arab region to soar if the global and regional economies continue to slow down.
According to BECO, the economic slowdown, such as the slumping oil prices and budget deficits, is enabling technology companies to boom globally as well as regionally.
Dany Farha, chief executive officer of BECO Capital said: "There is no better time to be a tech entrepreneur in the region than now. During these difficult economic conditions, there is a silver lining. It is when economic conditions are challenging that consumers and enterprises look for the most efficient and innovative solutions, and these are provided by technology companies. There is no better time to fund SMEs and entrepreneurs than in a downturn."
He adds: "Higher unemployment in a slower economy triggers a positive cycle of young pioneering professionals who create their own jobs by starting their own small ventures. It is the reason we witness a rise of new entrepreneurs in France and Spain, where both countries are enduring the industrialised world's highest unemployment rates."
The GCC governments are trying to replace oil-reliant economies through economic diversification policies, in order to reduce oil dependence. The UAE, in particular, has seen a lower oil price impact as its successful decade-long diversification strategies are coming to fruition. The non-oil private sector continues to show strong growth. This will further encourage governments to support the SMEs sector, and thus the start-up and entrepreneurship environment.
"Regional tech start-ups will thrive over the next couple of years, in an attempt to drive a much-needed higher productivity and efficiency across various industries. Take for example the last recession when Airbnb, Uber and other global unicorns were founded. These companies monetised the need of people in the post-crisis economy. Many disruptive technologies were founded in the ‘New Economy era of the late '90s'.
"I expect many tech breakthroughs to emerge in the next few years," he added.