Why the Middle East (ME) Got Late to the Startup Party

"Ya lahwy, Why buy online when you can fly to Paris for the real thing?” With a majority of the population sitting on high disposable incomes, there simply was no need to have ecommerce delivery platforms.

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Although startups in India and Middle East started around the same time, India’s bloomed at a rapid pace because there was real need for innovation. And of course oil is a reason for the lag too.

Investors of the oil Reich from ME didn’t have much needed for innovation. GetBaqala founder, Amjad Puliyali is of Indian origin now living in Bahrain. He started a grocery delivery startup, GetBaqala in 2016 after seeing the success of Flipkart and Snapdeal (circa 2012 before all this down round and shut down reports started circulating).

“In 2016, grocery delivery is still an innovation in the Middle East although it is nothing new in India. People here have a grocery store around every corner or maids to do all this,” Amjad said emphatically when BWDisrupt asked him why he decide to start a done-a-million-times grocery delivery business.

The penny drops. In India we are desensitized to delivery startups and payment wallets, we fail to realize that other regions are still catching up.

Here’s probably what the average Arab Sheikh must be thinking - “Ya lahwy, Why buy online when you can fly to Paris for the real thing?” With a majority of the population sitting on high disposable incomes, there simply was no need to have ecommerce delivery platforms.

It’s neither a good nor bad thing. The majority of ME simply had no reason to buy from a tech startup. But with the advent of smartphones and a youth that loves apps, technology enabled services and businesses are on the rise, even among the ones who can afford a private jet to a Chanel fashion show at two in the morning.

The real snag

The biggest reason why the ME startup scene was rather dormant, was lack of investing. Before the drastic oil drop to 35 dollars a barrel in February, 2016, there was no reason to park your money anywhere other than in oil (and real estate).

FICCI corroborates that revenue for the ME from oil exports had fallen.

“As per the Ministry of Commerce figures the overall trade has gone down; Indian exports have been constant for couple of years however the imports [from ME] have gone down mainly due to oil prices.

The total trade was approximately 200 billion dollars during 2012-13, which has come down to approximately 120 billion dollars during 2015-16.

Figures for 2016-17 (April-November) are also not very encouraging, the total trade is 76 billion dollars with Indian exports at 32 billion dollars and Indian imports from the region at 43.96 billion dollars.”

PayTabs is a fintech startup working out of Bahrain. With enough investment support and luck PayTabs has found a way to cross into India, a tough market to break in to. Its founder, Abdulaziz Aljouf says, “I think everyone is trying to shift from the oil reliant economy to the new era of tech and and startup building ecosystem.”

Haider Hassan has set up the first angel network in Bahrain, called Tenmou. “Many of the investors look at oil and traditional investing like real estate, it was difficult to convince investors to look at tech startups. But when one investor joins, the others also start coming out of the wood work.”

Jose Paul Martin, managing director of EQORIS Group, a ME based wealth advisory company, said, “With oil prices having collapsed from over 140 dollars in the hay days to 50 dollars today, both the government and the private sector are now looking to SMEs for providing growth in the economy as well as diversification from oil.”

It still won’t mean an absolute goodbye to investing in oil; just that oil might have to vie for attention from investors hereon.

Ms. Areijie Alshakar, mentors and invests in startups on behalf of the Bahrain Development Bank. She said, “Entrepreneurship is an economic driver and the GCC (Gulf Cooperation Council) areas are moving away from oil dependant industries. Tech companies allow for fast scalability and can reach global levels faster than more traditional businesses. Nevertheless, to drive the economy there needs to be a mix of both.”

How rich are Middle Eastern startups? find out here.

Tags assigned to this article:
Middle East startups GetBaqala PayTabs EQORIS

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