The Triumphs and Struggles of Arab Startups

DUBAI – The recent STEP conference in Dubai – the biggest startup conference for the Middle East and North Africa (MENA) region – attracted a lot of buzz. It seemed to indicate that the region’s startup scene was coming of age. Yet MENA entrepreneurs are still facing serious structural impediments to progress.

The successes of the region’s startups should not be underestimated. According to Wamda, a regional accelerator platform, more than a dozen startups – including Bayt, Careem, MarkaVIP, Namshi, News Group, Propertyfinder, and Wadi.com – now have estimated valuations above $100 million. Souq.com, a 3,000-employee company founded in 2005, is poised to be the region’s first “unicorn,” with a valuation above $1 billion.

Yet the regional environment remains far from conducive to entrepreneurship. Beyond the wars, terrorism, and political turbulence plaguing the Arab world – not to mention the usual challenges facing entrepreneurs outside Silicon Valley, such as lack of adequate risk capital, talent, or infrastructure – is a slew of deep-rooted structural problems.

One of those problems relates to enterprise demographics. According to one study, in 2011, family businesses represented up to 70% of the MENA private-sector economy – a higher share than in any other region. This means that a large segment of the business community raises funds, shares equity, and manages operations within small, tight-knit social circles.