The clock edges towards midnight, as you are sipping your third cup of coffee. The street outside is quiet, but your mind inside races as you scroll through LinkedIn, looking at your peers in France securing millions in funding while you are struggling to keep your startup afloat.
Frustrating, right? You have what it might take, but the path seems much tougher, as there is an invisible wall that seems to separate you from success. This is what we can call the success gap in action—the invisible but real divide between the entrepreneurial journey in the MENA region and in Europe. Here is a thing, the gap isn’t a dead end. It’s just a challenge like any other challenge that can be overcome.
In this article, we will delve into the challenges faced by startup holders, particularly in comparison to their European counterparts. We will also highlight some successful cases and discuss strategies to overcome these obstacles and foster a more robust entrepreneurial ecosystem in the MENA region.
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Understanding the Success Gap: MENA vs. Europe
Let’s take a step back and have a wider view. The entrepreneurial journey is a marathon. In Europe, entrepreneurs are running on a well-paved road. They’ve got signs, many resources, and a supportive crowd cheering them on. The legal framework is set, the market is stable, and there is a well-oiled venture capital machine by the end, ready to fulfill the idea.
Now, let’s look at the MENA region. The track is rocky, with unexpected obstacles at every turn. Regulatory hurdles, inconsistent policies, and markets that are still finding their footing. You are dodging obstacles, trying to find a way in a landscape that’s still evolving, instead of just running. What about the crowd? Well, it’s there, but they’re more skeptical, watching from the sidelines, unsure if they should cheer or wait to see if you stumble.
Structural and Environmental Differences
What makes this gap that wide? Mostly the environment. European countries, particularly those in Western Europe, have long-established infrastructures that support entrepreneurship, including well-developed legal frameworks, easy access to financing, and mature markets that provide a stable environment for startups to grow.
In the meantime, many parts of the MENA region are still constructing these essential components. For instance, legal frameworks in some countries can be complex and inconsistent, making it super challenging for entrepreneurs to navigate regulations, and we don’t forget that access to financing remains a significant barrier.
A report by the International Finance Corporation highlighted that while the MENA region has experienced growth in venture capital investment, funding for early-stage projects is very limited compared to Europe, where you might find yourself pitching to investors who are more conservative and hesitant to take risks on your new idea.
Moreover, the market condition is very different. The MENA region is characterized by a fragmented market with varying levels of economic development, regulatory environments, and consumer behaviors across countries, meaning what works in one country might not work in another, forcing you to adapt constantly, making resources-intensive to scale the business.
Network Deficiencies
This will sound familiar: You go to a networking event, looking for VC or partner leads; few show up, and the prospects are weak at best. This is in stark contrast to the events you will find around Europe, which are full of investors and mentors waiting on-site (often at rather conspicuous places) all keenly aiming for that next deal or partnership. And it is not only about the sheer numbers of people in your orbit; it also matters how strong those networks are.
The cohorts it attracts through this route are as strong across the board in Europe, where there is far more institutional support for them (incubators and accelerators), not to mention a cultural belief closer to both mentorship and answers. These networks in the MENA region are relatively young. They are there, but you may need to look a little harder for them and then help along the way. But that kind of effort can result in huge returns. Every relationship you build will present itself as an open door, and eventually it could be the piece to your puzzle, whether that’s knowing someone with a resource you need or just speaking words into existence.
Lessons from France: A Model of Success
France provides an interesting case study for how a strong entrepreneurial community can lead to success. The country has since gone on to be one of Europe’s leading hotspots for new startups, making Paris referred as the “Startup Capital of Europe,” not as a company but as part of the city itself. Their success is in part due to their supportive government, with programs like La French Tech that give entrepreneurs funds and exposure.
An initiative supported by the French government, La French Tech provides French startups with funding, mentorship, and international growth opportunities. Furthermore, the country strives to secure a continuous flow of skilled, computer-literate graduates who would like to join the startup landscape over time. This cocktail of support has enabled a new breed of French unicorns like BlaBlaCar, Doctolib, or Deezer to scale up internationally and operate as global businesses.
For MENA entrepreneurs, examining the French ecosystem offers a unique perspective to focus on governmental intervention (direct and indirect), promoting entrepreneurship via education mechanisms, as well as fostering deep-rooted networks. Now consider how you would “battle for peace” in your own context. The MENA region is perhaps not as built out in its infrastructure, but there are still means of networking and linking up while looking for communities to support these circles with political steps that can make a world of difference.
Unique Challenges Facing MENA Entrepreneurs
Now let’s return to you as the entrepreneur in the MENA region, managing an environment full of obstacles that your colleagues in Europe may never encounter. What are these obstacles, and how do they impact your entrepreneurial journey?
Regulatory and Bureaucratic Hurdles
Consider the last time you attempted to navigate the legal process to start your business. One could refer to the World Bank’s Ease of Doing Business Index, which helps to illustrate the challenges of registering a company, obtaining permits, and resolving contract issues in many MENA countries. In countries like Egypt and Jordan, you find yourself shuffling paperwork along rather than planning your strategic moves for your business. This is not only frustrating but an outright barrier to getting your business off the ground.
The Funding Conundrum
Let’s talk money. Now consider you changed to a few investors, and when you present your idea in a room their eyes gears up, appreciable nods starts but where is the money? By now a well-known tale in the MENA region, which is plagued with an access to capital problem.
While investment has been pouring into the network states from venture capital and private equity investors, access to finance is still a major hurdle for many. A common problem is that early-stage startups find it difficult to get the funding they need in order to scale. In 2021, startups in the region have raised $3.4 billion, according to a report from MagniTT, a data platform based out of MENA (FLAGS). However, this figure is still a drop in the ocean compared with Europe—where VCs invested more than $100 billion during the same period.
Furthermore, the shortage of financing resources is not only a symptom for bootstrapping companies, but offers in this range are hard to come by, so investors will invest mostly in later-stage startups where all boxes tick. Such a conservative approach inhibits the growth of these startups in this region, resulting in a success gap.
Cultural and Social Barriers
The next challenge that is often unstated but deeply felt is the cultural and social expectations and norms. In many MENA countries, a highly favored career path is a stable, traditional one, and there are still many who associate entrepreneurship with risk, which can add pressure on a budding entrepreneur, especially if they may potentially be the first individual in their family to choose entrepreneurship as a career.
For women, the challenge is even larger as the entrepreneurial landscape is mostly male-dominated. According to a Global Entrepreneurship Monitor (GEM) report on Women and Entrepreneurship, women in the MENA region are significantly less likely than men to start a business and are at a disadvantage compared to women in most other countries due to cultural norms, situations limiting their access to finance, and not having networks to support them.
Political and Economic Instability
Picture trying to build your company while the economy surrounding you is unstable—this is the case in the MENA region, where the last decade has seen conflict, uprisings, and economic crises further complicating the journey of the entrepreneur. For example, the conflict in Syria, instability in Lebanon, and inflation in Egypt have all affected the entrepreneurial ecosystem in their respective countries.
In Europe, while there are always down swings in the economy, Europe feels like a more stable environment for companies to develop and succeed.
The Talent Gap
The skills gap is most apparent in the tech sector and in areas like software development, data analysis, and digital marketing. As a result, startups’ only option is to either train employees or use expatriates, which increases the expected costs of doing business.
In conclusion, I’d like to touch upon talent, which you will need to help you realize your vision. While the region features a population of young individuals, many of whom are in their twenties, they do not possess the necessary skills for the modern economy. The World Economic Forum has called attention to the region’s skills gap, asserting that many educational systems in MENA do not properly prepare students for the labor market’s needs.
Strategies for Overcoming Local Obstacles
Then, how do you get past these obstacles? How do you convert these setbacks into springboards that lead to success?
Enhancing the Investment Ecosystem
To try to address the funding situations, you need to enhance the investment ecosystem. Governments can support improvement in the region by incentivizing investors to back and fund startup teams. For example, tax breaks for VC firms and angel investors should help garner more investment support for early-stage startups. Additionally, public-private partnerships can help by creating funds that target high-potential startups in out-of-favor sectors.
As entrepreneurs, you can also try alternative forms of fundraising. Crowdfunding allows you to raise money from the public in a very direct manner. Peer-to-peer lending is another applicable form, as it can facilitate access to startup funding without having the venture capital or angel investment. These methods already have traction in the MENA region, and with a little creativity could add a boost to support your startup team.
Improving Government Support and Policies
Think about if starting a company in your nation was a matter of clicking a few buttons online. That is the sort of ecosystem we want to cultivate. Streamlining the steps to starting a business, reducing costs, and simplifying access to resources can have a dramatic impact.
Governments can create innovation hubs and incubator programs that connect startups to coaches and networking opportunities so that they are able to accelerate their learning through proximity to other founders, investors, and experts in a shared space. These hubs can become the heart of the ecosystem in your community.
Also, don’t underestimate the role of policies that support innovation through grants, subsidies, or even funding research and development. Those actions will allow startups to more directly compete globally through the process of creating an environment of purposeful innovation, not just the possibility of it.
Building Stronger Business Networks
Do you remember the networking event you went to, but that nobody did? It shouldn’t have to be like that. The MENA region is where new networks and significantly stronger business networks need to be built. This means more events, more opportunities to connect with people, and much more collaboration among start-ups, investors, and ecosystem operatives.
Incubators and accelerators can and should play a major role in this. They light the way for entrepreneurial dreamers, not only with funding but through mentorship and establishing connections or networks to support them in becoming scalable ventures.
Another teamwork opportunity is cross-border collaboration. By collaborating and partnering with a start-up in the MENA region, a start-up in Europe can enter a new market, develop a joint venture, or does not market research or simply access, share, and exchange knowledge.
It’s all about building a network that is not just wide but based on solid foundations and even thicker than blood—a network that you will be supported through the storm and that will help to celebrate your highlights.
Addressing the Psychological Gap and Self-Perception
The psychological gap represents the instance in which you feel inferior to your European peers; specifically, this is a barrier that must be addressed to close the success gap. This perennially held belief often engenders self-doubt and creates aversion to taking risks.
One avenue to overcome the psychological gap is to cultivate an environment of confidence and resilience. When referring to a localized community, a society, or a network of communities surrounding participants who bear and understand the same barriers, the psychological gap starts to bridge. You will begin to see that your barriers are not distinctively yours but are an experience as part of being an entrepreneur, and collectively, with support, you will learn ways forward together.
Another avenue is building and highlighting success from an entrepreneurial sale of MENA stories. When the focus is on MENA entrepreneurs who experience barriers and push to the international level, displaying that these successful MENA entrepreneurs are possible, their exposure may increase confidence. There are several avenues to promote your entrepreneur story; consider media outlets, industry associations, and even the government. External to promotion, community support through an award selection and case studies are both encouraging evidence to showcase.
Case Studies: Overcoming Challenges in the MENA Region
Now, let’s take a moment to be inspired by a case—their journeys did not specifically rely on the journey—and their journeys were only rooted in their innovation and will to overcome challenges in spite of multiple barriers.
Case Study 1: Careem
A success story from MENA is Careem, a ride-hailing company launched in Dubai in 2012. Careem faced tough challenges and competition from app initiation startup partners to international brands like Uber, yet it grew rapidly across the region and exited Uber for $3.1B in 2019.
Careem’s achievements can be credited to many factors, such as knowledge of the local market, the capability to respond to regulatory change, and an emphasis on establishing a strong network of drivers and customers. The company had the advantage of investment in its early stages from local and international investors, which allowed it to obtain sufficient capital to grow.
Case Study 2: Swvl
Swvl, a transportation startup based in Cairo, is a concrete example of local entrepreneurs in the MENA who overcame local challenges to achieve their entrepreneurial dreams. Founded in 2017, Swvl is a bus-sharing service that aims to solve transportation issues for people in cities with insufficient public transport systems.
Swvl faced significant headwinds: navigating the regulatory terrain of various countries; securing funding in a region with low VC investment; etc. Ultimately, the company’s technology-based, educational, and local understanding of transportation helped the business scale up to more than 70 cities, including in Pakistan and Kenya. In 2021, Swvl became Egypt’s first unicorn to list publicly on NASDAQ.
Case Study 3: Fetchr
Dubai-based logistics startup Fetchr has already had to overcome a tidal wave of challenges surrounding the fragmented and inefficient logistics landscape in MENA, but apparently not quite enough. The company has designed a technology-powered model that helps in last-mile delivery using GPS coordinates, focusing on regions where traditional addressing systems are devoid of authenticity.
It overcame significant operational challenges to raise more than $50 million in capital and scale its operations across the MENA region. Its focus on innovations and local adaptations has played a crucial role in turning the company into one of the top-rated logistics startups across Asia Pacific.
Closing the Success Gap
The difference between the MENA region and Europe is multifaced but there are at least three fronts we can act on simultaneously to fix it. If the region were to understand what makes entrepreneurship there so difficult, and in turn develop strategies that would liberate it from those obstacles holding its entrepreneurs back, we believe MENA could reach peak entrepreneurial performance.
A better investment environment, more help from the government, wider business connections, and fewer psychological hurdles all need to be ironed out if we want to close the chasm between success. Moreover, leveraging key success stories and instilling an innovation and resilience-driven attitude can enable MENA entrepreneurs to not just survive but thrive in the race around this increasingly global competitive landscape.
Ultimately, the future of entrepreneurship in the MENA region depends on the collective efforts of governments, investors, industry associations, and entrepreneurs themselves. By working together to create a more supportive and dynamic entrepreneurial ecosystem, the region can not only close the success gap but also emerge as a global hub for innovation and entrepreneurship.
Discover the State of Funding in MENA – 2019 to 2023 : The white paper of this month is taking you through the ups and downs of MENA’s startup funding over the last 5 years. If you’re a startup founder, an investor or an ecosystem builder, this is your chance to learn from the past, spot the trends, and write your own success story.
Don’t miss out on knowing the history that could shape our future!
