x Abu Dhabi, UAEWednesday 26 July 2017

Are you 'the entrepreneur'? The happy ending is not guaranteed

Setting up a start-up in Dubai brings a unique set of challenges

Pep Montserrat for The National
Pep Montserrat for The National

The perception is that Dubai is a good place to do business, because of its size and status as a regional hub. And it is - but that is no guarantee of success for a would-be entrepreneur. Opening a small business anywhere is difficult, but I have found special challenges for my start-up in Dubai.

The recent TV show The Entrepreneur bridged the gap between large and small businesses and told people like me: yes, Dubai is taking start-ups seriously.

The show didn't feature high-level conferences, lengthy speeches or working papers on what was to be done to generate employment. It was simply a competition that showcased small business, offered various challenges, and rewarded one winner with cash and expertise from the associated blue-chip companies.

The difficulty for me as an entrepreneur is that I, too, would like to benefit from the combined expertise of Sony, Leo Burnett and Ernst & Young, the show's partners. But I can't seem to find anything catering for entrepreneurs on any of their communication materials.

Coming up with an idea isn't necessarily hard. You identify a problem, or a segment of people who aren't being served, and produce something as a remedy.

I want to make shopping for bras easier for me and many other women by developing an online store stocking all the sizes you can't get in the regular shops, and providing a calculator that will once and for all give you your size in every single brand.

Sounds simple enough, but formalising the concept is frustratingly difficult. I have been out of work for about four months, and am still unable to get a definitive answer on how to set up a business or how much it will cost here in Dubai.

I've talked to various free zones, I've spoken to chartered accountants and I've contacted a bank. No one is really quite sure, but if you're willing to lay down a large chunk of cash - say US$30,000 (Dh110,000) - you should be all set, with a trade licence, some sort of office space, a merchant account, a company stamp and potentially a residency visa.

For those of us with slightly smaller budgets, that's not really feasible.

There are generally four types of "entrepreneur". You have the former consultant who has been asked by investors to head a tried and tested model to generate quick returns in an emerging market. You have the individuals who have left their corporate jobs at senior levels and have stashed enough cash to start on their own fairly quickly. You have people like myself who never made it high enough up the corporate ladder to generate enough savings to handle all the HR, sales, marketing and development functions at once. And finally, you have recent graduates who simply cannot work in the corporate world because they're itching to try something on their own.

Guess which segment has it the hardest? People like me. Yes, in many circumstances, in other places in the world, the following scenario would be expected: you slum it on noodles and live on your parents' sofa and get some friends to help you cobble together a prototype and try to sell to everything with a pulse.

But in Dubai, I have some special challenges. My parents live elsewhere, so I still have rent to be paid. There's the cost of doing a visa run every 30 days. There's the cost of taxis to take me around to incessant meetings. And there's the cost of setting up a business and all the time, money and resources that would be better spent working on your product.

On the other hand, there may not be university or childhood friends around who will leave everything and work with you. Most of the people you're trying to hire are already in jobs, and don't have enough savings themselves to join a start-up. There's the repeated adage: "Business is in Dubai, but the talent is in the Levant." There's so much money here, but few angel investors. Several times I've found myself asking: "How hard can it really be to get $30,000 in seed money?"

Let's take a typical eCommerce retail business anywhere. To generate a profit margin, you need to buy wholesale and sell at a higher price. To buy at wholesale prices, you need to have a business set up. To have a registered business, you need to pay quite a bit of money.

Not only that, but in this process, while the trade licensing authority may approve your application, you have to go through the whole rigmarole again with the bank. If they decide that your eCommerce business is too risky, they'll either ask for a huge deposit (in some cases $50,000) or they'll just reject your application.

What about legal structures and lawyers' fees? Where do you find out how to structure agreements with co-founders and investors? One of the grey areas I've come across is the constant debate about whether to register an offshore company in the Cayman or British Virgin Islands, which costs about $1,000, and then open a branch here. Alternatively, people suggest setting up a company in Delaware, and then opening a branch.

Why can't I just set up a UAE-based company? If you're offering services, you can set up in a free zone fairly easily, but if you want to import and sell products, you have to find (and fund) a local partner. The other option - which also can be a fairly opaque process - entails registering a service-based company and then "adding on" an eCommerce element. This last part was explained to me over the phone, but I really have no idea what was meant by it.

How could we solve this problem? Supporting entrepreneurs on a shoestring budget would potentially generate millions of dollars in investment in the local economy and give the UAE the world-class capability in various industries.

One suggestion is to have a "start-up visa" system. Can we get the trade licensing authorities and the banks to work much more closely and have a streamlined process where seamless approvals could take place? Can we get subsidised rates for business set-up costs and bank deposits waived for certain types of start-ups? Can we have bodies that offer centralised functions such as HR, legal, accounting and IT support so that the entrepreneurs can focus on building a great product and acquiring customers?

Maybe one day this will materialise. In the meantime, at least one of our problems has been solved by The Entrepreneur. The winner, Nabbesh.com, helps people like me to source technology and creative skills, which I need to get my first prototype out into the world.

 

Alexandra Tohme was born in Lebanon and has lived in Saudi Arabia, Qatar and the United Kingdom. She's now in Dubai and the "Chief Underwear Officer" of www.amourah.com