Analysis: Access to capital and the nurturing influence of experience are the keys to success for start-ups of all stripes.
Fanning the entrepreneurial flame
While the funding he requires is only about Dh800,000 (US$217,805), it is more costly to set up shop than anywhere else in the Arab world. That is why Mr Kayyali's current business consists of some 40 developers huddled in a satellite office in his native Syria, while he works from Dubai. "The team that backs me up is a good team," he says. "They're a bunch of smart people and we communicate quite effectively with conference calls and e-mails. I don't necessarily have to be there physically, except for reassurance and moral support."
Still, Mr Kayyali readily admits it would be more efficient for The Kernel to move all its employees under one roof. Doing so, however, would cost him four times as much in Dubai than the expense for him to move back to Syria. "The reason I have to be here is because Dubai is incredibly connected to the rest of the world," he says. "It's where a lot of the business in the Arab market happens." Good news for Mr Kayyali and other promising expatriate entrepreneurs is on the way. The Mohammed Bin Rashid Establishment for SME Development announced last month it would open its incubation programmes to non-Emiratis early next year. The scheme, which has previously only been available to UAE citizens, assists start-ups in developing business plans through mentoring, government aid, networking and by connecting entrepreneurs with financiers.
Meanwhile, the Abu Dhabi Council for Economic Development has launched a similar scheme called "Akoun" ("to be" in Arabic) to promote an entrepreneurial culture among young nationals. More incubator schemes targeting start-ups in Dubai are in the works. Such a programme is in development in Dubai Internet City, while the Dubai Silicon Oasis plans to launch a global technology fund next year to attract manufacturers as well as research and development firms, said Malek al Malek, the executive director of Dubai Internet City.
Observers from venture capitalists to chief executives have been saying for months that technology start-ups need everything from financing to mentors within the country to have a chance of competing with other regional hubs such as Egypt and Jordan. "Money is important, but we also need to add to money with strategy, direction, resources and so on," said Samih Toukan, the co-founder of Maktoob, which was acquired by the online giant Yahoo last August, and of the Jabbar Internet Group. Mr Toukan speaks from experience. His deal to sell Maktoob, the largest online portal in the Arab world, was heralded as a new beginning for Middle East start-ups. Finally, regional entrepreneurs had a chance to see one of their own hook up with one of the world's most significant online companies.
As the deal closed last month, Jerry Yang, the Yahoo co-founder and its former chief executive, spoke of the company's new direction at a lavish party in Dubai's Habtoor Grand Resort. "Seeing the potential of Yahoo and Maktoob changing the lives of more than 300 million people in the Arabic world is really a dream come true for myself personally," Mr Yang said. "We really think that Yahoo is in a great position to lead in creating the kinds of experiences on the Internet that would be great for Arabic users, but at the same time creating business models necessary to support and grow a vibrant business."
Still, getting bought out by a large, multinational corporation like Yahoo may not be the right answer for some start-ups. It could become a hindrance for businesses which might get bogged down in bureaucracy and differences in corporate cultures, damaging the creative nature that got them noticed. While there is a near-unanimous cry for more venture capital in the GCC, getting it won't be easy. Many funds have shut down over the past year because tight credit conditions have made financing such deals difficult.
Last week's announcement that Abraaj Capital, the Dubai-based investment bank, had acquired Jordan's Riyada Ventures, a firm with several technology start-ups in its portfolio, was a step in the right direction. However, it might not have been enough to shift momentum. The mentorship opportunities that entities such as Jabbar Internet and the Mohammed Bin Rashid scheme can offer is one key way to fill that financial void. Mentorship is often cited by inexperienced technology graduates as being in short supply in the Arab business community.
Enter Habib Haddad and Gaith Saqer, Arab entrepreneurs who are developing services to connect promising young digital mavens with mentors, financiers and other like-minded people to incubate their ideas. Mr Haddad, the co-founder of yamli.com, a Boston-based Arabic search engine firm, created YallaStartup, while Jordan-based Mr Saqer opened ArabCrunch. NET, a social portal connected to his website, ArabCrunch.com. While both offer about the same services, each has received thousands of requests to sign up and offer proof that there is a genuine interest in providing support for new business ventures.
"In general, to create the right ecosystem takes time," Mr Haddad said. "Silicon Valley took about 50 years for the ecosystem to mature. But Dubai and the UAE move on a faster scale. The faster we see things in the Gulf being done, the more optimistic entrepreneurs can be."