Some people say the downturn has been good news for Dubai as it will now move from speculation to entrepreneurship.
Reality check 'is good for Dubai'
As Dubai restructures during a global economic crisis that has hit its vital property, finance and tourism markets, some people say the downturn has been good news for the emirate. Nabil Alyousuf is one of them. A former director general of the Executive Office of Sheikh Mohammed bin Rashid, Vice President of the UAE and Ruler of Dubai, he worked closely with many prominent business leaders during the boom years.
Today, he is one of a growing number of people looking to rebuild the Dubai economy on entrepreneurial, rather than speculative, foundations. "I have always said that despite the difficulties, what has happened in the last year has been good for Dubai," he said. "In business terms, it has taken us back to reality." For Mr Alyousuf, that reality is a Dubai rooted in the mercantile and entrepreneurial traditions of its past, building businesses and value from hard work.
At the height of the boom, life was tough in the emirate for a hard-working entrepreneur. Office rents were stratospheric, talented young people flocked to the property and finance industries, and investors had no interest in funding a small, risky venture. Each of these factors is now in a process of reversal, which Mr Alyousuf believes is a crucial early step in making Dubai a better place in which to start a business.
The city is now oversupplied with quality office space and rental prices are falling. Bright young graduates and skilled workers are entering a tough job market. And investors know the days of easy money are over. Since leaving the office of Sheikh Mohammed, Mr Alyousuf has founded two business that help start-up companies take off. Nabil Alyousuf and Associates, the first company, calls itself an "ideas factory" for the Middle East. The company helps entrepreneurs with a good idea connect with advisers, investors and partners, and already has at least seven new businesses in its pipeline.
A second company, to be launched in the coming month, will act much like a traditional venture capital fund, with a Gulf-focused twist. "One thing we have found out is that people in this part of the world, when it comes to start-ups and small businesses, they like to hold direct investments," he said. "Most venture capital firms treat their investors as investors in a fund, and that is the end of it. But people here want to be a part of what they are investing in, they want to sit on the board, visit the facilities, help out however they can. They want to be a part of the company, not just a source of funding."
The new company will connect small businesses directly with groups of investors who are interested in funding them, creating a closer link between the investor and the firm. The model will prove attractive, he said, because so many Gulf investors made big losses on large overseas funds. Bigger than either of these two firms is Mr Alyousuf's push for a Gulf city - which he suspects will be Dubai, Doha or Abu Dhabi - to become a "centre of innovation" for the Middle East. The cost of establishing support structures such as incubator centres and mentorship schemes would be small compared with other strategic investments.
By welcoming entrepreneurs from across the region, supporting them and then requiring that they base their successful business in the country, Mr Alyousuf thinks the idea is a recipe for "a huge national success". "For some reason no one is seeing it yet," he said. "One issue is that they all think the idea is too small. In the Arab world, entrepreneurship is synonymous with small companies, but people need to remember, Google was a small company."