Dany Farha says regulations obliging large businesses to prefer start-up companies over larger firms when choosing between two identical proposals can help the entire SME sector.
SME law was progress but governments can do more for start-ups and innovators, says Beco Capital chief
Regional governments can further encourage start-up and innovation culture by introducing regulations obliging corporations to favour newer businesses over more established entities, according to a leading venture capitalist.
Dany Farha, the chief executive of Dubai-based Beco Capital, told The National that the UAE’s SME Law of 2014, which set SME contract targets for government entities and government-related firms, was a great leap forward and urged lawmakers across the region to go further.
“When we heard about the SME Law we were jumping for joy in the office,” said Mr Farha. “The next step is how do we then extend that to help the entire SME sector.”
A further step would be to pass regulations, already in place in Russia and other countries, obliging large businesses to award contracts to start-up companies as opposed to larger firms when choosing between two identical proposals.
“As an entrepreneur and a start-up, the most difficult thing is to start getting big names to buy you,” he said. “The minute governments and big biz start buying from you, it gives you validation and you can use that to sell to everyone else.”
Such regulations are important to tackle reluctance on the part of big businesses across the Mena region to award contracts to start-ups, said Mr Farha.
“In the US it’s the culture for big companies to sign contracts with new, disruptive companies,” he said.
“Here a shift in mindset has to happen, with local companies reluctant to buy from firms that have only been up and running for six to 12 months.”
Such a shift was crucial to encouraging the growth of the SME sector in countries looking to diversify their economies.
“That’s where all the future jobs growth is going to come from. The likes of IBM don’t need your contract, whereas young entrepreneurs do.”
Mr Farha spoke to The National ahead of Beco Capital’s Boostmena event in Dubai tomorrow.
The event is primarily a gathering of regional and international VCs but will also include tech companies such as Mudassir Sheika, a cofounder of ride-sharing service Careem, as well as and Deepinder Goyal, Zomato’s chief executive.
Tech innovators in markets such as the Mena region and India are increasingly learning to leverage local market knowledge to fend off competition from new entrants from markets such as the United States and Europe, said Mr Farha.
“There’s a myth that tech innovation is only found in Silicon Valley and that when American companies come to the region they’ll just take over the market,” said Mr Farha, whose Beco Capital was one of the early backers of Careem.
“It doesn’t work that way any more. You need to be on the ground offering a highly localised product, working with local smartphones across different languages and cultures. With that localisation, you develop a far more relevant offering, which allows you to win.”
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