Building a Startup Ecosystem is Wayid Zain – Part#3

This is the last post in this series, and as I mentioned in the previous post, I’ll try to answer the following questions: Who should establish the incubator? And how should the incubator be structured?

The incubator should be established by…………Zain. Yes, Zain the Kuwaiti telecommunication company.

Why Zain is a good fit to create the incubator? 

1.Technical resources: Zain is not only a telecom company, its also a technology company. They have all of the technical resources (talented experienced employees and technical assets)  needed in a Hi-tech startup.
2.Customer base: Zain has more than 35 million customers around the world. For startups having a partner with this huge amount of customers is like a dream come true.

3.Global network: Zain is spread in 9 different countries. This adds much value to startups. It will be much easier for startups to grow internationally if they have a partner that have more than 10 years experience operating internationally with a strong global network with governments, suppliers and partners.

How Zain is going to benefit from this incubator?

1.Innovation lab: The incubator will be like an innovation lab. Startups are young, diversified, vibrant and full of energy, and Zain should innovative to survive in an industry that is changing very rapidly. Zain will have access to a great source of innovation that will help it to stay ahead of its competitors.
2.Brand awareness: It will be a great way to build brand awareness and to gain respect and appreciation from the Kuwaiti community.

3.Financial return: Zain will have a real equity stake in these startups. These startups might end-up being a very successful businesses that generates millions of dollars. Some other startups might also be an important partner, supplier or product that gives Zain a competitive advantage over its competitors.

I was part of Wayra, which is an incubator in Spain part of Telefonica (The Spanish telecommunication giant, that also owns O2 in UK and also operates in most of South American countries). Telefonica opened more than 9 Wayra offices around the world in 6 months!! Telefonica will benefit substantially from these incubators and now it is considered probably the smartest Telecommunication organization in the world. Check this article

But, now I want to answer the second question. How should the incubator be structured? Should Zain own the 100% equity in the incubator?

I believe we need to have a more balanced structure with a shareholder that have more than just financial incentives. The second shareholder should also have social responsibilities towards the community. I know, your thinking the government, but no its not the government. I believe we need a University to be part of the structure.

I believe GUST should be part of the incubator with an equity stake of 25%.

Why we need a university?

1.Source of talent: Universities is a non-stop flow of talent both in terms of mentors and entrepreneurs. First, the incubator will benefit from the global skills of the professors that can act as mentors for startups. Secondly, both startups and students can benefit from working together. Students get to benefit from working a real life experience and startups benefit from cheap labor.
2.Educating people: Kuwait society need to be more educated about entrepreneurship. Special courses, workshops and studying tracks about entrepreneurship should be developed, and universities are the best place for this to happen.

3.Diversity: Non-public universities are a good source of international students. It is proven that diversity helps unlock creativity and innovation. Having a diversified teams in the incubator is also a key element to its success.

Why Universities need the incubator?

1.Social benefit: Being part of the incubator will be a good way to give back to the society and the public. At the same time they are building their brand awareness and help in attracting higher quality students.
2.Creating hero’s and role models: If a startup became successful they can claim to be part of the success story. For example, Stanford University benefited a lot from the success story of Google.

3.Real market need: Being close to startups, will give the university a closer look to what recruiters are looking for in a fresh graduate. They will understand what does the market need, thus what type of courses they need to add or what courses they need to update or remove. The fresh graduate students will be more prepared for the real world, and will be in higher demand.

Zain and GUST will be the main shareholders in the incubator. However, they don’t have the required experience to run an incubator. A specialized team  should be recruited to run the incubator. This might need another post in the future in who should run the incubator.

In short, to accelerate the startup scene in Kuwait we need an incubator. The incubator should be owned by a leading technology company, and we believe that Zain is a good fit for this role. Moreover, adding a university to the mix will keep the balance and will add much value to the whole startup ecosystem.

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  1. Caren

     /  December 20, 2012

    I think the admin of this site is really
    working hard for his site, because here every data is quality based material.

  2. I know this is an old post. do you still believe in the same structure?

    I know that the parliament in kuwait approved this fund in mar 2013, and now it’s starting to take shape.

    I’m also very interested in the question of what governments must do to support startups. After much research, and based a lot on longer examples (e.g. silicon valley, malaysia, estonia, etc.), I highly believe in a very simple thing that governments can do, and it takes very little actual work: Fund of Funds Matching.

    Did you know that int he 1960s, 75% of all funding for startups in Silicon Valley, was from the government? (documented in Steve Blank’s The Secret History of SV lecture).

    The way it works:
    – gov would agree to do fund-matching for any new fund that opens in Kuwait at 4:1 ratio (i.e. if fund size is $10m, then gov puts in $8m of it). The fund has the right to buy out the government in 2 years. The fund MUST be a partnership between Kuwaiti + Internationally Reputable VCs.
    – Funds must invest in Kuwaiti companies (or companies willing to move to Kuwait).

    This very simple step proved time & again to put the right incentives and get the wheel running:
    1- The international VCs bring amazing wealth of connections and understanding of global business opportunities. They also bring experience in spotting and encouraging the right entrepreneur.
    2- Incentivize the top 2% of the population to become investors or entrepreneurs: with 10 such funds in a small geography like Kuwait, they will fight over the best entrepreneurs. This will create an entrepreneur-market – entrepreneurs will get better funding and better terms. (unlike now, where Arab world VCs are so limited, the terms are skewed hugely for investors). This will get more top people to leave their jobs and do entrepreneurship. It will even encourage kuwaitis working abroad to come back to start in kuwait.
    3- Global Exits: in the Arab world we do NOT have exits. It’s very hard to get acquired or go public – 2 very important things for startups. These global VCs will bridge this: advising the startups to go public in NASDAQ or getting acquired by Global companies. (because they know the needs of the global companies, and are involved in the local startup).
    4- The Kuwait VCs will get tremendous experience partnering with these global VCs.

    One last point: startups need HUGE number of top engineers. And there’s no geography in the world that has all the engineers needed (not even silicon valley). This is why the government must assist in attracting and giving visa & work permit to the best engineers in the Arab (and global) world.
    Silicon Valley would NOT survive if all foreign engineers leave.

    Abdullah – you have a great blog. I’m an entrepreneur in Saudi in ecommerce space. Let’s Skype. Would love to know more about your activities & fishfishme.

  3. I read Steve Blank’s post about Chile – the one you included in your earlier posts.
    I’m glad he points something similar to my earlier comment – the importance of VCs to get the wheel rolling:

    Venture Capital
    Perhaps it was just who I was meeting, but for a country so focused on innovation and startups the lack of venture capitalists was noticeable. Given the interesting things going on in the engineering labs I visited and the startups I met, one would have thought the place would have been crawling with VC’s fighting over deals. Instead it felt like the government – through CORFO – was doing most of the risk capital investing. Given that great VC’s are much, much more than just a bag of money, this means that startups lack experienced board members with practical experience. There seemed to be very few who knew how to coach entrepreneurs and to build companies. Finally, it wasn’t clear if everyone was on the same page; that for a Chilean startup to scale it was going to have to reach past Chile and go global. There seemed to be few tools, techniques and strategies to do so.

    A sign of progress will be when some of the CORFO guys leave the government and start their own VC firms.

  1. Let’s Learn from Chile#2 « Startup Q8
  2. Building a Startup Ecosystem in Q8 – Part#2 « Startup Q8
  3. How Should a Government Invest in Startups? «
  4. How Should a Government Invest in Startups? «

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