5 years ago, there were a number of entrepreneurial initiatives in Kuwait that large sums of money were allocated to but were operating independently of each other. A few governmental programs were servicing funding needs through both debt and equity instruments but nevertheless did not cover other building blocks of the entrepreneurial ecosystem, to name a few here is a list:
- Kuwait Small Projects Development Company
- Industrial Bank of Kuwait
- AlRaeda Enterprises
Half (approximately) of the allocated funds for these programs were earning interest from deposits and the other half typically funded traditional businesses, with no focus on knowledge based economy. However, the SMEs scene in Kuwait was still quite active relative to the rest of the GCC and a majority of small businesses and startups were funded by private money (friends & family) through traditional funding terms.
On the consulting side, there were a lot of boutiques that offered relatively expensive consultations (to the size of businesses being established) and a few were more entrepreneurial friendly in pricing. Here is a list to name a few:
- Cubical Services
- Traditional accounting/consulting firms
- Manpower and Restructuring Program
Beyond the abovementioned services, entrepreneurs were very much self-dependent (hustlers) and have been struggling with the following key issues:
- Excessive regulations: It is very challenging to start a business in Kuwait as the licensing requirements and procedures are quite complicated, they take a lot of the entrepreneur’s time to start and maintain rather than focusing on the business 100%.
- Attracting and maintaining talent is hindered by the strong benefits that the government offers and by the generous labor law rules and regulations with very restrictive immigrant labor permits.
- Being the largest procurer, Government business penetration is very challenging and is predominantly taken by large corporations and family offices.
- Access to private finance is limited as most private financial institutions do not view the SME/Venture asset class strategically and the Central Bank’s interest spread cap of 400 basis points is prohibiting high risk taking.
- Support programs are nascent whether its incubation services, grant schemes, mentoring, business development services, there are a handful of programs with limited capacity.
- The mindset and culture stand against encouraging modern entrepreneurship. Entrepreneurs are directly encouraged to take a risk-averse mindset and no sense of community exists.
With that said, there were a few startups in different industries that were marking Kuwait on the regional map, to name a few in the technology sector: Talabat, Koutbo6, KuwaitNet and many others in different sectors.
Infrastructure & market
During those years, government has invested heavily in telecom and internet infrastructure enabling residents and offices to benefit from fiber optic cabling in most areas around Kuwait. As the price of technology access was also witnessing a significant decline, penetration of internet became much more affordable and the bandwidth was only getting better and cheaper. The Apples of the world were causing huge software and hardware disruptions, making the quality and ease of using technology more accessible/useable than ever. The connectivity and efficiency only drove the world to be more connected through brilliant platforms and hardware and everything around the world was only a click away from everyone. Smartphone penetration climbed up the charts and Telecoms focused more on VAS for their customers, as voice calls became a utility.
Changes in Local Landscape
In the past 5 years, the Lean Startup school of thought became more global and standardized the startup’s lifecycle, early stage funding methods and tools were becoming more visible. As a result of funding gap challenges we had in Talabat.com, my partner and I started setting up a late stage VC practice in 2012 that evolved into a larger project on a national level (the National Fund for SMEs Development), and several institutions started exploring the rising asset class (Venture Capital) where international private funds started flowing into the ecosystem (i.e. Talabat.com) and incubators/co-working spaces started blooming. Individuals (including myself and many others)/family offices/corporates continued to invest in the asset class and the funding gap is much smaller in size than it used to be. Startup competitions (local and international) were happening and developers/designers became more in demand. Despite not having a tax-break policy for non-profit initiatives in Kuwait, non-profit startup initiatives became very popular and the calendar year started filling up with many events in the startup world. Here is an overview of how the local landscape looks like today.
If we look at the above table, a super majority of these initiatives are led by entrepreneurs, not government and not corporates (I‘m sure there are more efforts which I missed in the list). These are striving entrepreneurs who are giving us a sense of a real community that is shaping the future of our country’s startup ecosystem. As Brad Feld repeatedly mentions in his “Startup Communities” book, “entrepreneurs always lead the community” and this is exactly what we’re witnessing in Kuwait. There is a new culture of openness and information exchange between entrepreneurs that none of the earlier generations ever witnessed. Mentoring has become more standard and the notion of protecting your idea is gradually becoming obsolete. With more than 60% of the population less than the age of 35, the landscape is only starting to shape right now with much more efforts being geared for the community. There is a very important role for corporates and government to play but ultimately, the community has to continue being led by entrepreneurs who should streamline other stakeholders’ efforts for their benefit.
20 years ago, our flagship startup was Sakhr and we had Talabat conquering the marketplace model for the GCC in the past 10 years… all of that without 10% of the resources currently available for the community. Can you imagine what the next 10 years can produce for the local startup community? IT CAN ONLY GET BETTER!
Abdulaziz B. Al Loughani