When a forest fire burns down the bush woods, tall trees are left standing. This is the metaphor venture capitalists’ used in the Silicon Valley to explain why start-ups that were founded post-bubble, during the tech crash of 2001-2003 outperformed even the most established technology companies in the years that followed.
Google and Facebook both reached critical mass during technology downturns. Paypal and Skype both had sizable exits in a recession.
Silicon Valley’s vibrant ecosystem of intellectual property, venture capital and talent pool helped spawn these start-ups like no other region could. Good business plans found early-stage capital, albeit at modest valuations, while frivolous business plans died a slow, painful death. Brainy, engineering graduates joined unknown start-ups for stock options in lieu of staple career choices like banking and consulting. Some worked. Many failed. The net effect was extremely positive for the region and the entire United States.
Kip Knight, the VP of Marketing at eBay, has been quoted in Arabianbusiness.com saying that Dubai has the potential to become the next Silicon Valley. He felt that Dubai could also become a ‘seat of innovation’ and stressed the importance of effective market research in identifying target consumers. This was at a time when Dubai could do no wrong—discretionary income flowed into leisure, real estate and luxury accoutrements as expats poured their freshly minted pay packets into the burgeoning economy.
The days of fast cars, fast talk and fast money in Dubai seem to have abruptly given way to a more subtle, refined environment. Many aggressive collegiate joint ventures with UAE and North American colleges like New York University and Duke University got stalled and are only now taking shape. Dubai has long been the nerve center for trading in the region. However, what Dubai has clearly lacked has been an ecosystem to promote entrepreneurship until now. Since Dubai’s real-estate bubble burst, it has seemingly emerged as a stronger hub for tech start-ups in the region. This wasn’t an outcome that many could have predicted but more a by-product of a vastly improved regulatory environment, a bearish hiring climate and investors looking beyond real estate to diversify. Free zones have become more reasonable to operate within. Commercial rents have dropped significantly. Salaries have become realistic. Minimum capitalisation requirements for start-ups have eased.
However, Dubai has a tall order to fill if it wants to become a regional hub of entrepreneurship and technology innovation. The missing pieces still revolve around a lack of early-stage capital and a slowing trickle of engineering graduates. Sustainable start-up ecosystems take years to build and require a core of strong, engineering talent, service providers who are willing to accept non-cash compensation and early financiers who are willing to take the risk on intellectual property rather than
TECOM’s success with Dubai Media City and Internet City saw many media and technology entrepreneurs’ shine in everything from tech PR to Internet television and telecom services. Maktoob was one such example of a well-defined tech start-up that grew its base by being relevant and capital efficient. Its recent sale to Yahoo comes as no surprise to many analysts who see the MENA region as an important venue for Silicon Valley-like growth. Bayt.com, Dubizzle and Flip Media have all demonstrated market leadership in their ability to generate attention from large audiences.
An interesting benchmark for Dubai in taking its tech entrepreneurial ecosystem to the next level could well be Abu Dhabi’s media cluster, TwoFour54. This government-backed cluster of cutting-edge facilities target media entrepreneurs and content producers alongside those aspiring to gain a world class, digital media education. TwoFour54 goes many steps beyond other free zones in providing seed capital, incubation space and access to potential customers for start-up entrepreneurs. Dubai’s business-friendly climate would get rocket propelled if it opened its doors to world-class innovators, providing them access to capital and superior infrastructure. In my opinion, Dubai has a formidable advantage in promoting a Silicon Valley-esque ecosystem with a few of these missing elements in place. The bottom line is that Dubai has a lot going for it. To keep it moving forward as a thought leadership driven, innovative meritocracy, an entrepreneurial ecosystem needs to be built and nurtured.
Kartik Ram is a Dubai-based digital media entrepreneur