Why UAE needs to stimulate scale-ups

Scale-ups are companies with a proven business model and are at a pivotal point for growth in their life cycle.

The scale-up ecosystem for small and medium enterprises (SMEs) is developing at a faster pace in the UAE as compared to other Mena countries but access to finance and affordability of infrastructure and facilities remain a major challenge.

Mahmoud Makki, partner with Strategy& Middle East, said the future for SMEs is promising because there are a lot of activities from private and public entities to stimulate the startup scene.

"The UAE ranks better than other countries in terms of SME ecosystem to stimulate scale-ups, driven primarily by Dubai's position as a regional business hub and recent increased focus on SMEs and entrepreneurship," he said, adding that the country attracts many entrepreneurs from outside, including Egypt, Greece, Jordan, Lebanon, Turkey and South Africa.

A study conducted by Ideation Centre at Strategy& and Endeavor about scaling up SMEs in Mena revealed that successful scale-ups in UAE could result in 7-fold increase in job creation and 2-fold increase in revenue. In Saudi Arabia, a successful scale-up could result in 20-fold jump in employment generation and 8-fold rise in revenue growth.

Scale-ups are companies with a proven business model and are at a pivotal point for growth in their life cycle.

Highlighting some of the challenges, Makki pointed out that Series B and C financing is a major issue for SMEs.

"The second challenge is the shortage of talent with specific expertise. Although still sought after by expats, the local community is still driven towards public sector jobs. Another challenge is that banks still ask for high level of collateral from SMEs and not very long-term low-interest structures are available for scale-ups. Thirdly, the issue of cost of operating businesses such as rents are still high. These are the areas where the UAE can see improvements," Makki told Khaleej Times.

He pointed out that the scale-up percentage of SMEs is low at around 5 to 6 per cent globally and in the region.

"The economic impact of those few little companies is fundamental. For example, in the UK, the scale-ups generated 70 per cent of new jobs. So, our job is to spot those scale-ups and nurture them along the way.

"Amazon was a scale-up and it took Amazon 12 to 13 years to reach its exponential growth and we want more of them. There are many Amazons here in both tech and non-tech," he said at the launch of a study conducted by Ideation Centre at Strategy& and Endeavor.

On the regulatory front, the study said the UAE offers transparent regulations with an efficient application process to start a business - although processes still need some adaptation to accommodate new business models.

- waheedabbas@khaleejtimes.com