Drones use electric charges on clouds to make it rain across the United Arab Emirates. We never imagined emissions from our vehicles could be useful until Saudi Aramco introduced carbon capture tech that recycles 25% of CO2 from cars to power heavy vehicles and industries.
From algebra to coffee a lot was introduced to the world by innovators of the Middle East.
It’s not all about historical trivia, though. In the digital age, cities such as Dubai, Doha, and Riyadh foster innovative techs such as the hyperloop and autonomous vehicles. NEOM is integrating everything—cognitive living, digital twin—into its infrastructure to create a roadmap for cities of the future.
The numbers also reiterate the Middle East’s long-standing commitment to innovation, which is second only to China. Compared to a 45% global average, the Middle East has 58% committed innovators and is inviting more with startup hubs and golden visas for coders.
Universities such as the Mohamed bin Zayed University of Artificial Intelligence (MBZUAI) and King Abdullah University of Science and Technology (KAUST) provide a platform for research on smart tech and innovations such as Wayakit’s clean-tech that solve everyday problems.
INSPIRATION COMES FROM RECOGNITION
Government policies and investments are focused on incentivizing innovators in the Middle East, but is financial support solely responsible for nurturing creative ideas?
Acknowledgment and validation for out-of-the-box thinking ultimately drive the new generation towards coming up with unconventional tech to tackle routine issues. “Most VCs are looking for teams building businesses that are going to make a place, a community, or an environment better,” says Tammer Qaddumi, founding partner of VentureSouq, an equity funding platform for early-stage companies. “Yes, financial returns are a big driver of the business—a VC’s role is to allocate capital, constantly seeking to attract more capital by generating high returns, but the ‘real point’ of VC is to enable entrepreneurs to build businesses that improve life. Implicit in that is the idea that how it’s done now needs to be changed for it to be better. To change the way something is done, you need to be innovative and out-of-the-box.”
Startups that fulfill customers’ demands better than what exists in the market will ultimately drive more traction and revenue. The more companies can innovate products or services to give their customers a better experience, the more they will be able to retain clients and drive growth, says Karim Konsowa, co-founder of VC MENA and Investment Associate at Dubai Future District Fund.
“That’s why innovation is so important to VCs, because, in an ideal scenario, a company that constantly innovates and introduces new products and services according to their customer’s needs will be able to retain their customers and gain new customers,” adds Konsowa. “The more customers that company has, the more feedback it can gather from the market to keep iterating and enhancing its products or services and continue growing its customer base, thereby creating a ‘benevolent cycle.'”
Innovation can be in marketing and advertising, pricing, product development, and business model.
To Medea Nocentini, COO at Global Ventures & Founder of C3, companies that innovate demonstrate high levels of creativity, both qualities synonymous with high growth. “This allows VCs to invest in, and support, commercially attractive solutions that often provide solutions to pressing, real-life issues too.”
Global Ventures have invested in innovative companies, such as Red Sea Farms, Paymob, and Altibbi, to reduce water and food insecurity, increase financial inclusion, and improve access to healthcare.
“Companies that successfully innovate are more likely to deliver increased shareholder value and are more adaptable in the long-term,” she adds.
Events such as GITEX and Expo 2020 have enabled innovators from across the globe to showcase their tech and creative endeavors in the Middle East. Startup ecosystems have identified and nurtured innovative ventures, including Abu Dhabi’s Hub71 and spaces such as the Technology and Innovation Institute (TII) and the KAUST.
As the hyperloop and a quantum computer take shape at TII, Hub71 connects startups to a directory of investors, including Mubadala. KAUST has recently launched another VC fund directed toward deep-tech startups.
Speaking on identifying the right startup to invest in, Ramez Mohamed, CEO of Flat6Labs, says, “We usually consider the product innovation and market potential when assessing a startup for potential investment. However, what we focus on the most is the founding team behind the company. We firmly believe that strong teams can always plow through most challenges, and you can pivot your product or change your business model, but it’s almost impossible to change the team at such an early stage.”
According to Konsowa, the important factor investors focus on while gauging the potential of an innovative startup idea is the “quality and experience of the management team.”
“A great startup team, with relevant experience to the business they are trying to launch, is probably the first thing that helps me build conviction for a startup. After that comes the business idea and the market dynamics.”
A MARKETPLACE OF INNOVATION FOR VCs TO EXPLORE
Entrepreneurs and innovators can efficiently connect with investors through lists such as Fast Company’s Most Innovative Companies.
Since 2008, Most Innovative Companies has featured some of the most iconic and game-changing business ideas globally–from Netflix and Apple to Shopify and SpaceX. Fast Company has honored companies such as DropBox and Slack that have changed remote collaboration. Brands such as Nike and Hermes have also been acknowledged for innovative campaigns and products to connect with consumers.
Fast Company’s Most Innovative Companies list inspires new businesses to be brave and creative, while investors get better insights on emerging and existing startups to invest in.
“Any new information or profiling of innovative companies helps us in our search, in our research,” says Qaddumi. “And if we observe from a list that many companies are tackling a certain segment, that tells us something. Of course, we identify which sectors are ripe for change: observing consumer or company pain points; macro-economic performance data; paying attention to major government initiatives or regulatory changes; analyzing historical trends; to name a few.”
“But certainly, if publishers are picking up that their readers care about what certain companies are doing, that is something we will pay attention to.”
Echoing this sentiment, Ramez says, “We’re always looking for innovative startups and founders to invest in and join our different programs across MENA. A list of the most innovative ones will help us identify the top innovation sectors and build a strong pipeline for potential investments.”
The Fast Company’s Most Innovative Companies list can “consolidate VCs’ thinking and understanding,” says Nocentini. “The list will help to highlight which sectors have the best potential, what issues to focus on, and areas in the region where innovation is extensive.”
“It will also create a virtuous circle of awareness, endorsement, potential take-up [by customers], and future investment. This is good for the companies themselves, the VCs, and a positive environment for the entire ecosystem,” she adds.
Hackathons and startup challenges where innovative firms compete with unique products and services are hosted across the Middle East. These events promise funding and support as rewards, while every startup shortlisted gets the attention of venture capitalists. Applying for the Most Innovative Companies list also opens a window for firms in the region to connect with regional and global VCs.
Walid Hanna, CEO of capital firm Middle East Venture Partners (MEVP), explains, “Up until three to five years ago, there was very little funding for early stage innovation and technology investment. The UAE and Saudi Arabia have solved this issue, and Egypt is on the way. But, we need talent and money— infrastructure and cloud are there (as enablers).”
INVESTORS GRAVITATING TOWARDS INNOVATORS
In 2021, Middle Eastern startups attracted about $6.8 billion in funding through more than 1300 deals, most of which went to the UAE and Saudi Arabia. These two countries have also been providing maximum visibility to startups, evolving as regional tech powerhouses. For the kingdom alone, VC investments grew 244% to hit a record in the first half of 2022.
Shedding more light on the approach of VCs in the region, Mansour says, “VC is also called patient capital. We can stay in a company for a decade and not exit, and the company would still be growing. We are not daily traders or weekly traders.”
These two nations themselves also host challenges such as Outliers for tech startups, Fintech Abu Dhabi, and MITEF, where startups get to showcase innovation. This shows that prestigious lists such as Fast Company’s Most Innovative Companies help startups and VCs.
“It also helps set the trends for what to expect over the next couple of years when identifying innovation opportunities regionally and globally,” says Ramez.
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Patrick Chalhoub on his passion for art, culture and retro-futurism