collaborative entrepreneurship - wamda

COLLABORATIVE ENTREPRENEURSHIP Corporate-Startup Partnerships for Impact in the Middle East and North Africa (MENA)WAMDA - JAN 2016

P. 2Expo 2020 Dubai - Wamda - Collaborative Entrepreneurship - Corporate-Startup Partnerships for Impact in the Middle East and North Africa

This report was created under the Collaborative Entrepreneurship initiative launched by Expo 2020 Dubai and Wamda to promote partnerships between corporations and startups and unlock the region’s entrepreneurship potential.

Expo 2020 Dubai recognizes that global challenges cannot be solved in isolation and that sustainable solutions will require the creativity and innovation of the world’s collective minds. The Expo aims to act as a platform for innovation and entrepreneurship, not only during the six months of the event, but throughout its journey and the legacy it leaves behind. The key value for Expo 2020 Dubai is collaboration, and this is reflected in its theme Connecting Minds, Creating the Future. As such, Expo has partnered with Wamda to launch the Collaborative Entrepreneurship initiative.

Wamda is a platform of integrated programs that aims to accelerate entrepreneurship ecosystems throughout the MENA region. Its core focus includes media, community development, research and corporate and government advisory services. In the past few years, Wamda has become the leading grassroots community and knowledge platform for entrepreneurs and supporting stakeholders.

Authors: Elias Boustani, Marjan Faraidooni, Jonas Feller, Habib Haddad and Jamil Wyne

KEY TAKEAWAYS1. MENA’s entrepreneurship ecosystem is growing, but startups still face challenges to scale: MENA’s startup ecosystem is growing as new funds, incubators and general public support enter the region’s entrepreneurship landscape. However, startups still face a multitude of challenges to scale including finding talent, accessing markets and obtaining investment. These obstacles diminish the ecosystem’s potential and the chances for startups to become job creators in the region. Startup partnerships with corporations could help unlock this growth.

2. More corporations in MENA are engaging in partnerships with startups, but they are mainly CSR-driven: Globally, some of the most profitable corporations are partnering with early stage enterprises to spark innovative ideas and enhance competitiveness. There are also signs in MENA of startups building partnerships with corporations, such as Aramex and DP World in the UAE, which have provided platforms on which startups can obtain resources to scale. However, such strategic collaborations are minimal in the region as most corporations that support startups do so for corporate social responsibility reasons. As such, they do not leverage the full strategic potential of these partnerships such as building an innovative culture or expanding into digital or non-core businesses.

3. Expo 2020 Dubai and Wamda are launching an initiative to spur partnerships between corporations and startups in MENA: To accelerate the corporate-startup partnerships initiative, new partnership models and insights from corporations and entrepreneurs are critical. Wamda, in partnership with Expo 2020 Dubai, will release a report with interviews of over 100 corporate executives and experts in MENA. The report will help inform various stakeholders of the ecosystem on challenges and potential solutions for collaborative entrepreneurship in MENA. The accompanying toolkit and online platform that will be launched will assist corporations seeking to engage with startups or enhance their current partnerships with them. Finally, a Collaborative Entrepreneurship Summit will be organized in Dubai to share best practices and connect with leading experts.


515

3065

183

463

1986-1990 1996-20001991-1995 2001-2005 2006-2010 2011-2015

Figure 1:

Cumulative number of institutions and initiatives supporting MENA’s entrepreneurs by year. (1986-2015)

RISE OF ENTREPRENEURSHIP-SUPPORTING ENTITIES IN THE LAST DECADE

1. MENA’S GROWING ENTREPRENEURSHIP ECOSYSTEM AND LINGERING STARTUP CHALLENGES:

Currently, MENA faces some of the most difficult unemployment challenges in the world, with staggering numbers of its youth population finding themselves without jobs. These hurdles place strict limitations on the region’s socio-economic prosperity and diminish young people’s chances of finding gainful employment and thus making a valuable contribution to the region.

In recent years though, entrepreneurs and innovative ventures have become increasingly cited as a solution to the region’s unemployment challenges. The startup ecosystem in MENA has expanded tremendously over the past five to ten years (Figure 1). New venture capital funds, incubators and accelerators, non-governmental organizations and even government programs and policies have become increasingly present across the region (Figure 2). The figure below highlights this growth in recent years.

SOURCE: WAMDA RESEARCH LAB


2015

Figure 2:

Aggregate number of entrepreneurship-enabling entities in MENA by type of resources offered. (2010, 2015)

WITHIN THE LAST FIVE YEARS THE NUMBER OF SUPPORTIVE INSTITUTIONS AND INITIATIVES GREW 2.5-FOLD

2010Total 183

Total 463

136

56

X 2.4

X 2.5

X 3.9X 2.0 X 2.2

135

35

106

52

86

40

As a result of increasing access to facilities, training, accelerators and investment, the success of individual startups is becoming more pronounced. For instance, Rocket Internet in Germany acquired Kuwait’s Talabat for USD 170 million in 2015 and a consortium of investors acquired Egyptian startup Fawry for USD 100 million.

Additionally, UAE-based Souq.com is now valued at over USD 1 billion and a small yet growing population of startups are rumored to have crossed the USD 100 million valuation mark. Careem, Marka VIP, News Group and Namshi are all examples of GCC startups that have substantially risen in value in recent years. Enhanced technological infrastructure and evolving consumer behavior have also facilitated this growth. Lowering costs of innovation and access to technology have helped these companies sell their products and scale their reach.

InvestmentAngel networks — Crowdfunding Equity funds — Venture funds

TrainingCorporate — NGO University-backed

SupportAccelerator — Coworking — Hacker space Incubator — Tech park

NetworkAssociation — Competitions Events — Media


CHALLENGES TO STARTUP GROWTH However, many innovative startups still face notable challenges to growth. In a Wamda Research Lab survey of over 700 companies, done in partnership with Endeavor Insight, generating revenue (30%), building a team (24%), obtaining investment (24%) and expanding into a new territory (20%) were all commonly cited challenges facing entrepreneurs.

These hurdles impinge on startups’ ability to grow and in turn become job creators in MENA. While the ecosystem is indeed expanding and new players are entering this space, these lingering hurdles diminish the potential that these companies can have.

MENA’s large corporations, including multinationals, large regional companies and family offices, have long track records in the region and have successfully unlocked markets and built industry expertise over time. Given their assets and knowledge, they could provide startups with an ideal platform to scale. Simultaneously, startups could help these companies access new technologies and become more innovative in the face of sluggish growth. These types of partnerships, that Expo 2020 Dubai and Wamda term as Collaborative Entrepreneurship, would be in-line with global trends.

2. MORE CORPORATIONS IN MENA ARE ENGAGING IN PARTNERSHIPS WITH STARTUPS, BUT THEY ARE MAINLY CSR-DRIVENLeading global companies such as AT&T, Qualcomm and General Electric are partnering with startups to create and access new technologies and to even build general market knowledge, among other competitive advantages. These relationships are strategic and symbiotic. Corporations possess the resources, know-how and market access to be critical growth enablers for startups. Simultaneously, new technologies, agile methods, a risk-taking culture and more cost effective approaches to doing business are all assets that startups, by virtue of their size and knowledge of consumers’ behaviors, can offer corporations. Globally, more corporations and startups are uniting these goals to engage in strategic and high-impact partnerships.

These partnerships can come in multiple forms. Corporations can form venture capital funds or internal incubators to support startups within their own industries and supply chains. Simultaneously they can partner with startups to co-develop products or adopt more agile operational methods from startups themselves. As discussed below, many different types of engagement between the two parties are needed.

Corporate-startup partnerships are fundamental to both enhancing the competitiveness of corporations and startups in MENA, and supporting the region as a whole. It unites the private sector’s need for innovation with the need of startups to grow and create jobs. Corporations can provide startups with the platforms from which they can scale and spread their services and technologies.

“Dealing with fresh, young, innovative entrepreneurs can really inject life into a large corporation, and these established businesses should get involved by investing in or partnering with new startups.” –Fady Mohammed Abdul Latif Jameel, President, ALJCI (2015)

Beyond corporations, governments too have needs that can be addressed by collaborating with tech-startups. E-governance, data security and smart cities all require innovative solutions. Cities such as Boston, Philadelphia and San Francisco have pioneered such initiatives. For instance, Boston’s Office of New Urban Mechanics connects the city with startups developing inventive technology that could improve the quality of city services. In return, startups receive access to new, large contracts and markets. Such partnerships again demonstrate how larger entities such as governments and corporations can form impactful partnerships with startups.

Corporations have access to finance and markets that can help startups scale

Startups lack access to strategic resources needed to help them grow and create jobs

Corporations have established brands that customers know and trust

As they seek to acquire customers startups face challenges in building credibility

Corporations are hesitant to try new technologies or methods out of conservatism

Inherently, startups focus on building creative and dynamic cultures to spur new ideas

Large companies are mainly designed to efficiently execute a predictable and scalable business model rather than innovate

By nature, startups are agile and take risks to build new products and gain a competitive advantage

STARTUPS

STRATEGIC ADVANTAGE CHALLENGE NEEDING SUPPORT

SCALE

CULTURE

INNOVATION

CREDIBILITY

CORPORATIONS

Figure 3:

The business case for collaborative entrepreneurship

THE STRATEGIC ADVANTAGE OF CORPORATIONS MEETS THE CHALLENGE OF STARTUPS, AND VICE VERSA


NEARLY ONE IN TWO MENA CORPORATIONS SUPPORT STARTUPS TO SOME DEGREEOf the Forbes 100 companies in the United States (US), almost 80% have initiatives in place to support startups. For example, corporations such as Walmart, General Motors, McDonald’s and Citigroup have all implemented a wide range of partnerships, investments and corporate accelerators to spur innovation and to help them remain competitive both in the US and globally. These initiatives are diverse and occur both internally and externally. In select cases, these and other corporations will build innovation departments or research and development centers within their companies to produce new ideas and technologies. Simultaneously, they will create mechanisms and funds to supplement R&D efforts and source innovation from startups. Intel has even a USD 500 million investment fund for MENA and Turkey in place.

To a lesser, yet encouraging, degree corporations from MENA and Southeast Asia (SEA) have also demonstrated interest in such partnerships with 49% and 45% of corporations, respectively, having created some form of engagement with startups and the entrepreneurship ecosystem. Initially, these numbers seem encouraging as they suggest that MENA’s largest corporations have acknowledged the need to engage with entrepreneurs in the region.

45% 49%

SEA MENA US

77%

BASE: SEA (100), MENA (104), US (100)

Figure 4:

Percentage of corporations that launched collaborative entrepreneurship initiatives by region. (2015)

49% OF LARGE CORPORATIONS IN MENA ENGAGE WITH STARTUPS



OPEN FOR APPLICATIONS

CURRENTLY LOOKING FOR PARTNERSHIPS & ACQUISITIONS

20092012

2013

2005

ACQUIRED

2015

LAUNCHED

PARTNERED WITH STARTUP

BOOST ECOMMERCE

INVESTED IN

2

LAUNCHED LAUNCHED

2011

LAUNCHED

PARTNERED WITH

INVESTED IN

LAUNCHED

INCUBATED

Figure 5:

Examples of corporate-startup partnerships in MENA across three industries

SPOTLIGHTING CORPORATE-STARTUP PARTNERSHIP LEADERS IN MENA

There are encouraging examples of how startups and corporations are collaborating in MENA, with some of MENA’s most notable large companies and most promising early stage enterprises engaging in promising partnerships (Figure 5). It is also worth mentioning that this activity is recent: 50% of the engagements in the past ten years started only within the last 18 months.


MANY MENA CORPORATIONS’ ENGAGEMENT WITH STARTUPS ARE LIMITED TO CSRUnderstanding the different types of partnerships and levels of corporate startup partnerships is helpful when gauging how much value corporations perceive in startups.

The company sponsors entrepreneurship related events or offers mentorship without additional support, long-term commitment or internal resources.

The benefits for both companies and startups are minimal.

The company has a strategic interest in engaging with startups, the approach includes substantial resources committed with a long-term view.

Company and startups reap full benefits of their collaboration.

With collaboration not being a top priority the company engages with startups in select cases.

Ideally, this is to “learn about” the ecosystem and its benefits for both sides.

Figure 6:

Three levels of collaborative entrepreneurship and the typical forms of engagement for each

1

3

#CSR#Sponsorship#Perks#Mentorship

#Accelerator#Incubator#Investments#Acquisitions

Partnering with#Startups #Accelerators#Incubators#Venture funds

CSR-DRIVEN COLLABORATION

STRATEGICCOLLABORATION

2OPPORTUNISTICCOLLABORATION


Though the levels indicate that corporations allocate varying levels of resources to shape their engagement with startups, there is value in each type of engagement. Ultimately, many different models and methods of partnerships with startups or general initiatives to spur innovation will be needed.

While many of the MENA corporations we studied are somehow supporting the region’s entrepreneurship ecosystem, the large majority did not unlock the potential of strategic collaborations.

The US is again the leader in terms of advanced corporate-startup engagement with 50% of the corporations that have programs implementing more resource-intensive initiatives with startups. Likewise, although MENA has a slightly higher aggregate corporate-startup partnership score compared to SEA, a smaller percentage of corporations in MENA engage in opportunistic (41%) and strategic (14%) forms of corporate-startup partnerships versus SEA (47% and 24% respectively).

Although most engagement within this space has not evolved to a level that could have a high impact, there are still promising signs such as MBC, Aramex and STC seen in Figure 5. Furthermore, there is clear demand for corporate partnerships from startups.

In a 2013 Wamda Research Lab survey of over 700 MENA entrepreneurs, conducted in partnership with Endeavor Insight, only 10% had formed a partnership with a large company, yet 40% cited such partnerships as important for scaling. Moreover, when asked to indicate their strategies for scaling, of the companies that had partnered with a larger company, nearly 70% pointed to this partnership as their top strategy for scaling. With a growing ecosystem and notable interest from startups to create connections and partnerships with corporations, the foundation for increased integration between the groups is coming to fruition.

Figure 7:

Breakdown of companies with active corporate-startup partnerships by level of engagement. (2015)

24%14%

50%

47%

41%

40%

29%45%

10%

CSR-Driven Opportunistic Strategic

SEA MENA US

BASE: SEA (44), MENA (49), US (77)SOURCE: WAMDA RESEARCH LAB

THE STRATEGIC APPROACH IS COMMON IN THE US BUT NASCENT IN MENA.


3. EXPO 2020 DUBAI AND WAMDA ARE LAUNCHING AN INITIATIVE TO SPUR PARTNERSHIPS BETWEEN CORPORATIONS AND STARTUPS IN MENABoth opportunities and demand for corporate-startup partnerships exist. However, much ground remains to be covered. Awareness of the different types of corporate-startup collaborations, testing and building experience around these models, and ensuring that the ecosystem continues to grow, can all help to push this initiative forward. Additionally, more in-depth analysis of current corporate-startup activity and producing new insights, guidelines and toolkits on this field in MENA is of critical importance.

LAUNCHING A CORPORATE-STARTUP INITIATIVE To catalyze corporate-startup partnerships, Expo 2020 Dubai and Wamda are launching a corporate-startup initiative.

An upcoming WRL study will take a deeper look at the main trends and bottlenecks affecting collaborative entrepreneurship in MENA by interviewing over 100 executives and experts as well as surveying around 500 startups in the region. It will assess how corporations in MENA approach innovation, their perception of the regional startup community, and their priorities when working with local entrepreneurs.

Based on the study’s findings, Expo 2020 Dubai and Wamda will join forces to unlock the potential of corporate startup collaboration in MENA. An online platform and a toolkit designed to guide corporate startup partnerships will provide easy access to global best practices, celebrate success stories and highlight the impact on job creation and startup ecosystem development. Similarly, a Collaborative Entrepreneurship Summit will be organized in Dubai to connect with leading experts. By encouraging private sector innovation this initiative contributes towards a more sustainable, diversified and knowledge-based economy for the wellbeing of both business and society at large.


METHODOLOGYThe Wamda Research Lab (WRL) built the sample on Southeast Asia and the US according to the 100 largest companies by market capitalization as published by the Nikkei Asian Review and Fortune 500, respectively. The WRL examined 100 MENA companies as well, 50 of them with the largest market capitalization. The other half consists of the largest corporations in selected industries as well as subsidiaries of international corporations with significant economic activity in the region. Industries in the sample include banking and finance, communication and telecom, food and beverage, media, oil and gas, retail, services, transportation and logistics as well as conglomerates. Companies with substantial operations in both regions have been rated in each, separately.

The growth in startup supporting entities builds on a mapping of all institutions and initiatives related to entrepreneurship in MENA. The database covers initiatives created by governments, universities, corporations, NGOs and individuals from the region and outside. Although the database might not cover every single entity the sample size of 400 entries covering all Arab countries is representative.

Additional data in this report is drawn from a WRL online survey of 768 entrepreneurs in the MENA region, conducted in 2013 in partnership with Endeavor Insight.

To assess levels of engagement with startups the WRL created three distinct categories:

Limitations: The share of industries varies regionally. The US sample includes a high share of IT corporations that are historically more likely to engage in partnerships with startups while the most prominent industry in MENA is finance.

1. CSR-driven collaborations: Corporations that engage with startups mainly through corporate social responsibility channels such as sponsorship of events, resources (i.e. discounts, exposure to customers or training) and mentorship.

2. Opportunistic collaborations: Corporations that pursue partnerships occasionally, sign collaborations with existing incubators, accelerators or venture funds, or incubate, accelerate or invest in a limited number of startups.

3. Strategic collaborations: Corporations that make partnering with startups a key priority and constantly engage with startups by means of venture capital funds, startup acquisitions, corporate accelerators or other resource-intensive and strategic initiatives.

COLLABORATIVE ENTREPRENEURSHIP Corporate-Startup Partnerships for Impact in the Middle East and North Africa (MENA)

WAMDA - JAN 2016

collaborative entrepreneurship - wamda

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