Dubai: Governments, sovereign wealth funds, and large banks in the Middle East should put more money to support venture capitals and start-ups to boost innovation in the economy, industry experts said.

At a session at the Annual Investment Meeting (AIM) in Dubai, experts said governments should provide breaks to start-ups in the region to allow them to grow and expand.

“For the first few years as a start-up, you’re making losses. It’s pointless to ask a start-up to do due diligence, because as soon as you do, the auditors will give you an F, and you’re labelled a failure before you even start,” said Fahad Al Sharekh, managing partner of TechInvest in Kuwait.

During a panel discussion on entrepreneurship, he pointed out that governments and sovereign investment vehicles have asset allocations to various sectors like energy and property, but not to venture capitals. This hinders start-ups in the region from receiving funds.

Al Sharekh cited the example of the Chinese governments, which has already started allocating money to venture capitals, leading to the success of now-huge firms like Alibaba and Didi.

“The ecosystem is at the infancy and we need much more in the Middle East,” he said.

Also speaking on the same panel was Manish Patel, partner at US-based Highland Capital, who said fully-fledged ecosystems supporting start-ups would take not just venture capitalists, but academic institutions for research, and engineering teams to implement new ideas.

He cited New York and Singapore as hubs of developed ecosystems, pointing out that both started to implement their policies on supporting start-ups in the 1990s.

The comments come as more start-ups in the Middle East call for more support from governments for more flexible regulations and easier access to capital.

Fadi Ghandour, founder of Dubai-listed Aramex, in December told Gulf News a change in regulations in the Middle East’s financial industry is needed to support start-ups. He said regulators should strengthen foreign investment laws and other corporate regulations to encourage start-ups to get publicly listed.