One heartening feature of the region's business landscape is that venture capital generated activity more than managed to hold its own. Regional startups have drawn investor attention despite all the distractions from the pandemic. Image Credit: Pixabay

The entrepreneurship ecosystem in the Middle East has remained stable despite the COVID-19 crisis. In fact, the region is transforming into a thriving hub of opportunities for startups and small businesses, which in turn is attracting greater influx of investments.

The latest venture investment report by MAGNiTT revealed MENA-based startups attracted $659 million in the first-half of 2020, which equals to 95 per cent of 2019 funding levels. Here are a few points to keep in mind if you're considering the MENA market either for cross-border expansion plans or as your startup base:

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Decide if it's the right strategy

Currently, technology-intensive industries such as fintech, e-commerce, and logistics see the most traction in MENA. McKinsey & Co. indicates that, with the help of government-backed digital adoption schemes, the region could see 160 million potential digital users by 2025 and contribute up to 3.8 per cent—approximately $95 billion—to gross domestic product (GDP).

Plan for logistical challenges

Planning a full-scale launch to a new overseas market comes with a series of challenges. You have to navigate through different approvals and regulations from the local government as well as their banking ecosystem, comprehend taxation and other legal processes, and finally recruit local sales and operations teams.

Markets like Saudi Arabia have considerably streamlined business regulations to ease entry into the market for foreign players. The General Authority for Small and Medium Enterprises, also known as ‘Monshaat’, is one such initiative that aims to remove administrative, regulatory, and marketing obstacles businesses face.

Another integral part of cross-border expansion is your pricing. Given the currency fluctuations across some of the MENA nations, businesses might also have to offer localized pricing to simplify payment experiences for their customers. In all respects, having a clear logistical strategy helps lay a solid foundation in a new market - and it is the one oversight that could cost you a lot of time and money.

Put privacy first by design

Today, nearly half of the nations in the MENA region have introduced data protection laws to safeguard consumer privacy, the most recent being the upgraded Data Protection Law by Dubai International Financial Centre. The data protection landscape will further evolve as digital transformation takes front seat in the region. The UAE and Saudi Arabia are expected to enforce federal data privacy legislations in the near future.

Adopting a proactive privacy-by-design approach that includes self-regulatory practices around the capture, storage, usage, and retention of personal data can help businesses avoid compliance issues later. For instance, in-country data hosting will eventually become essential as cross-border data transfers become subject to heavier regulations.

Another important step—for startups in particular—is ensuring that the tools they use in their early stages of growth offer robust data security capabilities such as encrypted email services.

Local partnerships

Establishing cross-border trade requires experimentation along the way. Local partners can help test the waters before you look at setting up a physical presence in the market.

Through partnerships, you can create new sales distribution channels, streamline operations by outsourcing infrastructure, and co-develop a solution for addressing a market niche.

Leverage regional programmes

Although the pandemic has disrupted industries, the growth potential of MENA-based startups and local enablement programmes continue to attract global investors. Regional governments have ramped up efforts through cross-border alliances and by deploying policy measures to support the startup and SME community as they grapple the COVID-19 pandemic.

With the UAE and Saudi Arabia’s long-term agendas—UAE’s Vision 2021 and Saudi Vision 2030, respectively - small business entrepreneurs can eventually expect increased investment in the region's tech ecosystem.

With MENA entrepreneurship on the rise, and regional governments taking positive steps to eliminate bureaucratic challenges, global investors increasingly view the region as a lucrative market. However, a carefully planned growth and expansion strategy is vital in determining whether businesses can sustain in the MENA market.

- Ali Shabdar is Regional Director - MEA, Zoho Corp.