The economy in Kuwait, along with the rest of the GCC, is no longer oil-dependent. Kuwait is heading towards an innovation and knowledge-centered future. Several initiatives have been implemented to support this transition.
Not long ago did the nation witness the launch of several private sector funds such as Faith Capital, KISP Ventures (a Sharia’a compliant venture capital firm), and Seeds Partners. The recent acquisitions of Talabat.com by German Rocket Internet for $170M, Carriage by Delivery Hero for approximately $100M, and JustClean (previously Masbagti) by Faith Capital at an undisclosed amount put Kuwait on the regional entrepreneurship map with the momentum constantly developing and flourishing.
The Kuwaiti government’s efforts in encouraging the local entrepreneurship ecosystem include modernizing its economic framework: boasting high levels of openness to international trade while demonstrating monetary stability. Despite the latter, the Kuwaiti market continues to face the challenge of enhancing the efficiency of its business regulations.
The Study: Objectives and Methodology
This research is a holistic study utilizing a mixed-methodology approach for analyzing the entrepreneurship ecosystem.
Through this research, the challenges and opportunities facing the entrepreneurial ecosystem as perceived by Kuwaiti tech startups, either owners of technology, digital startups with a working product or service, or owners of technology startup at the idea stage, was measured through an online survey.
In addition to that, findings from the roundtable conducted in Kuwait on October 2017 “Aligning Efforts to Support Entrepreneurship and Innovation” are incorporated within the research. The roundtable consists of investors, entrepreneurship enablers, and regulators.
By combining these two pieces of the research, the report highlights the challenges and strengths of the ecosystem.
Ranking Entrepreneurship Ecosystem Domains
As the above chart demonstrates, the ecosystem faces three main challenges: difficulty accessing local talent (71%), navigating the regulatory framework (70%), and securing funding (59%).
Source of Tech Startup Funding
The major source of funding for the surveyed tech startups is dependent on non-equity funding. As the chart above shows, 76% have used their personal savings on their startups. Also, approximately one-third (33%) used bank loans. As for equity funding, angel networks dominate with 17%.
The roundtable participants discussed the issue of access to funding and the results are very insightful. Venture capital funds are widely available in Kuwait; however, a gap is seen between the VCs and the startups. Young startups lack the awareness of the various funding programs leading them to take the route of non-equity financing (such as bank loans). It is true that loans are secured easily but the debt financing is a big burden on tech startups for it hinders scaling plans.
Type of Support Services Available to Tech Startups
Correlating with the previous charts, the figure above shows the disparities in funding (50% gap) and in identifying and hiring talent (30% gap) the surveyed startups face. The chart also highlights additional service gaps in business and technical skills; there is 30% gap in go-to-market strategies as well as tech assistance, 20% in workspace, and 15% in mentorship and training.
The roundtable reflects similar opinions on the previous findings in terms of ecosystem gaps in services. There is a need for early stage networks such as educational programs (accelerators and incubators) to help startups develop the maturity level among both startups and investors.
In addition to that, pre-incubation programs are needed to prepare entrepreneurs for proof-of-concept, identifying business objectives, and methods of funding.
These support networks are beneficial for the whole ecosystem in terms of de-risking the market.
Infrastructure Required By Tech Startups
The figure above confirms that much of the needed infrastructure in Kuwait is readily available. There is easy accessibility to overall communication-related infrastructure services; 67% of the surveyed startups agree that mobile broadband is easily available, 39% agree on fixed broadband, and 33% VoIP. Also confirmed to be easily available are the payment systems such as e-payment gateways (54%) and POS payment gateways (52%).
However, there are of course a few infrastructural gaps, as shown in the survey, mainly revolving around e-government services (63%) and tech labs/maker spaces (59%).
The roundtable agrees that there is a lack of spaces from where entrepreneurs can develop their ideas and network with others such as workspaces, tech labs, makerspaces, and so on, which mirrors the previous survey results.
As shown in previous charts, e-payment systems and POS payment gateways rank high among the available infrastructure. However, the data in this chart showcases top regulatory barriers in core business operations, for example, structures for establishing a business is at 87%, business registration at 57%, and policies and procedures for investors at 34%. Therefore, these results illustrate a gap between business regulation and infrastructural support.
The roundtable concluded similar barriers as the chart above especially when it comes to policies tied to the establishment of businesses. However, the shareholders’ agreement, as a means of contract of enforcement, was recently implemented. Before that, the article of association alone was accepted as the enforcement contract.
For more details, download the full report here.