Why the Middle East is putting the focus on technology and innovation
The Middle East has woken up to the reality that oil is not going to last forever, and is now focusing on technology and innovation. In a bid to move towards this direction, the Economic Development Board of Bahrain (EDB) has made a strong push towards making Bahrain a fintech and a startup hub. Many now view Bahrain as a breeding ground for startups and entrepreneurs.
Simon Galpin, Managing Director, Bahrain EDB, says the significant investment is driven by both the private and public sectors, including Tamkeen, Bahrain’s labour fund; Bahrain Development Bank; and other accelerators including C5 and CH9.
These organisations and accelerators have provided extensive support to startups not only through funding schemes but also through training and mentorship programmes.
The recently launched Bahrain FinTech Bay is a leading example of Bahrain’s collaborative public-private approach to ecosystem building. Simon explains that it has been co-funded by 28 founding partners, spanning private banks and corporates as well as national banks and government entities. Bahrain FinTech Bay will support fintech startups with access to co-working space, mentors, accelerator programmes, and funding.
Simon says major investments such as Amazon Web Services (AWS) Region in Bahrain, the first in the region, will also create significant advantages for the startup ecosystem, placing the power of supercomputing in the hands of a startup and enabling them to scale quicker by allowing cheap and secure data storage.
Simon speaks to YourStory on why Bahrain is now pushing for startups in the region, the key nationalities of startups, and the kind of investments they are looking at.
YourStory: Why the push towards startups?
Simon Galpin: Startups have a major role to play in accelerating economic growth and diversification, in creating new jobs, and fostering new skills to meet future needs. They bring an international perspective, they cultivate a culture of innovation and entrepreneurship, and have the potential to scale up and grow very quickly. Additionally, major corporates can benefit from constant exposure to startups, allowing them to understand the importance of incorporating new technologies and driving them to be proactive and responsive to change.
The startup ecosystem in Bahrain also benefits from the Kingdom’s pioneering position. Bahrain was the first country in the GCC to establish a banking sector in 1961 and also the first to liberalise the telecoms market in 2004. For this reason, we are focused on further developing the supportive ecosystem that has nurtured startups in order to allow them to thrive and scale out beyond Bahrain’s borders.
YS: What is the amount of funding that has been pumped into the ecosystem till date?
SG: Preferably, we would like the ecosystem to have a wide range of funding options for startups that are at different stages in their journey. By that I mean seedfunding (Minimum Viable Product) for early stage startups, crowdfunding schemes that provide access to capital while also providing market validation, angel investment, a venture capital fund of funds, and finally private equity investment. India’s startup ecosystem has a variety of funding options available, which has allowed startups to acquire the necessary capital to grow and has resulted in more startups venturing into the market. This is similar to where the Bahrain Startup ecosystem is looking to go.
YS: What are the popular startups here and what is the number of startups here?
SG: Skiplino is one of the first products to come out of the Level Z concept, an “angel” holding company. Skiplino reinvented the way we queue by taking all the waiting time online, allowing businesses to manage their performance and agents better.
Another Bahraini startup is OneGCC. It is the first digital platform supporting the nationalisation of GCC jobs and the talent pool for GCC nationals. The platform focuses on skill matching as opposed to name-to-name job matching, a method that has proved successful in placing people in jobs they otherwise would not have thought of applying to.
Both Skiplino and OneGCC have received the Forbes innovator awards in 2017, and both are digital platforms. That being said, a recent McKinsey report suggests Bahrain leads the Middle East with a digital contribution to GDP of 8 percent - nearly twice the regional average, ahead of the European average and equal to the United States.
Bahrain’s startup ecosystem is diverse and spans the Kingdom’s key sectors, including tourism, F&B, and industry. We are seeing particular growth in fintech and digital startups, leveraging Bahrain’s strengths as the region’s most established financial services sector with highly advanced ICT infrastructure.
Additionally, Bahrain has one of the highest mobile (186 percent in 2014) and broadband (162 percent in 2015) penetration rates in the region and has reached a mature stage in fixed and mobile broadband market development. The launch of AWS’s Region in Bahrain will also create significant new opportunities for cloud-based startups, in growth industries such as gaming. The cloud uptake in Bahrain is projected to grow at CAGR of 49.7 percent by 2020, supported by AWS.
YS: What are the key nationalities of the startups here?
SG: Bahrain is an international hub, and its community of startups reflects that. We have a growing number of home-grown startups, startups from the GCC and the broader region, as well as scale-ups from around the world. There is a really good mix of nationalities, which is healthy for the ecosystem, and this is something unique to Bahrain’s ecosystem as you’re not likely to find this kind of mix in other global ecosystems.
Over the past two years, we have seen a growing number of startups from India who have either tapped into the Bahrain market or are interested in it. GetBaqala, for example, which was the first grocery delivery app.
Due to Bahrain’s small size, startups have unique levels of access – to decisions makers, policy makers, investors, and clients – so they can test their ideas, scale up and leverage Bahrain’s regional ties to access the rest of the region.
YS: What are the kind of investments you are looking at? Which sectors and why?
SG: For startups, the two sub-sectors that have great potential are gaming and fintech. Last year, the CBB introduced crowdfunding regulations, opening up alternative funding options. It also launched the first onshore regulatory sandbox in the region. Just last month during Fintastic Bahrain Week, the Bahrain Fintech Bay was launched; it is the Middle East and Africa’s largest fintech hub.
Further to the recent developments, Bahrain has a longstanding history as a regional financial centre with decades of experience and a large talent pool. Over 60 percent of the workforce in the financial sector is Bahraini. Given that, the Kingdom has the potential to create fintech products, especially those that are sharia compliant. Other sub-sectors gaining momentum are Blockchain and the Internet of Things.