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17 July 2020

Startups and Covid-19: Where do we go from here?

By Sarah Williams

In the Covid-19 era, it’s no secret that many startups around the world have either completely failed or scaled back to a bare minimum working model in the hopes of battening down the hatches and riding out the storm.

The big question in the startup world is, “Can start-ups survive this?” And there are a lot of voices clamouring to answer that question.

Hala Fadel, the chair of the board of MIT Enterprise Forum Pan Arab, answers the question pragmatically: “All startups are not created equal when facing the pandemic. Some sectors have seen their business surge cyber security, online events others have seen it stall travel, hospitality. In both cases, surviving requires resourceful management that can either sustain growth with limited resources or reinvent itself when sales go down to zero.”

She continues: “Times of crisis reveal good or bad management teams. Faced with disruption and uncertainty, resourceful managers, country leaders and governments take times of challenge as an opportunity for change and to help sustain the economy, including startups.”

The CEO of Arabnet, an insights and events company based in Beirut, Omar Christidis, echoes Fadel’s comments about government action. He believes the way forward is to look to governments that offer help and the right structure and support for tech startups. The entrepreneur had this to say on the topic: “With the increasing importance of startups to the future economy of MENA, it’s critical for government leaders, ecosystem stakeholders, and investors to support startups through these difficult times.”

Many governments have clearly agreed with Christidis, with stimulus packages being offered in many countries worldwide. However, the funds in most countries have been slow to come in or, in some cases, such as the UK, the government has gone back on its promises of economic relief, amid much fury from startups, entrepreneurs and freelancers.

Meanwhile, countries such as the UAE and Germany are providing stimulus packages that should, looking at the countries’ GDP and exports, help most businesses weather the storm.

The UAE – in particular, the wealthy capital, Abu Dhabi – is increasingly attractive for international companies, and is a magnet for foreign direct investment in the region, which is a positive place for startups to look toward, for future benefit.

According to the UN Conference on Trade & Development’s World Investment Report 2019, FDI flows into the UAE increased by $31m between 2017 and 2018, reaching $10.3bn, while FDI stock increased 8 per cent to reach $140bn (33 per cent of GDP). The country leads the region in the World Bank’s Doing Business Ranking, as the 16th ranked country in the world for business friendliness. The World Bank has cited the UAE as an inspiration for the region in terms of business-minded reforms.

Startups and Covid-19: Benefits of Abu Dhabi

Verdict spoke to Ibrahim Ajami, interim CEO of Abu Dhabi-based Hub71 and head of ventures, Mubadala Investment Company, about how younger, wealthier countries such as the UAE, are tackling the issues for startups and vulnerable industries.

“The Abu Dhabi government has been actively supporting businesses, and tech startups in particular, throughout the Covid-19 storm,” Ajami explains. “This was best demonstrated by the Abu Dhabi government’s quick economic response in March 2020 to support small and agile companies, further reinforcing the commitment toward growing and helping startups.”

Abu Dhabi, via its economic accelerator programme, Ghadan 21, introduced the Covid-19 Economic Stimulus Package stimulus package back in March to alleviate the cost of doing business in Abu Dhabi. The stimulus package is comprehensive, offering solutions to 16 different economic challenges companies may be facing, primarily focused on tech start-ups.

Ajami comments: “Initiatives like these will help Abu Dhabi-based startups weather the Covid-19 storm, and validates that Abu Dhabi remains a safe and trusted city for international founders who have ventured to the Emirate to scale their businesses globally.”

The unique aspect about the Abu Dhabi offering is that it’s not just for Emirati businesses or startups that are already operating in the UAE – Hub71 offers global startups generous subsidies that lower the cost of living and doing business in Abu Dhabi; namely 50 or 100 per cent subsidies on housing, health insurance and office space within its WeWork community for up to three years. The package applies to those who are thinking of moving operations to a country with a more stable governance structure.

More recently, Hub71 announced that it would increase its equity-free subsidies from 50 per cent to 100 per cent – on housing and office space for all its 50+ tech startups for at least two months.

Ajami added: “Startups in Abu Dhabi can now benefit from a host of subsidies – namely, subsidized electricity connection fees for the year, a $817m (£650m) credit guarantee programme for SMEs, performance guarantees for projects up to $13.6m (£10.8m) for startups, as well as faster payments for approved government invoices within 15 days.”

Learn more about the Hub71 Incentive Programme in our free whitepaper “Roadmap to Abu Dhabi: How to unlock new opportunities for your Tech Startup”, which includes information included on page 19 for how to be one of the few startups chosen to join the programme, and best tips for success. Download whitepaper

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