Insights and lessons from the Bay Area to MENA

I went to the Bay Area recently and immersed myself in the technology ecosystem to soak up the special sauce and try to better understand it from a structural perspective, in the hope of deriving inspiration and creating actionable lessons for customized and localized implementation in our own regional ecosystem. Here are some of my observations and take-home learnings that we as the collective ecosystem of stakeholders from government, investors, entrepreneurs and everything in between can harness in our our quest to build our own technology innovation hubs.

Talent

In the absence of data, it feels like SF has the highest number of people solving for tech and innovation per capita in the world. This extreme density feels like it exhibits its own network effects, making the ecosystem more valuable as it grows on a per capita basis. More people to lean on, more people to experiment with/on, more people to take risks on/with and all of this creating the earliest adopters in the world, and hence the greatest chance for new business models and new sectors to be created from scratch. It’s an amazing and powerful positive feedback loop.

The quality of minds is world-class, cutting edge; these are the people building frontier tech and truly innovating. They either emanate from the world’s top universities right next door (e.g Stanford and its peers) or they are immigrants from the best global universities (IIT in India). They are there with a single-minded objective: innovation and impact, and if they succeed, they build a better life. There is no visible sense of entitlement in the masses. It is a meritocracy in the startup world. Expectations are that most people will fail, some will coast and the vast minority will enter the echelons of the hall of fame.

They have a myriad of role models to draw inspiration from and who give their time regularly to those who ask and those who make a good case for warranting their time and attention. The spirit of philanthropy amongst successful Americans is visible everywhere and mainstream in the US culture. Their attitude of “pay it forward” before thinking about what benefits come from every interaction is exemplary and a trait I cherish and encourage us all to promote.

Capital

There is an abundance of capital, so much so that this capital is chasing many instruments within many diverse asset classes, many of these instruments don’t even exist outside of the US. Each of these sub-asset classes creates entire industries across both debt and equity. This capital is sophisticated and patient when it needs to be. Endowment and pension funds are two asset classes that are non existent in our entire region. Even in Europe these institutions are small and new and hence not creating the much needed patient capital required to invest in long term asset classes like venture and R&D heavy sectors like healthcare & biotech.

The capital markets are a lethal weapon, spawning well governed institutions that are acquisitive, driving M&A both with the cash hoards they create from their high growth profitability as well as with their shares as currency to finance M&A that is typically accretive. The public markets are not to be underestimated as it drives a tremendous amount of activity that starts with public companies acquiring for talent and growth, which in turn drives M&A between start-ups and acquisitions from traditional public companies. Imagine if some of the largest regional family conglomerates were public, and hence open to public scrutiny, with a high level of governance, with their public stock as M&A currency, how vibrant our M&A landscape would be in the region! Imagine if Souq and Careem were public companies, how much more M&A there would be as a result of the M&A and exit prospects investors would have from investing in the technology asset class.

Data, transparency and the publishing thereof

Everything is measured and much is public. There is a research organisation measuring most things you can imagine. HR, marketing, operations, finance, someone is collecting data and either publishing it or giving it to national institutions like the NVCA or the Kauffman foundation. Domain experts with different perspectives are blogging, writing books, posting videos, publishing newsletters and providing data, insights, perspectives, experiences, whether success or failures, there is a wealth of information out there backed by a ton of data that help inspire stakeholders to make more informed decisions, making the entire ecosystem stronger and more valuable as the sum of the parts. We have learned and continue to learn immensely from this transparency and democratisation of information and are eternally grateful to those contributors.

Institutionalization

There is a strong and prevalent culture of automating repetitive manual tasks, systemising and documenting processes and making everything programmatic, even incubation, acceleration and investing, combined with the culture of building institutions to create lasting legacies, institutions are built on strong foundations with the capability of rapidly scaling.

Mindset

Last but not least, the attitude of folks in the Bay Area is unique, in that they are very candid, friendly and open to new and different perspectives. The candor, apart from being highly appreciated so that everyone knows where they stand and they can improve, if they so choose, and move on, creates the most efficient interactions, eliminating the need for repetitive communications that are not required and focussing on the communications that are productive and desired. This candor promotes efficiency on a grand scale. It is this mindset of curiosity and humility that in large part creates the earliest adopters in the world in the Bay Area. These entrepreneurs have so many global success stories that they think global from the get-go.

I’ve heard the expression, “Silicon Valley is a mind-set”, now I understand what it means.

Conclusion

In conclusion and at the risk of oversimplifying, here’s my wish list for our governments, who hold the key to much of these drivers. The rest is up to us the entrepreneurial and investors in the ecosystem.

1) Talent:

The Short Term Fix: Governments need to issue innovation visas to global talent wanting to make MENA their home. The Dubai government is best placed to do this given the highly attractive nature of Dubai as a home base for tech and innovation entrepreneurs to serve the region. For e.g. if you are a graduate from Stanford, Berkley, MIT, IIT, Oxford, Cambridge and any of the world’s top 20 universities in computer science and computer engineering all the way up to frontier tech studies (A/R, V/R, AI, ML, Data science etc) then you will be given a special innovation visa, trade license, bank opening privileges and private and public sector grants with the ultimate objective and KPI of making Dubai the most “dense” innovation ecosystem as defined by the number people working on tech and innovation per capita, in the world.

The Long Term Fix: We need to invest strengthening our existing educational institutions and build new world-class entities that focus on the sciences and have strong R&D departments and budgets. This is how in the long-run we will maintain control over the pipeline of talent coming from and to our region. This is a long term investment and will pay off over the next generation but we need to start now in parallel with the short term fix.

2) Vibrant public markets:

Stimulate a vibrant public market of technology companies and group companies that can drive M&A, by
a) Setting up a DIFC/DFSA-like bodies with an independent regulator and courts system to ensure the highest level of governance.
b) Provide incentives and red carpet treatment for these companies to come to the public markets.

3) Patient Capital

The Long Term fix: Set up endowment and pension funds that can invest in the region across all asset classes to be a vital source of patient capital.

The Short Term Fix: Until then, since time is of the essence, give our Sovereign Wealth Funds (SWFs that currently perform the function of endowment and pension funds) the mandate to fill the void of the endowment and pension funds and obligate them to invest a prudent proportion of their assets under management in regional tech and innovation funds and direct opportunities. Without the funding, we have no chance to achieve any of the above.

The article was published on BECO’s blog and has been reproduced here with their permission. Featured image via The National.