AMMAN — While Jordanian entrepreneurs
have the right ideas about tackling the future, their government may not. Some
evidence for this can be found in the UAE, Saudi Arabia, Egypt, or the US; it’s
where many of Jordan’s best technology minds, their intellectual capital, and
businesses have migrated.
اضافة اعلان
Good
business ideas are location agnostic; they follow the money. Start-ups with
good ideas may have hatched in Jordan a decade or so earlier, but eventually
their true potential as they grew into big profitable businesses has been
realized elsewhere.
The
venture capital perspective
Jordan
doesn’t seem to be keeping statistics on how many start-ups, originally
established in Jordan, had moved their headquarters and core operations to
somewhere else. What we know already is that the numbers are big and that the
opportunity lost by Jordan is huge.
Khaldoon
Tabaza, founder and managing director of iMENA Group, told
Jordan News that
entrepreneurs leave because of lack of funding or because Jordan’s ecosystem
for start-ups has declined.
“In
the last nine years, Jordan lost more than $500 million of funding. This
estimate reflects what Jordanian start-ups had raised and spent from venture
capitals (VCs) in other markets. This could have happened in Jordan instead to
help its economy and its entrepreneurship ecosystem. Add to that more than $1
billion of exit value that many start-ups realized after they were sold to new
investors,” Tabaza said.
Start-ups
go through phases of creation; first a business idea is generated, then its
proof of concept is realized, and then it is funded. When the start-up grows
bigger, the founders cash in through exits by selling all or part of their
shares at higher stock valuations.
The
MENA Venture Investment Report by MAGNITT, a leader in tracking MENA region start-ups
VC, reported that 2020 had seen a record $1 billion in start-up investments. In
Jordan, according to Tabaza, 2020 accounted for only 3 percent of the volume of
regional venture capital and 9 percent of the deals.
“Talent
is Jordan’s differentiator, but such talent prefers to follow capital and
relocate their business to other tech hubs, resulting in significant loss of
both funding and exit proceeds, which would have otherwise circulated back in
the local economy.”
Tabaza
knows a thing or two about how Jordan’s entrepreneurship space has been
developing over the years. His entrepreneurship started in 1996, when he
founded Arabia Online, the first online business in the MENA region backed by
venture capital.
Tabaza
also co-founded Ideavelopers, the first regulated venture capital fund in Cairo
in 2001. In 2013, he founded the iMENA VC fund, which
has invested in some of the most successful online businesses in Jordan and the
region, including the likes of OpenSooq, Jeeny, SellAnyCar, Telr, and others.
Tech
hubs
Around
the world, winning cities have become synonymous with
tech-hubs, attracting high value-added businesses, with spillover effects
across all other economic sectors. “This is why Jordan should care about being
a regional tech hub,” said Tabaza.
Cities
thrive in entrepreneurship for different reasons, but the fundamental drivers
are unmistakable: a healthy overall ecosystem that serves entrepreneurs and the
availability of smart capital. Jordan today is quite low on these basic
requirements but this wasn’t always the case.
“Jordan
had lead the evolution of the regional tech industry as early as in 1988 and
the early 1990s in terms of capital availability and talent, which created the
first generation of regional tech leaders, giving the Kingdom a reputation for
being an entrepreneurial (country). By 2012 Jordan's celebrated status ended
and its entrepreneurial ecosystem started to decline,” Khaldoon added.
Network
effect
Network
effect is when an increase in one supply side, start-ups for example, triggers
an increase in the supply side of people willing to invest in start-ups; a
progressive relationship that leads to a healthy economic growth. “Nurturing a
tech industry is the result of the network effects of talent and capital, in
which talent attracts capital, and capital availability attracts more talent.
Network effect and access to large markets makes the right recipe for the
creation of a tech cluster, which is the sector leading now in fundraising,”
said Tabaza.
Since
the 1980s, stronger and more sustainable entrepreneurial initiatives in the
GCC, coupled with shortage of capital in Jordan, lead to a progressive decline
in the volume and number of deals. This took place at a time when the GCC was
beginning to see a boom.
“Local
initiatives undertaken, sadly, did not help, as funding initiatives focused on
either providing capital only on a matching basis, and/or making commitments to
foreign funds and asking them to deploy back in the country,” Tabaza added.
Neither
of those approaches worked. “Jordan still lacked a local lead investor to
enable such matching funds or lead deals and attract co-investment from
regional funds who do not have a presence in Jordan. To-date, much of the
committed capital in Jordan remains un-deployed, despite the pressing needs of
the industry.”
Jordan
needs to do even more than attracting capital and talent to re-ignite the
spark. “The solution is to compete on tax efficiency and ease of doing
businesses to level the playing grounds (with competing hubs in the region). We
need to devise and encourage new strategies of competing globally to access the
larger markets, rather than purely position ourselves as a back office for regional
or international firms.”
Silver
lining
One
encouraging trend amidst all the negative indicators in Jordan’s
entrepreneurial landscape is that female-to-male ratio for total
entrepreneurship activity has shot up from 0.26 in 2016 to 0.59 in 2019. This progress has shown an improvement of
around 127 percent in only three years, according to the Global
Entrepreneurship Monitor report, which has rewarded Jordan with a score of 100
out on the scale of 100 in the World Bank’s “Women, Business, and the Law” report.
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