Specialized Incubators will Spur Middle East Innovation

In other parts of the world, innovators have complete access to business and societal needs and they come up with ideas to fulfill these needs with innovations. Their ideas turn into businesses with the help of incubators.

In the Middle East, lack of research on business and social needs means that many entrepreneurs go into business without specific goals in mind – which results in undifferentiated businesses that don’t offer new value.

Here is where incubators in the Middle East can take a different approach. In addition to providing the general support that startups need, if each incubator focused on a specific business, social or environmental niche, it would add much needed direction to the process. These specialized incubators could conduct scientific and market research in their niche, and provide complete transparencies and opportunities for entrepreneurs to come up with ideas that solve specific problems.

For example, what if we had an incubator that focused on water shortage issues? One problem this incubator could tackle is the amount of water it takes – 140 liters – to grow the beans for only one cup of coffee! Coffee consumes two percent of the world’s water, yet the answer is not to cut coffee consumption, but to decrease the amount of water needed to produce coffee beans. Imagine the innovative solutions that could be developed by an incubator full of entrepreneurs focused this problem.

By creating incubators that work with entrepreneurs on the front end of innovation, sharing research and information so that problems can be addressed in the open, we not only create innovative businesses, but also contribute to the welfare of society.

To make such an approach feasible, we also need to address a few other areas.

One, incubators need to staff appropriately for the niche they are in. Depending on the focus, this could include scientists and engineers, teachers and educational experts, manufacturing and supply chain leaders – whichever fits the needs of the specialized incubator. Office support staff, including business development and marketing, may also need specific expertise. An incubator that tries to specialize without recruiting specialized talent will not provide adequate support for the startups there.

Two, the approach to incubator funding needs to change. Instead of giving money to startups and letting them decide how to spend it, incubators need to hand-hold new businesses to help them spend it wisely. Too many new businesses make mistakes in this area, investing in costly research without projecting return on investment, or approving expensive marketing campaigns to outdo the competition. It’s the incubator’s job, as an experienced business advisor, to keep startups from making such financial blunders, and instead use their funding to acquire the talent and infrastructure needed to support the startup once it leaves the incubator.

Three, startups need to have exit plans and incubators need to encourage startups to leave the nest. An incubator’s profit typically comes from startups exiting the incubator through a sale – a merger into a bigger company, an acquisition by a private equity or venture capital fund, etc. – or through a public offering (listing the business on the stock market). Without a solid plan for incubators to profit from their investments in startups, many incubators will fail, and those that stick around will become money pits. Yes, the venture capital and private equity market in the region is small, but there are many companies from outside the region who would likely invest in our startups if they were truly innovative.

In my opinion, we have enough general business incubators in the Middle East. What we need now are specialized incubators that work with entrepreneurs to create new value for business and society. Incubators can foster innovation if we structure them correctly and incubate real innovation instead of falafel shops.

Both comments and pings are currently closed.

Comments are closed.