It’s often the case that the terms start-up and SME (small and medium enterprise) are used interchangeably, but they are not the same thing. There are some fundamental points that, when recognised, make the difference clear.
Steve Blank, a serial entrepreneur and Silicon Valley legend, states that “a start-up is a temporary organisation designed to search for a repeatable and scalable business model”, while an SME is owned and operated independently for profit.
There are also differences in terms of their intent, functions and mode of funding.
Start-up companies are relatively new to the market with the intent to explore a new idea or a product, usually leveraging technology. Successful ideas and products elevate the business of these start-ups and pave the way for their growth. There are also start-ups that fail to implement ideas and cease existence fairly quickly.
SMEs, on the other hand, establish operations involving known products and services mainly for local markets.
Start-ups work to grow and expand into various lines of business that might offer them the ability to scale up operations. Their functions change in structure and type over a period of time. SMEs retain the same organisational and operational structure over their lifetime.
Are start-ups taking away funding that SMEs would otherwise receive? The answer is probably antithetical to the popular perception, but emphatically no. This is because start-ups and SMEs have different sources of funding.
Although they might both begin in pretty much the same way with the founder’s/family’s own money and probably a small portion of bank debt, start-ups focus on obtaining funding from angel investors, venture capitalists and private equity firms that would be willing to take the risk and invest. Series of such funding from investors dilutes the founder’s equity in the company in the case of start-ups, while SMEs retain the original ownership structure.
Careem.com successfully clinched a Series C investment of US$60 million in November 2015, with the Abraaj Group as lead investor. The funding round represents one of the largest investments in the Mena region’s emerging technology sector. It also marks the third round of fundraising by Careem, with Abraaj joining other prominent investors including Al Tayyar, STC Ventures, Beco Capital, Impulse (a subsidiary of Kuwait Investment Authority), Lumia Capital and Wamda Capital.
Before its acquisition by Amazon, Souq.com had raised $425m since 2005, according to CrunchBase. The company was reported to be valued at $1 billion during the previous funding round in 2015, but the deal with Amazon put its worth at less than that based on media reports and closer to $650m.
The ecosystem of SMEs has been in existence for a long time. More than 90 per cent of the companies in Kuwait, Bahrain, the UAE, Saudi Arabia and Oman fall into the SME category. To glaze it with some more statistics that would highlight the importance of SMEs in the GCC, they employ 60 per cent of the Saudi labour force, 57 per cent of Bahrain’s and 72 per cent of the workforce in the UAE. The SME share of total manufacturing capacity was about 82.8 per cent in 2015.
Having operations mainly in traditional sectors such as transportation, logistics and industrials, SMEs have been a catalyst for economic growth in the GCC.
However, banks are reluctant to lend to SMEs because of the higher risk factor associated with them. Hence countries in the GCC have formulated programmes to fund these companies, as they are employment providers as well as facilitators of economic diversification policies. In countries like India, it has been found that the growth of e-commerce start-up sites such as Flipkart and Snapdeal has helped SMEs in sectors such as logistics and transport. Creation of entrepreneurial hubs can provide interconnected growth of both SMEs and start-ups, each supporting their businesses.
MR Raghu is managing director of Marmore Mena Intelligence, a research house focused on conducting Mena-specific business, economic and capital market research.
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UAE currency: the story behind the money in your pockets
The specs
Engine: 5.0-litre V8
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UAE currency: the story behind the money in your pockets
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Engine: 2.0-litre 4-cylinder turbo
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Russia's Muslim Heartlands
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The White Lotus: Season three
Creator: Mike White
Starring: Walton Goggins, Jason Isaacs, Natasha Rothwell
Rating: 4.5/5
MEFCC information
Tickets range from Dh110 for an advance single-day pass to Dh300 for a weekend pass at the door. VIP tickets have sold out. Visit www.mefcc.com to purchase tickets in advance.
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Tony Adams, David Beckham, Dennis Bergkamp, Sol Campbell, Eric Cantona, Andrew Cole, Ashley Cole, Didier Drogba, Les Ferdinand, Rio Ferdinand, Robbie Fowler, Steven Gerrard, Roy Keane, Frank Lampard, Matt Le Tissier, Michael Owen, Peter Schmeichel, Paul Scholes, John Terry, Robin van Persie, Nemanja Vidic, Patrick Viera, Ian Wright.
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Health Valley
Founded in 2002 and set up as a foundation in 2006, Health Valley has been an innovation in healthcare for more than 10 years in Nijmegen, the Netherlands.
It serves as a place where companies, businesses, universities, healthcare providers and government agencies can collaborate, offering a platform where they can connect and work together on healthcare innovation.
Its partners work on technological innovation, new forms of diagnostics and other methods to make a difference in healthcare.
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3/5
COMPANY PROFILE
Name: Kumulus Water
Started: 2021
Founders: Iheb Triki and Mohamed Ali Abid
Based: Tunisia
Sector: Water technology
Number of staff: 22
Investment raised: $4 million
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Director: Laila Abbas
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Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.
“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”
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OPINIONS ON PALESTINE & ISRAEL
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The Al Barzakh Festival takes place on Wednesday and Thursday at 7.30pm in the Red Theatre, NYUAD, Saadiyat Island. Tickets cost Dh105 for adults from platinumlist.net
The smuggler
Eldarir had arrived at JFK in January 2020 with three suitcases, containing goods he valued at $300, when he was directed to a search area.
Officers found 41 gold artefacts among the bags, including amulets from a funerary set which prepared the deceased for the afterlife.
Also found was a cartouche of a Ptolemaic king on a relief that was originally part of a royal building or temple.
The largest single group of items found in Eldarir’s cases were 400 shabtis, or figurines.
Khouli conviction
Khouli smuggled items into the US by making false declarations to customs about the country of origin and value of the items.
According to Immigration and Customs Enforcement, he provided “false provenances which stated that [two] Egyptian antiquities were part of a collection assembled by Khouli's father in Israel in the 1960s” when in fact “Khouli acquired the Egyptian antiquities from other dealers”.
He was sentenced to one year of probation, six months of home confinement and 200 hours of community service in 2012 after admitting buying and smuggling Egyptian antiquities, including coffins, funerary boats and limestone figures.
For sale
A number of other items said to come from the collection of Ezeldeen Taha Eldarir are currently or recently for sale.
Their provenance is described in near identical terms as the British Museum shabti: bought from Salahaddin Sirmali, "authenticated and appraised" by Hossen Rashed, then imported to the US in 1948.
- An Egyptian Mummy mask dating from 700BC-30BC, is on offer for £11,807 ($15,275) online by a seller in Mexico
- A coffin lid dating back to 664BC-332BC was offered for sale by a Colorado-based art dealer, with a starting price of $65,000
- A shabti that was on sale through a Chicago-based coin dealer, dating from 1567BC-1085BC, is up for $1,950
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