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In recent years the Middle East has emerged as a hub for dynamic and vibrant group of entrepreneurs within the technology industry. The combination of large state investment and the rising desire to take on the tech capitals of the West has caused Middle Eastern start-ups to flourish. Indeed, for the investor, the Middle Eastern market offers a rare combination of thriving start-ups and a lack of foreign investment.
According to Forbes Magazine, mobile penetration in the Arab Word is at 109%, with Saudi Arabia having a penetration of 187%. This gives a great deal of opportunity to those who are developing, or investing in apps for iPhones or Android, and to a lesser extent Blackberry.
Indeed, the natural parallel is with the East African market, where the absence of adequate Internet connections have forced locals to rely far more on their mobiles for Internet connectivity. In East Africa, mobiles are used for everything, from paying for groceries to organising logistics. The development of the mobile market in the Middle East is comparable, with high mobile saturation despite a relatively low Internet infrastructure.
All good start-up communities are based on echoing and building upon successful businesses elsewhere. No product comes fully-formed and unique into the world, and within the Middle East, there are a number of local versions of established international apps and software.
These are often far better placed to exploit the local market, thanks to a deeper cultural affinity. For example, there’s PsstPsst, which is a matchmaking service aimed at the local Arab youth. Another success story, Souq acts as a local competitor to Amazon.
Due to the rising tech market, there is a vibrant community of adopters who are buying and using tech products on an unprecedented scale. The same processes that cause the tech boom have also caused the development of a market for products.
A Gulf in technology
Perhaps unsurprisingly, it is the states around the Persian Gulf that are leading the technology boom in the Middle East. The oil rich states of Qatar, the UAE and Saudi Arabia are all investing heavily in their technology infrastructure. This is increasingly dragging in foreign investors, who see the security that comes from governmental backing.
According to the Wall Street Journal, Berlin-based tech incubator Rocket Internet recently invested US$1 billion in the region, and this is seen as the first of many such investments.
So, investing in the Middle East is a growing phenomenon. As an investor, you only need to make sure that you follow the same due diligence as you would anywhere in the world: look at the USP, the business cash flow, and the target market, and you will be able to take advantage of this growing opportunity.