Start-ups are the back bone of the economy

Start-ups and small businesses are the backbone of any economy. Their numbers are on the rise, according to a gauge of the sector's health.

That is music to the ears of policymakers in the UAE who have been proactively cultivating an operating environment through mentorship programmes that incubate budding entities, overhauling the regulatory framework and improving access to funding, all of which help fledgling businesses to get off the ground.

These measures appear to be yielding results, which is welcome as the UAE strives to diversify its economy away from oil revenues and build a generation of job creators and innovators in addition to the country serving as a platform that attracts talent and serves as an example to others.

The online start-up community portal Magnitt noted in its first half year report on Middle East and North Africa start-ups that the number of investments in these small businesses has increased to 87 in the first six months of the year from 75 in the same period last year.

Although amounts being invested might be small in comparison to investments that take place in Silicon Valley, the landscape has evolved tremendously over the past decade.

Much of the investment that has gone into start-ups over the past year has been dominated by two names – Souq.com, the online retailer which was purchased by Amazon for US$650 million, and Careem, the ride-hailing service, which involved a $150m investment by Kingdom Holding of Saudi Arabia, the company controlled by Saudi Arabia's billionaire investor Prince Al Waleed bin Talal.

As well as giving a boost to the economy, investment in such entities has sparked local competition in the e-commerce field. It has paved the way for other dynamic companies to emerge and attracted venture capital to the region while also helping to bring about a paradigm shift in the way local and regional investors view aspiring entrepreneurs.

The successes of Souq and Careem serve as a catalyst for further investment in start-ups.

That will make the UAE a bigger destination for entrepreneurs and enable successful businesses to attract talent.