Global strategy consulting firm Strategy& and Lebanon’s entrepreneurship platform Endeavor have just released their first Scaling-up MENA SME’s report, which studies how a handful of firms – scale ups in particular – can fast-forward economic growth and ranked Lebanon second in the MENA region.
To support scale-ups and find better ways to assist their growth, the Scale-up Readiness Index was created to evaluate the maturity of the scale-ups ecosystem in the Middle East, taking into account four main pillars: business fundamentals, business propellers, country readiness and demand creators.
The report first defines scale-ups that are growing businesses of all ages and industries. For example, it might take a business 25 years or five years to scale; this depends on the industry, demographics, market, and products/services. It also states that, in the MENA region, scale-ups make up 5% of small and medium sized enterprises (SMEs) and yet generate on average 3.4 times more revenue and eight times more jobs in comparison to other SMEs.
The main findings include:
- MENA countries, except for the UAE (with a total readiness score of 1.6/3), rank below average for scale-up readiness (the index rates from zero – undeveloped – to three –fully developed). The UAE’s ecosystem attracts many entrepreneurs from different countries including Lebanon, Jordan, Egypt, Greece, Turkey, and South Africa.
- Lebanon ranks second with a total readiness score of 1.2, even though it ranked highest for financing (2.0) among all countries, and equally with the UAE for business propellers (1.6). Lebanon (along with Egypt) scored lowest for country stability (0.5) and access to markets (0.2).
- The UAE gets the highest percentage of funding (62%), followed by Saudi Arabia (34%), Lebanon (25%), Egypt (20%), and Jordan (10%).
MENA countries have to focus on giving scale-ups access to seven main areas to support their scale-up ecosystem: financing, talent and foreign markets, a large customer base, clear and transparent regulations, better facilities and infrastructure, and finally networking and coaching opportunities. The report also encourages MENA countries to assign a champion to lead their scale-ups strategies, meaning a small team dedicated to define scale-ups and collect data to identify them within each country. For example, the ScaleUp Institute in the UK, a non-profit privately-owned organization, is dedicated to researching, monitoring and constantly improving UK’s ecosystem.
According to the report, this approach will allow the MENA economy to flourish at modest costs and efforts due to the impact that scale-ups have on jobs and gross domestic product (GDP).