The Role of Start-ups in Economic Recovery and Growth

Start-up businesses are vital to the continuation and growth of economies, especially following economic shocks. George Hojeige, Chief Executive Officer of Virtuzone explains just how much start-ups contribute to societies by employing, innovating and improving services for consumers.

As the world continues to recover from the impact of the pandemic, the potential for start-ups to stimulate and accelerate economic recovery takes centre stage.

The global start-up economy was previously valued at nearly USD 3 trillion, which has been assessed by experts to be on par with the Gross Domestic Product of a G7 economy.

While the pandemic has impeded this growth, market studies indicate that start-ups still performed strongly at the end of 2020, citing a 4% year-on-year increase in global venture funding, which reached USD 300 billion.

According to Crunchbase, a leading platform for professionals looking to connect with innovative companies, this remarkable achievement was largely driven by the digital transformation of essential sectors, such as healthcare, education, finance, retail, entertainment and a majority of corporate work around the world.

As these sectors moved their operations online, they created huge market opportunities for companies specialising in tech infrastructure and cloud services, which are some key components of a successful and sustainable digital transformation.

Rise of online businesses in the UAE  

In the UAE, we have seen a similar trend emerge in 2020, as existing companies expedited their digital shift, more entrepreneurs explored business opportunities online and consumers increasingly turned to e-commerce to get the products and services they need.

In fact, Dubai Customs has predicted that e-commerce sales in Dubai will rise by 23% and reach USD 27 billion (AED 100 billion) in 2022, as a result of the drastic shift in consumer trends and behaviour.

In a separate study published by Dubai Economy and Visa, the UAE ranked as the most advanced e-commerce market in MENA, with an estimated annual growth of 23% between 2018 and 2022.

With a burgeoning e-commerce sector, we are likely to see more entrepreneurs and start-ups aim to harness this massive opportunity. From health, fitness and nutrition consultants, to shopping and delivery services, more professionals and businesses will go digital.

Supporting start-ups means supporting innovation and growth

Ask any venture capital fund manager what is the first question they ask founders, and they will inevitably answer, “What is the problem you are solving?”

Start-ups play a pivotal role in advancing technologies and fuelling innovation. As they uncover untapped markets and engineer innovative solutions, they are able to disrupt industries by introducing new and better ways to meet market demands, leading to economic and societal growth.

Consequently, this creates new employment and business opportunities that help revitalise the economy. By enabling and empowering start-ups, the government is helping to advance innovative ways that resolve existing challenges more quickly and efficiently.

In addition, by collaborating with its start-up community, the government can find unfulfilled or underserved markets and start filling in those gaps.

How can the UAE support its start-up community?

While the UAE has been constantly improving its start-up ecosystem, banking can still be a challenge for SMEs. As a bank account is necessary for SMEs to start operating, the process should further be streamlined and accelerated, while ensuring KYC and due diligence requirements are met.

Minimising the time frame needed for opening a bank account helps reduce the barriers for start-ups to enter the market. As things move forward, we can expect to see more digital banking and fintech solutions emerge to provide more cutting-edge finance technologies to businesses in the UAE and the region, without compromising on due diligence.

Aside from enhancing the banking process, start-ups also need to be provided with access to financing. The UAE clearly recognises its start-up community as one of the major building blocks of its economy. From the start of the pandemic and to date, the government has been active in launching economic initiatives meant to alleviate the challenges that businesses and start-ups are facing.

The Central Bank of the UAE has recently revealed that since its AED 100 billion economic stimulus package was launched last year to support businesses during the pandemic, it has helped over 320,000 recipients, including individuals, SMEs and private corporations. Currently, there are approximately 175,000 customers benefitting from the programme’s deferral arrangements.

Known as the Targeted Economic Support Scheme (TESS), the stimulus package includes AED 50 billion worth of zero-interest, collateralised loans for UAE-based banks and another AED 50 billion in funding. The Central Bank has also credited TESS in ensuring that UAE banks remain financially stable throughout the COVID-19 crisis and in helping the local banking sector bring back its liquidity to pre-COVID level.

What is Virtuzone’s role in the UAE’s start-up community?

Virtuzone was established in 2009 specifically to help companies and entrepreneurs that want to be part of the UAE’s business community. The UAE has more than 50 free zone, mainland and offshore jurisdictions, and Virtuzone advises people on the best jurisdiction to set up in, as well as the most cost-effective solutions, and then execute these setups for their clients. In a nutshell, we make sure businesses are set up the right way from the beginning.

As we know that banking is one of the challenges that most start-ups face, we have partnered with local banks and other financial services providers in the industry to ease the bank account opening process for our clients and give them better access to financing programmes.

We leverage the relationships we have built over the years to directly connect our clients with our partner banks and then act on their behalf to fulfil all requirements. With that added element of trust, we are able to simplify and expedite the banking process for our clients, while helping minimise the risk for our partner banks.

We are also exploring neobanking platforms and technologies to provide SMEs with more targeted banking solutions for their unique needs – and we are excited to soon be unveiling a project we have been working on!

In addition, we work closely with government authorities to enhance the local start-up ecosystem, equip aspiring entrepreneurs with the right information, evolve the current business setup process and enable businesses to tap into new growth opportunities, both locally and internationally.

For one, we are actively working on adopting a borderless business hub model that will allow UAE-based businesses to easily expand into surrounding regional markets, such as Central Asia, Africa and the Far East, with reduced risk, increased confidence and the right connections to do so.

As a business that started small 12 years ago, we fully understand how crucial start-up support is in achieving success, and how local start-ups contribute significantly to the nation’s economy.

Since we started, we have enabled over 40,000 entrepreneurs to establish their businesses in the country, and we will continue to champion the start-up community and build on this feat in the coming years.

As part of this commitment, we also equip our clients with the core business support services they need to successfully launch and manage their companies. From their accounting, payroll and VAT registration, to mail management, IT support and branding, our business support services are specifically designed to help position our clients on the path to success.