Startups vs. SMEs in GCC: Different Sides of the Same Coin?

Published September 28th, 2020 - 03:00 GMT
Startups vs. SMEs in GCC: Different Sides of the Same Coin?
The UAE’s Ministry of Economy says that 94% of the companies in the UAE are SMEs. (AlBawaba)

In a time when job opportunities are becoming more limited, many people are turning to the promising approach of SMEs and startups. Whilst both Small and Middle Enterprises (SMEs) and startups can be appealing to many people, understanding, and distinguishing between the two is crucial.

One of the biggest key distinguishers between startups and SMEs is innovation. Taking into account the time of technological advancements that the world is living in right now, innovation in technology seems to be the trend that most startups currently follow. The goal of startups is to introduce an innovative idea that can potentially transform the market. To do so, startups tend to rely on funding from investors to move forward with their idea. With the funds coming in from different investors, the control of startups tends to shift from the founder into the hands of the shareholders.

This is significantly different from how SMEs work. SMEs tend to focus on working with products that already exist in the market by targeting a certain circle of customers. Owners of SMEs also tend to be self-sufficient as they want to keep control of their business shares. While for SMEs, profit is more of a priority than growth, startups tend to shift their focus on growing and reaching a worldwide audience that profit might take months or years to attain.

The scalability of the product or service is an important angle to ensure the success of the startup. According to Statista, the leading startup industries in the MENA region are delivery and transportation. Take for instant COFE. COFE, first launched in Kuwait in 2018, is an app that helps users place orders from coffee shops and retailers. In April 2020, COFE launched in the UK after securing $3.2M in funding. This global expansion proved to be an imperative move for the app at exactly the right time. With the lockdown taking over the world, this app became appealing to coffee shops looking for contactless solutions to keep their businesses going. Another important example, is the first fuel-booking application, Cafu, which was founded in UAE. Cafu aims to provide users with fast, efficient and reliable fuel delivery wherever they are. The idea behind Cafu is to offer an innovative solution to make fuel more attainable at any time, any place. Founder, Rashid Al Ghurair, says: 

“It is the right time to build home-grown innovation for global impact…there is a global need to innovate and stay ahead of the digital transformation curve”

COFE and Cafu both offer a great insight onto what a startup really means and how innovation is an imperative part of the equation. 

While many people are currently finding startups to be intriguing due to their innovative and transformative nature, SMEs have become an important source of growth and employment for countries across the globe. The UAE’s Ministry of Economy says that 94% of the companies in the UAE are SMEs. Some examples of SMEs in the UAE include Hansa Energy Solution and QTM, both of which provide energy solution services. These companies do not focus on introducing new innovative products but rather an existing circle of customers and their interest in an existing product. 

While startups and SMEs can be very different, they both offer a lifeline for people to escape the limitations of working a normal 9 to 5 job. However, no matter what the approach is, an in-depth insight into both is required to make a well-rounded understanding. 

By Sama Al Kurdi
Sama Al Kurdi is an Industrial Engineer who is passionate about the business and tech scene in the MENA region.

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