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The UAE has gained a positive reputation both regionally and globally for its supportive business environment, which has led to a flourishing startup culture. Although the tech startup ecosystem in the wider MENA region is vibrant, the UAE is at the forefront of this growth. Last year, MENA startups raised a total of US$3.94 billion in funding, with almost half of this amount (47%, or $1.85 billion) being secured by startups in the UAE.
A question arises here: what makes the UAE so successful in fostering startup growth? Commitment is certainly one answer. In the UAE, we see extraordinary commitment from government and entrepreneurs. The environment provided by authorities and regulators is tailor-made for success. But that does not mean every startup prevails. Even in a league-topping nation like the UAE, entrepreneurs must still face the daunting reality: the large majority of all startups have failure in their future. Constricted cash flow, dried-up markets, competition, suboptimal business models- the reasons vary, but the outcome is a stark reality.
But the good news is, failure does not have to be the end of the story. Many of the factors that conspire to end a business journey merely contribute to failure for companies that cannot devise ways of outmaneuvering them. Successful management teams will treat these emergencies as red flags and nothing more. They will have perfected the art of judgment on when to zig and when to zag. Which leads us to the most extreme form of the zig (or zag): the pivot.
The pivot -a somewhat innocuous term for a sometimes-fundamental shift in a business model- can mean the difference between failure and longevity. UAE-based startup RemotePass emerged in 2020 as a travel website, and then the COVID-19 pandemic hit, and the market dried up. The founding team, determined to pivot, worked closely with investors to come up with an entirely new platform, one tailored for what was increasingly being called “the new normal.”
We all remember the new normal, don’t we? Stay at home, shop from home, entertain yourself at home. And work from home. RemotePass thus took on the COVID-19 challenge of acquiring top talent, and then built a platform to solve it by putting recruiters in touch with the new global, borderless workforce. Today, RemotePass remains a tech company, but its platform is a tool for hiring anyone from anywhere, without having to set up a legal entity in the employee’s home country. Any scale of business can use the platform to hire talent in more than 120 countries, either as independent contractors or as employees, and RemotePass takes care of compliance with local labor laws and data regulations.
Image courtesy RemotePass.
RemotePass’s story is a tale of building the right product at the right time. But I know that this is an extreme example. And not every pivot needs to involve migration to another industry. That said, when a founder commits their life to the fulfillment of a vision, it can often be hard to see the collapse of the road in front of them. But running away from the inevitable amounts to running into the arms of defeat. Here are four signs from my pivoting playbook that tell you it may be time for a zig- or zag:
1. The dulling competitive edge The early days are exciting. Your firm does something nobody else does at a time when it is sorely needed- unique solutions to common problems. But then, others jump on the bandwagon. A crowded market should not be the end. It is when the “U” in your USP (unique selling point, for the uninitiated) no longer applies that you need a rethink. If whatever set you apart -supply chain, differentiated services, or something else- is now being offered by the competition, it is time to pivot.
2. The growth ceiling When you are small, often, the only way is up. Startups can achieve growth multiples of which larger firms can only dream. However, once momentum slows, head to the drawing board, and start a huddle. Is the change due to market conditions, or a widespread downturn? If so, perhaps waiting for a recovery is wise. But if your leadership team detects market saturation as the problem, then pivoting may be the way to go.
3. The superior secondary revenue stream Startups innovate at a faster rate than established businesses. Their core offerings are fluid. When supplementary services or products start accounting for larger and larger portions of revenue, bells should sound. Pay attention to these streams from an early stage, and perhaps the need for a pivot will become obvious at a point where it is less painful to implement. The effort-to-return ratio is the most important driving factor. When the return on investment of a secondary revenue stream becomes significantly better than the primary, refocus.
4. The underwhelmed outsider Listening to customers is one of the hallmarks of a good business. Regularly engaging with customers to understand their evolving needs can uncover dissatisfaction and even reveal new opportunities. Other outside sources such as mentors, investors, and incubators are also worth consulting. People outside the management team are in a better position to notice things that may otherwise take time to manifest on balance sheets. The UAE has an incredible entrepreneurship ecosystem set up for just this kind of feedback. And it can help enormously with both detecting the need to pivot and with designing and managing the pivot itself.
Starting a business is not easy. If it were, success rates would be higher, and everyone would do it. (But then there would be nobody to employ!) That said, success rates can improve if businesses apply the tips laid out here, and remain aware of their internals and externals. When things go wrong, they will then be better able to understand where the problem lies, and whether a pivot is necessary to counter it. Pivoting is painful, but failure can be agony. The tools are now in your hands; I hope you use them courageously and well.
This article is from Entrepreneur.com
