Expanding to the GCC as an Indian Startup With StyleNook

  • In the August edition of our Expanding to the GCC as an Indian Startup webinar series, we asked the Cofounder of StyleNook and Founding Partner of Glowfish Ventures several questions on tech expansion into the GCC and how other Indian startups can follow

 

 

 

 

 

 

 

 

 

 

Kuntal Malia, Co-Founder, StyleNook shared how it is bringing AI-powered customized fashion to both India and the GCC

Sanjeev Kohli, Founding Partner, Glowfish Ventures discussed investing in and expanding tech businesses in the MENA region

Here are some the key takeaways from the discussion.

What advice would you give early-stage Indian startups looking to expand to the GCC?

Product-market fit is critical

Tech startup founders should evaluate if there is demand for their product and their technology can service that demand

  • Products tailored for the Indian market may not work for the MENA market
  • Unit-economics must be considered, buying high and selling low cant work over the long term
  • Founders should not make too big of a commitment without having clarity of the future and get locked into large up front fixed costs

 

What advice would you give to founders who are looking to raise funding from the GCC and MENA?

Aligning with investor interest is key

Gulf investors face difficulties in decrypting the Indian market

  • Gulf investors are more interested in later stage startups where the investment risk is better understood
  • The VC ecosystem in India is much more mature than the GCC and smaller Gulf investors typically get priced out by Indian VCs
  • Investors will have more interest if there is a possibility of cross border deployment and not when it is primarily India focused

 

With the funding slowdown ongoing, how bad is it for founders right now?

Founders should reenergize focus on cost

 

The funding slowdown is real and fund raising is difficult at the moment

  • Founders should look at this as an opportunity to shift to healthier economics
  • Startups who have not focused on monetization are going to struggle to raise funding
  • There is now a greater degree of thought now on cost-effectivity, lowering cost of acquisition

 

How important is it for startups to engage with government priorities?

Managing regulatory aspects for business is very important

 

Tech companies should be transparent with regulators in the GCC

  • For a long time, companies have taken the approach of act now and seek forgiveness later, as long as its not unethical or criminal, it may not hurt in the long term
  • In the GCC though it is better to ask for permission first even though other large tech companies have taken the opposite approach

 

What are some of the challenges startups would face when expanding across the MENA?

Most startups who enter the UAE struggle to expand across the region

 

Different market dynamics across the region make expansion difficult

  • Some startups who setup in UAE expand to KSA and even fewer go to other countries such as Egypt
  • Regulations, cultural nuances, setup costs make expansion complicated

 

Would Indian startups begin to consider UAE as a holding company domicile for international expansion?

There are definitely some positive effects of basing domicile in the UAE

 

Investors also seek stability with respect to domicile before investing

  • Investors seeks long term clarity, so would be more comfortable in investing in startups which are domiciled in countries with stable and favorable policies
  • Over time destinations such as ADGM in Abu Dhabi, Dubai and to an extent KSA will become more favorable destinations
What are some specific areas of opportunity in the GCC / MENA for Indian startups?

Indian tech should look at enabling GCC businesses

E-commerce and SaaS sectors are where quick wins can be achieved

  • If startups are looking at the B2C route, there are cultural, language issues to be worked out
  • The Indian e-commerce space is much more developed, so using that experience and products to become enablers of tech in the MENA is a good opportunity looking ahead
  • B2B2C is a prudent strategy to move into the region, where you can save on large capex, initial investments
  • Indian SaaS products are cost competitive and can be easily deployed in the MENA
What can the UAE learn from the Indian tech ecosystem and vice-versa?

Innovation is more likely to come out of India than MENA

Development of talent is the most important factor

  • Innovation is more likely to come out of India than the MENA, since the talent pool and pipeline is much more evolved
  • Deeptech innovation in the GCC is unlikely in the next few years
Are there fundamental barriers to entry for GCC based startups to enter the Indian market?

Scale difference of Indian market makes entry difficult

Business models have to be tweaked for India

  • If tech companies are successful in the MENA, it is not a given that the same model will be similarly successful in India
  • Market dynamics in Egypt are similar to India, so if tech companies can successfully expand to Egypt, they may have a good chance for success in India
  • There is an opportunity for consumer brands from the MENA to cross over their products into India and make it accessible
Who will win the race to become the tech leader in the region, UAE or KSA?

UAE has a significant advantage in the region

  • Would be foolish to bet against Saudi Arabia since their pace of reform has picked up massively in the past few years