PropTech Can’t Easily Penetrate the GCC: Part 2 — difficult ≠ impossible.

In the first part discussing this topic, I took a brief look at the challenging facing large scale adoption of property technology in the GCC. There were 4:

1- Difficult legal frameworks complicating the formation and growth of proptech startups.

2- An industry where the decision makers are older generations that are not up to date with tech trends.

3- The property industry operates in a different manner from the software solutions and development industries.

4- While funds for investment in real estate tech are increasing in the region, investor confidence is yet to reach a stage that can generate proptech momentum in the region.

Looking forward:

The challenges I laid out are by no means intractable, nor are they ignored by the powers that be. The value in understanding them ahead of time is managing the expectations of tech startups hoping to generate traction in MENA.

Legal frameworks: Solved

Regulation in the MENA region has notoriously been a slow-moving animal. As with other novel industries, regulatory frameworks take their cues from leadership as much as they do so from parallel frameworks in the west.

Anecdotes abound: Whereby concepts such as robot humans, national cryptocurrencies, hobby drones once seemed like asking for a legal challenge, the legal frameworks rose to the occasion. Over the past few years we saw Fintech innovation in the UAE kicking off with pilot programs, Saudi Arabia granting KSA citizenship to a robot, while Egypt’s Central Bank considered issuing its own currency and Tunisia trained drone pilots to contribute to its agricultural sector. These are no small feats and the policymakers involved in these decisions deserve recognition for paving the path for future startups and tech leaders. These examples all serve as reassurance that laws do change and cultures adapt to and embrace novelty.

Dinosaurs with computers: Solved

This mean problem can be frustrating, but there is a balance that needs to be struck between how much they expect them to come to you as an entrepreneur and how will you explain it. I agree that some technologies such as blockchain are notoriously difficult to explain(as John Oliver defined it: ‘Everything you don’t understand about money combined with everything you don’t understand about computers’). However, I have seen startups talking to potential clients by reciting a technical spiel while completely glossing over the looks of perplexion across the table.

While traditionally business development in the region consists of sharing a couple of decks and drafting out a proposal, disruptive technology needs a bit more legwork and holding your client’s hands through the process. A startup should be able to do a bit more in-depth research on their client, understanding the situation at hand, and proposing — in very practical terms — how Solution X can be implemented (Hint: the magic phrase is unlikely to be ‘we have 3000 transactions/second on our permissioned Ether network’, and more likely it is ‘your customers can complain about how long it can take them to process a payment, and we can address that complaint much better.’)

Old dogs, new tricks: Solved

Outdated processes are already facing increasing pressure. Unfortunately, the laws which guide outdated methods are notoriously the last ones to pivot and evolve, as legal frameworks are known to be slow movers, and for good reason. A suitable response from startups, for the moment, would be to adjust their client on-boarding model. Currently, the norm for the on-boarding model consists of a business plan based on an ambitious estimate of 3 weeks to onboard, sign, and receive a paycheck from a client. That’s a risky approach. Startups need to understand and internalize the fact that there are entrenched procurement regulations at play (the three quotes purchase process, for example). These regulations have the potential to drastically stretch out the time horizon before that sweet incoming fund wire transaction is finally made.

Lots of money is not the same as brave money: Solved

Tech investors in MENA are cautious. And they have to be. Are they overly cautious? Yes. How does a Proptech entrepreneur circumvent that caution and convince an investor to open the faucet. While the product might be crystal clear in the entrepreneurs vision, it nonetheless may not suffice to justify a USD 500,000 investment. Proptech entrepreneurs and innovators should focus on pilots, demos, and even freemium test runs to assuage the fears of the tech investor. If your startup can make 1$ on its own, it’s an easy argument to make that it’ll make a lot more with investor money.

The most famous tech startup successes and unicorns you hear about are the ones that were in the right place at the right time. So we come to ask ourselves:

Is this the right place? Definitely.

Is this the right time? Possibly. We know for sure that it hasn’t passed us by. It’s either now, or it’s around the corner. Either way, stick around, prep your demos, spell-check your decks, and stay on the ready!

Also get in touch if you have any questions or comments!