What free licensing could mean for Dubai startups?
A ‘free business license’ and other subsidized costs would be great to have for a startup, and it’s not as far-fetched as you may think.
Author: MAGNiTT
By Nader Sabry / Wamda – Image Credit Pexels
SOURCE : Wamda – What free licensing could mean for Dubai startups?
According to the Global Innovation Index 2017, UAE ranks 35th globally, yet this number can improve significantly if few decisions were put into act.
Free business licenses, which could be overseen by the Dubai Department of Economic Development and the Government of Dubai, are inevitable to stimulate the growth of innovation. The intensity of speed and change in today’s business environment is at its highest levels ever. It is driven by crucial game changers like blockchain, cryptocurrency, Artificial intelligence, data analytics, Internet of Things, and robotics.
These drivers are costly in the sense of initial startup, development, and market deployment. Rapid business model methods like the Lean Business Model and the design thinking approach have dominated innovation hubs built on one key factor, which is: Failing fast, succeed quickly. The speed of development is getting faster, therefore a smart government and innovation policies must be aligned in order to create an easier licensing regime.
| Change in spend of prototyping cycles: from ideas to initial production | ||
| Period | Prototyping duration | Avg. drop in cost from prior period (in percentage points) |
| 1990 – 2000: | 18-24 months | 5 |
| 2000 – 2010: | 12-18 months | 10 |
| 2010 – 2020: | 6-12 months | 35 |
| 2020 onwards | 6 months and less | 50 |
In fact, many technologies nowadays are obsolete or irrelevant by the time they have reached the end of the R&D cycle. To make this even more challenging, costs are reducing globally mostly due to transformative technologies like cloud computing, SaaS, collaboration platforms and crowdsourcing tools.
Though, they are all virtual, where does the disruption lie in making innovation work?
It is in analog business costs. That’s right, analog as in licensing, labor, real estate, and other substantial startup and operational costs.
| Prototyping cycle costs: costs per phase and startup product/service | |||
| Prototyping | Pre-production | Go-To-market | |
| Software | $50-75K | $10-20K | $100-250K |
| Hardware | $80-100K | $40-60K | $200-500K |
| Software + Hardware | $75-125K | $50-80K | $150-500K |
| [Disclaimer: These costs are adjusted to Dubai based startups and drawn from the writer’s own experience in working with several hardware startups.] | |||
In the case of Dubai, the lack of available hardware components, access to machinery for prototyping, and most importantly talent, are hidden costs. These drive startups to either go somewhere else and prototype there, or have them import everything, which is costly, and time-consuming.
For software-based startups, this is a talent-heavy equation that also leads to two outcomes. First, going elsewhere, staying there and then coming back, or second, outright importing the talent. Again, importing is challenging from a cost perspective, and startups won’t have access to enabling support networks which makes it even more costly.
Why is this imperative for the time being?
A blend of speed, intensity, and cost are critical in getting innovative solutions to market. Dubai’s unique position as a global hub, the Emirate’s visionary outlook, and its inspiring leadership, all contribute to making it a breeding ground for transformative innovation.
When it comes to the ease of doing business, the World Bank Group ranks Dubai in the 51st place. There is a direct correlation between ease of starting a business and innovation. The faster and less costly that process is, the quicker startups can ultimately succeed.
That said, the cost is the actual barriers right now. Free business licenses will allow risk-taking entrepreneurs to set up, tech talent to follow, and homegrown examples to flourish and scale-out from Dubai globally. Now is the time to take action, and nourish entrepreneurship by creating an ideal environment to put their magic to work.
How the model can potentially work
No free lunch that’s for sure, but off-loading costs, later on, allows startups to innovate then pay back big. The potential economic value for Dubai will be AED 52 billion (US$ 14 billion) and beyond. This model is the best bet right now. With a decline in business license renewals (high cost, lack of demand, government fees going up, and VAT introduced), and a growing number of static licenses (no renewals), the writing is on the wall.
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