ACCESS TO TALENT FOR MENA'S ENTREPRENEURS

A2T In collaboration with ACCESS TO TALENT FOR MENA'S ENTREPRENEURS July, 2016 In partnership with

Authors: Teeb Assaf, Habib Haddad, Jamil Wyne, and Katerina d. Contributors: Elias Boustani, Evan Bulman, Kevin Guh, Estee Ward, Rachel Burns, Chris Godshall, and Allison Kammert. Acknowledgements: A large thanks is due to Maya Rahal, Reine Farhat, Lucy Knight Aline Mayard d d for their support in editing this publication and for their support in translating the surveys. The WRL team would like to thank the following people for their time and support in developing and implementing the study. Their contribution was critical to ensuring that the survey was designed and carried out effectively and we are grateful for their involvement. Specifically, we would like to thank Roba Al Assi (Bayt.com) for her support and guidance, Sara Kadoui (NUMA) for her expertise in surveying Moroccan entrepreneurs and Pankaj Paul (Knowledge@ Wharton) for his assistance and generosity in accessing the Knowledge@Wharton network for the survey. Additionally, our team would like to thank the many entrepreneurs, investors, incubators, academics, lawyers and other experts who donated time to this study, your contributions were invaluable and we thank you all in the d section of this report. Partners: The Wamda Research Lab (WRL) is Wamda s research program that produces studies on entrepreneurship in the Middle East and North Africa (MENA) and seeks to foster thought leadership in this field. Its agenda is to inform investors, policymakers and other stakeholders on the challenges faced by entrepreneurs in the MENA region and the potential solutions for over-coming them. Bayt.com is the number one job site in the Middle East, offering a complete range of end-to-end employment solutions and career planning tools. Founded in 2000, Bayt.com is fully functional in English, Arabic and French, and offers the fastest, easiest, most effective and cost-efficient methods for employers to find quality candidates, and for job seekers to find top jobs, in the Middle East and North Africa. Beirut Digital District (BDD) is a hub for the digital and creative industries in. BDD provides a state of the art business environment, value-added services and infrastructure so that companies can increase their productivity and grow. International Finance Corporation (IFC) is a member of the World Bank Group and is the largest global development institution focused exclusively on the private sector. Working with private enterprises in about 100 countries, the IFC uses its capital, expertise, and influence to help eliminate extreme poverty and boost shared prosperity. d d d 2

TABLE OF CONTENTS EXECUTIVE SUMMARY 04 INTRODUCTION 07 HIRING METHODS AND TRENDS 09 Recruitment channels 14 Geography of hiring 18 Satisfaction with talent 23 Incentives and compensation 26 Cultural mindset 36 CHALLENGES TO HIRING AND RETAINING TALENT 39 Challenges to identifying candidates 41 Demand for soft and hard skills 45 Challenges to recruiting and retaining employees 50 Explaining the gaps 59 CONCLUSION AND RECOMMENDATIONS 61 APPENDIX 65

EXECUTIVE SUMMARY In 2015, unemployment in the Middle East and North Africa (MENA) stood at 1, the highest regional unemployment rate in the world. 1 Estimates suggest that the region must create 85 million jobs by 2023 to be on par with global average unemployment rates. 2 Governments and private sector institutions are pointing to entrepreneurship as a way to create jobs, spur innovation and diversify economies regionally. Investing in entrepreneurship could have a substantial impact on job creation if ecosystem provided conditions for startups to scale and therefore recruit more talent. in these efforts. To have a long-term impact on MENA s entrepreneurship ecosystem, stakeholders must ensure that entrepreneurs can find the necessary skills and mindsets needed to grow their companies. In this report, based on a survey of 963 entrepreneurs and 1,697 workforce participants, the Wamda Research Lab (WRL) aims to shed light on the trends and challenges of talent acquisition within MENA s startup ecosystem as well as offer recommendations addressed to ecosystem stakeholders on how to overcome these challenges. mproving access to and retention of talent must 1. Middle East and North Africa Overview, the World Bank, 2015 2. Addressing the 100 Million Youth Challenge Perspectives on Youth Employment in the Arab World in 2012, World Economic Forum, 2012 4

Hiring methods and trends: Startups are hiring, yet few workforce respondents consider a career at a startup: 90% of surveyed entrepreneurs plan to hire in the next year; 6 of workforce respondents think that working for a startup is a good career move, though only 1 of the workforce would like to work for a startup The workforce prefers corporate or government jobs: 6 and 41% of the workforce finds working for a corporation and the government, respectively, more appealing than working for a startup Hiring channels are not diversified: 3 of surveyed entrepreneurs rely on their professional network to recruit employees while only 7% indicated that they used universities to find recruits Entrepreneurs tend to hire locally but recognize that talented employees are available in other countries: with the exception of the UAE, 9 of entrepreneurs hire locally though they are aware there is talent in other countries; the most qualified regional workforce is thought to be located in Jordan, and 60% of entrepreneurs are satisfied with the quality of the local hires: the highest level of satisfaction is found in Levant and North Africa, while entrepreneurs in the Gulf countries are the least satisfied and tend to hire candidates from abroad There is a gap between salary expectations and salaries offered: 5 of entrepreneurs across MENA offer salaries ranging from USD 250 to USD 1000 per month, while only 1 % of the workforce is willing to work for less than D per month Entrepreneurs are willing to exchange salary for equity: 5 of the surveyed workforce is willing to work for a lower salary if their employer provides the opportunity to learn new skills, and 5 if their employer provides equity Challenges to hiring and retaining talent: Top challenges to hiring are skills and commitment-related: 4 of entrepreneurs say that identifying the right skills or expertise is the top challenge they face in the hiring process followed by 3 who expressed difficulties finding committed employees Top soft skills: surveyed entrepreneurs have difficulty finding employees that are motivated (4), independent (3), and with a high aptitude (37%) 5

Top hard skills: entrepreneurs have difficulty finding sales (2), business development (27%), and management (2) skills Corporate competition: 50% of entrepreneurs said they face competition for talent from corporations. Moreover, 6 of the workforce said they prefer to work at large corporations The workforce cites several risks to working for a startup: 31% of the workforce associate a career at a startup with lack of job stability, 27% think a job at a startup lacks professional development prospects, and 2 believe startups offer low salary Competitive market salaries are a hurdle to attracting talent: 4 of entrepreneurs state that the main reason why employees left their company was because they wanted higher salaries; 2 of the workforce named salary as the main reason for leaving a job at a startup Conclusion and recommendations: The report reveals that although entrepreneurs are creating jobs in the region, their access to talent remains limited. The surveyed workforce in our sample deems working for established corporations as more attractive than working for a startup. Access to specific skills, a better aligned academic and private sector, and a culture more interested in working for a startup are needed for MENA s entrepreneurs. Recommendations: The issue of talent acquisition and development is of critical importance in MENA s entrepreneurship ecosystem. Cultural trends, hiring methods, educational challenges and the allure of stable work at large, established corporations all complicate the team building process for MENA s entrepreneurs. We recommend that multiple players in the ecosystem need to play a role in improving access to talent conditions, including entrepreneurs themselves. Universities, media, government and incubators and accelerators all have a role to play in this process. Specific efforts include promoting the concept of work a startup to, creating a legal framework that is supportive of employee stock options, helping entrepreneurs access new recruitment channels and enabling more engagement between universities and entrepreneurs. These measures are not a prescription for success, but can help ecosystem stakeholders and entrepreneurs identify good practices for tackling the talent access equation in the region. 6

INTRODUCTION Unemployment in MENA is a longstanding obstacle for the region s economic and social development. In 2015, unemployment in the Middle East and North Africa (MENA) stood at a 1, the highest regional unemployment rate in the world. 3 According to the World Bank, the region s youth unemployment rates are also the highest in the world, with over 2 of the youth currently unemployed. In Saudi Arabia and Jordan, youth unemployment rates reached 30% in 2012, and this figure was over 40% in Palestine and Tunisia. Estimates suggest that the region must create 85 million jobs by 2023 to be on par with global average unemployment rates. 4 Entrepreneurs can play a critical role in creating jobs in MENA. In seeking solutions to this challenge, governments and private sector institutions are pointing to entrepreneurship as a way to create jobs, spur innovation and diversify resource dependency. Recently, the region has witnessed an upswing in the establishment of institutions supporting entrepreneurship. In the past years alone, Jordan established more entrepreneurship supporting institutions than it has in the past decade. In the period between 2000-2010, the number of entities created to support entrepreneurs in Jordan was 10, and between 2010-2014, this figure was 14. Similarly, in the UAE, the number of institutions created post 2010 is more than double those established between 2000 and 2010. 5 Scaling enterprises in particular can have a significant impact on this process. Scalable companies can have a substantial impact on job creation. Globally, a small percentage of scale-up companies contribute the majority of new jobs created. For instance, Endeavor Insight has found that while of the businesses in Columbia were scale-ups, they account for nearly 4 of the country s new jobs. 6 In Southeast Asia, scale-ups represent 1 of total companies but create 77% net new jobs. 7 Similar trends can be found in MENA. In Jordan, of the country s total firms accounted for over 50% of net new jobs in past three years. 8 Talent and access to it is critical within the scaling process. The transition from a group of founders and early-stage employees to scaling a team across borders with a widening range of skill sets requires both qualified and invested employees. Finding talent is critical to the enterprise scaling process. In a Wamda Research Lab (WRL) survey, in partnership with Endeavor Insight, of over 700 entrepreneurs in the region, building a team was one of the top challenges faced by entrepreneurs when scaling into new markets. More specifically, over 60% of entrepreneurs cited finding talent as a barrier to building their team and pointed to challenges with retaining talent and paying salaries. 9 Without a strong team, entrepreneurs chances of successfully scaling are diminished. 3. Middle East and North Africa Overview, the World Bank, 2015 4. Addressing the 100 Million Youth Challenge Perspectives on Youth Employment in the Arab World in 2012, World Economic Forum, 2012 5. Four-country report, Wamda Research Lab, 2015 6. The 8-45 Report, Endeavor Insight, 2013 7. The Impact of Entrepreneurs at Scaleup Companies in Southeast Asia, 2014 8. The Critical 9 Percent, Endeavor Insight, 2015 9. The Next Step: Breaking barriers to scale for MENA s entrepreneurs, Wamda Research Lab, 2014 7

About this report: If MENA s entrepreneurship ecosystem wants to improve conditions for finding talent and scaling companies in the region as a method to solve unemployment, there must be increased focus on and understanding of skills and processes that affect talent acquisition and retention. To date, quantitative research regarding the challenges MENA entrepreneurs face when building and retaining their team is limited while insights on MENA s workforce opinions regarding working for entrepreneurial enterprises is minimal as well. Through this report, WRL aims to shed light on the processes, strategies and barriers to talent recruitment and retention facing MENA s entrepreneurs. The study examines the workforces interest and willingness to work for a startup, and the incentives they seek in professional opportunities. This report consolidates data and insights collected from MENA s entrepreneurs and the workforce to gain a better understanding of the main trend and challenges shaping the team building process for MENA s entrepreneurs. It is based on a survey of over 900 entrepreneurs, most of which plan to hire in the near future, and over 1600 members of the region s workforce. It is also supported by over 100 individual interviews with entrepreneurs, investors, incubators and other entrepreneurship experts in MENA. 8

HIRING METHODS AND TRENDS

KEY TAKEAWAYS Startups are hiring: 90% of entrepreneurs are planning to hire in the next two years Startup jobs are not deemed attractive by the workforce: only 1 of said that they themselves would like to work for a startup Corporate and government positions are preferred over startups: 6 d 41 d Entrepreneurs are hiring locally, but they also acknowledge that talented employees could lie elsewhere in MENA: d from the UAE, 9 of entrepreneurs hire locally ajority of entrepreneurs are satisfied with their local talent pool: 60% of entrepreneurs are satisfied with the quality of the local employees, the highest dissatisfaction levels are observed in the Gulf countries 10

Hiring channels are not diversified: more than one third (3) of entrepreneurs rely on their professional networks to hire, 1 use online recruiting sites, 1 use online networking resources or friends, and 7% use universities There is a gap between salary expectations of the workforce and salaries offered by startups: 5 of entrepreneurs across MENA offer ranges between USD 250 to USD 1000, while only 1 % of the workforce is willing to work for less than D per month Entrepreneurs are willing to trade-off salary for equity: 41% of employees value non-wage benefits; 5 is willing to work for a lower salary if their employer offers equity and 5 if their employer provides the opportunity to learn new skills There is a mismatch between non-wage benefits offered by startups versus benefits valued by the workforce: 60% of entrepreneurs offer opportunities to innovate within the company yet only 1 of the workforce cited that opportunities to innovate are important in the job they seek 11

MENA S ENTREPRENEURS ARE LOOKING TO GROW THEIR TEAMS, BUT STARTUP CULTURE HAS NOT YET DIFFUSED INTO MENA S POPULATION MINDSET Of the 963 surveyed entrepreneurs, nearly 90% plan to hire employees in the near future, which indicates that the majority of startups in the region are creating job opportunities. Additionally, 6 of the workforce respondents perceive working for a startup is a good career move. However, when asked whether they themselves would like to work for a startup, only 1 said they would like to work for one. Figure 1 90% 6 1 of surveyed entrepreneurs plan to hire in the next year of workforce respondents think that working for a startup is a good career move of workforce respondents said that they themselves would like to work for a startup Entrepreneurs: BASE: N=963 Workforce: BASE: N=1658 Figure 2 Do you consider working for a startup as a good career choice? 6 1 2 Yes No Undecided BASE: N=1658 12

Figure 3 Workforce career preference Large corporation 3 No preference 2 Startup or SME 1 Government Other 7% Intergovernmental organization 7% Non-profit/NGO Don't know BASE: N=1697 While the region s ecosystem has developed over the past several years and public interest in entrepreneurship has grown in parallel, working for a startup is not yet considered a viable career choice. There is a mismatch between the workforces perception of working for a startup and their willingness to actually do so. 13

RECRUITMENT CHANNELS As companies scale in MENA and seek to move into new markets they will need to explore multiple channels for hiring and building their teams. Within our sample, more than one-third of entrepreneurs rely on their professional networks to find new hires as shown in Figure 4 below. The second most used hiring channel is online recruiting sites (1), friends (1), and social networking sites (1). Though the findings suggest that more entrepreneurs in Kuwait and (1 and 1, respectively) in our sample use universities sparingly to find new hires, very few in other countries pointed to universities as useful channels for hiring talent. While using professional network is one tool to find and hire talent, universities should not be underestimated as they have access to a large talent pool of educated candidates. "The lack of intern culture stems from the fact that kids in many MENA countries remain dependent on their parents for a very long time, so there s very little incentive to start working until after graduation. To change this mentality, it s important to work with universities to express to students the profession/life advantages that interning before graduation can offer." - Ahmed Aduib, cofounder, Abaya Addict 14

3 OF ENTREPRENEURS IN THE SAMPLE RELY ON PROFESSIONAL NETWORKS TO HIRE, 1 USE ONLINE RECRUITING, AND 7% RELY ON UNIVERSITIES Figure 4 Preferred hiring channels 3 1 1 1 7% 11% rofessional network Online recruiting sites Friends Social networking sites Universities Career fairs BASE: N=853 "There is very little guidance for university students during the process of transitioning from school to work, and many students wind up in positions that perhaps don t fit their interests, skill sets, or personalities. It would be helpful if there was more professional guidance offered at universities that supported startups, and that encouraged adventurous, unconventional students to look into working for people like us." - Tarek Bakkar, managing partner, IMS Medical 15

". " -, e so, Interviews with entrepreneurs point to difficulties in developing relationships with regional universities. Entrepreneurs discussed how few universities re open to collaborating with startups or how most lacked commitment to forming long-term partnerships. These issues potentially explain why relatively fewer entrepreneurs have turned to universities to build their teams. Regarding specialized recruitment websites and social networks, entrepreneurs said that these resources re typically most useful when trying to fill entry-level positions, while professional network websites re better for filling positions that required more work experience. 16

CASE Study: BBerryPin.com Working with universities to source talent Bashir Osman founded BBerryPin, in 2011 and sold it to Blackberry for USD 300 in 2013. Osman credits the successful acquisition in part to building and scaling a strong team. He started BBerryPin with two friends, one programmer and the other a business developer. After securing seed investment the team decided to hire six more people, leveraging social media and freelancer websites to find employees. The founders offered higher than average salaries, which, coupled with paid vacations, telephone allowance, flexible schedules and a trendy Googlelike office all helped to attract a flow of applicants. After going through a daunting task of filtering irrelevant resumes and making a few hires Bashir realised that they were not committed to the company and their work ethic was sub-par. The new hires hard skills were also weak. Osman and his team had to revise their screening process of employees. The founders then devised the idea to hold a series of skills based competitions at nearby universities. They advertised for a graphic design and coding project, and the applicant who delivered the best project would be hired. Forty-five applicants submitted projects, and Osman hired two of them. The competitions allowed people to demonstrate their technical skills as well as their creative thinking. By watching this process, Osman also measured qualities like self-confidence, passion and perseverance. Key insights: Working with universities can help entrepreneurs identify potential hires. While students may not think that startups provide attractive work opportunities, competitions and more thoughtful engagement with universities can help entrepreneurs find talent. 17

GEOGRAPHIC HIRING TRENDS surveyed entrepreneurs hire from the country their main office is located in (Figure 5). Although most entrepreneurs hire locally, there is a perception that talent is also available outside their home country. Hiring from abroad can include limited access to recruitment channels beyond home country, burdensome paperwork, relocation and associated logistical costs. Additionally, political instability and restrictive labor regulations in several MENA countries can affect the ability of startups in these countries to hire from other geographical locations. As a result, the findings presented may imply that talent is not moving across borders. The UAE, globally ranked d for its capacity to attract talent, where more than 50% entrepreneurs reported they resort to sourcing talent from abroad, represents an exception to the rule. d "Hiring and retaining talent in Jordan is very challenging. Talent is available, but startups are facing a lot of competition and they are getting priced out." - Khalil Shadid, founder, Reserveout 18

THE MAJORITY OF SURVEYED ENTREPRENEURS HIRE DOMESTICALLY, THOUGH THEY ACKNOWLEDGE THAT TALENT EXISTS IN NEIGHBORING COUNTRIES AS WELL Figure 5 Percentage of entrepreneurs hiring locally Morocco 9 Tunisia 97% 9 Saudi Arabia 8 UAE 51% Palestine 9 9 Jordan 9 BASE: N=963 Figure 6 Where do entrepreneurs in the UAE and KSA think the most talented employees are located? Saudi Arabia 8 2 Jordan 20% Palestine UAE 51% 21% Jordan 1 1 Other 50% 1 Other 1 Saudi Arabia UAE BASE: N=61 BASE: N=96 19

THE MOST QUALIFIED REGIONAL WORKFORCE THOUGHT TO BE LOCATED IN JORDAN, LEBANON AND EGYPT Figure 7 Where entrepreneurs in MENA think the most talented employees are located 1 UAE 11% Palestine 1 Jordan 17% d BASE: N=963 Though the capacity to attract talent does not always correlate with perception of where the most talented workforce is located, surveyed MENA entrepreneurs point to Jordan, and as countries with the highest concentration of qualified local. 20

ENTREPRENEURS IN SOFTWARE DEVELOPMENT, ONLINE SERVICES AND ECOMMERCE CITED JORDAN AS HAVING THE MOST TALENTED EMPLOYEES; ENTREPRENEURS IN ARTS & CREATIVE, MARKETING PR BELIEVE THE MOST TALENTED EMPLOYEES ARE IN LEBANON Figure 8 Where entrepreneurs from selected industries think the most talented employees are located Arts & creative industries 3 2 Jordan 21% Marketing d PR 3 UAE 2 Jordan 21% UAE 1 21% Palestine Palestine ommerce Jordan 3 2 2 UAE 17% Palestine Online serives Jordan 3 UAE 2 21% 20% Palestine Software development & services Jordan 37% 2 Palestine 20% 1 UAE 10% BASE: N=419 21

Case Study: Samih Darwazah Center For Innovation Management & Entrepreneurship at the American University of Beirut Leveraging relationships between entrepreneurs and academia The Center was established in 2011 to promote entrepreneurship and industry-academic collaboration through joint-instruction and startup acceleration, teaching and mentoring growth stage firms in MENA, focusing on the following programs: Darwazah Student Innovation Contest: The event was launched in 2013 for all AUB students and attracts around 100 applications annually. Participants attend three days of training in business development and present a business plan to a committee of ecosystem experts and entrepreneurs. One prize of USD 15,000 and one of USD 5,000 are awarded to the first and second-place winners, respectively. Entrepreneurship and innovation practicum: The course is available to all AUB students and is considered one of the most sought after courses in the university. Modeled after Steve Blank s Lean Launch Pad, the course requires that during 16 weeks students develop business idea, test prototype and pitch it to a committee of judges. Case Studies a Research: This initiative focuses on finding regional role models and developing a set of business cases based on local success stories. Mentoring and acceleration of early stage entrepreneurs: The program in collaboration with Speed, Bader and Endeavor to provide direct support to entrepreneurs in. Key insights: Universities can play a significant role in supporting entrepreneurship in MENA. In addition to providing academic knowledge, they can encourage students to experiment with entrepreneurship and also build partnerships with ecosystem players. 22

SATISFACTION WITH TALENT The majority (60%) of entrepreneurs in our sample stated that they were satisfied with the quality of talent in their countries (Figure 9). MOST ENTREPRENEURS ARE SATISFIED WITH THE LEVEL OF EMPLOYEE TALENT, AND A QUARTER OF THEM EXPRESSED DISSATISFACTION WITH THE QUALITY OF HIRES Figure 9 Entrepreneurs satisfaction levels with employees 1 60% 2 Satisfied Unsatisfied Undecided BASE: N=963 23

Analysis of relation between perceived talent location and entrepreneurs level of satisfaction with local talent (Figure 10) reveals two prevailing trends: More than 90% of the companies located in Levant and North Africa hire locally, out of which more than 60% are satisfied with quality of the local talent. Entrepreneurs in,, Tunisia and Palestine are the most satisfied with local talent. Gulf countries, predominantly the UAE, Saudi Arabia, and Bahrain believe that the most talented employees are located outside their countries. d d Consequently, our research finds that they heavily rely on recruiting from abroad. ENTREPRENEURS IN LEVANT AND NORTH AFRICA ARE THE MOST SATISFIED WITH LOCAL TALENT WHILE THE LEAST SATISFIED ENTREPRENEURS ARE IN THE GULF COUNTRIES Figure 10 Entrepreneurs satisfaction with local talent by selected countries Morocco Tunisia 1 % 7% 1 KSA 20% 1 % 7 1 1 % 6 % 2 % % 27% % 5 % UAE 2 % 4 % Palestine % 7% 7 % Jordan Bahrain Satisfied 1 2 % % 2 31% 3 Unsatisfied Undecided BASE: N=909 24

Satisfaction levels of local talent may be associated with the proportion of population that pursued tertiary degrees. Average tertiary school enrollment in MENA stands at 26., compared to 90. for OECD high-income countries. The World Economic Forum (WEF) conducted a survey demonstrating that tertiary school enrollment was highest in, Jordan, Saudi Arabia, followed by Tunisia, Algeria, Bahrain and and the lowest in the UAE, Qatar and Morocco. 10 Case Study: Buzzeff, Morocco Focusing on employee engagement and aligning employee and company goals Buzzeff, a social video advertising platform with offices in Morocco and Dubai, currently employs 20 people and handles a portfolio of over 70 advertising campaigns in 15 MENA countries. From the start, Jerome Mouthon, the founder, and his executive team formed a company with an extensive employee-training program. Ali Naguib, Buzzeff s managing director, credits the executive team s tactics of mixing an entrepreneurial mindset with corporate strategies as the result of their experience working at multinational companies. Buzzeff established the program by prioritizing the following HR and team-building strategies: Increasing face time with employees: Mouthon and Naguib conducted interviews with every employee regarding their expectations and goals about their positions at Buzzeff, their strengths and weaknesses, and the skills they needed to excel at their jobs. Aligning company and employee goals: Buzzeff s executives identified a core set of skills they believed could be developed in their employees to more expediently attain these objectives. Soliciting external support: The executive team hired an external HR consultant to create a 15-session training program on topics such as time management, holding productive meetings and effectively conducting conference calls. Additionally, an English tutor comes to the office regularly to help develop employees language skills.the resulting company culture not only produces happy employees, but also encourages workers to continuously hone their skills to better serve both Buzzeff s and their career goals. Key insights: The Buzzeff executive team leveraged their corporate experience in developing employees skillsets, but approached the process of doing so with an entrepreneurial mindset. They were open to innovative methods of training employees and leveraged input from employees, company s executive strategy and an external HR expert to produce their training program. 10. The Global Competitiveness Report, World Economic Forum, 2015 2016 25

INCENTIVES AND COMPENSATION Incentive packages are an important tool to attract and retain key employees as well as keep a continuous flow of hires at all stages of a company s development. Though the actual dollar amounts differ significantly depending on industry and region, the main components of the incentives package should be fairly standard and aim to include: base salary and a variety of financial and non-financial incentives, such as stock options, health benefits, paid vacations, stimulating office environment, flexible working hours etc. "Management is more important than the money and a flat organization is essential. A flat organizational structure gets everyone engaged and promotes a sense of ownership. Having people listen to each other makes them feel like they count. Invest in people, listen to them, make sure they feel like they drive the change - Sherif Kamel, VP information management, American University in Cairo MOST ENTREPRENEURS IN OUR SAMPLE OFFER SALARIES THAT ARE BELOW SURVEYED WORKFORCE S EXPECTATIONS Figure 11 Monthly salary offered by entrepreneurs vs. monthly salary expected by the workforce Below USD 1,000 5 1 % USD 1,000- below 2,000 2 2 USD 2,000- below 3,000 USD 3,000- below 4,000 10% 11% 17% USD 4,000- below 5,000 USD 5,000 or above 10% 2 Offered BASE: N=979 Preferred BASE: N=1608 Based on our survey data, 5 of entrepreneurs pay salaries ranging between USD 250 to USD 1,000, while only 1 of the surveyed workforce expects to work for less than a USD 1,000 per month. Almost half of the workforce expects to earn USD 3,000 and more, while only of entrepreneurs are meeting such standards. The discrepancy between the salaries offered versus expected is further reinforced by the fact that 2 of the workforce stated that they left startup jobs because the salary was not sufficient. 26

HIGHER THAN AVERAGE SALARIES ARE OBSERVED IN GULF COUNTRIES AND LEBANON, WHILE NORTH AFRICA, PALESTINE AND JORDAN ARE ON THE LOWER END Figure 12 Average monthly salary offered by startups per selected countries, in US dollars 27% 2 1 11% US dollars 1000 1500 2000 2500 3500 4500 4500+ UAE 1 11% 17% 1 1 1 US dollars 1000 1500 2000 2500 3500 4500 4500+ Morocco Jordan 17% 21% 21% 250 500 750 1000 US dollars 1 2 2 250 500 750 1000 US dollars Palestine BASE: N=963 1 21% 2 250 500 750 1000 US dollars 27

"Building a team is almost as important as the actual idea. An idea is only as good as the people who are going to execute it. You need passionate people committed to the vision. Staffing a startup is very hard and you won t be able to pay them large salaries, they will work long hours, so how do you find them? - Mona Ataya, founder and CEO, Mumzworld ENTREPRENEURS IN THE SELECTED COUNTRIES ARE INDUSTRY STANDARDS Figure 13 Startups pay compared to the average and IT industry minimum pay 11 1 5 2 40% 4 1 UAE 5 3 10% Jordan 8 1 <MIN AVG AVG+ BASE: N=680 11. International Labout Organisation database; www.salaryexplorer.com database 28

alaries offered by more than 80% of startups in are above the IT industry minimum level, though only 2 of entrepreneurs offer above average salaries. The finding suggests that startups in should not be facing problems filling entry level positions however they could find it difficult to attract experienced hires. Roughly 80% of entrepreneurs in and the UAE offer average or below average salaries with a high share of salaries below the minimum level. For Jordan specifically, 8 of the salaries offered are at or below the industry minimum. The above findings show that offering competitive salaries is a common challenge for startups in MENA. Startups are known to operate limited financial resources, which could translate into smaller financial packages for potential employees. While financial packages are important in attracting employees, entrepreneurs should also focus on non-financial packages to retain talent and keep employees with their company for the long haul. However, our research finds that a number of incentives are being underutilized. 29

THERE IS A MISMATCH BETWEEN NON-FINANCIAL BENEFITS OFFERED VERSUS BENEFITS VALUED Figure 14 Non-financial benefits offered to employees versus benefits valued by the workforce Flexible working hours 6 21% Opportunities to Innovate 60% 1 Bonuses 5 2 Training opportunities 5 1 Non-wage benefits 50% 41% Opportunities for promotion 4 2 Equity or share options 2 17% Free transportation or transportation 2 Maternity program or childcare 1 1% Family allowance 7% Offered by entrepreneurs BASE: N=822 Valued by the workforce BASE: N=1449 30

Figure 14 shows that 60% of entrepreneurs said they offer opportunities to innovate within the company yet only 1 of the workforce cited that opportunities to innovate are important in the job they seek; Moreover 6 of entrepreneurs offer flexible working hours, though again fewer, 21% of the workforce, values this benefit. Although MENA's ecosystem has grown rapidly in the past years, the data suggests that the startup company culture and the incentives it can offer employees have not yet taken root in the region s work culture as a whole. Our research finds that 4 of entrepreneurs offer opportunities for promotion, yet 2 of the workforce value progressive career development. "Non-financial incentives are more important than financial incentives. Startup environment is flexible (working hours, management) and the startup environment attracts people. - Rima Shaban, manager of innovation and entrepreneurship center, Abu Dhabi University 31

"We highly value employees who value the company and its vision equally or over their personal wealth and success. - Rafah Al Khatib, CEO, 3eesho MORE THAN HALF OF THE WORKFORCE IS WILLING TO WORK FOR A LOWER SALARY IF EQUITY IS OFFERED Figure 15 I am willing to work for less money if I receive equity Agree Disagree Undecided 5 21% 2 BASE: N=1569 MAJORITY (5) OF THE WORKFORCE IS WILLING TO WORK FOR LESS MONEY IF THEY RECEIVE TRAINING OPPORTUNITIES Figure 16 I am willing to work for less money if I receive training opportunities Agree Disagree Undecided 5 2 1 BASE: N=1549 Opportunities to develop new skills and progress in their careers can serve as effective incentives for employees. Additionally, while startups may not be able to offer lucrative salaries to employees there are a number of incentives they can use to attract talent, like offering their employees equity and stock options in the company. Aside from potential financial gains, such incentives can also help employees derive a sense of ownership in the company, which can help build their long-term commitment to it. d lower salary offer if stock options are provided (Figure 17). 32

ALTHOUGH HALF OF THE WORKFORCE IS WILLING TO ACCEPT A LOWER SALARY IF STOCK OPTIONS ARE PROVIDED, JUST ONE QUARTER OF ENTREPRENEURS ARE OFFERING EQUITY TO THEIR EMPLOYEES Figure 17 Startups offering equity 2 7 Offer equity Do no offer equity BASE: N= "Entrepreneurs should be encouraged to give leadership positions, develop their internal entrepreneurial culture and provide opportunities for their employees. - Kamal Hassan, President and CEO, i360 33

WITH THE EXCEPTION OF THE UAE, THE MAJORITY OF ENTREPRENEURS IN MENA DO NOT OFFER STOCK OPTIONS Figure 18 Percentage of entrepreneurs who offer equity to their employees (per selected countries) UAE Jordan Morocco Palestine Bahrain KSA Algeria Tunisia Kuwait 3 2 2 2 20% 20% 1 1 1 11% 10% BASE: N=963 The practice of issuing stock options is still a developing practice in MENA. According to Figure 18, this incentive is most common in the UAE (3), followed by Jordan (2), Morocco (2), Palestine (2), d (20%). During interviews, a few entrepreneurs stated that main reasons holding them back from offering stock options were difficulties finding experienced lawyers to structure stock option plans according to the local legislation, as well as the fact that prospective hires would not understand the meaning of the stock options and therefore would not see value in such offering. 34

Case Study: Stock options ractices in Stock options can be an important incentive for helping recruit and reward employees, especially when a company is young and cannot offer attractive salaries. As MENA s startup ecosystem evolves and startup teams grow, the practice of offering stock options is gradually becoming more common, yet based on interviews with entrepreneurs, still remains an under-utilized resource. s case provides an overview of the challenges that its development has faced to date. Lack of legislation: Apart from the law n.308 dated 3/4/2001 relating to Bank Share Issuing and Trading, Bank Bond Issuing and Bank Ownership of Real Estate that contains an article 3, governing the granting of stock options to the Chairman, the members of the Board, the management and employees of Lebanese banks, there is no tailored general legal framework that supports stock options in. However, several mechanisms of the Lebanese civil and commercial law can be used to create a contractual framework for stock options, equivalent to the practice borrowed from the US. For example, vesting can be done through the mechanisms of the general civil and commercial law. Minimal legal expertise: According to interviews with lawyers and entrepreneurs,, as well as MENA itself, has minimal legal specialization with stock options. The lack of expertise in this area complicates the process for structuring these deals. Though as demand grows, more lawyers offer their services at structuring stock options contracts. It is very important that the lawyers keep in mind the particularities and specificities of Lebanese laws, and avoid importing blindly the provisions of foreign stock options agreements, as such provisions are not always adapted to, and enforceable under, the Lebanese laws. Nascent concept: In our survey, roughly half of the workforce said they would accept a lower salary if stock options were offered, which suggests a certain degree of awareness around this incentive s value. Where employees are not educated on the matter of stock options it is a responsibility of an entrepreneur to provide some guidance and/or training. Key insight: A combination of an underdeveloped legal structure, minimal legal expertise and a still-growing public awareness all hold back the widespread usage of stock options amongst startups in. The Lebanese case is similar to the situation in MENA as a whole, with a lack of expertise, customized legislation and general public knowledge stifling more abundance of stock options. 35

Cultural mindset The culture of entrepreneurship is fundamental to shaping MENA s ecosystem and general buyin for entrepreneurship in the region. This research reveals that the workforce in MENA does not yet find working for a startup to be an appealing career opportunity. Family and society pressure, risk-aversion and lack role models are some of the factors that diminish the value of working for a startup in MENA. "The culture in MENA is such that a manager won t always be willing to share his expertise with his subordinates out of fear that they would surpass him. This holds the economy back because people don't collaborate as much as they should. - Alia Adi, founder and CEO, Basmaty 36

MOST OF THE SURVEYED WORKFORCE PREFERS CORPORATE OR GOVERNMENT JOBS TO A CAREER AT A STARTUP Figure 19 Working for a corporation is more appealing than working for a startup 2 6 Agree 1 Disagree Undecided BASE: N=1520 Figure 20 Working for the government is more appealing than working for a startup 2 41% Agree Disagree 3 Undecided BASE: N=1519 According to Figures 19 and 20, 6 and 41% of the workforce finds working for a corporation and the government respectively more appealing than working for a startup. The preference for corporate jobs is the strongest in Saudi Arabia, Qatar, and Kuwait while the preference for the government jobs is the strongest in the UAE, Kuwait, Saudi Arabia,. 37

"MENA corporations are likely to regard a candidate s experience at a startup as unimpressive. Job seekers in the region know this, and are therefore hesitant to accept a position at a startup - Amir Barsoum, CEO, Vezeela by Dr Bridge Most entrepreneurs interviewed mentioned that there are heavy familial and societal pressures on young university graduates to find employment at large corporations. Similarly, employment as doctors, lawyers, bankers and government workers are also looked upon favorably. Relatively few success stories role models in the region could also help explain why working for a startup remains an unpopular career choice. The region s startup community is still young, limited success stories and best practices have yet to diffuse throughout MENA. Case Study: Glowork, Saudi Arabia Khalid Alkhudair s vision of an online recruitment platform in Saudi Arabia designed entirely for women was radical to many people. As Glowork matured and Alkhudair sought to take on more team members, funding became an issue. He benefited from a Saudi government program that offers to pay half the salaries of Saudi nationals. Ever a proponent of practicing what you preach, Alkhudair hired mostly women. In fact, today, 81% of his almost 70 employees are Saudi women. Alkhudair points to several reasons for how he has been able to grow Glowork s team: Previous management experience: Alkhudair credits his success in building his team to his previous experience in the corporate sector. He learned from his time at KPMG how to effectively manage employees and to ensure their satisfaction within their work environment. Equity: He immediately made sure his employees felt like co-founders, offering an equity proposition that, in time, would provide returns on their commitment. Autonomy: According to Alkhudair, every employee at Glowork is the face of the company. They are given the opportunity to speak for Glowork at conferences and programs, which has helped to build both a sense of agency and loyalty amongst employees. Key Insights: Using his management experience at KPMG, Alkhudair formulated a system that allows his employees to take an active role in the company s future through leading lectures and workshops and benefiting from an equity share. Alkhudair attributes his success in being able to build an effective team to several factors: leveraging experience from his corporate management background; motivating employees by engaging them emotionally and financially and allowing considerable degree of autonomy and trust that helped to build both sense of agency and loyalty amongst employees. 38

CHALLENGES TO HIRING AND RETAINING TALENT

KEY CHALLENGES TO BULDING TEAMS THE LIMITING FACTORS HINDERING TALENT ACQUISITION: Main challenges for sourcing talent: Identifying candidates with the right skills or expertise (4) Inexperienced entrepreneurs Soft skills: The top soft skills that surveyed entrepreneurs have difficulty finding are motivated employees (4) and independence (3) MENA s educational system lags behind private sector demands Hard skills: The top two hard skills that entrepreneurs have difficulty finding are sales (2) and business development (27%) Underutilized recruitment channels THE LIMITING FACTORS HINDERING TALENT RETENTION: Salaries are competitive: 4 of surveyed entrepreneurs cited that the main reason why employees left their company is because they wanted higher salaries Scarce resources available to offer competitive incentive packages to attract top end talent and retain key employees Corporate competition: 50% of entrepreneurs cited corporations as their biggest competitor for talent. 6 of the workforce agreed that working for a corporation was more appealing than working for a startup. Limited offer of training and career development prospects Public sector competition: of the entrepreneurs said the government was a competitor for attracting talent, 41% of the workforce said that working for the government is more appealing than working for a startup Unclear startup prospects for scale and employee development 40

CHALLENGES TO IDENTIFYING CANDIDATES Identifying candidates with the required soft and hard skills and willingness to commit to working for a startup is a notable challenge facing MENA s entrepreneurs, as shown in Figure 21 below. While many entrepreneurs in our survey report being satisfied with the local talent they have been able to find, there are certain skills that are hard to find. During interviews, entrepreneurs expressed general dissatisfaction with the region s education systems, citing that it lags behind private sector need. This lag is most prominent in the technology industry. Chiefly, entrepreneurs indicate: identifying the right skills or expertise (4) followed by people who will commit long-term (3), identifying the right personality (2), and finding people who are interested in working for a startup (2) are the top challenges to hiring employees. Surveyed entrepreneurs point to specific skill gap in their potential hires. According to interviews, this challenge is a product of regional educational systems that lag with private sector needs and also a general cultural aversion in the region to working with younger companies. Additionally, as the entrepreneurship ecosystem in MENA is still young, many founders within it are still seeking to establish their companies brands as well as create a welldefined hiring strategy. "There is a huge youth bulge so talent is available, they are accessible, smart and educated, however they tend to lack soft skills and therefore they will need training. - Dr. Ayman Ismail, Director, AUC Venture Lab 41

IDENTIFYING EMPLOYEES WITH THE RIGHT SKILLS OR EXPERTISE, AND FINDING PEOPLE WHO WILL COMMIT LONG TERM ARE THE TOP HIRING CHALLENGES Figure 21 Top challenges to sourcing employees Identifying the right skills or expertise 4 Finding people who will commit long-term 3 Identifying the right personality 2 Finding people who are interested in working for a startup 2 Finding the right level of experience or seniority 1 Knowing where to look for potential hires 1 Negotiating a reasonable salary with new hires Having good HR staff or HR processes Multiple Response Question BASE: N=963 As the entrepreneurship ecosystem in MENA continues to mature, many founders within it are still seeking to establish their companies brands as well as create a well-defined hiring strategy. Startups should pay critical attention to diversifying their recruitment channels, vetting potential hires through establishing internship programs and/or a rigorous interview process. "Educational institutions and policy developers should be able to forecast market 5 years from now. As it stands now, there is a mismatch between specialties demanded by the market and those universities produce. - Ziad Sankari, founder, CardioDiagnostics 42

THESE CHALLENGES STAYED CONSISTENT AT THE COUNTRY LEVEL AS WELL, WITH ENTREPRENEURS IN JORDAN, MOROCCO, THE UAE, LEBANON, PALESTINE AND EGYPT ALL IDENTIFYING LONG-TERM COMMITMENT AND SKILLS AS THE TOP TWO CHALLENGES THEY FACED WHEN HIRING EMPLOYEES. Figure 22 Top challenges to hiring new employees (per selected countries) 3 Finding people who are interested in working for a startup 3 31% 31% 2 2 27% 2 2 2 21% 2 27% Having good HR staff o processes 4 4 3 3 3 27% Finding the right level of experience or seniority 2 2 2 2 1 1 1 17% 1 7% Negotiating a reasonable salary with new hires 5 51% 4 7% 4 40% 3 Identifying the right personality Finding people who will commit long term Knowing where to look for potential hires Identifying the right skill or expertise Multiple Response Question Morocco UAE Palestine Jordan BASE: N=909 43

Case Study: PALMA CONSULTING, JORDAN nternship program connects higher education with business world Palma Consulting is a consulting organization that specializes in helping companies with IT development and ensuring that IT processes are integrated with the organization s business strategy. When Palma Consulting started gaining traction in 2002, the firm found that it needed engineers who were able to apply tech development to business strategy and look at the utility of IT applications in relation to a larger organization. Founder Tamara Abdel-Jaber began by recruiting from Jordan s universities, but quickly found that the curriculum was highly theoretical with little application, and thus did not prepare students for the kind of work her clients expected. To solve the problem, Tamara applied insight from some of her clients in Germany. According to Abdel-Jaber, The German government has facilitated an ecosystem where software companies donate their products or services to universities and in exchange benefit from the resources and talent pool surrounding these universities science parks and innovation incubators. Though the same type of partnership has yet to happen in Jordan, it prompted Abdel-Jaber to build an internship program into Palma Consulting s recruitment process. She several engineering schools and informally connecting with relevant faculty members, who would recommend students with a good blend of scientific and personal skills as intern candidates. Over time Tamara created a steady stream of students pulled from 10 universities across the region. She takes on average three interns per semester. Around 40-50 interns have gone through Palma to date, with around 10 hired as full time consultants. Alumni that were not hired by Palma Consulting had found jobs in places like the UAE, Saudi Arabia, Jordan,, Sudan and Libya, by that spreading the firm s reputation across the region and generating new leads. Key insight: Inspired by partnerships between German companies and academia, Palma Consulting developed an in-house internship program that enhanced its own recruitment and training processes while also enabling young graduates to augment their own skills and marketability. 44

DEMAND FOR SOFT AND HARD SKILLS Employees must often utilize a collection of hard and soft skills to perform their core duties. Combining hard business development, sales and analytical skills with softer ones such as communication, initiative and a professional work ethic is ideal and in these firms. In MENA, with regional educational challenges and a young entrepreneurship ecosystem with companies still growing their teams and leveraging few channels for hiring, many entrepreneurs struggle to identify specific skill sets. MOTIVATION, INDEPENDENCE AND HIGH-APTITUDE ARE THREE SOFT SKILLS THAT MENA ENTREPRENEURS HAVE THE MOST DIFFICULTY FINDING Figure 23 Soft skills that entrepreneurs have diffculty finding in job applicants 1 1 2 2 2 31% 37% 3 4 We do not have trouble finding any soft skills Flexibility Teamwork Personal skills Leadership Communication Time management High aptitude Independence Motivation Multiple Response Question BASE: N=867 45

Our survey data suggests that the top soft skills that surveyed entrepreneurs have difficulty finding are motivated employees (4), independence (3) and high aptitude (37%). Finding individuals with the appropriate combination of technical and professional skills is highly challenging. There are a lot of people with technical backgrounds, but finding someone with a professional attitude, presentation skills, and the right work ethic is the problem. - Amr Shady, Chairman, TA Telecom HIGHER PERCENTAGES OF SCALEUPS REPORT HAVING DIFFICULTY FINDING EMPLOYEES WITH TIME MANAGEMENT AND WORK SKILLS Figure 24 Soft skills that entrepreneurs have difficulty finding in job applicants (scaleup vs non scaleup) 40% 3 37% 3 3 3 2 2 27% 2 2 2 2 20% 2 1 1 11% Motivation Independence High aptitude Leadership Time management Communication Personal skills Teamwork Flexibility We do not have trouble finding any soft skills Multiple Response Question Scaleup BASE: N=439 Non-scaleup 46

For the most part, scaleups and non-scaleups report similar challenges (Figure 24) except for a difference in finding employees with good teamwork skills. For this point, 2 of scaleups report good teamwork skills as a major challenge whereas only 1 of non-scaleups report it. This may potentially be a result of the fact that scaleups face more difficulties building effective teams due to their growing size. The top soft skills that were most challenging to find in job applicants remained consistent across countries. Each of the four top soft skills that is hard to come by was cited by at least 1 of entrepreneurs across surveyed countries. Motivation was the most-selected soft skill in Jordan, while ndependence represents the biggest challenge in and Morocco. One of the main challenges is that the few people with the technical skills we're looking for are employed by large companies and expect really high paychecks. We need to target recent grads whose salary expectations are not as high. Therefore, a way to more effectively connect startups with recent grads looking for jobs would be helpful. - Mostafa Farahat, cofounder and general manager, Nafham IN TERMS OF HARD SKILLS, ENTREPRENEURS REPORT HAVING THE MOST DIFFICULT FINDING SALES, BUSINESS DEVELOPMENT AND MANAGEMENT SKILLS Figure 25 Hard skills that entrepreneurs have diff culty finding in job applicants 2 27% 2 2 2 21% 1 1 1 11% 10% 7% Sales Business Development Management Marketing Programming Analysis Communication Writing Graphic Design Administrative Financial We do not have trouble finding any hard skills Linguistic Legal Multiple Response Question BASE: N=887 47

When comparing access to these skills for scaleups and non-scaleups, we see that a higher percentage proportion of scaleups have difficulty finding, business development (3) managerial (3) and marketing skills (2), compared to non-scaleups (2, 1 and 1 respectively), as seen in Figure 26 below. Four things need to change: 1) Education system - curricula are outdated, universities are too rigid and they must listen to the marketplace; 2) Government it is not doing its job; 3) Private sector - speak to education institutions and government; and 4) Culture - many people do not have jobs and are not searching for a job by choice. People have to change their mindset and see the opportunity of the entrepreneurial landscape. - Marwan Ziadat, former managing director, Darebni TV 48

LARGER PERCENTAGES OF SCALEUPS REPORT CHALLENGES FINDING BUSINESS DEVELOPMENT, MANAGEMENT AND SOFT SKILLS COMPARED TO NON- SCALEUPS Figure 26 Hard skills that entrepreneurs have difficulty finding in job applicants (scaleup vs nonscaleup) 3 2 3 2 3 1 2 1 2 1 17% 1 1 1 1 1 17% 11% 1 10% 7% 7% Sales Business development Management Marketing Analysis Communication Administrative Graphic Design Programming Writing Financial We do not have trouble finding any hard skills Linguistic Legal Multiple Response Question Scaleup BASE: N=439 Non-scaleup 49

The most challenging hard skills to find are also the most demand skills by entrepreneurs. When assessing by country, we find that sales, business development, management, marketing, programming and analysis were noted as the most demanded skills. Sales skills are in particular demand in Saudi Arabia, Bahrain and Jordan, marketing in Palestine and communication skills in Morocco. Greatest challenge is the lack of technical skill in. Long term, it would be great if universities could help remedy this. In the short term, needs more coding camps, hackathons and workshops. There are so many services for entrepreneurs and learning how to start a business, but the services for people to develop the technical skills that so many entrepreneurs really need are lacking. - Amr Saleh, CEO, Integreight CHALLENGES TO RECRUITING AND RETAINING EMPLOYEES Recruiting and retaining employees is another critical element within the process of building teams and scaling companies. Employee retention is contingent on a multitude of factors such as salary, learning and promotion prospects as well as company culture and employee-manager relationships. Additionally, the allure of stable work opportunities and better income prospects can influence one s career choices. Furthermore, while there is a general discussion regionally of the reliance on the public sector employment, fewer entrepreneurs in our sample see the government as a competitor for talent relative to corporations and other startups and SMEs. 12 It's important to create a community of like-minded people who will form a coherent working culture. Also, the fact that employees can see that they're able to continue to develop their careers while at the company (promotions, etc) makes people want to stick around at the company. Dr. Bridge has an informal training program in which senior level employees hold trainings for lower level employees. - Amir Barsoum, CEO, Vezeeta by Dr Bridge 12. Youth in the Middle East and the Job Market, Saif, Ibrahim and Abdul Khalek, Joulan, Carnegie Endowment for International Peace, 2011 50

SURVEYED ENTREPRENEURS SEE CORPORATIONS AS THEIR PRIMARY COMPETITION FOR ATTRACTING EMPLOYEES Figure 27 Entrepreneurs main competitor for attracting employees 50% Corporations Government Non-profit, NGOs. 2 Other startups, SMEs % % BASE: N=863 Surveyed startups face competition for talent from corporations (50% and to a lesser extent from other startups (2 and government institutions () as shown in figure 27 above. Corporations provide stability, steady growth, attractive compensation, and various incentives. Additionally, 4 % of the surveyed workforce believes public sector employment is more attractive than work at a startup or SME, suggesting that the consistency and stability provided by governments is an allure for employees in the region. The pattern is consistent through the surveyed countries and industries. Government jobs are a second choice for the surveyed workforce in North Africa and Bahrain, while NGOs are a popular choice in Palestine. The level of professionalism and commitment is very low. Can't have this at a startup. Students must be more exposed- people just go to school and study whatever their parents want them to. Degrees aren t useful for assessing candidates, as education is not strong in the region. Exposure is missing- people don't know what's out there in the labor market. - Sima Najjar, founder and CEO, Ekeif 51

MORE THAN 50% OF ENTREPRENEURS IN EGYPT, JORDAN, LEBANON, MOROCCO, SAUDI ARABIA AND UAE SAY THAT CORPORATION ARE THEIR MAIN COMPETITORS Figure 28 Entrepreneurs main competitor for attracting employees (per selected countries) Corporations Other Startups, SMEs KSA 6 57% 5 Morocco 5 UAE 5 Jordan 51% Tunisia 4 Palestine 3 Bahrain 3 UAE Bahrain Jordan KSA Tunisia Palestine Morocco 3 3 2 2 2 21% 20% 1 1 Tunisia 2 Bahrain 1 Morocco 1 Palestine 1 KSA 11% 10% Jordan Government Bahrain Morocco Jordan Palestine KSA Tunisia Family Businesses 7% 1% UAE 1% UAE 1% Non-profit, NGOs Palestine 2 Tunisia Bahrain Jordan UAE Morocco 1% KSA 0% d BASE: N=419 52

Big companies usually employ people who have the proven ability to deliver quality results, and convincing them to leave their jobs and come to our small startup is hard because doing so is so risky. When you're at a startup, your career has the potential to grow rapidly if the company grows rapidly. And when you're an employee at a startup, your voice is meaningful; you're an essential member - Mokhtar Rawy, former cofounder and CEO, Swipe n Tap 53

LACK OF JOB STABILITY, PROFESSIONAL DEVELOPMENT PROSPECTS AND LOW SALARY ARE THE TOP THREE REASONS WHY THE SURVEYED WORKFORCE IS NOT WILLING TO WORK FOR A STARTUP Figure 29 Factors that contribute to the workforce s disinterest in working for a startup 27% 31% 2 Insufficient learning opportunities The brand is not strong enough My family does not want me to work for a startup Other The salary is not sufficient Lack of job stability Lack of career prospects or professional development BASE: N=172 Figure 29 shows that a lack of career prospects (27%) and a lack of job stability ( %) both deter workforce participants from working with a startup and could also limit a startup s employees long-term interest in remaining with the company. 54

HIGHER SALARY PROSPECTS IS THE MOST COMMONLY-CITED REASON FOR EMPLOYEES LEAVING STARTUP Figure 30 Why did employees leave your company? Wanted more training opportunities Wanted more flexible hours or working conditions Wanted more benefits (i.e. insurance) Wanted more opportunities for promotion Wanted to pursue an educational degree Wanted to work for a more stable company Wanted to work for a company with better brand name or prestige They were fired Wanted a higher salary 10% 10% 1 1 1 21% 4 Multiple Response Question BASE: N=863 55

Figure 31 Why did you leave your job at a startup? The salary was not sufficient The company closed down and I was forced to leave It was only a temporary job and I left when I found something better I was not challenged enough I left to pursue an advanced degree I was working too much I was not interested in the work I was fired 2 20% 11% 10% 1% Multiple Response Question BASE: N=519 56

Securing skilled workers over the long term is a primary concern for companies of any size. Insufficient salary comes up as a top reason for leaving job in a startup, cited by both entrepreneurs and workforce. 4 of surveyed entrepreneurs cited that the main reason why employees left their company is because they wanted higher salaries, 2 employees cited insufficient salary being the main reason why they left their job at a startup. Brain drain and general regional challenges also compound this issue. The World Economic Forum s Global Competitiveness Report highlights the difficulties of some MENA countries to retain talent, with six out of ten countries performing below the OECD high-income country average (Appendix B, table ). In particular, and underperform their peers in the region. Discontent is not just limited to these countries, as 30% of respondents to the Bayt.com Middle East Salary Survey said that they are planning to look for a better job as an expat in another country. 57

Case Study: SOUKTEL, PALESTINE Motivation as a tool to attract and retain high-performing employees Souktel, a labor market focused mobile solutions development company based out of the West Bank, has witnessed significant product growth driven largely by client demand since its start in 2007. However, growing a company within the region s restrictive political economic environment has been a challenging experience as top regional talent in the IT sector is migrating to the US, the GCC, or Europe. As a result, Souktel uses specific approaches to find and attract highly skilled employees. The company s cofounder Jacob Korenblum says that Souktel s priority is to recruit locally based Palestinians. In addition, however, the company also looks to hire Palestinians living abroad. Many Palestinians living in the diaspora are interested in returning home, if comparable job opportunities are available opportunities which value their global exposure to doing business. Korenblum has found that the best way to incentivize diaspora Palestinians to return is to offer a blend of unique work opportunities and compensation above the market norm. Our top diaspora talent understand that by returning to Palestine they can have very unique, rewarding jobs which just aren t available in the US to the same extent. It s expensive to run a company in the West Bank, but we want our employees to maintain a good quality of life. We think of cutting costs elsewhere to pay higher salaries as a way to care for the company while securing top talent that drives growth. He has also made training and development on the job a flat versus topdown process by emphasizing job shadowing, knowledge sharing, and transparency. He has also managed to bring in development consultants and trainers on a pro bono basis. e insig ts: Souktel treats talent acquisition as a long-term investment. Beginning with the interview process through training and development, the company focuses on identifying and motivating the right fit and then utilizes an array of resources to attract, cultivate and retain the talent 58

EXPLAINING THE GAPS Although many entrepreneurs in our sample indicated high levels of satisfaction with their employees skills, many barriers remain, which could place limitations on how effectively startups can hire and scale their companies. We point to main factors that could contribute to these challenges for MENA s entrepreneurs as they create and scale their teams. Education system: Regionally, there is widespread discussion on how educational challenges prevent students from entering the labor market. 13 While the region is experiencing increased tertiary enrollment rates, which is set to continue into the foreseeable future, the quality of education systems remains in question. 14 Unemployment rates are still high despite ostensible educational gains. 15 Many entrepreneurs explained their difficulties in finding the right talent as due to students not receiving the proper mix of hard and soft skills in universities. Additionally, some pointed to few training opportunities following graduation for young labor market entrants to augment their skill sets. We need to have small groups and workshops to enhance the quality of talent. Do early work with students at schools and universities. You connect with people, you learn, you correct yourself. Europe is a very good example - the Twinning program, which is a Paris and Berlin gaming collaboration. Talent of a person is one thing, but the ethics is something else. We need to find a solution for ethics and someone who is not afraid of failure. - Nour Khrais, founder and CEO, Maysalward Competition from corporations: Many entrepreneurs in our survey indicate that they are competing with corporations to attract employees. These larger, established entities offer higher salaries and are more stab e than startups. Job seekers prioritize the brand, salary and job stability over the leadership and growth opportunities that younger companies can offer. 13. Jobs for shared prosperity: time for action in the Middle East and North Africa, World Bank, 2013 14. Breaking even or breaking through: reaching financial sustainability while providing high quality standards in Higher Education in the Middle East and North Africa, World Bank, 2011 15. Global Employment Trends for Youth, International Labour Organization, 2015 59

Hiring procedures and channels: Many companies in our sample are still young with over 60% being five years or younger. While firms will mature and structure operations at varying speeds, human resource processes are most likely still being developed, and while some indicated during interviews that they offer training opportunities, formalized skills development programs are still rare. Additionally, most surveyed companies only rely on a few channels for hiring employees, suggesting that they are not accessing the full range of options for finding new staff. Cultural perceptions: With relatively few exits, the merits and opportunities for working at a startup have yet to take root in the region. As a result, the level of interest in joining a young company, despite a lack of financial and non-financial incentives, is still arguably low for much of MENA s labor force. High cost of failure, lack of regional role models are some of the factors affecting weak perception of startup career in the region. 60

CONCLUSION AND RECOMMENDATIONS The issue of talent acquisition and development is of critical importance in MENA s entrepreneurship ecosystem. It is an essential resource for starting and scaling companies, yet identifying, recruiting and retaining talent is a challenge for MENA s entrepreneurs. With a nascent startup community and only early indicators of impact, entrepreneurs in MENA must contend with multiple hurdles when recruiting and growing their teams. Cultural trends, hiring methods, educational challenges and the allure of stable work at large, established corporations all complicate the team building process for MENA s entrepreneurs. While surveyed entrepreneurs want to hire, indicate satisfaction with their employees and express optimism in available talent in their local as well as neighboring markets, a multitude of factors limit the degree to which they can effectively find, hire and retain talent. Many players in and outside of startups ultimately contribute to shaping teams and scaling them. Universities, policymakers, media, incubators and entrepreneurs themselves all have roles to play in maximizing the impact that the region s human capital can have on its startup community. The below recommendations are a list of potential methods and interventions these players can implement to support access to talent issues for MENA s entrepreneurs. These measures are not a prescription for su, but can help ecosystem stakeholders, including entrepreneurs themselves, identify good practices for tackling various facets of the talent access equation in the region. Recommendations for improving access to talent for MENA s entrepreneurs: ntrepreneurs d d d d d d d Promote a partnership mindset: present and build a collaborative culture in interviews with potential employees and amongst the startup s staff. As startups will have difficulty paying large salaries to employees, relative to corporations and governments in MENA, they can instill a common sense of purpose, ownership and vision within their companies to recruit and retain staff. Share knowledge and ownership: open dialogue and shared vision were often discussed in interviews with entrepreneurs as important facets of building good rapport with employees and retaining talent as well. Entrepreneurs discussed how a culture of knowledge sharing was of paramount importance in building teams, yet not-often practiced in MENA. To counter this, entrepreneurs should emphasize openness and collaboration with their teams from day one. 61

Experiment with financial and non-financial incentives: entrepreneurs should explore ways to combine both financial and non-financial incentives. As noted in our survey findings, labor force participants were willing to sacrifice higher salaries if they could obtain stock options and training opportunities. Combining these and other incentives can help convince employees of the importance of working for a startup as well as remaining with it for the long-term. Diversify recruitment channels: in addition to personal and professional networks, explore partnerships with universities, collaborations with corporations to acquire mentorship and employee exchanges, internships, freelancers and remote hires can all assist startups in accessing new hiring channels and opportunities. Continuous networking efforts and leveraging employee networks to find talent can also help entrepreneurs maximize their reach for future recruitment efforts. Incubators and accelerators: functioning as offices, knowledge hubs and networks, incubators and accelerators play a significant role in channeling expertise to startups. As such, they can also play critical roles in supporting access to talent. Mentorship: within their networks of investors, seasoned entrepreneurs and corporate executives, incubators and accelerators have access to expertise on helping companies to scale. Creating mentorship connections between these experts and incubated companies, in interest of building knowledge of employee recruitment and retention practices, can help in disseminating best practices. Recruitment platforms: given their role as gathering points and hubs for the ecosystem, incubators and accelerators can also support developing specialized online platforms for startup recruitment. These sites can cater directly to meeting startups talent needs and also focus on building communication between entrepreneurs and prospective employees. Legal support and HR support: entrepreneurs interviewed for this study pointed to the need for legal support to understand laws regarding stock options and equity sharing schemes with employees as well as other legal aspects of the hiring. Incubators and accelerators can help connect startups with lawyers to guide them through this process. Media: media outlets can play a direct role in shaping public awareness around entrepreneurship and spreading knowledge on the startup culture. Highlight startup stories: while the startup ecosystem in MENA is still young and many entrepreneurs as well as ecosystem supporting institutions have much ground to cover, the media can play a significant role d knowledge to the rest of the region on startup culture and values. Arguably, in geographies such as MENA where the appeal of starting a company and working for a startup are still underdeveloped, media can play an even more significant role in popularizing the concept of startup employment. Facilitating recruitment: given their reach and online and offline channels, media can help startups reach larger audiences for recruitment purposes. Startup-specific partnerships can enable entrepreneurs to leverage the media s access to advertise both job postings as well as their companies in general to the general public. 62

Policy makers: like their role in the entrepreneurship ecosystem as a whole, policy-makers are chiefly responsible for providing the foundation and environment to enable talent development and acquisition. Educational reform: focus on educational policy reforms, helping schools and universities develop and administer curricula that focuses on 21st century skills and entrepreneurial thinking amongst students. While these specific education practices do not guarantee that students will become entrepreneurs or join startups as employees, it can enhance the ecosystem s impact and reach to prospective labor market entrants form a young age. Startup support programs: governments can also engage in dialogue with entrepreneurs to explore methods for supporting startups salaries. Subsidies of employee salaries or tax breaks to support the team building process could help entrepreneurs access talent. These efforts hinge squarely on communication and idea sharing between the public sector and the ecosystem. Data and transparency: governments can also help startups in providing access to data on hiring trends and tendencies in their countries. With this knowledge, startups could obtain a better understanding of the main hiring patterns in their local labor markets and d Universities: though relatively few entrepreneurs in our sample used regional universities to recruit employees, the academic sector plays a fundamental role in developing talent and preparing it for the labor market in MENA. Engage with entrepreneurship ecosystem: universities can build partnerships with incubators and accelerators, financial institutions and NGOs in the ecosystem to share knowledge, host events, create dialogue around the skills needed to compete in the private sector as well as help entrepreneurs source talent. Leverage career offices: university career offices can develop relationships with startups to help place students in class projects, internships or full-time positions. Career offices can also hold career fairs and lectures for startups to present their companies to students and discuss the culture and merits of working at a startup. Additionally, career offices can include startups within their databases of employers, allowing to easily identify candidates based on a specific set of skills, availability et c. Promote an entrepreneurial culture: in addition to infusing entrepreneurial thinking and concepts into curricula, engage students in entrepreneurial projects, competitions and hackathons. Entrepreneurship events and faculty research focused on entrepreneurship can also help spur more interest in the startup community within universities. Additionally, allowing students to lead these initiatives within the university can help to cultivate a more entrepreneurial mind-set among them. 63

METHODOLOGY d d d D d d d d d 1. Survey of entrepreneurs and the workforce Entrepreneurs: d d d d d dd d d d d d d d d d d d Labor force: d d d d d d d d D d d d d d d d d 2. Interviews with entrepreneurs and ecosystem experts d d d d d d d d d d Data Constraints: d d d d d d d d d d 64

APPENDIX A ro ilin entrepreneurs in our sample 1a Main office location BASE: N=963 Countries Jordan Palestine UAE Morocco Bahrain Saudi Arabia Tunisia Algeria Kuwait % 17% 17% 1 10% 10% Tunisia Saudi Arabia Bahrain Morocco UAE 10% Algeria Pales7ne 10% Kuwait 17% 1 Jordan 17% 1b Main office location Regional groups: Levant North Africa Gulf % 41% 3 2 Gulf 2 Levant 41% North Africa 3 2 Company age BASE: N=963 Less than 1 year Age Less than 1 year 1-4 years 5-9 years 10 years and older % 5 20% 17% 10 years or older 17% 5-9 years 20% 1-4 years 5 3 Founder's experience BASE: N=769 Years None Less than 1 year 1-2 years 3-5 years 6-10 years 11-15 years 16-20 years More than 20 years % 11% 21% 31% 1 7% 16-20 years 7% 11-15 years 1 More than 20 years 6-10 years 31% Less than 1 year or none None 1-2 years 11% 3-5 years 21% 65

4 Industry distribution BASE: N=963 Industry Software development and service Other Online services Ecommerce Art and creative industries Marketing and PR Services Telecom and mobile Management or technical consulting Education Media and journalism Content generation Manufacturing services Environmental Financial services Retail Tourism and hospitality Gaming Pharmaceutical and healthcare Food and beverage % 17% 1 7% ro ilin t e or or e in our sample 5 Current employment status BASE: N=1449 Values Working full time (30 or more hours per week) Unemployed: Professional with past working experience Other Working part time (fewer than 30 hours per week) Unemployed: Recent graduate Full-time student 1% % 7 1 1% Working full 3me (30 or more hours per week) Unemployed: Professional with past working experience 1 Other Working part 3me (fewer than 30 hours per week) 7 Unemployed: Recent graduate Full-3me student 6 Which country do you currently work in? BASE: N=1697 Countries Saudi Arabia Jordan UAE Algeria Tunisia Morocco Other Iraq Kuwait Qatar Palestine Libya Oman Bahrain % 1 1 11% 1% 1% 1% Qatar Other Morocco Kuwait Tunisia PalesJne Iraq Libya 1% Oman 1% Bahrain 1% Algeria UAE 1 Saudi Arabia 1 Jordan 11% 66

7 Highest level of education BASE: N=1435 Education level Bachelor Masters Other Vocational raining Assoc degree Secondary ducation PhD Primary or no education % 51% 2 7% 0% Associate University Degree Voca5onal Training Other 7% Secondary Educa5on PhD Masters 2 Primary or no educa5on 0% Bachelors 51% 8 Gender BASE: N=1697 Value Male Female % 7 21% Female 21% Male 7 9 Age BASE: N=1566 Age Less than 25 years old 25-30 30-35 35-40 40-45 45-50 More than 50 % 1 1 21% 17% 10% 1 10% 17% 1 Less than 25 years old 1 25-30 30-35 35-40 1 40-45 45-50 21% More than 50 67