Editor’s Note: This is a guest post by Mikko Silventola, partner at Annia Capital. Should also be noted that Silventola sits on the board at Frontier Projects International.
Are you interested in expanding your start-up company or growth company to the Middle East? During my past five months in the Middle East, I have personally met really many Finnish and Nordic entrepreneurs looking to expand their business to the Middle East markets. Many companies visits here with a bigger delegation and try to meet as many potential partners or customers as possible. I believe it is quite easy to meet and get meetings with Arabs but difficult to get money out of them!
So when thinking about potential partner who could help your company to expand here – you should always ask one important question: How many deals have you made in the area or with the Arabs?
Frontier is a good example of a consulting company that has also helped Calcus Group to expand to the Middle East and I have recently joined the company as a Board Member.
I interviewed the Founder and CEO Mr. Timo Nurminen for my second post in Arcticstartup.
Silventola: Tell us a little bit about your background?
I started my career at the Finnish Security Police, known as Supo and then worked briefly at the Ministry of Foreign Affairs. I soon figured out that government career was really not for me and I started a software company called Trackway in 2001 with two of my close friends. We were one of the leading software developers for RFID technology which was expected to revolutionize various industries such as logistics, manufacturing and anti-counterfeiting. Company become one of Finland´s fastest growing Start Ups, not a bad achievement if we take into account, that we started the company right after the great dotcom bust when no one in their right mind would start another software company. Trackway was sold in late 2007 to Finnish telecommunications operator Elisa and to Stora Enso. After that I decided it was time to do something else and I got an idea to start helping Scandinavian companies to enter the fast growing markets here in the Middle East. Out of that, Frontier Ltd was born in late 2008 and company was established in the famous Dubai Internet City Freezone.
Silventola How did you end up to the Middle East and Dubai?
I have been living many years as a schoolboy in both Iraq and Kuwait in the 1980´s and 1990´s. My father was a consultant to large construction projects so we lived in the Middle East more than we did in Finland. Things came to abrupt end 2nd of August 1990 when Saddam Hussein invaded Kuwait. My father was taken hostage among thousands of others and he ended up spending 3 months in Baghdad, Iraq as Saddam´s guest as they were friendly called. After he was released, we wowed never to return to Middle East but once you have been living in the region, it is hard to resist. So by 2008 I felt that it was time to return to Middle East which I consider my second home. Dubai was perfect choice due to its many Freezones, quality of living and vibrant business culture. It also has best connections to anywhere in the world so it was an easy choice to make Dubai as the base of operations!
Silventola Why should a Finnish or Nordic start-up company or SME company enter the Middle East markets?
I would rather ask first, why should the Finnish or Nordic start-ups always enter the most competed and difficult European markets such as Germany, UK and France? I think there is this bandwagon thinking going on and many start-ups end up failing in European markets which they, rather ironically consider their home markets. I would argue that it is in fact more difficult for Nordic Start Up to succeed in France compared to for example, United Arab Emirates. Major reason for this is that Scandinavians have solid reputation here and rather strangely we get along better with Arabs than other nationalities. Maybe it is because we are small nations living in harsh environments and we share the culture where personal honesty and integrity is highly valued.
Nordic Start-ups should enter the Middle East markets because this is one of the few global markets that is growing in terms of GDP, there is great effort to move from carbon based economies to knowledge based economies, there is 100+ million consumer market with very young demographics and finally, start-ups and SME´s have become accepted as integral part of thriving business environment. And people here are absolutely crazy about new technologies and solutions, more so than in Finland where we like to consider us as advanced techie geeks.
Silventola What is the financial situation in the Middle East at the moment compared to the Nordic countries or Europe?
I think one only needs to read or watch the news from Europe to realize, that if you want to operate in markets that grow instead of shrink, you have to look outside of Europe. Middle Eastern oil states such as United Arab Emirates are expected to grow 3-5% this year. Qatar is expected to grow anywhere between 8-12% and overheating is more talk of the town than austerity. Companies have high investment capabilities and they are keen to invest into newest innovation and technologies. On the consumer side, people have high disposable income and purchasing power.
Silventola Is there still room for services/products in the Middle East?
This is a very good question. Service market is challenging in a region, where you can order 2 EUR hamburger and McDonald´s will deliver it to your home at no extra cost. For companies with large part of their revenue coming from services this is challenging, especially if they expect to charge similar daily rates for their services as in Nordic countries. My advice is to try to transfer some of the service component directly to product pricing to ensure healthy profits. If company has real niche expertise that is both unique and hardly anyone else can offer same level of knowhow, then it is possible to charge Nordic rates or even higher. But these cases are few and far between. In terms of products and technologies, there is demand across the border from IT solutions to healthcare technology and consumer solutions.
Silventola How does Frontier help young companies to enter markets in the Middle East?
We have helped 36 Nordic companies to the Middle Eastern markets since 2008. These companies have been from various industries so we have fairly good understanding of the markets. Most of assignments include partner, distributor or reseller search. We will identify and screen best possible partners for the Nordic companies and perform detailed due diligence. Picking the right partner in the Middle East is of paramount importance, more so than in many other markets. We will help the Nordic company to secure best possible partner and commercial agreement and support in the initial phases of the market entry. Another popular service has been our outsourced salesforce and business development concept where we train ourselves on our customers products and sales process and then perform real, active frontline sales work with the single aim of seeking commercial deals or pilot projects. We have also seen increasing demand to set up local Freezone companies for Nordic companies so that they can operate here with 0% income and corporate tax. We establish these companies as turnkey solution to Nordic companies. Finally we have standard support services such as market research, legal, PR and marketing.
Silventola What about ELY-financing when entering the market?
ELY financing is only for Finnish start-ups and SME´s for testing the market potential. It is very good option since it is fast and easy to apply and financing covers 70% of the project value as aid. Many of our customers have used ELY VARA financing instrument successfully to finance their first stages of the market entry to the Middle East. In fact we are very proud that not a single one of ELY VARA finance applications has been rejected from any of our customers. This is a testimony of the high quality of our projects and references!
Silventola How easy is to get this ELY-financing? Will Frontier help with it?
Filling the ELY VARA application takes couple of hours to complete and we often help in this process by providing input. Reporting has been made easy also with only few pages of final reporting required after the project. I think many companies have misconceptions about different finances instruments available to them.
Silventola What’s the biggest mistakes that Finnish or Nordic companies do when they enter the Middle East?
In the Middle East business culture centers around personal relationships. Often Nordic companies do not appreciate this and directly go to business issues or long technical presentations whereas locals like to know more about the people behind the company. Also coming here to boast or advice locals how things are done much better in Sweden or Finland is not very helpful. Also there seems to be widespread misconceptions that one can overcharge customers here because they are “rich” and have “oil” is something I have seen often. That never ends well I can assure that. Finally, to think that business can be done from the Nordic remotely via emails and Skype calls is totally out of question. It simply won’t work, many have tried, none have succeeded.
Silventola What’s the local business culture like?
Business culture is very international and varied. It really depends whom you meet and in what context. English is used almost everywhere as the official business language which makes things easier. One has to get used to the fact that meeting times can change anytime without any reason, be postponed without warning or that someone calls you 7.00 in the morning and expects you to be in the meeting at 8.30 in a location 120 km away. So understanding that the concept of time is more fluid is important. One also needs to maintain high level of follow up activity to get things done. This often requires some sort of local presence, either by traveling to region periodically or having someone like Frontier to maintain local contacts and pushing things forward operationally.
Silventola Why should expanding companies partner with Frontier?
We have the required expertise and references to navigate the critical early stages of the market entry to Middle East. Also we can significantly accelerate the time it takes to get established here, whether it be the first deal, pilot project or setting up a company. This is where the return of the investment comes for our customers: less risk with faster end results. We are also very sales and business development oriented who operate in the front line of the business. We are all former entrepreneurs so we understand what start ups and SME´s want and how they operate. Each project is for us important one and team works as hard as they can to make it success. This is why our services have been tailored especially for Start Ups and SME´s and this also shows in our customer satisfaction and retention rate.
Silventola How can we contact you if we want to proceed with ELY-project in to the Middle East?
I can always be reached by email [email protected] or my mobile +971 55 990 45 32.
I also travel periodically to Scandinavia to meet existing and new customers.
Mikko Silventola is a founding Partner of Annia. In addition he holds the position of Board Member and Founder of Calcus Publishing Group, a Nordic publisher of focused Employer Branding and Corporate Branding reports. He is also the Chairman of the Board and Founder at TAEL Group, a rapidly growing Nordic digital Content Marketing company and Board Member at Frontier Projects International.
Special thanks to Mr. Timo Nurminen, Frontier Projects International!