2021 was a great year for startups. The world was gradually recovering from the impacts of the coronavirus, and economic indicators were relatively favourable. However, 2022 has been a different ball game, particularly for startups. Inflation has been at a record high in many countries, and national governments are scrambling to control this global economic downturn.
This economic situation has severely hit many startups, and climate startups are not left out. This article will highlight how Middle Eastern climate startups can navigate the current economic challenges.
Challenges for Startups in 2022
So far, there has been a significant funding dearth in the startup ecosystem in 2022. According to the State of Venture report, global startup funding reduced by 19% QoQ in the first quarter of 2022 and further declined by 23% in the second quarter of the year. This sudden decline in funding is due to the current economic situation of countries across the developed and developing world. For instance, inflation in the US is currently 8.2 per cent. This inflation rate has largely stemmed the tide of investment funds from the country.
There are also other geo-political issues related to the Russia-Ukraine war. The energy crisis and supply chain uncertainties catalysed by the war have increased investors’ reluctance to funnel their funds into startups. More so, 2021 was characterised by a lot of focus on startups, particularly because tech stocks were booming. However, the economic reality has placed a lag on this startup boom.
Another challenge that reared its head this year is the talent shortage. The global talent war has gotten more intense in recent years, with countries battling to retain skilled workers. Specifically, in the Middle East, the talent shortage seems to have intensified in 2022. For instance, a 2022 PWC survey found that a significant proportion of employers identified skill shortage as one of their primary concerns.
These economic indicators have significantly affected startups seeking to maintain operations or raise funds. However, there are ways to navigate this economic situation.
How Middle Eastern Climate Startups Can Navigate the Current Challenges
While the global funding landscape has undoubtedly declined, funding channels have not been completely closed. Essentially, investors are still on the lookout for startups with viable solutions and balanced books. They are now more attentive to financial due diligence. Moreso, the calls for climate resilience have been higher than ever before. This means that with adequate financial prudence, Middle Eastern climate startups are still in a position to benefit from the current economic situation.
To combat the talent shortage, Middle Eastern climate startups can look to outsourcing. This could prove to be effective, particularly with technical functions. There are numerous benefits to outsourcing. It reduces the effects of the talent shortage, cuts costs, and increases efficiency.
Middle Eastern startups will need to strengthen their resilience as the world moves to recover from the current economic situation. As a climate startup, it is vital to stabilise your books and effectively communicate the viability of your solutions to investors. This will ensure that your company is well-capitalised for maintenance or expansion.
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