Indian tech entrepreneur Amjad Puliyali had worked for a decade in Dubai, but in 2016, he relocated to tiny Bahrain to launch an online grocery delivery startup called GetBaqala. With just 1.5 million people packed into a 295-square-mile country of 33 islands, Bahrain is the smallest market in the Middle East. But Puliyali and his co-founders realized it had a lot else going for it. They’re among a growing number of tech founders — with startups in food and fitness, software development and fintech — on the rise here.

A historic node for crucial trade routes, Bahrain sits next to Saudi Arabia, the Gulf’s biggest economy, and is close to the United Arab Emirates. It shares many of the demographic and customer behavior patterns of the region’s larger markets. But beyond those innate advantages, the country’s Economic Development Board (EDB) helped Puliyali’s team swiftly get their paperwork and visas ready. Puliyali had to visit Bahrain just once to get the startup running. It’s one example of how Bahrain is positioning itself as the Gulf’s natural home for tech startups looking for small laboratories for their products — a Silicon Valley in the Middle East.

The country is laying out a web of benefits for startups. The Bahrain Development Bank (BDB)’s accelerator program, Seed Fuel, launched in 2015 and funds startups — GetBaqala received $66,000. Rowad, another BDB program that started in 2015, incubates startups. Tamkeen, a labor fund, subsidizes training of Bahraini professionals by startups. It’s the region’s only country that allows startups full ownership, zero taxes and consistent regulations across its territory. According to a December 2016 KPMG Cost of Doing Business report, businesses in Bahrain benefit from 30–40 percent lower operating costs than those in neighboring Dubai and Qatar. And entrepreneurs are noticing.

The country has provided so much in a short span of time … nurturing our confidence and skill set. Amjad Puliyali, Indian startup founder in Bahrain

Bahrain is witnessing a boom in tech and tech-enabled startups, from 16 registered in 2015 to 34 in 2016, 50 in 2017 and already up to 75 in 2018. The country is now attracting independent accelerators and incubators such as Bahrain FinTech Bay, CH9, C5 Accelerate, Flat6Labs, Bahrain Fashion Incubator and Brinc Batelco IOT Hub. And Amazon Web Services last year announced plans to set up its first Middle East and North Africa data hub in Bahrain.

“The country has provided so much in a short span of time … nurturing our confidence and skill set,” says Puliyali.

For Bahrain, these investments are part of a long-term strategy to wean the economy away from a dependence on oil and gas, says Pakiza Abdulrahman, manager in charge of startups and business development for information and communication technology firms at the EDB. The country’s non-oil economy — increasingly the kingdom’s focus amid global fluctuations and uncertainties in oil prices — is expected to grow by 4.3 percent in 2018. The country was the first in the region to begin a process of economic diversification — in the 1980s — and grew into a financial hub in the 2000s. Small and medium enterprises (SMEs) constitute 90 percent of the country’s companies and contribute 30 percent to Bahrain’s GDP. “Our focus now is on harnessing that culture to drive high-growth potential, technology-driven startups,” says Abdulrahman.

Central to Bahrain’s strategy, says Abdulrahman, is a “Team Bahrain” approach. There’s no one government arm alone that is working with startups, while other departments maintain traditional bureaucratic regulations — a pattern across larger economies ranging from India to Brazil. In Bahrain, the EDB, BDB, Tamkeen and the SME Development Board led by the Ministry of Industry, Commerce and Tourism all work with startups to facilitate their birth and help them in their early years.

That’s helping make the country an innovation sandbox for startups looking to eventually expand across the Middle East and beyond. Malaeb, a cloud-based booking app for soccer fields that launched in Bahrain in 2016 is now available in Kuwait and Saudi Arabia. Skiplino, a queuing system that allows people to line up digitally through a mobile application, started in Bahrain in 2015 and now exists in more than 100 countries. And Puliyali hopes to replicate GetBaqala’s success in Saudi Arabia and the UAE.

The startups emerging in Bahrain also cut across sectors: 36 percent of them are focused on the retail and food and beverage sectors, while general software development accounts for 30 percent, and fitness and health another 16 percent. Fintech startups constitute 14 percent of Bahrain’s expanding innovation ecosystem.

The relatively small size of the market compounded by a dearth of venture capitalists actively investing in tech startups means that access to funding remains a hurdle. Deploying public funds into VCs, Bahrain concluded, would bolster the overall health of the ecosystem, reinforcing its national aim of becoming a startup technology hub.

That’s why the Central Bank of Bahrain introduced new regulations in 2017 to enable conventional and Sharia-compliant crowdfunding to promote investment in startups. In May this year, the BDB launched the $100 million Al Waha Fund of Funds — a first-of-its-kind initiative in the region — which will invest in venture capital funds with the aim of attracting more VCs and angel investors to Bahrain. Shaikh Mohammed bin Essa Al Khalifa, chairman of Al Waha’s advisory committee, says he hopes this fund will “make a significant difference, enabling entrepreneurs to realize the potential of their ideas.”

Those “ideas” will only grow, as millennials increasingly turn to fintech, artificial intelligence, big data and the internet of things for solutions to challenges plaguing the world, suggests Puliyali. Bahrain has caught on, and it’s beginning to reap the benefits.