A startup fever with a Middle Eastern twist

Young Arab entrepreneurs throughout the Middle Eastern region (the “youth bulge”) are collaborating to revitalize their local economies and attracting international investment.

A group of Wamda’s Mix N’Mentor attendees listen to another person speaking
“Wamda’s Mix N’Mentor event, Beirut, Nov 10, 2012” by AltCity Media/Tech Collab Space (Flickr)

Hamra Street, Beirut.

A new Shoreditch is in the making: hipsters and tech geeks, young entrepreneurs and perplexed investors. The startup fever that has overtaken the west has reached Middle Eastern shores. Whilst all eyes are focused on Cairo’s latest death penalties, Damascus’s chemical arsenal, or Baghdad’s suicide attacks, a quiet revolution is stirring up the Arab world. With stifled growth and soaring unemployment, young Arabs are taking the reigns of their local economies, fighting off instability and bringing much needed vitality to the region, with a middle eastern twist.

Two weeks ago, two Lebanese entrepreneurs launched a new website, Yallacondoms.com, which allows Lebanese to circumvent judgmental pharmacists and disapproving passers-by and order condoms, pregnancy tests, lubricants and so on from the privacy of their home. Instabeat, another Beirut based start-up that has developed a heart rate monitor for swimmers, has recently secured a Series A round of investment from Wamda Capital, Jabbar Internet Group and other Angel investors. Between matchmaking apps, grocery delivery sites, clean tech companies or fitness trackers, projects are proliferating, and many are attracting international attention. In 2012, JP Morgan invested $20 million in Namshi, a Dubai-based e-commerce firm, while Yahoo acquired Maktoob (in 2009), a regional web portal. In November 2013, Boris Johnson announced the launch of a £100 million fund to encourage tech startups from the Arab World to come to London. Local venture capitalists and private equity funds, such as Abraaj Capital and Citadel Capital, are also rushing in, to the delight of the hundreds of tech savvy young Arabs at the heart of this movement.

Other initiatives are also burgeoning to support the development of this new trend. Wamda, an online platform formed in 2010 to provide support for young entrepreneurs, reveals in its first Research Lab’s study on the development of the entrepreneurial ecosystem in the Middle East that there are over 140 organisations around the MENA region that actively work with entrepreneurs. This activity is a new response to the region’s youth bulge. In 2011, the 15 to 30 year old cohort represented more than 40% of the population. While this generation has presented itself until recently as a heavy burden on employment figures, it has now grown restless and is going against economic forces to forge its own business trends. Rather than joining the ranks of jobless or poorly paid government workers, Arab youth are changing the labour market dynamics by creating new jobs and challenging gender biases. Indeed, no one is left out: figures provided by The Economist estimate that the share of women entrepreneurs is at 35% in a region where less than 16% of women are in employment. Conferences, events, workshops and competitions are being launched all over the region to promote the role of women and include female entrepreneurs in this startup fever.

Increasing opportunities and a favourable entrepreneurial environment have also succeeded in containing the brain drain that this region has suffered. Whilst traditional economies have repeatedly failed to retain local talent, this new trend is successfully capturing much needed knowledge and skills and integrating it into the job market. Governments are reacting positively to these changing circumstances. The Lebanese Central Bank has recently announced the release of a stimulus package aimed at encouraging startup companies. King Abdullah of Jordan is credited with turning Amman into the Middle East’s start-up hub. The Arab League even hosted a forum for Arab Entrepreneurs and Innovative Ideas last February, gathering both investors and entrepreneurs.

However, the challenges start-ups face are still daunting. While a few lucky entrepreneurs can rely on extensive networks of family and friends for initial funding, many still suffer from a lack of venture capital in the region in the initial stages of the business. Additionally, the lack of appropriate infrastructure in many countries is an impediment to growth and scalability for many of these start-ups. Currently, the MENA region has the one of the lowest broadband penetration rates in the world, estimated at around 40%. This hinders development of new initiatives and limits the market available to e-commerce businesses. In response to this situation, eight mobile telecom companies operating in the Middle East and Africa have agreed to cooperate to reduce infrastructure costs and to make broadband more affordable, thus increasing penetration rates. This leads many to hope that this revolution will bring about much needed investment in infrastructure, as well as increasing foreign wealth. This will in turn boost local economies, and offer a whole region the prosperity it is in dire need of.

By engaging young people and empowering them, this revolution might just succeed where the ‘Arab Spring’ has failed.

 

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