Startup Rising – The Entrepreneurial Revolution Remaking the Middle East – by Christopher M SchroederLeave a comment
August 23, 2015 by David Miller
I can’t exactly recall how I stumbled across the work of Mr Schroeder but it was certainly via Twitter and I think it was via the preeminent venture capitalist Marc Andreesen (who I follow on Twitter) who writes a foreword to the book called “Startup Rising – the Entrepreneurial Revolution Remaking the Middle East“, published in 2013.
What caught my eye was succinctly captured in the acknowledgements of the book when Mr Schroeder retells:
“When I first thought of writing “Startup Rising”, a friend and expert in the book publishing world smiled and said to me, “The two least-selling books are those on entrepreneurship, and those on the Middle East. You are quite contrarian to write about both in one shot”
As a lawyer who previously majored in Arabic and Persian and who’s co-founded a technology startup, I’ve had to learn a lot about the background to successful technology companies, ecosystems and in particular entrepreneurs, primarily by following such people on Twitter and then reading their more detailed blog posts. But in all my reading – and this probably reflects my failure to follow / find people worth following with technology interests on الشرق الأوسط the Middle East – I’d seen (to date) very little about the intersection of technology and the Middle East. So my interest was piqued when I saw a tweet which prompted me to tweet the author Mr Schroeder the following.
Mr Schroeder generously replied:
Flattered he’d want to know what I thought, I gave myself the job of doing just that. I replied:
While I see that Mr Schroeder has just released an update of his 2013 book, I’ve reviewed the original 2013 text as that’s what Amazon were kind enough to send me! This is my review.
Crossing the Rubicon
Mr Schroeder starts his story with the summer 2010 “Celebration of Entrepreneurship“ in Dubai, heralded as a first in the region of a Silicon Valley type conference with 2,400 attendees of principally entrepreneurs and investors. As a seasoned entrepreneur investor and mentor Mr Schroeder had been introduced several years previously, through his membership since 2003 of the Young Presidents Association for CEOs round the world, to a group of US and Arab CEOs;
“The purpose of our group” as one Arab member more colloquially but accurately described later, “was to convince one another after September 11 that we’re not all assholes”.
Organised by two of the luminaries of that group of US-Arab CEOs, Lebanese-Jordanian entrepreneur Fadi Ghanour (founder of Aramex – think FedEx logistics but in the Middle East), and Arif Naqvi (founder of the Abraaj Group, a private equity firm) – the 2010 Dubai based Celebration of Entrepreneurship was their creation, and they reached out to Mr Schroeder to come and see first hand what it was all about. Why did they invite Mr Schroeder? As the flyleaf of the book explains, Mr Schroeder’s work for the Washington Post had already seen him travel to various emerging business and ecosystems in the world. In that sense he was already a herald of tech changes that were appearing fast over the global horizon.
For Mr Schroeder, his trip to Dubai and the Celebration of Entrepreneurship in 2010 appears to have been the author’s Middle Eastern Rubicon, since, once crossed, saw him travelling to Cairo, Amman, Beirut, Istanbul and Damascus:
“Nobody discussed politics, religion or politics or historical obstacles. Instead, all they wanted to do was invent and build new businesses”.
Mr Schroeder’s own introduction to the internet came through deeply personal experiences that even in the early 90s, brought people together in a niche online community support network. That started his peripatetic journey into technology and a career where
“The global ramifications of technology and collaboration hit me like a two by four”.
The Valley and the Wadi
It’s important to remember that while the focus of Mr Schroder’s book is the Middle East, the ever-present background is the USA and, specifically, Silicon Valley:
“For all the hype, hubris, wealth and celebrity associated with “the Valley”, it remains an extraordinary place. It stands alongside Periclean Athens or 11th century Andalucia or Renaaissance Florence for its raw, competitive, innovative zeal, which has utterly changed the world we live in”.
Silicon Valley is therefore the backdrop to the entire book, the benchmark against which the Middle East tech enqelaab (revolution) is set. The ‘network effect’ is all.
I think this – the importance of the ‘Network Effect’ – is worth reflecting on. In his seminal book “Hackers & Painters – Big Ideas from the Computer Age“, Paul Graham (who created the first web based application in the mid 90s, an ecommerce tech start up Viaweb that was acquired by Yahoo!, and who is now a leading force in tech innovation not least due to his founding status in and influence in the tech accelerator Y Combinator) described the Network Effect in a passage that I think is worth quoting in full:
“Good design happens in chunks. The inhabitants of 15th century Florence included Brunelleschi, Ghiberti, Donatello, Masaccio, Filippo Lippi, Fra Angelico, Verrocchio, Botticelli, Leonardo and Michelangelo. Milan at the time was as big as Florence. How many 15th century artists can you name?
Something was happening in Florence in the 15th century. And it can’t have been genetic , because it isn’t happening now. You have to assume that whatever inborn ability Leonardo and Michelangelo had, there were people born in Milan with just as much. What happened to the Milanese Leonardo?
There are roughly a thousand times as many people alive in the US right now as lived in Florence during the 15th century. A thousand Leonardos and a thousand Michelangelos walk among us. If DNA ruled, we should be greeted daily by artistic marvels. We aren’t, and the reason is that to make Leonardo you need more than his innate ability. You need Florence in 1450.
Nothing is more powerful than a community of talented people working on related problems” (Paul Graham, Hackers & Painters – Big Ideas from the Computer Age, 2004, p. 144)
That both Mr Schroeder and Mr Graham should both draw parallels between Silicon Valley and 15th century Florence is perhaps no surprise; but what it perhaps reminds us is that geography and people – what both Mr Graham and Mr Schroeder recognise – can create an ‘ecosystem’ unique in time and place, and that what made (Florence) and makes (Silicon Valley) those ecosystems – so fertile is something worth exploring; and ultimately cultivating; and finally replicating.
Why would a Venture Capitalist invest in an emerging market?
رأس المال الاستثماري والأسواق الناشئة
For Mr Schroeder, two points arose when talking with venture capitalists about networks outside of the US:
- large market opportunity in an emerging market and also outstanding call centre and
- engineering talent at a competitive rate (p.9).
What was new especially in the Middle East was:
- transparency and access to technological, social and collaborative tools on a scale never before seen
- investors more comfortable with polital risk in emerging markets
- changing market dynamics and growth / opportunities in the Middle East
Across the spectrum, the hunger is clear in the entrepreneurs that Mr Schroeder met; young men and women whose revolutions that were unfolding which were
“Not merely about overthrowing longstanding dictatorships, but challenging a generational premise and complacency of their parents that things could not change”.
A challenging aspect of the entrepreneurial journey that Mr Schroeder highlights is the need for entrepreneurs to navigate and circumvent for example government restrictions on online access for data and social networks. Says one entrepreneur:
“The rules are a pain but we figure them out”
So Mr Schroeder’s aim in writing the book wasn’t to write the definitive guide on startups in the middle east, rather to:
“Challenge the traditional narrative of the Middle East in light of substantial and swiftly growing access to rapid technological change”.
On the internet, nobody knows you’re a dog
على شبكة الانترنت، لا أحد يعرف أنك كلب
Chapter 2: Work-Around
The author here examines what has been
“an entropy of acceptance that there could only be one way of doing business”
namely the system of “wasta” that can be paralleled to the 18th and 19th century (and less so today) use of the word “influence” or perhaps ‘nepotism’ in the USA and UK whereby the ability to get ahead in a walk of life was about
“Whom you knew, whom your parents or mentors knew, what favors they could cash in or bank for a later day”.
Discussing the vulnerability of any business to regulatory or governmental interference, one quote from an interviewee stands out:
“If you don’t know the right people, you simply won’t get the the paper [licence]. Do you know that the same guy is at the permit office 20 years” after he first dealt with him … “The reality of my life always has been, and it hangs over your head now, if they are going to unplug you they will unplug you”.
Crucially, this pervasive presence of “wasta” was something that the early Arab tech entrepreneurs realised wouldn’t be present on the web.
It is your destiny
“It is written”
Founded by Samih Touka and Hussam Khoury in 2000, Maktoob was an all Arabic web portal that was sold in 2008 for $175M to Yahoo! Maktoob – Arabic for amongst other things “it is written” or “destiny” – became a standard bearer for the vanguard of emerging tech startups in the Middle East, proof positive that a successful exit to a leading tech company was possible.
النجاح يولد النجاح
One of the refrains repeated by Mr Schroeder is the phrase echoed by the entrepreneurs he met all over the region that “success breeds success”, and that Maktoob is key to that.
(One stand out comment from Touka is how in 2003 they sent their customers thousands of Arabic alphabet stickers to overlay upon their English language QWERTY keyboards (Arabic keyboards being at that point virtually non existent) – a move that Touka says endeared Maktoob to their users).
The new breed of entrepreneur
In Chapter 3 Mr Schroeder explores three types of entrepreneurs, what he calls:
- problem solvers and
- global players.
Improvisers take an existing business model and Arabize the product; e-commence falling into this category (souq.com being the best example – souq being Arabic for market). Case studies of problem solvers highlighted by the author include the “green recycling” of computer parts by university students, as well as software companies digging into the skein that is Cairo traffic. Finally, the global players are those startups looking to ‘go global’ from the outset: startups delivering weather apps, athlete monitoring technology tools, and cardiac diagnostic internet of things products.
Regional opportunities – الفرص الإقليمية
Unique opportunities to the Middle East is what the author explores in chapter 4, entitled Leap Frog; namely:
- mobile tech,
- solar energy and
- social networks.
So for example the “unbanked” ie those people who don’t have a bank account. In the context of solar energy solutions in Egypt, Ahmed Zahran of KarmSolar says that
“The hardest thing for outsiders to appreciate when considering Egypt, the biggest change that has to happen here and [which] I think is changing, has been our absence of imagination. This was the greatest legacy of the Mubarak regime”.
As for social networks, the so called Arab Spring that spread through parts of the a Middle East in 2012/13, brought about an interface of mobile technology, social networks and people coming together in crowded streets and maidaans.
The Florence of the Middle East
فلورنسا في الشرق الأوسط
In his chapter on The Ecosystem Builders, Chapter 5, the author highlights three categories of support required for the creation and growth of great ecosystems in which startups can thrive:
- Investors (through finance but also through legal and HR advice);
- Conveners (who help connect entrepreneurs to one another); and
- Recognisers (organisers of startup competitions and conferences).
Underlying the challenge to the birthing of successful ecosystems are the fragile application of the rule of law, so that regulatory and legal inefficiencies, coupled with a bureaucracy designed to maintain full employment, coalesce to form lethal disincentives to new tech ecosystems. The flipside of the same coin is that there is a huge pent-up demand for tech startups and their solutions, with each new success giving expression to that pent-up demand.
Across both Jordan and Egypt, Mr Schroeder carefully teases out example of tech accelerators that enable the Investors to provided the finance and mentoring so crucial in a startup ecosystem. On more than one occasion the author points to Saudi Arabia with its regionally high mobile tech penetration, its high per capita income and its grossly underserved ecommerce market; a combination that presents a sizeable opportunity for the startups that can crack it.
Fighting the Status Quo –
(meaning: Let’s go!)
For the Conveners, the example of Habib Hadad, a Lebanese entrepreneur, is important. With experience of a US startup under his belt, Haddad returned to Lebanon from Boston and helped created a Beirut gathering of startups called “Yalla Startups” in 2010, an experience that confirmed what he saw in the uprisings across the Arab world:
“Everything we were doing in startups, like the uprisings, was about fighting the status quo” (p.109).
The challenge though is also driven by the classic Catch-22 scenario that the Middle East has great talent but not as much experience. But with companies like LinkedIn establishing themselves in a region where 60% of the population is under 30, talent is becoming more movable.
Finally, the Recognisers, the prestigious startup competitions that recognise emerging tech talents, are now in full swing in the Middle East. Companies alike Google, and colleges like MIT, are seeing the vast numbers of talented young tech entrepreneurs willing to shape their countries’ futures in a fashion different from their parents’ generations’.
Chapter 6, “Startup / Turn-around” discusses the education of the new generation, and in particular how local grassroots civic community hubs help show that opportunities (can) abound through technology (and education); hubs that help to create a
“Safe space for nonconformist, alternative thinking and respect for diversity and good traditional values”.
The blend in such hubs of: health services, legal tips, CV writing and computer programming classes; help to both inspire and empower not simply the children attending – but also their mentors. The focus is on enquiry-based learning (not simply parrot rote learning) and civic engagement. Self confidence and ambition and, crucially, a path down which these themes of self confidence and ambition can be channelled, are key. As one mentor put it:
“I once thought ‘wasta’ was everything… Now anything seemed possible”.
The choice for the young Arab tech entrepreneur is simple: “surrender to frustration or initiate action”, as one Palestinian interviewee put it.
Mind the Gap
المرأة في قطاع الأعمال
“The New Middle East – Women at the Startup Helm” (Chapter 7) explores (as you might expect) the impact and role of women in startup tech companies across the Middle East. Salutary reminders that Saudi Arabia, the Gulf States and the UAE have more restrictions on the role of women in civic society than say the countries of the Levant (Lebanon, Egypt, Jordan, Syria), flag to the reader that even in the Arab world itself the role of women is different in different countries. Notwithstanding the fact that for example the Gulf States have a higher percentage of educated women, the unemployment level of that group is higher (a staggering 80% in Kuwait). But Mr Schroeder’s point is simple: as in all regions in the world where the gender gap is closing, more and more women are stepping up to create, innovate and ‘make’ in business; and all the more so where technology is accelerating the closure of that gap.
The author examines four areas he found where female tech entrepreneurs in the Middle East were having particular impact:
- offering services in Arabic (on weddings, cooking for example)
- helping families to achieve work-life balance (around health issues, driving a ‘mompreneur’ mindset)
- leveraging experiences from the Arab Spring (revolutions) to create collaborative crowd sharing platforms (from academic R&D projects to book list recommendations)
- development of scalable women-focussed retail and e-commerce platforms (eg B2C marketplace matching for products made by female crafts experts)
“It has nothing to do with the law… Nothing to do with religion. It is about broad-based cultural perceptions about what women can do here. Nothing will change that but education and experience”.
So says Jordan based Randa Ayoubi whose multi media content production business is reportedly worth $200M. Her sentiments are echoed by other leading women who see the internet as game-changing in transforming opportunities for entrepreneurs who are women.
Faith & Florence – إيمان و فلورنسا
In Chapter 8, “Religion and the Ecosystem”, Mr Schroeder says:
“As I share my experiences in the region with friends in the United States, I am invariably asked if Islam and sectarian tensions make a thriving ecosystem difficult, if not impossible, in the Arab world. Not one of these same people has ever asked me about how Hinduism in India or Judaism in Israel affects those remarkable ecosystems”.
This is a powerful statement. To his credit the author admits to having been tempted to leave the subject of religion out of his book altogether, and prefaces his chapter by stating clearly his credentials that he is no expert, no theologian. Exploring interpretations of Islamic finance, popular cartoon creation and drawing on examples of technology being used to engage the faithful of the Middle East, Mr Schroeder’s chapter could as easily take up a whole book in itself. He speaks to entrepreneurs for whom their startups in the Middle East are often seen as extensions of a founder’s personal values. Reflecting on this, and seeing it written down in type, it seems to me that this could as easily be said to apply to startup founders outside of the Middle East as in the Middle East. And perhaps this is the point, one of the themes that emerges through the book: that the startup founders in the region are no different from those in the US, UK, Ireland, albeit the ecosystem and regulatory challenges facing them may differ.
Tug of Tech
In Chapter 9, “Not a Matter of Whether, But When”, Mr Schroeder powerfully encapsulates what he sees as the competing tensions in the region:
“…two distinct narratives – both at odds with each other but also coexisting: the top-down entrenched powers’ desire to control their societies’ agendas; and the bottom-up often tech-enabled problem solving and opportunity building that is happening regardless… Every growth market is wrestling in some form with its own version of this tug-of-war”.
‘Technology resilient to geographic volatility’ perhaps best describes the author’s connected theme; while in no way diminishing the on-the-ground effect of political and regional instability, his point seems to be that technology is generally less susceptible to being dismantled by unfriendly authoritarian regimes than traditional bricks and mortar products that can be, quite literally, bulldozed out of the way.
Further strands are teased out:
- the failure to understand that the Middle East is a consistent growth market to be understood up close and personal and not from afar
- that there is a wider shift from West to East in terms of the growth of the middle class, the power of the consumer, and the profitability of investment opportunities across those regions
- that how the youth of the Arab ‘Street’ expressed themselves in the Arab Spring is part of a wider global phenomenon that spans both East and West, of young people changing their societies by harnessing the opportunities that technologies enable new stories to be crafted
The author additionally touches on governmental constraints on the fiscal and political capital required to create the conditions necessary for the birthing and nurturing of ecosystems that can cradle the new startups of the Middle East. Internet clampdowns, liability for defamation for readers’ online comments – these can be, and are, clumsily employed in the Middle East – but the author seems to suggest that these aren’t unique to the region (which of course they’re not).
أمل – Hope
The message that emerges is ultimately one of ‘amal – hope. As Nitin Nohran, dean of Harvard Business School, and one of Mr Schroeder’s mentors, says:
“People greatly underestimate the psychology in all this… We are in a moment of conceptual change where no one needs to live in a world in which our lives are determined by dictators. [The Arab Spring] is a political expression, but also an economic one that is behind the entrepreneurs you are seeing”.
حق تقرير المصير
It this spirit of self-determination,حق تقرير المصير, of the sovereignty of an individual to not only dream of making a change, but – and crucially – having the technological and business capacity to make it happen, that seems to be something relatively new to the region. To those in the West who’ve never lived under political regimes that stifle and control a person’s aspirations, this concept might seem quite nebulous, something of an excuse for a regional failure to create local versions of successful businesses in the West. To think this simply reveals a lack of understanding of the region. What Mr Schroeder now says is just this: that the ‘genie’ of individual entrepreneurial self-determination on the wave of technology startups, is out of the bottle.
In closing the author calls for proactive reconsideration of our preconceptions of the region; but points out that no amount of reading can substitute simply… getting on a plane and visiting the region.
It’s not often that the Acknowledgments section of a book are a riveting read: yet Mr Schroeder has made his so. Almost a dozen pages list out the 150 people that the author met and learned from; it reads like a Who’s Who of tech leaders in the Middle East and of those interested in the region from a tech perspective. The same point carried through to his Annotated Bibliography that lists out approximately 60 primary sources. Someone looking to dig deeper into a non-academic understanding of the region could do far worse than starting with the sources listed here.