The rise of high-tech businesses in the Middle East is the latest ‘revolution’ to transform the region, according to a Washington-based author.
Amid the social and political unrest of the Arab Spring, there is a quieter uprising underway as an army of mostly young people collaborate to form innovative businesses, according to the U.S. entrepreneur and investor Christopher M. Schroeder.
In Schroeder’s book “Startup Rising”, published this month by Palgrave Macmillan, the author documents how these agile, web-powered businesses are quietly transforming the region into a hub of innovation.
“There is no going back,” he told Al Arabiya in an interview.
Schroeder acknowledges that there are “unsettling” conditions in the region, not least with the situation in Egypt, Syria and Yemen.
But in an interview with Al Arabiya, the author explains how Arab entrepreneurs are using new technology as a positive force.
“I cannot say what will happen in six months or a year, but I can say there will me more - a ton more - technology in the hands of hungry, smart people across the region in the next five,” he said.
Examples of successful startup businesses in the region include the Arabic web portal Maktoob, which in 2009 was snapped up by U.S. internet giant Yahoo for a reported $164 million. Schroeder told Al Arabiya that more groundbreaking startups are already in the pipeline.
Q&A with Chris Schroeder, author of ‘Startup Rising: The Entrepreneurial Revolution Remaking the Middle East’
Q. How would you define the health of startup scene in the Middle East?
As we used to say in science class: there's incredible potential energy eager to get into kinetic energy! The entrepreneurs are amazing and building great businesses… but face too many headwinds in terms of raising capital, rule of law and depth of infrastructure. But they are building anyhow, and building ecosystems from the bottom up.
Q. What are the main challenges to being an entrepreneur in this region?
It varies country by country. In some places, just consistent access to broadband can be a challenge. Finding good mentors and good investors who want to support them long term can be a challenge. Government red tape (like moving goods from country to country in e-commerce) can be unnecessarily cumbersome. It's easy to list things, but two things are important. First, I’ve seen improvement in many places over the past three years and secondly, they are building companies anyway.
Q. Are Middle East governments helping, or hindering, progress in the sector?
It depends. Jordan for some time has supported first the [information and communications technology] sector overall, and has been supportive of the new generation of entrepreneurs. But across the board there has been a trend toward constraining internet “privacy” laws and slow movement on getting through cumbersome regulations… I have not seen yet governments give this the priority it should be for the coming 21st-century economy.
Q. You’re also an entrepreneur and venture capitalist. Have you, or would you, consider starting or backing a venture in the Middle East?
Without hesitation. I made a conscious decision to not invest in startups there now to keep some objectivity in writing the book. I contribute in other ways (as a mentor, sitting on boards without compensation) and will remain this way. But if the core question is, ‘are these companies fundable?’, the answer is ‘absolutely’. There is political risk, obviously, but we live in uncertain times generally and in emerging markets in particular.
Q. Your book cites the famous example of Yahoo! buying web firm Maktoob in 2009. But another example is LivingSocial, the U.S. firm that exited the Middle East after acquiring a Dubai startup. Which example do you think will be more representative going forward?
Both. Businesses make decisions all the time for a host of factors. LivingSocial came to the Middle East as part of their global expansion and decided to focus more significantly in the U.S. market. Intel, four weeks after Mubarak fell, bought SysDSoft [an Egyptian designer of software and hardware]. Some will come in, some will change course. That is natural in business.
Q. Your book describes the Middle East startup scene as a ‘revolution’. But isn’t it more of an evolution?
Arthur C. Clarke once said, or quoted someone as saying, that revolutions are often underestimated in the long run. I'll stick with my term.
Q. So is there a ‘Silicon Valley’ of the Middle East? If so, where?
I have concluded this isn't the right question. There is one Silicon Valley and it is extraordinary. I believe after that there will be multiple hubs of tech and innovation around the globe.
Q. How are women represented among Middle East entrepreneurs?
I consistently saw more women at a typical Middle East startup gathering than I see in the States. And the women I met are some of the most serious, hungry, walk-through-obstacles entrepreneurs I’ve met anywhere. The challenges they face are real, and any society that wishes to hold back its best talent will face real challenges at home over time as people demand their voice, and in a global market place. Many, however, hated me asking about “women entrepreneurs.” They said, “WE ARE ENTREPRENEURS!”
Q. Many entrepreneurs I have spoken to describe the difficulty of finding seed capital for their projects. Is that a problem you encountered while researching your book?
Yes, though I have found seed capital gaining ground. I think the challenge the region is facing now is what we in the States call the ‘A’ round - [companies raising] $1-3 million once they are ready to scale. New funds are being raised, however, to go right at this now.