Entrepreneurship: Challenges across the region

Starting a business in… Egypt

Instabug’s Moataz Soliman and Omar Gabr

In the wake of Egypt’s 2011 uprising, civil society blossomed, characterized by the booming startup scene led by young entrepreneurs. The efforts have been spurred in part to counter the country’s unemployment rate of 13.5 percent and rising. With a population of 80.72 million as of 2012, this leaves almost 11 million people unemployed.

Amidst tumultuous times, Omar Gabr and Moataz Soliman launched mobile app Instabug in June 2012. Instabug helps mobile app developers find glitches in their apps by engaging users to report them through the simple process of shaking their phone. For apps that have incorporated Instabug into their system, they will have a screenshot of the bug sent straight to the developer with information on location and what network they were using. Gabr explains that this helps shorten the product life cycle to help test apps faster before they reach the store. Instabug was the 2012 winner of MIT Enterprise Forum’s Arab Startup Competition, which brings together startups from all over the Arab world.

Gabr admits that they have experienced some difficulties starting a business in Egypt at this time. “Being in Egypt in this current situation — I don’t think it was the best idea to start a tech startup targeting the world,” he says. He also concedes that there were some perks. “The good thing is that there are not too many startups in Egypt, so the whole ecosystem is trying to help them.”

That ecosystem is still nascent, but there are a lot of people working toward boosting it. “The Egyptian startup ecosystem began to develop after the revolution,” says Gabr. “People had this sense of importance and urgency that they want to build their country and develop their own business and develop their own products. I think now it’s really moving.” Startup accelerator Flat6Labs launched in Cairo in 2011, and every four months six teams move through the acceleration process. Other accelerators are beginning to appear on the scene. One was recently launched by the government under the acronym of TIEC, the Technology Innovation and Entrepreneurship Centre.

Like many startup ecosystems in their preliminary stages around the region, there are important gaps waiting to be filled. One problem that Egyptian entrepreneurs encountered was the absence of early angel investors — perhaps not surprising considering the volatility of the situation. With the exception of the Cairo Angels, Gabr says that Egypt is dry in financial resources between the small amounts given by incubators and accelerators and the larger-ticket venture capital firms (VCs). Instabug received a total of $150,000 from the Cairo Angels and regional VC firm Leap Ventures.

When asked if he would want to keep his business in Egypt, Gabr was positive. “There are many competitive advantages we have staying here,” he says, having just gotten back from three months in Silicon Valley. Though he says having a presence in the Valley is also essential, Egypt is a competitive place to run a startup in terms of process, salaries of the engineers, legal fees, etc. “So starting a startup is a whole lot cheaper in Egypt,” he says.


Starting a business in… Jordan

Gallery AlSharq’s Riham Mahafzah

Like many startup ecosystems in the Middle East, Jordan did not have much going on until about four years ago. Then two developments came about that changed everything. First Maktoob, an Arab internet services company, was bought out by Yahoo in 2009. It went on to become the Arabic version of Yahoo and became one of the first success stories in the region
This gave hope to many entrepreneurs in the Middle East, who tried to follow in Maktoob’s footsteps. It also spurred the second development, which, in the wake of Maktoob’s acquisition, started as a conversation between King Abdullah II of Jordan and now-executive chairman of Jordanian startup incubator Oasis500, Usama Fayyad. The king had seen the success of Maktoob, and wanted to replicate it. Thus was born Oasis500, with a mission to support entrepreneurs by providing them with training, funding, and mentorship. It has certainly brought some startups to the light by helping them along the way from ideas to concrete businesses.

Riham Mahafzah is one such entrepreneur. She started her business, Gallery AlSharq, through Oasis500. Gallery AlSharq is a website that sells Middle Eastern digital content — stock photography of landmarks, nature, hobbies, food, as well as illustrations. Mahafazah studied architectural engineering and launched her business after having worked for 13 years in an advertising agency for the creative fields. “Starting a business with Oasis500, they opened the door to good connections and mentors,” she says. “And most mentors are CEOs of large companies who help you develop business strategies.” The mentor Mahafzah met through Oasis500 is now an investor in her company.

Unlike many startups in the Middle East, when asked about the challenges she faced in starting her business, Mahafzah did not immediately refer to institutional problems such as lack of funding, inadequate support, problematic laws, or an unstable political situation, which is perhaps indicative of Jordan’s startup environment. Her issues were more business-oriented, such as the lack of human resources. “A real barrier at the beginning was finding the right developer,” she says. Another issue was educating contributing photographers on how to use the platform in sharing their content online. Though Jordan may be a stable oasis compared to the region, it has its limitations. Mahafzah acknowledges that businesses in the Middle East still struggle to find angel investment. “In general angel investment is not easy to generate in the MENA region. It’s not easy to generate $100,000 to $1 million because investors have to be brave,” she says, referring to the risk involved in early-stage companies, exacerbated in the Middle East’s immature startup ecosystems. Mahafzah raised her angel round of $150,000 in September, and had two seed investments prior. Total investment in her company so far has reached $200,000.


Starting a business in… the UAE

Nabbesh’s Loulou Khazen Baz and Rima Al-Sheikh

The United Arab Emirates seems like a bastion of efficiency with its business-friendly laws, infrastructure and its relative ease in attracting investment, which has drawn flocks of international companies to its gates. Oil and gas wealth income since the 1960s has permitted the country to invest in infrastructure crucial to businesses.

The UAE has well-developed telecommunication facilities, low taxation, and a hassle-free system for registering a business. For startups, there are numerous incubation programs such as In5, Silicon Oasis, SeedStartup, and i360 to name a few. Startups from elsewhere in the region have even moved operations to the UAE because of its superior business infrastructure.

Nabbesh is an online platform that connects jobseekers to employers based out of Dubai. Neither of the co-founders are Emirati — Loulou Khazen Baz hails from Lebanon while Rima Al-Sheikh is from Syria — though they stated that their reason for starting a business in Dubai was incidental to the fact that they were living there. Nabbesh was founded in 2012 out of a demand for employment in the Middle East. Highlighting flexibility, it is geared toward short-term, project-based consultancy or freelance jobs.

The Nabbesh team says the UAE’s business hub is a great place for young entrepreneurs to network and seek advice from the more seasoned counterparts in their industry. “The good thing is you get to connect with entrepreneurs from the same industry and you get to talk to them and learn from their experience,” says Al-Sheikh. “This whole network of learning or knowledge sharing is one of the pros.” The UAE also has a large expat community, which adds to the mentorship experience for start up companies. “There’s a lot of learning that you can do from different people, different cultures,” adds Khazen Baz.

Dubai is also a great place to garner investment. “There’s also access to funding here, there are more VCs, there’s more angels in this part of the world. It’s more mature,” says Khazen Baz. After winning a cash prize of 1 million United Emirates Dirhams (approx $272,000) on reality TV show The Entrepreneur, the Nabbesh team managed to secure an additional $81,700 in funding for their project.

Despite the favorable investment climate and the support from different entities, operating a business in the UAE is expensive. “I think this is a major difficulty for most entrepreneurs,” says Al-Sheikh. Particularly for a startup, which can’t afford to pay large salaries, it is difficult to convince talent to work for them instead of migrating to a bigger company with higher wages. “It’s like a war for talent,” says Al-Sheikh. “Most of the people have their jobs and not many are very excited about working in a startup,” adds Khazen Baz.


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