Syrian entrepreneurs flee war-torn country to save their tech ideas

August 30, 2013
Like many in Aleppo, Louay Otba’s hope for the future now lies under a pile of rubble. A few months ago, his eco-friendly water decontamination technology won third place at the MIT Arab Business Plan Competition. For a young entrepreneur in Syria, where family businesses and clan ties rule the economic landscape, the opportunity was unprecedented. Now, the materials he bought with his prize money have been shelled into oblivion and his office in Aleppo’s Sheikh Najjar industrial zone leveled.There’s no option but to leave. “I’m not worried about my life in Aleppo,” he said over tea in Beirut. “But I’m an entrepreneur. If I stay in Syria, my idea will die.”As Syria’s regime and its myriad opponents wage war, the United States is weighing a push to enter the fray. Of particular concern is the fortunes of Aleppo, where the city’s renowned industrial centers lie in tatters.

The decimation of a company is hardly as stark as the human brutality depicted on news sites and YouTube. Yet the closure of many of Syria’s small and medium-size businesses — collectively worth billions of dollars — has left its economy shattered.

It’s not just young entrepreneurs being forced out of Aleppo. Syria’s lifeblood, the textile industry, is also in retreat. Revered throughout the Arab world since the days of the Silk Road, Aleppo’s fabrics fueled one-fifth of Syria’s industrial output in 2011, when the textile sector employed 30 percent of the country’s workforce. In recent years, its colorful, bawdy lingerie became an iconic secret of Damascus’s old souks.

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Now, the sector is producing at an estimated 10 percent of its former capacity. Textile factories have been dismantled, with machine parts sold to Turkey for a fraction of their worth. The city’s industrial leaders have fled. Most headed for Egypt, which welcomed them under Mohamed Morsi. Whether Egypt continues to be the best option is an open question.

Those looking to get beyond Egypt face a quandary. Many who have ties in Lebanon have already crossed the border, while entry to the Persian Gulf countries remains difficult for most, and economic sanctions complicate travel to other countries around the globe.

Jordan, Syria’s resource-poor neighbor to the south, however, has opened one of the few avenues available to Syrians for starting over. Jordan’s Oasis500, a tech start-up accelerator at the heart of Jordan’s booming information and communications technology sector, offers Syrians with viable business ideas passage into Jordan.

Those who pass the first pitching round are welcomed for three months into its white stone building in the King Abdullah Business Park, a military-gated enclave overlooking Amman that houses Jordan’s tech jewels: HP, Ericsson, Cisco, Microsoft, Dell, Samsung and LG.

(Disclosure: The writer’s employer, Wamda, has an investment arm that partners with Oasis500, but its news division covers technology in the region independently of the investment side.)

For Judy Samakie, whose father’s factory produced furniture textiles and curtains, the idea sounded too good to be true. After looters had threatened to bomb and burn the factory to the ground, the Samakies paid to have it protected. Safety was a new cottage industry; mercenaries had kidnapped her brother and threatened to cut off the hands of her family’s factory manager unless ransom was delivered.

Her friend Mohannad Ghashim called from Jordan, explaining that investors would give her about $14,000 in exchange for a 20 percent equity stake in her start-up. It was an offer that might sound obvious to a college graduate in Silicon Valley or New York.

Samakie had reservations.

“What company?” she said over the rare phone call; electricity was often down.

“The one you’re going to pitch,” he said.

In war-torn Aleppo, investment in ideas alone was considered preposterous. “Mohannad, is this a money-laundering front?” she said in jest. “What have you gotten yourself into?”

Modeled after Silicon Valley

With $7 million in assets under its venture capital arm, Oasis500 is the Arab world’s first tech start-up accelerator. In an oil-rich region, its impact is a drop in the bucket, he says.

“Somehow what our government has picked up from the West is that progress is about laying down physical infrastructure,” Usama Fayyad, its executive chairman, says. “They have completely missed the point that accelerating companies changes the cultural work ethic and transforms economies.”

“A single building,” he says, “which typically costs $50 million to $100 million, could create 10 Oasis500s.”

Internet-based technology, its swiftest growing sector, is one of the Hashemite Kingdom’s brightest hopes. Many other issues put it on the cusp of crisis: water deficiencies, lack of domestic oil, historically overprotected manufacturing industry, focus on public sector jobs and its reputation as a refugee haven. A drip feed of foreign aid from the U.S. and its gulf neighbors helps keep potential turmoil at bay.

Last November, citizens angrily protested a repeal of oil subsidies. Unemployment hovers at about 12.8 percent and, with more than 500,000 Syrian refugees flowing into the country’s northern cities to compete with Jordanians for jobs, it’s not improving.

At the World Economic Forum in May, Jordan’s King Abdullah II said, “Our region’s single greatest economic crisis, youth unemployment, pleads for double action: immediate relief to meet urgent needs; and inclusive, high-growth strategies that can produce the millions-more jobs we must have soon.” Companies that have “turned to Jordan’s young, tech-savvy workforce,” he said, are key to any solution.

Indeed, the tech sector has been the country’s hope for creating those jobs for more than a decade; Abdullah’s REACH initiative, implemented from 1999 and 2007, and ongoing National ICT strategies, have propelled the information and communications technology sector’s revenue from $60 million in 1999 to about $1.8 billion today, according to government statistics.

Jordan’s tech sector contributes an estimated 14 percent of GDP, provides more than 84,000 jobs and is growing at 25 percent a year, faster than any other sector.

The need to sustain this growth is pressing. Fayyad, a data mining expert who honed his chops at NASA’s Jet Propulsion Laboratory, Microsoft and Yahoo, has a technologist’s sense of urgency. “No Arab country is doing enough,” he says. “In Jordan, we have a lot of support from the king but not from the government.”

“Other governments, however, have rebuilt their countries by creating tax credits for start-ups and investing directly in job creation, ” he says, pointing to the United States, Europe and even Israel’s famously booming tech scene next door.

Of the 55 companies Oasis500 has seeded, 90 percent are active, and 22 have attracted a total of $7 million in follow-on investments. It is not alone in its ambition; Flat6Labs, a Cairo-based accelerator, is working to forge a regional network of start-ups and investors, while others, such as Tenmou in Bahrain, focus on unifying the local investor community.

It’s no accident that Oasis500 and its fellow accelerators have followed a model debuted in Silicon Valley. After Yahoo famously acquired Arabic Web portal Maktoob in 2009 for around $150 million, a rush of money into the Jordanian start-up scene created a new generation of angel investors and a much-lauded success story. If Mark Zuckerberg inspired a generation of U.S. college graduates to head for Silicon Valley instead of Wall Street, this was Jordan’s closest equivalent — those with an appetite for risk now consider launching a tech company.

Almost four years later, Jabbar Group, the umbrella company created by Maktoob’s founders, has launched eight companies that together employ more than 600 people.

The region’s next Maktoobs may be in the making, but in today’s Middle East, a similar acquisition has not been replicated.

There is hope, however, that tech accelerators can fill the gap in education left by Jordan’s overcrowded university classrooms and inspire a post-Yahoo generation to continue innovating. The argument goes like this: If tech accelerators can grant start-ups the training, and if early-stage investors can support accelerator graduates, and if even just one more success story can be created, then the Arab world will have the pipeline that it needs. Young people will create wealth, jobs and stable societies.

Yet if entrepreneurs aren’t steered toward viable market ideas that can secure follow-on funding, accelerators risk creating a dumping ground of start-ups that, after three months of injecting optimistic business plans with steroidal revenue projections, are left to rot in their own idealism.

After its revolutions, the promise of succeeding in business with a self-made idea beckons to many of the Arab world’s brightest. Aspirations are high.

The rise of e-commerce

Ghashim, Samakie’s friend, was a pioneer on Aleppo’s tech scene. Now a friendly godfather to Oasis500’s Syrian entrepreneurs, the jovial Ghashim is building his own business and also pacing the tiled floors to advise other start-ups with a broad smile and a few Britishisms peppered into his Syrian-accented cadence.

The man known to friends and Twitter followers simply as “Moe” did battle in Aleppo before the war began but only against its corrupt business environment. As he puts it: “In Syria, you deliver 1 percent, and 99 percent goes to corruption.”

Working in e-commerce was a way to do business in Syria without, well, doing business in Syria. After working for an e-commerce agency and an online uniform retailer in the U.S. for seven years, he returned to Aleppo in 2008 to start a firm.

Once back among his family, he tried to restructure their generations-old furniture business, but dealing under the table — the only way to secure contracts — proved too unsavory.

In the tech world, however, he wasn’t subject to the unspoken rules that governed Syria’s close-knit elite. Outsourcing e-commerce solutions to U.S. clients with a new start-up, named 7arake, or “movement,” proved a simple way to make his own rules. In four years, Ghashim built a successful little business selling custom Web sites to U.S. clients for below-market rates.

At the time, most tech start-ups were launched on family savings and boot-strapped from day one, he says, as local investment wasn’t an option and government support was minimal.

Ghashim and his peers lived in a bubble. “The government didn’t really know that we were working with U.S. clients,” he says. They also managed to work around U.S.-imposed sanctions on software — “we could find any products that we needed.”

In 2009, he launched, a site that aggregated printed government bids and rendered them searchable online. He pitched it to the government, hoping its support to scale the project could boost the country’s lagging economy.

Immediately, he realized his mistake. “Close the site, or we’ll hurt you in our own way,” he recalls authorities threatening him over the phone.

“I had spent all of this time thinking that I should improve the platform so that they would surely like it,” he says. “Then I realized that not only were they not interested in the idea whatsoever. They simply didn’t want to invite transparency.”

‘Investing in myself’

When the war in Syria began, U.S. sanctions against its banks made it impossible for American clients to pay Ghashim, and daily blackouts for 12 hours or more made business an afterthought.

Ghashim and his partner were forced to confront their surroundings. “We had to begin actually understanding what was going on in the Middle East,” he says.

Having heard about the boom in start-up accelerators in the region, they realized that joining one might be their best shot for starting over. After visiting incubators in Lebanon, Ghashim headed to Jordan. Initially, he was skeptical, thinking they might be a poor imitation of TechStars or Y Combinator, the Silicon Valley accelerators that popularized the model globally.

“When I came to Oasis500, I was shocked,” he says. The accelerator’s Google-inspired facilities impressed him. With $4,000 to his name, Ghashim applied.

“I explained that I was Syrian and asked if I could use a desk,” he said.

On the spot, the accelerator accepted him to a weeklong boot camp.

“From the minute I came to Jordan, I started working around 14 to 15 hours a day,” he says. With family or friends out of reach, “I was spending my life at Oasis500.”

After the boot camp, he was invited to join Oasis500’s eighth class 9 (or “wave”) in March 2012. With $14,000 in seed money, he built ShopGo, a site designed to help offline businesses go online (think: Shopify for the Middle East).

By June, Ghashim had five clients and was securing contracts faster than he could build Web sites. Within months, his client base grew to 24, as demand for an out-of-the-box site coincided with a growing Middle East e-commerce boom. Rocket Internet, the German company known for cloning successful online companies in emerging markets, had entered the Middle East with the launch of Namshi, a Zappos-like online retailer. Flash sales site MarkaVIP, which launched out of Jordan, also inspired a slew of e-commerce ventures.

Oasis500’s leaders knew a good prospect when they saw one. “How can we get more entrepreneurs as hardworking as you?” Ghashim recalls Fayyad asking bluntly.

Ghashim knew a few. Some had businesses; some didn’t. All were Syrians who might one day return to rebuild to their country. They were like him. “I could never fight” in the war, he says. “But I’m investing in myself, so that I can go back and build.”

Samakie, her brother and four others that Ghashim tapped agreed to come try their luck. Two came from Cairo, another flew in from Beirut, and a fourth, one of Syria’s earliest technology entrepreneurs, hoped to bring his wife and children. The Samakie siblings, both Canadian citizens, realized that Amman might be their only chance.

A risky journey

Leaving Aleppo wasn’t easy. When the Samakies boarded a bus for Beirut, the rape and sexual violence committed against women in Syria had already been cited by the International Rescue Committee as a primary reason women were fleeing the country.

Samakie had heard as many stories of buses being raided and burned as she had of buses making it through. Yet once her father gave his reluctant approval, her mother and younger siblings pushed her to go. “Do it for us,” they said.

When they left on Jan. 9, a rare snowstorm was falling in Syria. Samakie put on her characteristic white hijab, a Gap sweatshirt, jeans, boots and a winter coat, and hopped on the bus.

Due to restrictions on women crossing Lebanon’s northernmost borders, they headed south to Damascus, from which a few weeks later Syrian forces would lob Scud missiles back into Aleppo.

To reach the capital, they crossed checkpoints both rebel and regime. At the first, regime soldiers tersely checked the travelers’ IDs. The next checkpoint, only 200 meters away, was rebel-manned. They iterated the same routine, cautiously eyeing the regime over the short distance.

Checkpoints were rebel-staffed all the way to Hama, where, in 1982, Bashar al-Assad’s father, Hafez al-Assad, snuffed out a rising resistance — later obliquely referred to as the “incident.”

“Smiling is not allowed in Hama,” one rebel admonished Samakie, while cautioning her brother not to mention his background in banking.

The bus skirted Hama and nearby Homs, a linchpin city situated between Aleppo and the coast that the regime was fighting tooth and nail to reclaim. Months of heavy government crackdown had left most of the city in regime hands, with thousands of Syrians and a handful of foreign journalists killed in some of the conflict’s most ruthless standoffs.

A five-hour trip took 12. In the no-man’s land between Syria and Lebanon, their bus broke down. After an anxious night, the entrepreneurs began walking. A hitchhike and a taxi later, they boarded a plane to Amman, where they were able to do what many Syrian’s aren’t: enter Jordan with prospects.

Welcoming Syrians

Six days after they arrived, Aleppo University, where Samakie had studied, was bombed. “I had a nervous breakdown,” she said. “Friends of ours died. If I were there, I would have been going to my first exams. The what-ifs that occur to you . . .”

At Oasis500, she’s found a new home where entrepreneurs at Oasis500 slouch on beanbag chairs and compare code and revenue models in a mix of Arabic and English. While the building’s central courtyard harkens to traditional Islamic architecture, its spiraling multicolor slide nods to Google’s playfulness.

Curved, space-age pods offer spaces to chat next to sleek, workstations awash in Apple power cords. Motivational quotations pepper the walls, offering advice from Aristotle, Shakespeare and an Iraqi poet framed by colorful pixilated mosaics that evoke Pac-Man. A quote from the Koran advises: “God does not change what has befallen a people until they change their own selves.”

Preparing for a discussion about her business plan, Samakie paces the smooth wooden floor, ruddy-cheeked and shy, but effusive. Six months after stepping off the bus, she’s one of Amman’s entrepreneurs to watch.

While three others returned to Cairo and Beirut to regroup, Samakie has gained traction with her delivery service for healthy fare from restaurants across Amman. In a fast-food friendly city, it will cater to the growing population of health-conscious eaters.

She has emerged as a front-runner in her class and is going full throttle to build the business during her three-month incubation. It’s been an uphill battle. “I’m learning everything from scratch,” she says.

Samakie knows the odds: 90 percent of start-ups fail. It’s even worse in an emerging market such as Jordan. But she’s convinced that by bringing on board two fellow Syrian women serving as a photographer and a dietitian, she can help others down a better path.

Oasis500 is hoping the journey grows easier. After all, eight more Syrians have arrived, including one who owned a textile factory in Aleppo. If he can build an online site to sell suits, he’d be one of the few resettled Syrians to translate his 10 years of experience into a new profession.

And now, Louay Otba, who won third place in the MIT Arab Business Plan Competition for his eco-friendly venture, may be looking to join.

This is a precious opportunity, says Abdulsalam Haykal, a leading Syrian tech and media entrepreneur who runs Aliqtisadi, a business news site.

“Only a small percentage of Syrians have the option of being anywhere else than Syria, mostly due to financing or lack of access to other markets,” he says. “Being an entrepreneur is one of the hardest jobs anyone could have even in the most prosperous economies. We need more programs for Syrian entrepreneurs.”

The accelerator will welcome as many Syrians as it can. “We will do whatever it takes to help get them in, support them while they are here, and, if they have great ideas, invest in them,” Fayyad says. “Whenever the situation in Syria improves, they will be needed on the ground.”

Fayyad is blunt about the gravity of their situation: “They are outside their homeland, they typically don’t have family, and building a start-up is tied to their survival. It’s really work, work, work, and we believe that hard work leads to results.”

It also offers a reprieve from the ongoing nightmare next door. “Sometimes I think I’m not living in the same world,” Ghashim says. “I can’t believe that all this blood is happening in Syria.”

But, he reminds Samakie, “The only way to survive is to manage to build something here.”

Curley is the Beirut-based editor of Before she was a tech journalist, she studied the neuroscience of economic decision-making.

Author: Nina Curley

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