During my trips to the middle east I try to capture new thoughts about things I observe. My previous post on the topic covered my early observations. This summer I had the privilege of hanging out with some Jordanian entrepreneurs and listen to their heroic journeys. Here are my observations:
The opportunity is significant, but opaque.
On the ground it is clear the opportunity is significant. You can see how peoples lives can be impacted by technology. The things we use everyday in the West, such as online shopping, online banking, LBS, e-commerce, etc are still not mainstream, but it is clear the region is at an inflection point. Internet access to spreading like wildfire. There is a desperate need to local solutions.
However, the opportunity is still very opaque for people not on the ground. As part of some due diligence I was doing, I had a very difficult time finding any concrete data about market size, the flow of money, the major players, etc. Such information is easily found for other markets. Information appears to be shared anecdotally, and once pieced together does not always add up. Candidly, people like me, who have short stays, walk away not feeling comfortable investing.
Recommendation: We need to capture, document and publish real market data to showcase the opportunity. It is a critical piece of bootstrapping the investor/acquisition ecosystem.
The flow of money is a serious challenge
This appeared to be a universal problem for everyone I talked to. Getting money into their bank accounts is difficult.
Investors: Getting money from investors is a challenge. There are not many early stage investors. If they do exist they offer ridiculously low valuations only viable to the desperate.
Business-To-Consumer: Lots of startups complained about something we take for granted, the lack of a payment gateway. Most complained that they can not find a bank willing to offer them an online payment system. Therefore, collecting any money from consumers that scales and automatically goes into their bank accounts is just MIA. Options like paypal, etc just do not work. They need to get creative, but this issue really hampers the local startups from succeeding.
Business-To-Businsess:: Another complaint I heard is that money collection is real challenge. You can do a lot of business on credit, but payments become an issue. I was told that bartering is a common means to pay for things when money and credit are tight.
Exits: Exits are hard anywhere. In the US, large corporations understand that acquisitions are an important tool to infusing talent, create new businesses, and get access to new technology. The acquirers in the region are lacking, unless they are from the outside. As someone who has been through an exist it is a tough journey and does not happen easily. Therefore in the region the odds for exists are very limited. This is a tricky problem since you run into a chicken and egg. You need big corporations to acquire little guys. However, there aren’t that many big guys around. So we need to help the little guys become giants.
Recommendation: Embrace the realities since these problems will take a while to get solved. Governments should take the flow of money issue head on since it will require legislation to address this huge gap.
Exposure outside the MENA
I asked everyone I met how they want from the Diaspora to help? This was in part to ask how someone like me can help and how organizations I am involved with such as YallaStartup, and MIT Arab Alum Association can help. The most common thread I got is more exposure to the US. When I go back I will look for ways to bridge this gap, but my advice to these startups is that exposure is a full on contact sport. Get out there, make it a priority.
Recommendation: You should try to goto the conferences, make it a point and mingle. Whenever you visit someplace new, reach out to people you know and do not know. This is standard procedure for us in the US. People like to do business with people they know and like. Just do it!
MENA Entrepreneurs are warriors!
The entrepreneurs I met are real warriors. They are leading the pack with their risk taking. I salute them all for what they have achieved given the difficulties they talked to me about.
Finally, the Arab diaspora really wants to help. if you have ideas for how we can help, please do contact me at [sami at samishalabi.com]