A few weeks ago I had the great pleasure of collaborating with, and attending, Rise Up Summit in Cairo, Egypt. Rise Up Summit is one of the leading startup events connecting the entrepreneurial ecosystem MENA region (Middle East & North Africa), attracting local and international venture capitalists, startups, and enthusiastic entrepreneurs. I was organizing a hackathon during RiseUp, offering a really a great opportunity to work directly with the local entrepreneurs in Cairo and get “under the skin” of the ecosystem there. Here's what I learned in talking and building with the entrepreneurs of MENA.
Startups as the Way Forward
Building a supportive and sustainable startup ecosystem is key to the development of the MENA region itself. Funny enough, many of the comments I heard throughout the RiseUP sessions were exactly the same I would hear when discussing the state of the European startup ecosystem:
“..we don’t have enough funding”
“..we don’t have enough talent”
“..Poor quality of startups”
“Greedy business angels and way too risk-averse and conservative investors”,
“..this is not Silicon Valley” - this last comment was key for me.
I think many MENA founders and investors are trying to replicate a Silicon Valley 2.0 in the MENA region, a sort of "Silicon Desert" with the buzz of unicorns and hype of California.
California Dreaming
Indeed Silicon Valley has been described as the leading example of a successful entrepreneurial ecosystem - and lots of great articles have be written about how this was done and why.
If you want to read more about this and the importance of ecosystems, I would recommend looking into the work of: Guy Kawasaki, Clayton M. Christensen, Marc Andreessen, Brad Feld. However, “..most authors on the subject rightfully conclude that history never repeats itself and therefore that it’s not possible to emulate Silicon Valley’s story.".
So, given that Silicon Valley’s story is unique and cannot be replicated, what can the MENA region do to apply the knowledge that has been accumulated within the Valley to build an ecosystem that is valuable, makes sense within the local cultural contexts, and ultimately does what a startup ecosystem is supposed to do: help entrepreneurs build scalable and great businesses?
What Makes for a Strong Startup Ecosystem?
First, we need to acknowledge that we are playing catch-up with a lot of other ecosystems out there. Even taking Silicon Valley aside, there are lots of growth and investments happening in, say, the Nordics and Europe, as well as India and Israel.
We need to patiently walk the long road to build an ecosystem that does not blindly emulate Silicon Valley, but amplifies the strengths of our local environment to help startups leapfrog ahead. Nicolas Colin and his team developed a model to analyze entrepreneurial ecosystems, based on the idea that the entrepreneurial ecosystem have three characteristic ingredients:
Capital: by definition, no new business can be launched without money and relevant infrastructure (which consist of capital tied up in tangible assets).
Know-how: you need engineers, developers, designers, salespeople: all those whose skills are necessary for launching and growing innovative businesses.
Rebellion: an entrepreneur always challenges the status quo. If they wanted to play by the book, they would innovate within big, established companies, where they would be better paid and would have access to more resources.
All three ingredients are present, in variable proportions, in every country; however, the key is the degree to which they mix within the entrepreneurial part of the community. All in all, 7 combinations are possible - read more here. The entrepreneurial ecosystem in Egypt is an interesting mix - all ingredients are present, however they do not melt well together.
The Egyptian Startup Ecosystem Mix
Capital: There is a high amount of capital present in the country - however, startups are having a hard time growing due to hostile and complex regulations and a lack of access to this capital. This means that many aspiring entrepreneurs with know-how are unable to go from having an idea to building a massive empire, unless they come from a very wealthy family or have really fortunate connections. Even though there might be lots of capital in Egypt, it is not easily available to startups and mainly in the hands of the elite.
Know-how: Egypt has a quite well developed educational system, though it still favors the few. The county also suffers from a high talent emigration, particularly to the United States, GCC and Europe. While conducting Hack4Egypt I was positively surprised by the skills and capabilities of the participants (we received more than 600 applications, and choose 100 “hackers”). Some of the participants developed very impressive algorithms, and one of them even managed to develop a more accurate algorithm for Google Maps.
Rebellion: Needless to say, that Egypt has a high level of rebellion. Sadly though, it has a high level of repressed rebellion, often through violence. The Arab Spring is the best example, but another one can be found in the still high amount of youth in prison, especially for freedom of speech violations. In fact, Egypt is the largest jailer of peaceful political opponents in the world. This has led to political movements, social activism, artistic creation, and crime.
Mixing Egypt's Capital, Know-How, and Rebellion
The many recent developments and growth lead me to believe that there is hope for developing these 3 ingredients further. One thing that we need to focus on is to mix - and melt - the 3 ingredients more closely together. By taking the above into account, below are 8 thoughts on how we can make the startup ecosystem better and rise forward:
1. Stay Competitive: We cannot ignore the fact that we live in a globally competitive environment, and hence have to respond relative to the options that exist around the world. Today, Egypt and the entire MENA region have to compete with some very aggressive startup ecosystems.
2. Make People Want To Be Here: People sometimes think that they can create or improve the startup scene by starting something like the Y Combinator there. Yet I agree with Paul Graham on this point: it will have near zero effect. The key is to support and fund startups such that they want to stay and not leave. Startups that will not be dreaming about moving to Dubai or SF, but startups that will stay in Cairo because they don’t have to leave. Why? Because all the right conditions are there for building their startup and making great things.
3. “We don’t have enough talent”: Incorrect. In fact, Egypt has a high pool of very talented computer engineers and software developers. I am working with the tech community in the MENA region and we now have a community of +2,000 techies, developers, entrepreneurs, engineers, and hackers. During the hackathon in Egypt, I was really impressed by the raw talent that I met and had the opportunity to work with. The talent and potential is there, the need is in a proper guidance and relevant education forward. Which brings me to the next point:
4. Educate: The talent and energy is there, the need is now to develop it, refine it, so it can grow. There are plenty of engineers in Egypt, and some excellent universities. However, there is a need to develop the ones that are already there to become really talented so they can take themselves further. Today, according to what I saw in Egypt, the educational skills necessary to start companies that focus on empowering innovations are scarce. If the national educational system does not provide the students with all of the skills that are currently needed in our interconnected world and to develop and innovate further - then the entrepreneurial ecosystem has to provide the youth with the skills, resources and knowledge that is critical for them.
5. Become more specific: The key to getting the best outcome is to narrow the focus on a few areas where Egypt or the MENA region could create a strategic competitive advantage at a global scale. Startups, incubators and accelerators have to develop more core expertise areas. It is slowly happening now, but we need more specialized programs that help grow and develop specific talents, then are able to guide this talent to investors with relevant capital and who take regional context into account. Specific programs are on the rise, such as ones focusing on health, education, agtech, and fintech - but we need to become better in connecting the right people with each other. Silicon Valley was also initially focusing on startups more broadly - but - now this focus-oriented approach is becoming more common.
6. Startup hubs have to nourish the ecosystem: I have seen a lot of startup hubs actually working against each other - and that should never be the point. Incubators need to collaborate and nourish the entire startup community, and this collaboration can start at the lowest levels. In Dubai, for example, it' s not unheard of for three awesome events to be happening simultaneously at three different incubators. I would have loved to attend all the events). Else they just foster silos. Let’s not do that. Let’s focus on collaboration.
7. “Greedy business angels and way too risk-averse and conservative investors”: This is an area of development that really needs more education and communication, especially in the MENA region. Let us start by having more dialogues about who a healthy investor is and what good and sustainable business is. It is essential that the hubs actually support the startups and do not create toxic environments or cut the wings of the startups from the very beginning. Doing this is not sustainable and will ultimately lead to the talented entrepreneurs leaving the country.
8. Celebrate our Heroes: Let's do it. As Guy Kawasaki said - every region needs its heroes. Kids needs heroes, so that they can say, “When I grow up, I am going to be the next ...” There are multiple successful startups in Egypt and the MENA region. Lets become better at celebrating them.
And finally, there’s one more thing you need to do, quoting Kawasaki: “Aim higher than merely trying to re-create Silicon Valley. You should try to kick our butt instead. That’s true entrepreneurship.”.
Read next: Are entrepreneurs born or made?