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Lebanon's Startup Ecosystem Roadmap - BDL Accelerate 2015

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Lebanon's Startup Ecosystem Roadmap - BDL Accelerate 2015

  1. 1. Creative Commons License Attribution-NonCommercial-NoDerivs [CC BY-NC-ND]
  2. 2. Contents I. Foreword by Banque Du Liban 4 II. Acknowledgements 6 III. Executive Summary 7 IV. Introduction 8 V. Our Approach 10 VI. Back to Basics 12 A. What is a Startup? 13 B. What is an Ecosystem? 16 VII. Ecosystem Framework 18 A. Drivers of evolution 19 B. Evolution as a function of space 20 C. Evolution as a function of time 22 VIII. Focus: Mapping Lebanon 24 IX. Zoom out: Trip Around the World 33 XI. Lessons from Around the World 54 X. Challenges from Lebanon's Startup Ecosystem 56 XII. Actionable Initiative: Lebanon's Startup Ecosystem Roadmap 76 XIII. Conclusion 80 XIV. Closing Notes 82 XV. Partners 84 XVI. Endnotes 88 Commissioned and Edited by Startup Megaphone Startup Megaphone is a specialized resource and marketing engine that amplifies and directs the voice of Lebanon’s startup ecosystem to the world. Startup Megaphone organizes international events and activities in key cities (e.g. New York, London, Singapore…), showcasing startups, investors, and support institutions from Lebanon, and enabling their fundraising, networking, and business development. Startup Megaphone empowers Lebanon’s nascent entrepreneurship scene, positioning it as a premier international startup hub. www.startupmegaphone.com Developed and Prepared by Startup Ecosystem Think Tank (SETT) SETT is a consulting-think tank hybrid with a special focus on Startup Ecosystems in emerging markets. SETT helps clients better understand their ecosystems through research, reports, and workshops. SETT guides clients in reimagining their landscape through a problem-centric approach to program development and training. Project Director and Author: Tamara Zakharia tamara@settpartners.com Research Analyst and Contributor: Raissa Achkar Consultant and Contributor: Maysa Mourad www.settpartners.com Creative Direction and Design by Roof Eleven www.roof11.com Funded by Banque du Liban Banque du Liban (BDL) is the Central Bank of Lebanon. It was established on August 1, 1963 and became fully operational on April 1, 1964. It is currently headed by His Excellency, the Governor, Mr. Riad Salameh. www.bdl.gov.lb Creative Commons License Attribution-NonCommercial-NoDerivs [CC BY-NC-ND]
  3. 3. 4 FOREWORD by Banque Du Liban Banque du Liban continues to be the cornerstone of the Lebanese economy, and its governor, Riad Salame, at its forefront. The past four years have revealed significant national and regional difficulties, but even during the most challenging of times, the Lebanese economy was able to achieve real annual growth of 2%. Banque du Liban’s unconventional monetary policy tools have kept the economy afloat despite the unfavorable conditions. Our forward thinking and progressive outlook ensure that Lebanon’s economic development matches the quick-paced, momentum of world economies. Developed markets are relying less and less on physical resources and migrating towards an inwards investment model: the knowledge economy. Knowledge-based economies rely on the production, distribution and use of knowledge and information. This translates into an economy that depends primarily on its human capital to produce knowledge. Lebanon’s richest resource is unquestionably its human capital, making it an ideal knowledge-based economy candidate. Believing that this is the new growth model, and having faith in the Lebanese youth, we, Lebanon’s Central Bank, accordingly issued Intermediate Circular 331 to encourage Lebanese banks to invest in the equity capital of startups, incubators, accelerators and other companies working in the knowledge economy. This innovative scheme has made available potentially USD 400 million to support creativity and innovation. Having been launched over a year ago, this initiative has so far committed around USD 200 million by the banks and already invested in several start-up funds, support institutions and companies. The main objective of Circular 331 is to develop Lebanon’s startup ecosystem and ultimately its economy by providing the right environment and infrastructure to support the surge in innovation and job opportunities that the growing knowledge economy is expected to create. Knowledge provides stakeholders the power to make more informed decisions, ultimately increasing the chances of success. We believe that this report is a step in that direction, offering a better understanding of our local ecosystem and the challenges it faces, allowing us to devise better solutions that will guide us throughout our ongoing progress. Marianne Hoayek, Founder and Organizer, BDL Accelerate Creative Commons License Attribution-NonCommercial-NoDerivs [CC BY-NC-ND]
  4. 4. 7 Acknowledgements This report was commissioned to identify the main challenges the Lebanon’s startup ecosystem faces and the initiatives the Lebanese ecosystem needs to undertake to fill in the gaps preventing it from becoming a high-potential site among global startup ecosystems. The research identified the main features of the Lebanese ecosystem through round tables sessions. In these sessions, key stakeholders identified and elaborated on the main challenges they face, summarized in this report as 13 key pain points. In addition to examining Lebanon’s ecosystem, the research examined best practices in cultivating startups through a review of nine countries and their ecosystems. The result of this study us a set of recommendations for Lebanon’s ecosystem, presented as specific initiatives, summarized below: Executive summary Abdallah Jabbour – Lebanon For Entre- preneurs (LFE) Antoine El Boustany – Saned Partners Bassel Aoun – Kafalat iSME Corine Kiame – IM Invest Ghaith Yafi – Y Ventures and B&Y Ventures Henri Asseily – Leap Ventures Josiane Sreih – Lebanese American University (LAU) Malik Khoury – LeWagon Mirna Shidrawi – AMIDEAST Entrepre- neurship Center Nader Shoueiry – Ministry of Economy and Trade Nadim Zaazaa – UK Lebanon Tech Hub (UKLTH) Nicolas Sehnaoui – Beirut Angels Paola Chakhtoura – American Lebanese Chamber of Commerce Paul Chucrallah – Berytech Fund II Racha Ghamlouch – ArabNet Rami Panayoti – Middle East Venture Partners (MEVP) Sahar El Zaloua – MIT Enterprise Forum (MITEF) Pan Arab Sami Abou Saab – Speed@BDD Sara Hassan – eTobb Tarek Sadi – Endeavor Lebanon Theodore Khoury – Bootcamp Yasser Akkaoui – Executive Magazine Zeina El Khoury – Ministry of Economy and Trade Zeina Saab – The Nawaya Network Roundtables Endeavor Egypt Tehran Hub C4 Ventures Startup Bootcamp Istanbul Golden Gate Ventures Ideas Factory Chile Partners Alejandra Winter Etcheberry - Ideas Factory Chile Alireza Omdivar - Iran Entrepreneurship Association Aly Khaled ELShalakany - Cairo Angels Arnaud Bonzom - 500 Startups Babak Kabiri – Sarava Cansu Deniz Bayrak - StartupBootcamp Istanbul Christina Bechhold - Samsung Global Innovation Center NY Chrysantos Chrysantou - Notion Capital Colette Ballou – Ballou PR Eero Kasanen - Aalto University Elif Ceekan - StartupBootcamp Istanbul Emma Swift - Tech City UK Habib Kairouz - Rho Ventures Habiba Moawad - Endeavor Egypt Hadi Farnoud - Camva Iran Heba Gamal - Endeavor Egypt Ines Cheaib - C4 Ventures Juan Jose Güemes - IE Business School Justin Hall - Golden Gate Ventures Karim Harmouche - PricePinz Kathleen Fritzsche - Accelerate Stuttgart Lena Dimitrieva - Pitchbook Lotta Hassi - ESADE Business School Mario Berta - FlySpaces Maya Rahal - Wamda Menna AbdelRahman- Cairo Angels Michael Lints - Golden Gate Ventures Neda Golshan - Sarava Ramez Mohamed - Flat6Labs Rocio Fronseca - Startup Chile Rodrigo Martinez- FYI Said Rahmani – Sarava VC Samir Housri - theMednet Sara Usinger - Avatech Sebastian Vidal - Startup Chile Simon Schaefer - Factory Berlin Steven Hailey – Eureeca Till Ohrmann - Pirate Summit Uldis Leiterts - Infogram Will Mercer - The Trampery UK Ziad Abdel Nour - Blackhawk Partners Interviews Umbrella Initiative Initiative 1: Information & Processing Initiative 2: Education and R&D Initiative 3: Promoting Lebanon Initiative 4: Attracting Talent Initiative 5: Legal Training & Policymaking Initiative 6: Diaspora Creative Commons License Attribution-NonCommercial-NoDerivs [CC BY-NC-ND]
  5. 5. 8 9 Lebanon’s history brings together a myriad of cultures, religions, innovations, and wars. The state was only granted sovereignty in 1920, and gained its independence from the French in 1943. Years of conflict have devastated the country and its economy, which hasn’t fully recovered. Yet, history also has numerous positive anecdotes that capture the resilient spirit of the Lebanese people. In many cases, they have transformed the challenges of their environment, making innovative strides in business. In 2013, Lebanon’s Central Bank, Banque du Liban (BDL), issued Intermediate Circular 331, which will inject US $400 million into the development of Lebanon’s knowledge economy and will provide critical funding to the country’s promising startup ecosystem. Initiatives like Intermediate Circular 331 reflect the belief that Lebanon has the potential to produce ideas and transform them into successful businesses, scaling up the whole economy and decreasing unemployment. Proper planning is vital for BDL’s Intermediate Circular 331 to create long-lasting economic impact. Introduction Today is therefore a pivotal moment for Lebanon to assess what is needed for the startup ecosystem to thrive. This report aims to explore the main pillars needed to support the Lebanese startup ecosystem. One of the main tools of analysis is the success of other cities, countries, and their respective startup ecosystems, which provide case studies for strengthening our very own. We propose a plan to implement these insights, which is titled: Actionable Initiative: The Lebanon Startup Project. This initiative will pave the way for Lebanon to develop a cohesive domestic startup ecosystem catering to an international audience. The value of this report lies in the proposed recommendations that are specific and actionable. Through roundtable discussions with Lebanese ecosystem stakeholders, the report clearly highlights the main challenges currently facing the Lebanese startup ecosystem. The report then applies best practices from other ecosystems to contextualize possible solutions to these challenges. Creative Commons License Attribution-NonCommercial-NoDerivs [CC BY-NC-ND]
  6. 6. 10 11 Over the course of a month, we carried out semi-structured inter- views with more than 60 stakeholders from all over the world. We used Skype or phone to conduct the majority of these interviews, and calls lasted 25 minutes on average. The objective of each interview was to gain in-depth knowledge about how a particular city or institution managed to overcome a specific challenge. The challeng- es at the center of these discussions aligned with the challenges identified by Lebanese ecosystem stakeholders in phase 3. Researchers briefed these experts and influencers on the ecosys- tem in Lebanon and asked them to reflect on their own ecosystems through the lens of Lebanon’s particular challenges. In the final phase of this research, the data (macro and micro) and input of experts (local and international) were synthesized. Proposing actionable initiatives for Lebanon’s startup ecosystem moving forward OUR APPROACH 1. Drivers of evolution 2. Evolution as a function of space 3. Evolution as a function of time The sessions were structured as follows: 1. Presentation of SETT (5 minutes) 2. Presentation of project (10 minutes) 3. Presentation of challenges and case studies from around the world (10 minutes) 4. Discussion among stakeholders moderated by SETT The objective of the round tables was to prompt discus- sion among the local stakeholders to better understand the challenges hindering the Lebanese ecosystem. The approach presented in this document draws on nine months of research and preparation work led by SETT. During this period, the researchers assessed varying factors that constrain or drive a startup ecosystem’s ability to flourish. They then applied the conclusions of this assessment to make recommendations on interventions that are likely to be effective in fostering the startup ecosystem in Lebanon. This approach has five core components: We conducted a literature review in order to under- stand what defines a startup and how its ecosystem is constructed. Our research is comprised of articles, books, and studies carried out by entrepreneurship and innovation experts and influencers, allowing us to con- jure a cohesive definition of a startup by combining the underlying themes of the most accredited definitions. We then deconstructed a startup ecosystem, and in doing so were able to identify three key elements to its evolution. The three elements represent the dimensions of the report framework: Identifying Constraints and Challenges Exploring the drivers and constraints of the Lebanese startup ecosystem; Identifying commonly used terms such as startup and startup ecosys- tem and presenting a framework for evaluating both; Defining Contexts Macro and Micro Data Collection Mapping and charting startup ecosystems’ growth1 2 3 4 5 Based on our framework for evaluating an ecosystem, we collected data to populate and illustrate the three elements of the framework. Online research and interviews were the core methods we used to map data on local players of every ecosystem. Our Report Partners also supported this research by filling in a form listing local ecosystem players, which we reviewed and incorporated into our final lists. This phase of research guided our efforts in defining illustrative tools for each ecosystem: The “Drivers of Evolution” map The “Evolution as a Function of Time” Once we had a localized picture of each, we added a macro layer of data on the ecosystems, using already existing indicators and economic data as the main sources of information for this layer. In the case of any missing information, we contacted the relevant ministries. This macro data is reflected in the color- coded areas of each ecosystem’s “Evolution as a Function of Space” graph. The resulting maps and graphs allow us to more easily compare between ecosystems, both locally and internationally, in order to extrapolate best practices. Categorization of Best Practices Classifying different startup ecosystem interventions from around the world Devising Solutions In phase three, we identified key stakeholders in the Lebanese ecosystem and invited a represent- ative from each to attend one of three roundtable sessions. Each session was an hour long and had between six and ten participants. Creative Commons License Attribution-NonCommercial-NoDerivs [CC BY-NC-ND]
  7. 7. 13 Definition BACK TO BASICS What is a startup? Going through the plethora of reports and articles published about startups, one quickly notices that there are multiple definitions of a startup in play. The word startup could be used to refer to a new venture in one article, while in another the number of employees at a company defines it. Because there is no science to define what a startup is, we will lay out the startup definitions set by industry lead- ers and highlight the points they share in common to bring them together into one comprehensive definition. This definition of a startup will be used throughout the course of the report. - Steve Blank, co-founder of E.piphany - Paul Graham, founder of Y Combinator Steve Blank is a Silicon Valley serial-entrepreneur and academic. Blank is recognized for developing the Customer Development methodology, which launched the Lean Startup movement. [1] Paul Graham founded Y Combinator in 2000, and today it is the leading Silicon Valley Accel- erator. Y Combinator has invested in more than 940 companies including Dropbox, Airbnb, Coinbase, Stripe, and Reddit. The combined market capitalization of YC companies is over $65 billion.[3] An organization formed to search for a repeatable and scalable business model. A company designed to grow fast. Being newly founded does not in itself make a company a startup. Nor is it necessary for a startup to work on technology, or take venture funding, or have some sort of ‘exit.’ The only essential thing is growth. Everything else we associate with startups follows from growth. - Eric Ries, author of Lean Startup Eric Ries is an entrepreneur and author of the New York Times bestseller The Lean Startup: How Today’s Entrepreneurs Use Continuous Innovation to Create Radically Successful Business. [2] A human institution designed to deliver a new product or service under conditions of extreme uncertainty. Creative Commons License Attribution-NonCommercial-NoDerivs [CC BY-NC-ND]
  8. 8. 14 15 InnovationGrowth, Fast & Unreasonable Growth The various startup definitions are The age of a company doesn’t matter when classifying a startup. Whether it was founded a few months ago or three years ago, as long as a company’s growth curve is still vertical it can be classified as a startup. Therefore, overwhelming- ly fast growth is one characteristic of startups. Startups grow very quickly to eventually gradu- ate into a corporation. If they fail to grow quickly, they become zombies. The period of vertical growth between founding day and when growth plateaus is the startup period. Growth can mean several things. It can be inter- nal growth, by expanding teams and operations, or it can mean market growth, by increasing the number of users and customers. What does not define a Startup? When does a Startup stop being a Startup? A startup looks at an old problem and strives to find new solutions for it. The element of novelty is key; a startup must be introducing a new or better way of doing something to the world. With novelty comes uncertainty; therefore we associate startups with risk. 1 2 The size of the company The industry in which the company operates When it was founded Being a startup is a culture more than anything else. Startups of all ages and sizes would like to remain categorized as so, but main- taining the dynamic, high-risk agility of a startup becomes much harder as profits and the number of employees increase. The million-dollar question that confuses many is ”when does a startup stop being a startup?” The brief answer is that this transition occurs when there is a general shift of focus from creation to preservation. Below we will articulate what this means in more tangible terms. [4] General shift from creation to preservation When examining the various definitions given to startups by the industry experts and influencers, we identified the following underlying and overlapping themes: When there is a general shift from creation to preservation, a startup stops being a startup. Little Day to Day Risk Plateaued Growth Slowed Down Innovation Rate Profit generation reduces the risk element and resource strain of a startup. As a result, volatility decreases and decisions are made on a longer rather than shorter-term basis. Day to day operations are more stable, and pivots in the company’s business model happen less frequently. The company is no longer on steroids; the growth rate of the company slows down, as defined by its number of em- ployees or the number of its customers or users. The growth curve begins to plateau. Large operations and consequently large teams make it much harder to quickly change direction and respond quickly to the customer feedback loop. Innovation becomes incremental rather than radical. Creative Commons License Attribution-NonCommercial-NoDerivs [CC BY-NC-ND]
  9. 9. 16 17 “The Valley has reshaped lives and languages, creating new verbs - to google, to facebook, to uber - and repurposing old ones - to tweet, to message, to like.” The term ‘Silicon Valley,’ coined by columnist Don Hoefler in Electronic News in 1971, reflects the presence of the local silicon computer-chip companies. Located in the southern part of the San Francisco Bay area in Califor- nia, Silicon Valley has become the most celebrated technology hub, creating the space and framework for ideas to become groundbreaking companies by attracting entrepreneurs and investments. [5] Silicon Valley’s success is a story that provides insights and lessons to those concerned with the formation of other startup ecosystems. In order to understand the Valley’s development, it is important to explore its historical background. [6] What Is An Ecosystem? Startups, as defined earlier, have ecosystems of their own. Startups operate within a web of interconnected players. They are founded by entrepreneurs, accelerated (in some cases) by accelerators, funded by venture capital firms and angels, they sell their product to customers, and later on get acquired by larger corporations. The previous statement is an oversim- plification of the very interconnected and complex systems within which startups operate. The players are plentiful and the possibilities for their interactions are limitless. We will therefore add one extra dimension to the original question: “What is a startup ecosystem?” Silicon Valley is hailed as the holy grail of startup ecosystems. By understanding Silicon Valley and how it evolved over the years to become the uncontested startup launch pad, we can better understand the different factors that contribute to progress within ecosys- tems in general . A startup ecosystem is the complex and interconnected system within which startups exist and operate. Silicon Valley: An Introduction Historical Background Google defines an ecosystem as a complex network or series of interconnected systems. Silicon Valley has become a sustainable entity, playing a positive role in the economy and setting the stage for future generations of success. Over the last two years alone, the tech region just outside of San Francisco has accounted for nearly half of all startup company exits. Silicon Valley tech companies’ total GDP comes to a whopping $535 billion, besting the GDP average for North America at $430 billion.[12] The area plays host to between 14,000 and 19,000 active startups. Today, Silicon Valley is the ecosystem that many aspire towards; entrepreneurs want to found their companies in the Valley, investors want to invest in the Valley, and cities want their ecosystem to reflect the Valley’s success in creating impact for the economy. The report aims to dissect the success of an eco- system, and by looking at the case of Silicon Valley, the mother of all startups, we can easily extract three dimensions from its success: People who believe, right timing and the availability of resources Silicon Valley Today William Shockley, a scientist who worked on a new semicon- ductor device to control and amplify electric signals, decided to move to the Bay Area to start a semiconductor company in 1956.[7] Such a decision was strange for the Bay Area, as there were no opportunities for financing, customers, or suitable employees.[8] Shockley took it upon himself to meet with US institutions to connect with graduates, and placed ads in aca- demic journals to recruit employees. He hired eight promising engineers with the average age of 30. Although Shockley’s company shut down a few years later due to bad management, the engineers decided to keep working together as a team, but were unsure in what form. They approached a fellow banker, Arthur Rock, who convinced them to create a firm and look for financing opportunities on the East Coast. It took Arthur Rock 35 trials to get funding.[9] A serial entrepreneur, Sherman Fairchild, finally funded them to form Fairchild Semiconductor in 1957.[10] Fairchild helped them establish a contract with IBM, which heightened their credibility and opened up avenues to military sales. By 1960, “Fairchild recorded sales of $21 million and was the eighth largest player in its industry. The company also began production of the first integrated circuit.”[11] As a result of the success of Fairchild Semiconductor, “spinoff’ businesses began to emerge in the Bay Area. A spinoff is the “creation of an independent company through the sale or distribution of new shares of an existing business or division of a parent company.” For example, Fairchild employees founded new computer chip companies or firms to produce glass components, which were then used by Fairchild. In 1961, four of the eight engineers involved in starting Fairchild gave Rock funding to start the Bay Area’s first venture capital firm. It was therefore the growth of the local computer chip industry that prompted the creation of Silicon Valley. The cycle of spinoffs continued with the founding of Intel by Robert Noyce, one of the original eight Fairchild engineers. He supported Steve Jobs with advice, and later Jobs advised Face- book founder Mark Zuckerberg. Another Fairchild executive, Don Valentine, invested in Apple, and then started Sequoia Capital, an important venture capital firm in the Bay Area. This fascinating history of Silicon Valley highlights a very clear concept: with the right people, environment, and timing, a start- up ecosystem goes beyond the “first generation” of founders. It also serves as a case study, allowing us to understand what key performance indicators we need to measure in order to evaluate the evolution of startup ecosystems in general. Creative Commons License Attribution-NonCommercial-NoDerivs [CC BY-NC-ND]
  10. 10. 18 19 The drivers of an ecosystem’s evolution are the individuals and institutions moving it forward. The Drivers of Evolution map provides an overview of the stakeholders in an ecosystem, providing an easy way to visualize and understand the context in which startups are operating in. Drivers may include prominent venture firms, governmental agencies involved in policy, startups feeding the ecosystem with talent, universities spearheading innovation and/or any other major player making a dent in the playing field. 1. Drivers Of EvolutionECOSYSTEM FRAMEWORK Education/ Training Competitions Funding Financial Institutions Spaces Accelerators/ Incubators Startups Research Governmental Institutions Media/ Promotion Support Units 1. Drivers Of Evolution 3. Evolution As A Function Of Time 2. Evolution As A Function Of Space Through deconstructing Silicon Valley’s success into three key elements (i.e people, time and spatial resources) we have a better understanding of what it will take to construct other ecosystems. This leads us to our ecosystem framework, a framework that aims to dissect an ecosystem’s development status by looking at it through three different, and equally important, lenses The institutions and individuals driving an ecosystem forward are represented in the “Drivers of Evolution” map, where they are grouped into different categories. We’ve identified four main stages of growth an ecosystem undergoes and they are represented in “Evolution as a Function of Time” graph. Finally, the resources available to ecosystem stakeholders based on their geographic location, also referred to as spatial resources are represented in the “Evolution as a Function of Space“ graph. Exits Creative Commons License Attribution-NonCommercial-NoDerivs [CC BY-NC-ND]
  11. 11. 20 21 Capital Resources These refer to the total amount of funding opportunities available in a given ecosystem, as well as how acces- sible the funding is to entrepreneurs. Examples include venture capital firms, government funds, grants, loans, and funding programs such as accelerators. Government Budget Balane %GDP Gross National Savings %GDP Inflation, Annual % Change General Government Debt, %GDP Country Credit Rating, 0-100 Best Venture capital availability Governance This includes the strides in leadership that move an ecosystem forward and make it more hospitable to busi- ness. Examples include governmental policies, national agendas, local leaders, and activists. Diversion of public funds Wastefulness of government spending Burden of government regulation Transparency of government policymaking Business costs of crime and violence Reliability of police services Strength of auditing and reporting standards Efficacy of corporate boards Protection of minority shareholders’ interests Strength of investor protection Infrastructure This refers to all the elements that facilitate the success of a startup ecosystem, such as support units (accel- erators, incubators, co-working spaces), transportation, and Internet. Quality of overall Infrastructure Quality of Roads Quality of railroad Infrastructure Quality of port infrastructure Quality of air transport infrastructure Quality of electricity supply Mobile telephone subscription/100 pop Markets and Networks Markets concern both the size of the local market and an ecosystem’s access to other markets, and their size. Networks refer to the connectivity of the country, both internally and outside its borders. Factors to consider here include the size of an ecosystem’s diaspora population, size of neighboring markets, and size of local markets. Intensity of local competition Extent of market dominance Effectiveness of anti-monopoly policy Effect of taxation on incentives to invest Total tax Rate, % Profits No. procedures to start a business No. days to start a business Prevalence of trade barriers Trade tariffs, % duty Knowledge Resources These knowledge resources are all the resources related to increasing the knowledge generated and distributed in an ecosystem. Examples include research and development centers, universities, and corporate innovation labs. Capacity for innovation Quality of scientific research institutions Company spending on R&D University-industry collaboration in R&D Gov’t procurement of advanced tech products Availability of scientists and engineers PCT patents, applications/million pop Willingness to delegate authority Human Resources Human resources are defined by the quality and quantity of people in the ecosystem. This includes, but is not restricted to, the levels of education, number of graduates, fields of specialization, and level of professional expertise of the ecosystem’s workforce. Secondary education enrollment, gross % Tertiary education enrollment, gross % Quality of the education system Quality of math and science education Quality of management schools Internet access in schools Availability of research and training services Extent of staff training THE PILLARS IDENTIFIED IN THIS REPORT ARE AS FOLLOWS: 2. Evolution As A Function Of Space Prevalence of foreign ownership Business impact of rules on FDI Degree of customer orientation Imports as a percentage of GDP Burden of customs procedures Exports as a percentage of GDP Domestic market size index Foreign market size index Fix telephone lines/100 pop Int’l Internet bandwidth, kb/s per user Mobile broadband subscriptions/100 pop. Fixed broadband Internet subscriptions/100 pop. Firm-level technology absorption Efficiency of legal framework in challenging regs Startups require specific infrastructure and resources to be available in order for them to thrive. In this section, we group the differ- ent categories of resources that influence an ecosystem’s success into six resource groups. The resource groups constitute an ecosystem’s vitals, what it needs to thrive. Each group is reflects by the geographical realities of an ecosystem – in other words, the resources available to an ecosystem as dictated by the space it exists in. For example, if an ecosystem is located in a city with a high tech university density, then the knowledge and talent resources available for its startups are abundant i.e it will score high on these two resource groups. Each resource group represents all the sub-resources we have identified as relevant for a startup ecosystem and specific to that resource group. We use relevant sub-resource indices as indicators for scoring each resource group. Each resources group is scored from 0-10 using an internal model for performance scale. 0 means the resources available are not ideal for a startup ecosystem to flourish, 10 means they are optimal. Each of one of the six main identified resource group score is expressed numerically (0-10) in the following sections. Creative Commons License Attribution-NonCommercial-NoDerivs [CC BY-NC-ND]
  12. 12. 22 23 The grassroots stage is the very beginning of an ecosystem. It is a period of organic activity usually generated by the passionate leadership of a few individuals within the ecosystem. Key drivers at the grassroots stage could be the first startup (Silicon Valley) or first accelerator (Lebanon), or even a series of events, such as Startup Weekend in Tehran, that lead the movement. Very little funding and few venture capital firms are present at this phase. The majority of the funding is a direct result of bank loans, angel investors, and the three F’s (Family, Friends and Fools). At this stage of an ecosystem’s development, it is far too early to even mention exits or Series A investments. 3. Evolution As A Function Of Time Characteristics: •• Highest density of venture capital firms •• Highest investment numbers •• Unicorns •• Exit Valuations at $50 million to $1 billion •• High number of research and development centers •• Headquarters of top accelerators and incubators worldwide. Intervention Stage Regional Hub International Hub An ecosystem is in a continuous cycle of growth. Examining an ecosystem without bringing into context its particular stage of growth is turning a blind eye to one of the most important factors for proper evaluation: time. No two startup ecosystems were created alike, but they do undergo very similar cycles of development, allowing us to identify four stages of growth for ecosystems: Characteristics: •• Increased investment •• Increased number of Startups •• Increased number of venture capital firms •• Increasednumberofsupportprograms (competitions,accelerators) •• Towards the end of this phase we start noticing small exits in the range of $ 5-30 million. An ecosystem becomes a regional hub when it is the epi- center of its region. For investors, this ecosystem is where they will establish their funds and offices to access the rest of the region. For entrepreneurs, it is the city in which they will base their headquarters to reach the surrounding market. International accelerators and incubators will be quick to set up shop there. It becomes a hub of talent, funding, and high profile networking. Characteristics: •• Market access point (due to infrastructure) •• Regional location to set up shop •• Regional money distributed out of this ecosystem •• Exits at $50-400 million •• Very few unicorns •• International accelerators and venture capital firms setting up shop. During this phase we can see a slow surge in seed investment as the movement gains traction and players begin to attract the attention of corporations and governments. At the beginning of this phase, it is possible to pinpoint a few key startups and their stages. By the end of this phase, the number of startups at seed stage has increased significantly. Characteristics: •• A few angel investors •• Practically no venture capital firms •• A handful of startups •• No exits •• Independent startup activities increasing •• Activists and influencers start to attract attention Intervention stage follows the grassroots stage, as growth becomes slightly less organic in this period. At this point, the startup movement in a particular ecosystem has begun to make some noise. Startups that may previously been ridiculed or ignored are able to secure early stage funding and have a few employees under their wing. More students are asking their professors about startups and unicorns, and accelerators are receiving more applications by the day. Corporations and governments notice the commotion and want to capitalize on what already exists. At this stage, governments step in with policy changes and funds, or corporations step in with substantial support programs. The intervention could also be that a startup emerged as a large success, and overnight a few founders have millions to reinvest into growing the local ecosystem. Very few ecosystems have become international hubs. These are Silicon Valley and New York. An ecosystem becomes an international hub when it be- comes a center of international innovation, as its startups are creating solutions that address global problems. What we usually see with international hubs is that they specialize in a specific vertical to innovate, and they become the global lead- er in that specific field. Grassroots Stage Creative Commons License Attribution-NonCommercial-NoDerivs [CC BY-NC-ND]
  13. 13. 24 25 Rich in human capital, Lebanon’s youth maintain one of the highest educational attainments in the Arab world, with a tertiary enrollment rate of 48 percent.[13] However, this educational at- tainment does not translate into lucrative economic opportunities within Lebanon, which are made complicated by the ongoing po- litical instability that dominates the country’s everyday functions. While Lebanon’s most recent unemployment data points to 11 percent,[14] more alarming is the youth unemployment rate which stands at 20 percent,[15] for those between the ages of 15 and 24, compared to the world average of 13 percent. This results in many youth looking for job opportunities outside of Lebanon. Lebanon is a small country of 4 million citizens and a large refugee population, including the recent presence of 1.1 million registered Syrian refugees. It currently has no diplomatic relations with the state at its southern border, and has a rather complex and historical one with its northern neighbor, Syria. Lebanon witnessed a 15-year civil war from 1975 to around 1990, ultimately resulting in quadruple the number of Lebanese citizens living outside of Lebanon creating a wide and tightly connected diaspora network across the globe, estimated at 16 million people. Mapping Lebanon Unemployment rate data - 2013 The past five years have witnessed a new wave of business in Lebanon: startups. Entrepreneurship support units are now present, startups have successfully exited, and funds have been multiplying. Despite all the factors working against Lebanon’s progress, the entrepreneurial ecosystem is remolding the Lebanese economy. Banque du Liban’s Intermediate Circular 331 (BDL C331) is an opportunity to boost Lebanon’s knowledge economy sector and support human capital, and has the potential to save the country from economic stagnation. Lebanon is an ideal candidate for a knowledge economy, which is an economy typically directed at the production, distribution, and use of knowledge and information. The Central Bank guarantees 75 percent of local banks’ investments in the knowledge economy through direct startup equity investment or indirectly through startup support entities, reducing the risk of the investment by mitigating the potential losses and reducing them to 25 percent. BDL C331 is designed to diminish risk for local banks and does so by dictating the banks’ portfolio diversification. Local banks can invest up to 3 percent of their capital in startup support entities, funds, or directly into startups themselves. Additionally, a bank can invest up to 10 percent (of its 3 percent) in any one startup, thus spreading the risk. Local banks can also receive a seven-year interest-free credit from the Central Bank, which can be invested in treasury bonds with an interest rate of 7 percent. In return, the bank commits to investing in the knowledge economy. While the banks take on 50 percent of the risk, they are entitled to 75 percent of any profit made, making participation in BDL C331 an attractive prospect. By making funding accessible, BDL C331 aims to both retain local talent and to attract expatriate talent to set up shop in Lebanon, in hopes of putting an end to the brain drain the nation has witnessed in the aftermath of the civil war. The funds will be primarily deployed to develop a technological and digital sector in the country. The main objective of institutionalizing the Intermediate Circular 331 is to move Lebanon towards a knowledge-based economy and eventually create job opportunities to battle the 20 percent youth unemployment rate. To ensure the circular is appropriately used, the Central Bank has laid down ground rules for qualifying companies. The company should be a Lebanese joint-stock company with nominal shares, with its activities supporting the knowledge economy, prompting creative intellectual skills. It should also have an enriching impact on the economy, social growth, and job creation in the Lebanese market. 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 35 39 42 47 50 57 61 72 78 86 91 99 105 113 129 144 161 177 190 198 200 Number of companies operating in ICT per year in Lebanon since 1994 Source: IDAL 's Directory of ICT Companies Lebanon- 2013 11% between the age of 15 & 24 (World) 13% between the age of 15 & 24 (Lebanon) 20% Creative Commons License Attribution-NonCommercial-NoDerivs [CC BY-NC-ND]
  14. 14. 26 27 MAP OF LEBANON’S ECOSYSTEM > Alt City > Beirut Digital District > Co-working 961 > FabLab Beirut > Flat6Labs > Speed@BDD > UK Lebanon Tech Hub Spaces Accelerators/ Incubators Competitions > Bader Startup Cup > Cartier Women’s Initiative Awards > Hyundai Startup Competition > FCM > Startup Campus > Global Social Venture > Femme Francophone > Intel Challenge ME IoT > MIT Enterprise Forum Arab Startup Competition Funding > Abraaj Group > Beirut Angels > Berytech Fund > Leap Ventures > Lucid Investment > Middle East Venture Partners > Saned Partners > Y Ventures > B&Y Venture Partners > IM Capital Research > Endeavor Insight > Lebanon For Entrepreneurs > Startup Ecosystem Think Tank > Wamda Research Lab Financial Institutions > Top Banks as measured by total assets & market capitalization > Kafalat Governmental Institutions > Ministry of Economy > Ministry of Trade > Investment Development Authority of Lebanon Media/ Promotion > ArabNet > BDL Accelerate 2015 > Entreprenergy > Startup Megaphone > StepFeed > Wamda Education/ Training > Amideast Entrepreneurship Institute > BAU Center for Entrepreneurship > LAU Institute for family & entrepreneurial Business > Le Wagon > Samih Darwazah Center for Innovation Management & Entrepreneurship at AUB > Bootcamp Support Units > Beirut Creative Cluster > Berytech > Bader Young EntrepreneursProgram > Endeavor Lebanon > LebNet Exits > Diwanee > Shahiya Drivers Of Evolution The Lebanese ecosystem has been slowly developing since the beginning of 2001. Over the years, the stakeholders guiding the ecosystem went from few to many. The stakeholders that make up the current Lebanese startup ecosystem are represented below in the Drivers of Evolution Map, grouped in their respective categories. Creative Commons License Attribution-NonCommercial-NoDerivs [CC BY-NC-ND]
  15. 15. 28 29 Evolution As A Function Of Time Evolution As A Function Of Space To have a better idea about the resources available for the average entrepreneur operating out of Lebanon, we will examine it’s six resource pillars represented in the Evolution as a Function of Space framework. We can very quickly notice that the Human Resourc- es rank higher than the other indices. To better understand the state of the Lebanese ecosystem we must understand the stage of growth it is at. The ecosystem first began to flourish in 2012, when a group of young men came together and founded Lebanon’s first Accelerator program, Seeqnce. [17] The program had limited funding and resources but managed to accelerate the most prominent startups in the market today. Seeing that the momentum the grassroots movements has initiated would soon be extinguished if it weren’t supported by something much bigger, the Central Bank founded Circular 331. The BDL Circular 331 has increased the amount of funding available for the startup ecosystem drastically over the last two years, and as a result we observe an increase in the number of startups being founded, the amount of investments being deployed and the number of institutions supporting startup activity. Therefore it becomes clear that Lebanon falls at the very beginning of the Intervention Stage. Grassroots Stage Intervention Stage Regional Hub International Hub Creative Commons License Attribution-NonCommercial-NoDerivs [CC BY-NC-ND]
  16. 16. 30 31 Intermediate Circular 331 dated August 22, 2013 MECHANISM More About BDL Intermediate Circular 331 [18] Creative Commons License Attribution-NonCommercial-NoDerivs [CC BY-NC-ND]
  17. 17. 33 A Trip Around the World ZOOM OUT A large part of this report is identifying what successful ecosystems have done, and how Lebanon can learn from their experience. The following section, A Trip Around the World, provides a snapshot of each of the ecosystems the report extrapolated best practices from. Each city has its own section with a general introduction. Each section features an Evolution as a Function of Time graph that highlights the point of evolution an ecosystem is currently at. Each section also features an Evolution as a Function of Space graph that showcase the city’s resource groups and their respective scores and finally it features a Drivers of Evolution map. The Drivers of Evolution map provides an overview of the different ecosystem drivers and stakeholders but is in not meant to be comprehensive; it serves as general a snapshot. Creative Commons License Attribution-NonCommercial-NoDerivs [CC BY-NC-ND]
  18. 18. 35 Turkey, the crossroads of Europe and Asia, has a population of 77.7 million, with half of it under the age of 30.7. When comparing Turkey to EU countries, it has the fourth largest labor force, totaling around 28.1 million.[19] The tertiary education enrollment rate is around 70 percent.[20] Turkey’s entrepreneurship scene is vibrant and has gained momentum over the past two years, especially in the historical city of Istanbul. Istanbul’s geopolitically strategic location between Asia and Europe, combined with the holistic startup support, puts the city on the forefront as a regional Euro-Asian hub for startups and investors to converge. The way Istanbul managed to capitalize on its geography to create an entrepreneurship and innovation hub provides many insights for learning. Istanbul Coworking Spaces > Republic of Turkey SME Development Organization (KOSGEB) >The Scientific and Technological Research Council of Turkey (TÜBİTAK) > TC Sanayi ve Teknologi > Bakanlığı > TC Başbakanlık Hazine > Müsteşarlığı Angel Networks > Istanbul Startup Angels > BRC > Burned Business Angels (BUBA) > Galata Business Angels (GBA) > MYP > Şirket Ortağım > Labx > Bayraktar & Partners > Bahariye Melek Yatirim > Keiretsu Forum > TEB Melek Yatirim Fonu > TR Angels > Starters Hub > Kolektif House > Urban Station > Yazane Exits > Yemeksepeti > Gittigidiyor > Markafoni > Pozitron > SadeceHosting > Mikro-Ödeme > Mackolik > JoyGame > StartupBootcamp Istanbul > ITU Cekidrek/Gate > E-Tohum > Koç Incubator > Özye Incubator > Pilott > Viveka > Fit Startup Factory > Founder Institute > Inventures > Embryonix > CAP > Gemim > Garanti Partners Accelerators/ Incubators Venture Capital > Starters Hub > Early Bird > HummingBird > 212 > Revo Capital > Vestel Ventures > IDA Capital > Doğa Girişim > iLab > Sankonline > 3TS Capital Partners > TRPE Venture Partners > Inventram > Innovent > Aslanoba Capital > String Ventures Drivers Of Evolution Grassroots Stage Intervention Stage Regional Hub International Hub 10-20 VC firms 5-10 Exits 100-200 Startups Governmental Initiatives Creative Commons License Attribution-NonCommercial-NoDerivs [CC BY-NC-ND]
  19. 19. 37 Singapore’s success has not been accidental; it is the culmination of decades of public planning. As early as the 1960s, the post-independence Singaporean government committed to becoming a knowledge-based economy fo- cused on innovation technology. At the time, multinational corporations (MNCs) were attracted to the labor-intensive sectors. By the 1970s, there was a much bigger national talent pool, and the workforce was shifting from blue to white-collar. MNCs had transferred their technological operations to Singapore, fostering the development of human resources to build and expand new technologies.[21] With an educated work force, Singapore began attracting skill-intensive industries such as electronics and petrochemicals, and further technologic- al development fostered advancements in the biomedical sciences and innovation enterprises. Singapore is notable as a small country of 716 square kilometers that managed to transform its post-war conditions into an entrepreneur- ship and technology hub. Singapore Competitions & Hackathons > Angel Hack > BAwehack > Echelon > Imagine Cup > Lean Startup Machine > Seedstars World > SITF Awards 2015 > Startup Singapore > Startup Weekend > UP Singapore Governmental Initiatives > Ace > ACRA > EDB Singapore > Enterprise one > IDA > ie Singapore > mda > Ministry of Manpower > National Research Foundation > Spring Singapore Media/ Promotion > E27 > Bloomberg > BeSuccess > TechCrunch > TechinAsia > The Wall St. Journal Training > Alpha Camp > Draper University > General Assembly > Hyper Island > The Testing Ground > Founders Institute Education > National University of Singapore (NUS) > Nanyang Technological University (NTU) > Singapore Management University (SMU) > Singapore University of Technology and Design (SUTD) > SITF > SCAPE > Ace > The Working Capitol > WH > Cowork@SG > SpringBoard > Hackerspace.sg > Impact hub Singapore > Pug-In@BIK71 > The Co > Woolf Works > Collective Works Spaces Accelerators/ Incubators > Biofactory > Clearbridge Accelerator > Founder Institute > iAxil > ideas.inc > Joyful Frog Digital Incubator > Life Sreda VC > Rockstart Accelerator > SPH Plug &Play > Startup Focus > The Co-Foundry > The Unilever Foundry > Unframed Unicorns > FlipKart > Garena > Grab Taxi > Lazda Drivers Of Evolution Venture Capital > Intel Capital > 500 Startups > Sequoia Capital > Innov8 > SBI Ven Capital > Rakuten Ventures > New Asia Investments > Majuven > NSI Ventures > Golden Gate Ventures > Jungle Ventures > East ventures > Infocomm Investments > IMJ Investment Partners > Gree Ventures > Fenox Venture Capital > Digital Media Partners (DMP) > Monk’s Hill Ventures > Vertex Venture Grassroots Stage Intervention Stage Regional Hub International Hub 50-100 VC firms 20-50 Exits > 1000 Startups Creative Commons License Attribution-NonCommercial-NoDerivs [CC BY-NC-ND]
  20. 20. 39 There is a sort of eccentricity to Berlin that is difficult to find anywhere else. Young people, vibrant art, and crea- tivity all dominate the city, not to mention its rising tech scene. After Berlin’s wall was destroyed in 1989, the city’s lower rents combined with its vibrant art and music scene attracted young people to take up residence.[22] Berlin managed to channel its central location, high quality of life, and artistic energy towards supporting startups, attracting talent, and drawing ideas and investors. Berlin > Sharedesk > Ahoy! Berlin > Mobilesuite Berlin > Betahaus > SuperMarkt > Idea Camp > Rainmaking Loft > Sanktoberholz > Café Nest > Agora Collective Coworking Spaces > German Startups > Group Berlin AG > Axel Springer Plug and Play Accelerator > Berlin Startup Academy > Team Europe > Hitfox > Epic Companies > MCUBE > The Factory > Hardware.co > Hub:Raum > IQ Consult > Microsoft Ventures > Accelerator Berlin > Project A Ventures > Rocket Internet > Project Flying > Elephant > StartupBootCamp > You is Now Accelerators/ Incubators > Business Angels Club > Berlin-Brandburg > Mas Angel Fund Angel Networks Drivers Of Evolution Grassroots Stage Intervention Stage Regional Hub International Hub 10 -20 VC firms 5 -10 Exits 200 - 500 Startups Venture Capital > SalesForce Venture > West Tech Ventures > Blue Yard Capital > Cherry Ventures > Dresselhaus Ventures > e.ventures > German Startups Group > Join Capital > B-to-V (Brains to Venture) > Bertelsmann Digital Media Investments (BDMI) > Berlin Venture Partners > Heilemann Ventures > Paua Ventures > Point Nine Capital > Westtech Ventures > XLHealth > Seedcamp Berlin > Earlybird > Hasso Plattner Ventures (HP Ventures) Creative Commons License Attribution-NonCommercial-NoDerivs [CC BY-NC-ND]
  21. 21. 41 Inspiration, imagination and energy have always made New York City a space constantly boiling with fresh ideas that attract valuable and diverse talent, cementing it as a global hub of art, media, fashion, and finance. The now-popular- ized “Empire State of Mind” has inspired many to flock to the city in pursuit of their ambitions and dreams, and many argue that the city’s “have to make it” attitude is exactly what keeps it alive and pulsing with new business ideas. The way New York City proceeds to create innovative busi- ness ideas could be a stepping-stone for Lebanon to learn from. New York City > Betahaus > Agora Collective > Sankt Oberholz > Openers > Axel Springer Plug›N›Play > Factory > Rainmaking Loft Coworking Spaces > Pandodaily > AVC > Business Insider > BETABEAT > Bits News > NYC Tech Meetup > Columbia Venture Community > NY Tech Women > Uncubed NYC > NY Venture Community > Digital Dumbo > Startup Digest > GARYSGUIDE > SmashSummit > Feast Conference > Brooklyn Beta > Likemind > Ignite NYC Events & Networking > First Growth Venture Network > Dreamit Ventures > Startup Health > Entrepreneurs roundtable Accelerator > FinTech Innovation Lab > SeedCamp > NYC Seed > Founder Labs > BluePrint Health > NY Digital Health > Accelerator > TechStars Accelerators > Prehype > Betaworks > Soho Tech Labs > 212Media > FictiveKin > Pratt Design Incubator > DE-DE Incubators > Accel Partners > Bain Capital Ventures > Bessemer > Canaan Partners > FlyBridge > GreyCroft > IA Ventures > Insight Venture Partners > OAK Investment Partners > Polaris > rho Capital Partners > RRE Ventures > Rtp Ventures > SoftBank Capital > Spark > StarVest > Thrive Capital > Tiger Global > Tribeca Venture Partners (TVP) > VAIZRA > Venrock > Warburg Pincus Venture Capital > 500 Startups > Betaworks > Contour Venture Partners > Lerer Ventures > Metamorphic Ventures > Advancit Capital > First Round Capital > Zelkova Ventures > Eniac Ventures > High Peaks > QUOTIDIAN > Great OaksBox Group > Box Group > DFJ Gotham Ventures > Bold Start Seed stage investors Drivers Of Evolution Grassroots Stage Intervention Stage Regional Hub International Hub > 100 VC firms >150 Exits >1000 Startups Creative Commons License Attribution-NonCommercial-NoDerivs [CC BY-NC-ND]
  22. 22. 43 Known worldwide for its historical heritage, creative potential, and its oft-noisy streets, Egypt is home to 90 million people. Cairo has a metropolitan population of nearly 22 million, making it the largest city in Africa and the Middle East, and the sixteenth largest metropolitan area on Earth.[23] Egypt has long been at the forefront of music, film, media and literature, positioning it as a regional and worldwide cultural influencer. Young Egyptians are relatively well educated and inspired by their heritage, and are an active creative force in the region that plants organic seeds for a startup ecosystem to emerge. Cairo > 302 Labs > Al Maqarr > Ice cairo > Innoventures Startup > Circus > Rasheed 22 > The District > TIEC > Penguin Square Coworking Spaces > AUC V-Lab > Flat 6 Labs > Misr El Kheir Foundation > Injaz Egypt > Innoventures > Juice Labs > Kamelizer > Nahdet el Mahrousa > Plug and play Egypt > Shekra > Tahrir 2 > TIEC Accelerators/ Incubators Competitions > AUC Entrepreneurship Society - Business Plan Competition > AUC V-LAb > Egypreneur > Startup Egypt (Injaz) > Startup Giza > Startup Grind > Startup MENA > The Entrepreneur Accelerator Program (TIEC) > University Run- Student Run Competitions Governmental Initiatives > Social Fund for development Technology Innovation and Entrepreneurship Center > Bedaya > Mashrou3ak Exits Otlob SySDsoft Fawry Angel Networks > Cairo Angels > KI Angels Venture Capital > 138 Pyramids > Ideavelopers > Innoventures > Kamelizer > Sawari Ventures > Tamkeen Drivers Of Evolution Grassroots Stage Intervention Stage Regional Hub International Hub 5 - 10 VC firms 5 - 10 Exits 100 - 200 Startups Creative Commons License Attribution-NonCommercial-NoDerivs [CC BY-NC-ND]
  23. 23. 45 Iran has long made the headlines as a state subject to international security and economic sanctions. In a country that intrigues people outside of its boundaries and holds a largely untapped market, innovative minds with incredible potential seek to create their own Tehran Valley. Iran’s Internet and mobile phone penetration rates of 55 percent and 110 to 143 percent, respectively, are among the highest in the region. These figures suggest a tech savvy young population.[24] Under these conditions, entrepreneurship ecosystem play- ers in Tehran are mobilizing to form the right conditions for a startup ecosystem to emerge. Tehran > Maps > Avatech > Dimond > Trigup > Bardia > TAC > Tehran Hub > Efarda Coworkingspace > Coworking space 404 > Shariksho (Online share space) Spaces Accelerators/ Incubators Competitions > Startup Iran > Seed Stars > Slush > Sharif VCCUP Governmental Initiatives > Hi- Tech Development Fund > Innovation Accelerator Center > Pardis Technology Park > Vice-President for Science and technology Events > Startup Grind > Startup Weekend > Startup Spark > Lean Startup Machine > 20TA30 > Hamfekr Media/ Promotion > Peyvast > Asreertbat > Kasbokar > Tafahom > Techly.co Education/ Training > University of Tehran > Sharif University of Technology Exits > Avabook > Picuu > Zoodfood.com Venture Capital > Iratel Ventures > PSIG > SHENASA > Sarava Drivers Of Evolution Grassroots Stage Intervention Stage Regional Hub International Hub 0 - 5 VC firms 0 - 5 Exits 50 - 100 Startups Creative Commons License Attribution-NonCommercial-NoDerivs [CC BY-NC-ND]
  24. 24. 47 Ruled for 25 years by General Augusto Pinochet after a coup against socialist president Salvador Allende, Chile witnessed its fair share of civil and political unrest, and a 20-year economic depression that began in the 1970s. Pino- chet’s regime, which still has the approval of most parties, left behind a legacy of the free market policies, though these were very harsh when first implemented. After years of resistance, political instability, and civil insecurity, Chile underwent a political revival at the turn of the century, and now ranks twenty-first in transparency in the international corruption index.[25] With a stable country, a young population, and the will to change Chile’s image internationally, Chile’s government created the Startup Chile Initiative in 2010, or what James Adams, former dean of Stanford Engineering school, calls “the deal of a lifetime.” Santiago > Co-Work LatAm > Corfo (Biblioteca) > Exosphere > IF Chile > Justpeople > STGO Makerspace > UC Innovación Anacleto > Angelini > Urban Station Workspaces & Innovation Centres > 3ie > Austral Incuba > Chrysallis > Emprende FCh > Incuba UC > Incubatec > Innovo > UDD Ventures > Wayra Seed Accelerator Governmental Initiatives > Corfo > Startup Chile Media/ Promotion > AndeasBeat > DoceTips > El Definido > El Diaro Financiero > El Mercurio > El Tercera > Fayerwayer > Innovacion.gob.cl > PulsoSocial > The Santiago Times Training > Academia De la Felicidad > ASECH Etapa O > Founder Institute > Santiago Startup Essentials Investor Networking > Avonni > Chilean Investors Forum > CIE Chile > Emprendo Verde > Endeavor Chile > Erase Fundacion Chile > Mentores Por ChileAngel Networks > Chile Global Angels > DaDNEOS > Ignacio Canals > Jean Boudeguer > Magma Partners > Pablo Viojo > Santiago Angels Public Economic Development > Preyecto Red > ProChile/Contact Chile > Sercotec > Al Gramo > Betazeta > ComparaOnline > Crumplo > Cuponatic > Goplacelt > HappyShop > Mediastream Success Stories Venture Capital > Aurus VC > Austral Capital Partners > EQUITAS Capital Drivers Of Evolution 5 - 10 VC firms 5 - 10 Exits 100 - 200 Startups Grassroots Stage Intervention Stage Regional Hub International Hub Creative Commons License Attribution-NonCommercial-NoDerivs [CC BY-NC-ND]
  25. 25. 49 London is the epicenter of diversity, finance, ideas, and implementation. Seventy-five percent of the top 500 global companies[26] are based in London, [27] a city that sees 1,000 new tech startups develop per month.[28] Silicon Round- about, an organic tech city, formed progressively in East and Central London in 2008, and later started receiving governmental support. London is the third largest tech hub after San Francisco and New York. London is one of the most established financial sectors in the world, accounting for 53 percent of European invest- ment in the financial technology industry[29] . Having lever- aged its indigenous strengths and cluster formations, the city grew into a tech hub centered around a robust fintech industry, making it the “fintechopolis” of Europe. In 2013, “47 percent of UK investment went into first-round deals compared to 27 percent in Silicon Valley.”[30] London > Huckletree > Google Campus > Rainmaking Loft > Central Working > Winkley Studios Coworking Spaces > Techstars London > Wayra London > Truestart > Seedcamp > StartupBootcamp > Founders factory > Entrepreneur first > Bethnal Green Ventures Accelerators Competitions > Growing Business Awards > EDF Pulse Award > Santander Universities 60 sec > Cleantech Innovation Showcase > Low Carbon Prize > IE Venture Day > Broadcast Video Expo > UCL Bright Ideas > Health Tech London > UK Private Business Awards > Innotribe Challenge > The Responsible Business Awards > Business Rocks Inov8 > Shell LiveWire Grand Ideas Award > Digital E.Awards > The Europas Awards > VOOM Governmental Initiatives > TechCity > Enterprise Investment Scheme > Grant for Business Development > The National DTI Grant for Research and Development > Entrepreneur Visa > Business Bootcamps > The Entrepreneur First Venture Capital > Angellab > Ardiadne Capital > C4 Ventures > BGF Ventures > Dawn Capital > DN Capital > Downing Capital > EC1 Capital > Entrepreneurs Fund > Frog Capital > Forward Partners > Firestartr > Felix Capital > IQ Capital Partners > MMC Ventures > London Venture Partners > Notion Capital > Index Ventures > Atomico > Accel Ventures > Iris Capital > Balderton Capital > Highland Europe Capital > Advent Venture Partners Drivers Of Evolution Grassroots Stage Intervention Stage Regional Hub International Hub > 100 VC firms > 150 Exits > 1000 Startups Creative Commons License Attribution-NonCommercial-NoDerivs [CC BY-NC-ND]
  26. 26. 51 Finns are known for their sense of style, trendy coffee shops, Angry Bird and advanced design and architecture legacy that puts function over form. Finland was also ranked 4th most competitive economy after Switzerland, Singapore and the United States in the World Economic Forum’s Global Competitiveness index 2014-2015 report. Home to 1 in 5 Finns, small, compact and stylish, its capital Helsinky is internationally applauded for highly innovative initiatives in technology, design and entrepreneurship. The support of government and decline of Nokia have been major contributors to the establishment of Helsinki as one of the major Tech hubs outside of Silicon Valley. Helsinki Coworking Spaces > Hub Helsinky > Arctic Startup > Minimum Viable Office > Helsinki Think Company > Startup Sauna > Summer of Startups > KoppiCatch Accelerator > Cleantech Invest > NewCo Helsinki Accelerator > Boost Turku > Gorilla Ventures > Vigo > Lifeline Ventures > Veturi Growth Partners > Love of Technology Strategy (Lots) > Royal Majestics > Newentures > Vendep > nnovatum Partners > Founder Institute/ Helsinki > AppCampus > Boost Turku > Hitseed Accelerators/ Incubators Venture Capitals > Finnvera > Aboa Ventures > Aura Capital > Butterfly Ventures > Camelco Capital > Dasos Capital Oy > EQT Partners Oy > Helmet Business > Mentors > Innventure > Vendep > MHS Capital > Conor Venture Partners Angel Networks > Finish Business Angel Network Education/ Training > Aalto University > Young Innovative Companies Grassroots Stage Intervention Stage Regional Hub International Hub Drivers Of Evolution 50 - 100 VC firms 50 -100 Exits 500 - 1000 Startups Governmental Initiatives > Start.Smart.me > Vigo > Tekes > SITRA > Finish Industry Investment Events > Slush Creative Commons License Attribution-NonCommercial-NoDerivs [CC BY-NC-ND]
  27. 27. 52 53 Human Resources Challenges Challenge 1: Mismatch between current skills in the market and the skills startups ask for Challenge 2: Not enough access to lawyers experienced at dealing with startups and their unique structures Knowledge Resources Challenges Challenge 3: Lack of investment in research and development Challenge 4: Not enough opportunities for private sector involvement in academia Challenge 5: University and schooling systems in Lebanon do not cater to the modern world’s talent needs (entrepreneurship, innovation and tech knowledge). This problem is twofold A. Mismatch between skill of recent graduates and today’s progressive market needs B. Interdisciplinary interaction in universities are limited among different departments Markets and Networks Challenges Challenge 6: Not enough marketing efforts targeting those outside the ecosystem and internationally Challenge 7: Need for access to larger markets Challenge 8: Not enough private sector interest in startups, creating an even smaller market Challenges in the Lebanese Startup Ecosystem We invited Lebanese startup stakeholders to a series of roundtable sessions, which focused on exploring various challenges facing the domestic startup ecosystem. This section synthesizes the challenges under the relevant ecosystem pillars. Capital Challenges Challenge 9: Not enough of the funding is being spent on seed stage investments Challenge 10: Lack of a strong business angel network Governance Challenges Challenge 11: Lack of alignment among the stakeholders Infrastructural Challenges Challenge 12: Lack of proper legal framework for: Investment with a clear lack of laws ensuring the right framework for the below: (a) Shareholder Rights (b) Preferred Shares (c) Minority Shares (d) Limited Partners Separation Laws Establishing a company with a clear lack of laws ensuring the right framework for the below: (a) Equity Compensation Laws (b) Bankruptcy Laws (c) IP Protection Laws Challenge 13: Long and lengthy process for establishing and shutting down a company Creative Commons License Attribution-NonCommercial-NoDerivs [CC BY-NC-ND]
  28. 28. 55 Lessons from around the WorldBuilding successful startup ecosystems is not a science therefore agencies ven- turing to build one face a significant amount of uncertainty. Exploring narratives of already successful ecosystems can aid these agencies in devising plans. Successful foreign ecosystems can inspire and educate us about solving our own core obsta- cles. The following section has categorized the Lebanese core challenges under ecosystem resource groups and extrapolates solutions to the Lebanese hurdles from relevant international best practices. HUMAN RESOURCES Creative Commons License Attribution-NonCommercial-NoDerivs [CC BY-NC-ND]
  29. 29. 56 57 Short Term Fix Create a cohort of lawyers, who have already assisted startups in their many stages (incorporation, disputes, acquisitions, IPOs, liquidations). The cohort will be made up of Lebanese lawyers with the relevant experience, recom- mended by startups and investors who have already worked with them. The cohort will also feature international law- yers based in the most common offshore incorporation des- tinations. The cohort will then host a series of educational workshops every quarter to educate the local lawyers about startups and their unique structures and best practices. Long Term Fix The long-term fix has an educational dimension: include Circular 331, startup structures, and best practices in undergraduate and graduate law studies in local university curriculums. Short Term Fix Lebanese students are making a name for their country in the top tier universities of the world, across diverse disciplines and fields. The short-term fix to remedy the mismatch between the skill sets the startup ecosystem needs and what is locally available is to attract that talent back to Lebanon. In many cases, there are talented individ- uals that already want to come back to Lebanon, but are looking for an opportunity to make the leap. Almost like the Chilean model for expats. An initiative should be created to offer Lebanese talent of certain skillsets and experience areas, such as UX designers, coders, and growth hackers, the funding and incentives to return and found their own startups in Lebanon. Long Term Fix As with Berlin, the long-term fix will be by-product of a developing and growing ecosystem and talent flowing inwards. The startups will grow and they will recruit more talent, from within Lebanon or from outside. The key is to make the inward movement as easy as possible by provid- ing talent with very clear guidelines about relocating to Lebanon, establishing a company in Lebanon and raising funds through BDL Circular 331. ATTRACTING INTERNATIONAL TALENT: CHILE Chile’s government, along with its Ministry of Economy, created the Startup Chile initiative to pave the way for a knowledge economy in Chile and position it as a startup hub in Latin America. Their aim was to change the mindset of young Chileans and inspire them to become entrepre- neurs with a global vision. They were quick to realize that the only way the program could take off was by importing talent from all over the world, as Chileans did not have the skills and mindset to do so just yet. They bet on Chileans following suit after being inspired by interactions with international entrepreneurs gravitating toward the region. The program brought in high- class entrepreneurs from around the world and granted them US $40,000 in funding, no strings attached (i.e. no equity), space to work for six months, and soft landing (company registration, residency, and a bank account).[31] The program imported the relevant and right kind of talent into Chile and has been hailed as one of the most success- ful programs for attracting entrepreneurial talent to date. Challenge 1 Mismatch between current skills in the market and the skills startups ask for Extrapolating success into Lebanon Challenge 2 Not enough access to lawyers experienced in dealing with startups and their unique structures 8 companies acquired 75 companies that participate in other accelerators 50 million capital invested 10.000 applications +18 000 entrepreneurs Startup Chile Program Stats +800 projects +110 Applicants’ countries 65 entrepreneurs’ countries CHURN OUT SPECIFIC NEEDED TALENT: BERLIN’S ROCKET The founders of Rocket Internet saw the need to replicate successful companies in emerging markets quickly. Founded in 2007 and headquartered in Berlin, Rocket Internet both imitates and churns out successful companies. Known as the “copycat factory,” Rocket Internet is simultaneously a venture capital firm and tech incubator. Its approach is to identify prosperous Internet businesses and emulate their approach toward emerging markets.[32] The office space in Berlin provides companies with space, access to investors, marketing, and talent to grow, making it a locus of talent and knowledge of emerging countries and their respective networks. Rocket Internet feeds the local ecosystems with a continu- ous flow of talent. The company’s turnover rate is very high, and their investment in training is high as well. Employ- ees tend to stay for short periods of time, take what they learned within Rocket Internet’s safe walls, and apply to it to either their own startup or one they later join. Rocket Internet serves more than just being a company that turns ideas into successful companies - it also turns talent into “startup-ready and hirable” talent for the whole of Berlin, and talent is at the heart of any ecosystem’s success.[33] Creative Commons License Attribution-NonCommercial-NoDerivs [CC BY-NC-ND]
  30. 30. 58 59 Knowledge Resources Challenge 3 DRASTICALLY SUBSIDIZING UNIVERSITY R&D CENTERS, FINLAND Finland has been consistently ranked first and second for its development and funding of innovation and technology. “The government allocates funding flexibly and across a range of public and private players, most notably via Tekes and Sitra—the national industrial R&D fund and the national innovation fund, respectively.”[34] Tekes is the most important publically funded expert organ- ization for financing research, development and innovation in Finland®. It not only provides funding for technological advances, it supports service-related, design, business and social innovations through working with top innovative companies and research centers in Finland. The impact that Tekes has created is significant; it funds some 1,500 business research and development projects, and almost 600 public research projects at universities and research institutes. Tekes has fueled private, public and academic investment and interest in innovation and technological advances.[35] Lack of investment in research and development Short Term Fix The Intermediate Circular 331’s main objective is to move Lebanon towards a knowledge economy, therefore any activity that may create Intellectual Property can be guar- anteed by the circular. This information may be well-known among startups and the startup ecosystem but may not be heard of yet by institutions and individuals outside this circle. A short term fix is to educate institutions about the circular and how they can raise funds to support their R&D activities through it. Long Term Fix A long term fix requires a more sustainable initiative, one that depends on tax relief instead of upfront guarantee funded by the private sector. This can be done by providing tax reliefs for the various types of activities that generate intellectual property, and can be extended to individuals, academic institutions and corporations. Extrapolating success into Lebanon • Qualified engineers • Information tech- nology skills • Development and application of tech- nology • Funding for techno- logical development • Public and private sector ventures 1st 2nd 3rd • R&D person- nel per capita • Skilled labor Creative Commons License Attribution-NonCommercial-NoDerivs [CC BY-NC-ND]
  31. 31. 60 61 Challenge 4 TYING ACCELERATORS WITH LARGE COMPANIES IN THE COUNTRY: ISTANBUL’S STARTUP FACTORY Özyeğin University saw that entrepreneurs initiating a star- tup needed an array of support that the private sector was equipped to provide. On May 4, 2011, it became a pioneer university in involving the private sector in the startup world in Turkey. Özyeğin University partnered with Turkcell to “accelerate commercialization of ideas and technologies and to promote entrepreneurship” and founded the Startup Factory.[36] The entity acts as an accelerator that develops strategies through mentorship of Özyeğin faculty and experienced serial entrepreneurs. It also introduces entre- preneurs to angel investor networks in Turkey and provides support for professional services. Successful companies in the mobile business get to participate in the Turkcell Partner Program.[37] Through identified partners, Turkcell develops new pro- grams and services in the mobile business realm in the hopes of delivering to a wider audience.[38] Not enough opportunities for private sector involvement in academia Short Term Fix Push universities to make use of the guarantee provided by the Central Bank for knowledge economy endeavors. Universities will be encouraged to establish research and development(R&D) centers to extend their own activities. It is advised that they recruit an international partner to support their efforts in establishing the R&D unit also lending the local university international credibility, access to specialized talent and a vast network. The university and the international partner could make use of the funds guaranteed by the Central Bank while still retaining the majority of their intellectual property rights. Long Term Fix Extend the subsidies to international universities and corporations by marketing Lebanon as a back end for the research of regional and international companies, allowing them to access the local pool of funds to fuel their activity. Extrapolating success into Lebanon Challenge 5 A. MISMATCH BETWEEN SKILLS OF RECENT GRADUATES AND TODAY’S PROGRESSIVE MARKET NEEDS Build Talent for innovation: Singapore’s A*STAR Singapore created a plan to promote the knowledge econ- omy, and one of the most renowned cases is the story of A*STAR. Replacing the National Science and Technology Board in 2002, the Agency for Science and Technology Organization (A*STAR) is “Singapore’s public sector agency that spearheads economic oriented research to advance scientific discovery and develop innovative technology.”[39] A*Star takes the concept of ‘education for employment’ a step further, becoming academia for innovative industry. Under A*STAR’s motto to push human capital development, Singapore’s youth is targeted by scholarships and awards, allowing them to pursue graduate and postgraduate de- grees in the leading universities of the world. These awards promote scientific talent among early-career researchers at public research institutes, industry and universities.[40] This program resulted in the rapid development of a large and highly educated Singaporean youth very quickly. The Singaporeans quickly realized that it will take them many years before their education system is on par with inter- national standards, so they leveraged international aca- demic institutions to feed their own talent pool, while they built their own world-class universities in parallel. Introduce “Innovation Programs” into Universities: NYU, Syracuse Many fresh grads or young professionals are unprepared to face the challenges set by a changing, volatile, and com- plex world. National and international reports point out the skills gap, particularly in soft skills such as communica- tion, critical thinking, and hard skills such as coding. Many employers blame this gap on higher education.[41] Entre- preneurship, a Kauffman Foundation research report found in 2008, “is one of the fastest growing subjects in today’s undergraduate curricula.” [42] University and schooling systems in Lebanon do not cater to the modern world’s talent needs (entrepreneurship, innovation and tech knowledge) Few schools around the world offer an entire academic department specialized in entrepreneurship, let alone as a part of a center dedicated to entrepreneurship. Syracuse University in NYC is one of the few institutions to create an Entrepreneurship and Emerging Enterprises program (EEE) department in collaboration with the Falcon Center for Entrepreneurship. According to Terry Brown, the new executive director at the Syracuse University (SU) Falcone Center for Entrepre- neurship, the academic development of the central NY area should be directed towards “creating an entrepreneurship innovation economy.” [43] The center’s motto is “dream, believe, pursue,” and the center operates with the mentality of innovative cooperation between universities and busi- nesses. To help develop entrepreneurial impulses within the stu- dents, Syracuse provides the financial resources, technical skills, and mindset by “combining classroom with experi- ential learning”[44] through a variety of innovative programs and initiatives. “More than 7,500 students a year take 85 or more different courses infused with entrepreneurship and innovation each semester. About 100 new student ventures are launched every year.” [45] This is the story of how one academic giant managed to turn its rigid education systems into an agile one that accommodates the needs of today. Creative Commons License Attribution-NonCommercial-NoDerivs [CC BY-NC-ND]
  32. 32. 62 63 B. INTERDISCIPLINARY INTERACTIONS IN UNIVERSITIES ARE LIMITED AMONG DIFFERENT DEPARTMENTS A Degree Program and Space for Interdisciplinary inter- actions – Aalto, Finland One of the best examples of Finland’s large-scale, holistic approach to innovation is Aalto University.[46] It is the result of the merger of three established universities: Helsinki’s School of Economics, University of Art and Design, and Uni- versity of Technology. Aalto developed curricula and stimu- lated research to explore novel, commercially significant ideas. In bringing together experts from disparate arenas, including design, media, and technology, the university develops new approaches to common problems and mani- fests the Finnish government’s conviction that innovation will come from cross-disciplinary efforts. They promote this primarily through a space and a program. 1. Space Aalto Design Factory (ADF) was born from a research project focused on creating an ideal physical and mental working environment for product developers and research- ers. Today ADF is one of the flagship projects and first physical manifestations of Aalto University encouraging and enabling fruitful interaction between students, re- searchers, and professional practitioners. ADF operates in an old wood research laboratory, which has been designed to support experimentation, prototyping, and interaction. The multi-purpose nature of the spaces makes it possible to maintain a high rate of use and to keep things flexible.[47] 2. Program The International Design and Business Management (IDBM) Master’s program initially started off as a minor program in 1995, bringing together designers, engineers, and business students into one space. Then, the market in Finland began to target students who had completed that course for recruitment and employment. The positive feedback loop was what pushed the university to expand the program into a full-fledged Master’s degree, where it now consists of international and multidisciplinary courses accompanied by a year-long industry project in collaboration with companies from all over the world. Short Term Fix Survey Lebanese startups and investors on the type of graduates they are looking for and what skills they need. Once the skill gaps have been identified, the next step would be to increase science scholarships for Lebanese students to study in top tier universities, on the condition that they come back to Lebanon to spearhead innovation for at least two years afterwards. Long Term Fix Propose partnerships between research and support units within academic institutions to strengthen or create active entrepreneurship centers and workshops. Alternatively, enhance collaboration of businesses with universities by partnering support units with universities to create a center for entrepreneurship. Extrapolating success into Lebanon Short Term Fix Learning from the humble beginnings of Aalto University and how it transformed itself from a classical school to a pioneer in educational innovation, we can quickly recog- nize what we are able to do today to change the Lebanese status quo. Introducing interdisciplinary courses in the form of electives that bring together students from differ- ent backgrounds to work on a project together would be a positive first step. This will create a feedback loop for the university to expand such programs. Long Term Fix Creating spaces for interdisciplinary interactions is instru- mental for innovation to flourish. Universities must invest in innovation labs where students can experiment and proto- type, explore different materials, and exchange thoughts. Extrapolating success into Lebanon IDBM is offered as a Master and a Minor program.[48] Degree options: + Master of Science in Economics and Business Administration (M.Sc. Econ.) + Master of Science in Technology (M.Sc. Tech.) + Master of Arts (M.A.) Creative Commons License Attribution-NonCommercial-NoDerivs [CC BY-NC-ND]
  33. 33. 64 65 Not enough people know about what is going on in the Lebanese entrepreneurship ecosystem. This problem is twofold: a. Not enough marketing efforts outside of the ecosystem and internationally Create a Brand: Startup Chile Startup Chile managed to create a reputation for the country and position it as a startup hub. The first year, 19 international media outlets featured news pieces about it. Two years later, this figure had grown to 928, which is quite remarkable given that the program had no marketing budget whatsoever.[49] The program even inspired other governments around the world to have similar programs such as Startup America, Britain, Greece, Italy, Brazil, Jamaica, and Peru. Soon enough, Startup Chile found its way to weekly news, appearing in “at least one article a week in the world’s major newspapers,” said Sebastian Vidal (Startup Chile Program Director). By successfully changing the mindset of young Chileans, the program also pushed them to get out of the country and build stronger networks, with Chile at the center. This also enhanced the effectiveness of the program in creating a brand for Chile. The strength of Startup Chile was: 1) The content was highly marketable: They made it extremely easy for expats to pursue entrepreneurship in Chile. The whole process was very clear and information was available online. The process was simple and easy. 2) Grassroots marketing efforts: The pro- gram had an Alumni initiative, where former program participants organized Startup Chile events in their new home countries to spread the word about the program and about Chile. This was considered free and very persuasive community-based marketing. b. Lack of information available online - no unified re- source for information about the Circular or about setting up a business in Lebanon. Markets and Networks Challenge 6 Making Information available: Tech City UK The UK government saw the need for growing its digital busi- ness medium and for playing an international role in this sphere. In 2010, Prime Minister David Cameron launched Tech City UK to further support the locally grown Silicon Roundabout tech hub in London. Tech City UK continues to support entrepreneurs in setting up their businesses and fostering growth. Tech City UK looks at the ecosystem holistically with clear mechanisms for documenting successes and creating a strong feedback loop to inform policy. Additionally, it is providing a centralized entity that provides easy and accessible information to stakeholders, be it a startup, investor, or partner. The promo- tion wing of the initiative activates local media channels and works on disseminating information, while the website clearly articulates information catered to various objectives. Under its government resources wing in the website,[50] the government guides you through the steps to set up your business and get funding. Short Term Fix Make information easily accessible in multiple languages, for foreigners and locals. Create a website with user-friendly information catered to supporting the various startup ecosystem stakeholders. This website would serve as as centralized entity with information on the how-to’s of creating a startup in Lebanon and ways to apply for funding. Create a startup PR agency that is commissioned to pro- mote what is happening in the entrepreneurship scene in Lebanon to the traditional outlets to combat exclusion. The PR agency will make sure that startup news is communicat- ed to the masses locally and internationally. Long Term Fix Develop the various programs needed to build the startup ecosystem. Build on this report to create programs that cater directly to the gaps identified. Creating a holistic array of pro- grams geared with specific objectives for supporting the various startup stages will create alignment of stakeholders’ actions. Extrapolating success into Lebanon 2010 1 19 2011 92 113 2012 172 928 2013 +250 +1000 National International Startup Chile Media Coverage Creative Commons License Attribution-NonCommercial-NoDerivs [CC BY-NC-ND]
  34. 34. 66 67 Challenge 7 Extrapolating success into Lebanon Need for access to larger markets Unite to Create a Regionally Competitive Startup Ecosystem The youth bulge in West Asia is the region’s greatest challenge and greatest opportunity at the same time. Iran and Egypt are resource rich, and have an incredibly talented pool of young entrepreneurs who need equal opportunities to launch and grow their initiatives. The Middle East is a double edged sword. On one side, it is home to the youngest population in the world, but it has the highest regional unemployment rate. Lebanon’s market size is not significant enough for startups to scale up at a high speed, which means that Lebanese entrepre- neurs have to look towards other markets as potential targets to sell their products or services. Egypt and Iran have a dynamic population of 90 million and 80 million respectively, and the challenge lies in leveraging each country’s advantages to create a competitive regional startup ecosystem. Regional investors also need more opportunities to invest in the region and support fledgling entrepreneurs for their solutions to grow and scale. “The need to have more integrated regional markets is a neces- sary step so that impactful and strong solutions can scale and expand in West Asia,” said Azadeh Tajdar from Tehran Hub. Short Term Fix Launch regional exchange programs that allow young entre- preneurs from the region to visit other countries with relevant markets. Exchange programs are a great way to build region- al resources, networks, and markets for new and innovative products, and such programs would also include connecting entrepreneurs to leaders, role models, and mentors. The focus would be on building skills and capabilities in leadership and management. Long Term Fix Identify the markets with the largest and most active diaspora pockets and develop relationships with them. Additionally, laws need to be proposed that would facilitate regional exchange programs - when initiatives are developed to a larger scale, all participating support units and institutions should sign a pledge to ensure transparency, leading by example and minimizing level of corruption. Challenge 8 Short Term Fix Create discussion panels between entrepreneurs and leaders in the banking sector to have a more comprehensive understanding of what the industry needs and what flexible advances startups can offer to the industry. Long Term Fix Launch an intensive Innovation Lab program by forming a solid board of leading regional and global figures in finan- cial institutions. Select a number of promising fintech star- tups and plug them into an accelerated program where they will receive constructive criticism to improve their products and the opportunity to match with top institutions. Not enough private sector interest in startups, creating an even smaller market Matching Fin-Tech Startups with Big Banks- NY FinTech Innovation Lab Financial Technology (Fintech) Startups face an intense- ly competitive environment, but tech is the chosen new playground for banks to compete in. As a result of heated competition, fintech startups find that selling to big banks is time consuming. Partnership Innovation Fund, along with Accenture, created the NY Fintech innovation Lab. Accord- ing to Maria Gotsch, CEO of FinTech Innovation Lab, “The needs are big, the market is big, and spending is big”.[51] The NY FinTech Innovation Lab pairs startups with mentors in the banking industry, and bridges technology with financial services customers. Customer feedback can take up to 18 months to receive and evaluate. The goal is to compress those 18 months to 12 weeks. By easing and accelerating the matching process, the initiative boosted the growth of enterprise in the fintech sector in NY. The initiative also leveraged the benefits that came from proximity to the largest concentration of financial tech firms in the US. The goal was to create jobs, increase investment in the marketplace, and participate in getting NYC on the map as part of the ecosystem in Fintech. The direct advantage for fintech startups was that, once incorporated in the infrastructure, it is hard for them to be displaced, so the company is able to grow and its stability is ensured. The initiative was extremely aggres- sive in developing its activities, hosting Select Leadership Program panels, raising $175 million in funds, setting 163 meetings with mentors, plus 199 meetings with participat- ing banks in just 12 weeks.[52] Extrapolating success into Lebanon Creative Commons License Attribution-NonCommercial-NoDerivs [CC BY-NC-ND]
  35. 35. 68 69 Capital Challenges Challenge 9 Not enough of the funding is being spent on seed stage investments In 2008, Prime Minister Lee Hsien Loong announced a national program called National Framework for Research Innovation (NFIE) with a five year US$242 million plan to grow funds and support innovation and entrepreneurship in Singapore. The plan had various initiatives that were acting on multidimensional levels: funding early stage startups, encouraging further research amongst professionals through grants, creating the right incubation infrastructure, prompting high tech venture firms to move to Singapore, and bringing multiple industries together. Some schemes under NFIE [53] included the following encapsulated in the below table: The Strength of this initiative is that it stipulated that the funding would enable startups of all stages, including Seed Stage startups (i.e funding for “Proof-of-Concept). This meant that investors had to fund ideas, not only established ventures, something they may have avoided doing had they not been obliged to. This ensured a steady flow of startups for the long-term pipeline. Short Term Fix The funding available for the ecosystem market must be divided upon the different stages of investment to avoid an end scenario where the majority of the investments were driven by a conservative approach to investment i.e Early and Growth Stage Startups and were not invested where it most needed i.e. Seed Stage Startups. Long Term Fix The long term fix to sustain continuous reinvestment in innovation and the knowledge economy would be shift from an upfront guarantee based scheme i.e Intermediate Circular 331 to subsidy schemes for investments in new and innovative ideas. Extrapolating success into Lebanon Innovation Cluster Programme Global Entrepreneur Executives Technology Incuba- tion Scheme Proof-Of-Concept Grants Early Stage Venture Fund N/AUS$3 Million85% coinvestment US $347,000 per startups) US$174,000 Maxi- mum US $7 Million Dollars Amount Encourages tech economies and organizations to form innovation clusters bring ideas quickly to the market, raise productivity, create jobs and grow the sector. Attract high-tech venture backed firms in communi- cationt medical and clean tech to move to singapore NFIE invests in selected startups, recommended by technology incu- bators. The Technology In- cubator co-invests the remaining 15% of investment into the start-up, and guides and mentors the startup Fund professionals in public hospitals & institutes of higher learning in carrying further technology products with poten- tial of commerciali- zation Fund seed venture capital firms that support high-tech companies Target Source: National Research Foundation, Prime Minister’s Office Singapore, “Programmes,” http://www.nrf.gov.sg/about-nrf/pro- grammes, accessed October 2015. Creative Commons License Attribution-NonCommercial-NoDerivs [CC BY-NC-ND]
  36. 36. 70 71 Challenge 10 Lack of a strong business angel network Create a Strong Angel Network: The Cairo Angels The Cairo Angels is the first formal angel network in Egypt and one of the strongest in the Middle East and Africa, with 80 members who invest at least US $10,000 to $25,000 once a year as a required minimum. This is a significant investment in the Egyptian context, keeping in mind an overall lack of funding. “Collectively, they make equity investments in the range of $30,000 to $125,000 per company, and can syndicate larger in- vestments to our partner organizations.” [56] Each quarter, at least one deal closed at $150,000 for a single investment in Egypt. Angel investors have the choice between being a loner or leader and co-investor without taking “majority stakes.” According to Aly Shalakany from Cairo Angels, the mindset of investors is “sell big and monetize,” therefore agreeing on a common, global, and ambitious vision. The Cairo Angels network also agrees on looking for startups specialized in agriculture, logistics and energy sectors that have both a regional and global vision. Regular panels are created to discover new talent and give them feedback, pushing them forward if necessary. The Cairo Angels leverage a London branch of around 30 mem- bers. This branch plays a key role in connecting entrepreneurs with foreign investment and mentorship, while exposing and connecting them to larger markets. Short Term Fix Start a dialogue between local angel investors aimed at creating a strong angel network. Once the network is solid enough locally, network members look for foreign investors in strategic locations such as London, NY, and Silicon Valley to join the circle as the network’s foreign branch. Long Term Fix Strengthen ties amongst members of the same network and other ecosystem stakeholders by creating a “support investors” initiative, and by leveraging capacity building techniques and activities such as networking tips, mentoring, and sponsoring pitch events. Extrapolating success into Lebanon Governance Challenges Cairo Angels invested in more than 14 startups in 2 years Creative Commons License Attribution-NonCommercial-NoDerivs [CC BY-NC-ND]

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