Startup Rising: The Entrepreneurial Revolution Remaking the Middle Eastby Christopher M. Schroeder
Despite the world's elation at the Arab Spring, shockingly little has changed politically in the Middle East; even frontliners Egypt and Tunisia continue to suffer repression, fixed elections, and bombings, while Syria descends into civil war. But in the midst of it all, a quieter revolution has begun to emerge, one that might ultimately do more to change the face… See more details below
Despite the world's elation at the Arab Spring, shockingly little has changed politically in the Middle East; even frontliners Egypt and Tunisia continue to suffer repression, fixed elections, and bombings, while Syria descends into civil war. But in the midst of it all, a quieter revolution has begun to emerge, one that might ultimately do more to change the face of the region: entrepreneurship. As a seasoned angel investor in emerging markets, Christopher M. Schroeder was curious but skeptical about the future of investing in the Arab world. Travelling to Dubai, Cairo, Amman, Beirut, Istanbul, and even Damascus, he saw thousands of talented, successful, and intrepid entrepreneurs, all willing to face cultural, legal, and societal impediments inherent to their worlds. Equally important, he saw major private equity firms, venture capitalists, and tech companies like Google, Intel, Cisco, Yahoo, LinkedIn, and PayPal making significant bets, despite the uncertainty in the region. With Startup Rising, he marries his own observations with the predictions of these tech giants to offer a surprising and timely look at the second stealth revolution in the Middle East-one that promises to reinvent it as a center of innovation and progress.
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The Entrepreneurial Revolution Remaking the Middle East
By Christopher M. Schroeder
Palgrave MacmillanCopyright © 2013 Christopher M. Schroeder,
All rights reserved.
Celebration of Entrepreneurship
I sat, jet-lagged, in a small conference room, watching the desert sun sink toward the western horizon. It was my first trip to the Middle East in over a decade, and I had forgotten how hot it could get there even in November. Last time I had been a tourist — all antiquity, pyramids, and museums in Cairo. Now I was a seasoned internet investor, board member, and entrepreneur, attending one of the first region-wide gatherings of tech startups in Dubai. The looming skyscrapers and business towers before me had been barely an architect's dream during my last visit. Now, only the heat was familiar. By the end of this conference, virtually all my preconceptions of the Middle East would be thoroughly altered.
As if on cue, a flowing figure in black glided before me like a phantom. She sat beside me, shoulders proudly back, dressed in the traditional head-to-toe abaya that revealed only her face and hands. She said she was a university student in Saudi Arabia, and while there had designed a luxurious leather carrying case for mobile devices like smartphones and iPads — complete with a battery pocket to keep them charged. She asked whether I thought this was a good business idea.
I have happily listened to hundreds of ideas, investment pitches, and calls for mentorship throughout my career. It's inspiring to meet people trying to start something from scratch, with the odds so strongly against them, and it's gratifying to flatter myself that my nearly two decades of business experience might materially help these budding entrepreneurs. But on this day in 2010, my first mentorship experience in the Middle East was unnervingly different.
Fumbling for a coherent answer, I asked a few questions about her background and the genesis of her idea and offered some generic encouragement about following her dreams. She nodded politely, but with a palpable sense of boredom. "Thank you for that," she said. "It is very helpful. But I should have been more precise. I have a pre-order for a thousand units, and this leaves me with a dilemma. There are four low-cost manufacturers in China who are enthusiastic about doing business with me, but I am nervous about having my suppliers so far away. Should I risk manufacturing my idea with people I don't know very well, or should I raise the roughly $45,000 I'd need for machinery and then hire a young woman I know locally to handle production?"
I was stunned. Before me was a young, Saudi Arabia — based, tech-savvy woman entrepreneur looking to expand her operations globally. This was not the Middle East that I had been taught to expect. It was not the Middle East that my Western peers, even the most sophisticated businesspeople, knew. In fact, her story shocked even many of my skeptical friends in the region when I later described her.
One of the other young entrepreneurs in the room, the founder of a computer animation startup based in Syria, sensed my amazement. Eerily resembling a younger Leonardo DiCaprio with a ponytail, he winked at me. "There's a lot going over here, right sir?" Right.
I was in Dubai because I have been a successful entrepreneur and sometimes successful investor in many startup companies. I've played the roles of leader, board member, mentor, and amateur psychologist. I know the high of watching customers flock to a new product, and the gut-wrenching terror of realizing that even a small mistake on my part could cost my employees their livelihoods. When I talk with young entrepreneurs so passionate about technology and the internet that they can't imagine doing anything else, I am conversing with a sister or a brother. I know what they're in for, and I applaud them for it. It's a life of bold choices; one that, as the legendary founder of Netscape and venture investor Marc Andreessen reminded me at the beginning of one of my ventures, yields only two emotions: total euphoria and abject fear.
I was there primarily, however, because of an unusual journey.
In the United States, I am frequently asked why I care about the Middle East. My answer is usually a baffled, "Why don't you?" It's hard to name two regions of the world whose mutual needs, tensions, misunderstandings, and mistakes have had more impact in shaping their fortunes than these two. When I was growing up, when we thought about the Middle East at all, we generally lumped its unique cultures and histories into some simplistic context framed around the Israeli-Palestinian conflict or the Iranian Revolution. In college, I had a brilliant roommate who had recently escaped civil war — torn Lebanon with his family. When our late-night bull sessions turned to the Middle East, he tried patiently to teach our dorm-mates about the nuances of the region and how we were viewed there. One night, one of our classmates turned to him, as if the West had had no responsibilities for the region's challenges and said, "There is no hope. We should build a wall around the region and let you just figure your own shit out." There was embarrassed silence, but none of the rest of us had anything more sophisticated to offer our exasperated friend.
In the following decades, America's economic and strategic connectedness to the Middle East continued to increase. The accompanying tension and confrontation reached their apex in the terrible and brutal shock that was September 11. By that time I was a well-travelled executive. I understood that engagement and problem-solving anywhere required sensitivity to the countless big and small distinctions on the ground — that the most creative solutions were rarely one-size-fits-all. I had just joined the Young Presidents Organization (YPO), which has nearly 16,000 CEO members from around the world. The group's mission is less about business networking than building connectedness and understanding among senior executives. In 2003, a fellow U.S. member introduced me to other members from the Arab world. We collectively decided to form a sub-group of U.S. and Arab CEOs to help each other learn and understand our various cultural perspectives.
"The purpose of our group," as one Arab member more colloquially but accurately described later, "was to convince one another after September 11 that we're not all assholes." About two dozen of us met as often as three times a year — once in New York or Washington, once in Europe, once in the region. We got to know each other personally, and debated with outside experts. Most importantly, we learned about the unique problem-solving under way in both regions, well below the radar of the broader political narrative of economic aid and potential military conflict.
Two members of this remarkable group stood out. Lebanese-Jordanian entrepreneur Fadi Ghandour had built Aramex, the region's largest FedEx-like logistics and transportation company. Just over 50, he has the lean figure and tenacity of a man who swims two miles each morning regardless of what time zone he's crossed that day. Arif Naqvi had founded the Abraaj Group and built it into one of the largest private equity investment firms among all global growth markets. His legendary twenty-hour days underscore his insatiable curiosity about newly opening and changing worlds. They met when Arif invested in Fadi's company, and soon became close friends. They shared a passion for the broader societal impact of business, and led innovative corporate social responsibility initiatives around the Middle East. And as they compared notes on their teenage sons, how their lives were structured around and changing due to technology, they became convinced that they were witnessing an age of unparalleled historic opportunity.
During our YPO gatherings, they championed the rise of young tech-driven entrepreneurs throughout the developing world — especially in the Middle East. They believed that there were now significant opportunities for young people to create and build businesses that did not exist just a few years ago. A rising generation was demanding a different and better life than their parents', they argued, and they expressed these demands through the businesses they were creating. For Naqvi and Ghandour, embracing these entrepreneurs was nothing short of embracing the potential for a new Middle East. And they are putting their money and time where their mouths are. Both are leading go-to figures in the region, investing in, mentoring, and connecting regional tech-based startups. In the summer of 2010 they joined forces to hold what they called the region's first "Celebration of Entrepreneurship" in Dubai, an event that perfectly symbolized their beliefs. "You have to come and see this for yourself, man," they emailed me in invitation. I was skeptical, but most of our group knew we needed to be there.
The sold-out gathering had all the earmarks of a typical Silicon Valley event: more than 2,400 eager entrepreneurs and investors — most of them young and tethered to their mobile devices — sharing, debating, and connecting. There was the requisite hip music. Been-there/done-that speakers mixed with kids who were new to the game, dashing out ideas on whiteboards and rallying each other to new ventures. Yet the participants weren't familiar U.S. internet startups but a new generation of entrepreneurs from the Arabic-speaking Middle East. The music wasn't LA hip-hop but Arif Lohar, a leading Pakistani folk/fusion artist, whose band's vibrant rhythms combined with the vocals of Meesha, a stunning pop singer and top star in the region. They rocked the house with Urdu lyrics expressing love for and thankfulness to God.
Nobody discussed politics, religion, or historic obstacles. Instead, all they wanted to do was invent and build new businesses.
The Celebration of Entrepreneurship set me on subsequent journeys beyond Dubai — to Cairo, Amman, Beirut, Istanbul, even Damascus — and I saw similarly talented, successful, and intrepid entrepreneurs by the thousands, all driven to build, all willing to face the cultural, legal, and societal impediments inherent to their worlds. Just as importantly, I saw major global private equity and venture investors and tech companies like Google, Intel, Cisco, Yahoo!, LinkedIn, and PayPal among others making significant bets, and doubling down on earlier investments, despite uncertainty in the region.
Fadi's and Arif's instincts were, of course, prophetic. Only three months after the Dubai event, many of these same young people we met were protesting in Tahrir Square and other cities throughout the region, demanding open societies that would allow them to prosper.
Before Dubai, my own instinct was to summarily dismiss the likelihood that Ghandour and Naqvi were right. In retrospect, I attribute this not only to my own regional bias, but also to the fact that I ignored everything I was witnessing in my own daily work running internet companies. I knew — as well as anyone — what level of innovation individuals are capable of when they build connections and share collaborative experiences through technology, no matter where they live. I should have known better.
My start in the early days of the internet was deeply personal. Within eighteen months in the late 1990s, I learned that my best friend suffered from crippling bipolar disorder and my mother-in-law was diagnosed with lung cancer that had spread to her brain. I am the grandson of Italian immigrants, so depression was not a disease, but something to "suck up." Cancer was only discussed in hushed tones among family and left in the hands of the doctors. Shocked by what turned out to be death sentences for both people I loved, I turned to the internet to try to understand things outside of my comfort zone.
This was nearly a decade before social networks, but I found small communities of people online who were going through similar experiences. We never knew each other, but in the months to come we taught each other, pointed each other to resources, and supported each other in troubling moments. When my loved ones lost their battles, these communities helped me process and mourn. I was a smarter, better informed, more sensitive support to my family and friends because of these connections. And I had no doubt that technology was unleashing not merely tools of convenience, but entirely new ways to share insight, build relationships, and take action. "You are not alone. You are not crazy. Actions you take can make a difference because others like you did the same." This has since become my stump speech on what this technology means for us. It was empowering and signaled a power shift. We as individuals could demand the transparency and make the connections to help us act. The world would change.
Some years later, a group of like-minded entrepreneurs and I decided to put our personal and professional experiences to work. We launched one of the first social platforms in health, HealthCentral.com, to aggregate "patient wisdom" in safe and trusted environments. Our company consisted of nearly fifty individual web and mobile sites where people who had "been there" could share their condition-specific experiences. We convinced some of the leading investors in the internet and media worlds to back us. Through the tumultuous ups and downs that characterize most startups, our platform grew to engage over 15 million people monthly. We were inundated daily with stories of people emboldened to step up, help each other, and better their own health as well as that of their loved ones.
It was on a chance trip during my tenure in my previous company — Washingtonpost.Newsweek Interactive — that the global ramifications of technology and collaboration hit me like a two-by-four. The Washington Post's gracious and forward-thinking chief executive Don Graham asked me to visit Tokyo, Seoul, and Helsinki to get a closer look at these rapidly changing and advanced broadband and mobile societies. I spent several weeks with established CEOs and upstarts, thinkers, business professors, and students to see how they bought and used technology.
The cultures, histories and approaches in these countries are quite different from those in the United States. But the groundwork for social networks, mobile e-commerce, mobile texting, and shared video were well laid there several years before they became the norm here. My greatest epiphany, however, was that in expecting to see everything technology — a tech-powered, Jetsons-like world — I was unprepared to see almost nothing. Technology in these societies had become like water or electricity. People assumed its availability and simply embedded it in their day-to-day lives. Many were puzzled as to why I had made these trips at all. A diffusion of innovation — due to exponentially increasing access to information technology — was allowing entrepreneurs to create, collaborate, and affordably scale business to solve local, regional and even global problems as never before.
These societies were electrifying. And I began to wonder even then: what will happen when every country has similar access to these technologies?
The West tends to look at the world through the prism of its own successes, and believes that it has a monopoly on innovative ideas and entrepreneurship. Nothing amuses the entrepreneurs I meet around the world more than when some U.S. politician refers to entrepreneurship as a "leading American export," as if other, thousands-of-years-old entrepreneurial cultures have only recently discovered it. And one of the most common questions I hear from American entrepreneurs, investors, and policy makers as they consider looking at new growth markets is, what will be the "next Silicon Valley" of a certain region or country?
For all the hype, hubris, wealth, and celebrity associated with "the Valley," it remains an extraordinary place. It stands alongside Periclean Athens or eleventh-century Andaluca or Renaissance Florence for its raw, competitive, innovative zeal, which has utterly changed the world we live in. One cannot avoid stepping off a plane there without almost feeling the ubiquity of drive and innovation in almost every conversation in every restaurant, coffee shop, or bar.
Ben Horowitz, the former CEO of the tech juggernaut Opsware and co-founder of one of the most successful venture capital funds, Andreessen Horowitz, told me that what people most often underestimate about the Valley is the pure network effect of talent that is drawn to it. "Extraordinary engineering, product, creative people tend to attract the same," he told me, "to a point now that every company is tripping over themselves to attract the best — and the best really are in control of their own destinies here because of it." Mike Moritz, chairman of the legendary Sequoia Capital — a pioneering venture capital firm responsible for backing the likes of Apple, Google, Cisco, PayPal and LinkedIn which are among the other most successful technology companies in the world — agrees: "We try to find the most promising companies but if they are even a few hundred miles away — say Los Angeles and San Diego — our number-one challenge is to get the best people to move there."
Excerpted from Startup Rising by Christopher M. Schroeder. Copyright © 2013 Christopher M. Schroeder,. Excerpted by permission of Palgrave Macmillan.
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