chris-schroeder
Business Management

In the Arab Middle East an American Hails Local Entrepreneurs

Christopher Schroeder is an American entrepreneur and venture capitalist but he splits way off from that herd in many ways. Schroeder is one of a relatively (and shamefully) small number who understand the ways in which globalisation is changing the face of the technology sector, and more broadly, business and society the world over. Schroeder takes a particular interest in the Arab Middle East where he has travelled widely and reports back with remarkable vigour and conviction on the rising tide of startups, ecosystems and entrepreneurs who are striving for success despite the many and various challenges that affect the region.

In 2013, Schroeder’s book Startup Rising was published (interview here) and the book has just been republished in paperback with an afterword from the author. It’s an excellent guide, a refreshingly positive piece of reportage, polemic and special pleading for the area. In a way, the book is an analogue to Start-up Nation, the analysis of Israel’s rise in technology but it is a broader, more ambitious and emotional book.

Schroeder, just returned from a trip to Egypt (“a mind-blow”, he says) answered my questions by email. The following is a lightly edited version of our exchange.

Me: It’s about a year since you published Startup Rising and now you’re releasing the paperback version. Tell me a little about how things have developed in the interim. You talk a lot about the West/US’s blindness to the growing scene in the Middle East and elsewhere. Are those blinkers coming off a little in the wake of the IPO of Chinese e-commerce giant Alibaba, the rise of Dubai’s Souq.com, or companies like Mercado Libre and Globant in Argentina?

Schroeder: I think Alibaba has been a real wake-up call not only for its size, but the realization of its size [being] built fundamentally without the West at all. And yet, it is also often viewed as a bit of a one-off (even with so many more companies like Tencent coming). Those very comfortable with emerging growth markets, like [South African media giant] Naspers, certainly get it. New regional A-round funds are being raised, which is encouraging. Dave McClure, of [startup accelerator network] 500 Startups by my count has been to the region four times over the past four months and invested in 15 startups there. Success will breed success.

Alibaba was a remarkable IPO based on a business that has grown predominantly locally - and yet in the end CEO Jack Ma plumped for a US market for its float. Will the strength of the US bourses act as a bulwark, especially in tech?

It is about liquidity and access to capital, and there is no question that role can be played. Jack, as I'm sure you know, is also setting up office in Palo Alto.

Are you seeing Middle East firms both mimicking the classic tech/net success models and breaking free from them to suit local needs?

Like every early ecosystem there is always value in the first successes being local and regional. Nothing wrong with $100m or $150m exits in the growing days.  Of course, Souq.com was just valued north of $500m and I think we'll see some real surprises there.

How successful have Middle Eastern firms been in selling to neighbouring countries in the Middle East?

Places like Dubai are the hubs of east/west/north/south - all kinds of goods and services pass through. Saudi Arabia, within the region, is an enormous destination for consumer goods. This has expanded across emerging markets to emerging markets.

Are you seeing the Western-style continuum of ecosystems in the Middle East? That is, strong education, good links between academia and startups/business, a soft-touch legislature and tax regime etc.?

This and changes in law have been slow. GCC [which promotes a common market for Arab Gulf states] has just passed some interesting laws to streamline the movement of goods and services. The key is implementation at the ground level. Universities have a long way to go, but are focusing more on technology.  At the same time this is an amazingly autodidact phenomenon -- kids are teaching themselves online around the traditional top-down educational expectations.

Do you expect a regional super-hub to emerge?

Where there is ubiquitous access to technology there will be innovation. I don't see necessarily one central hub -- though there is an enormous opportunity for gravity of talent to great cities to live in like Dubai, Abu Dhabi, Amman, Cairo, Alexandria, Beirut. But kids have to feel they can win, or they will move to where they will.

Do you see any signs of détente between the Middle East and Israel commercially?

No. There are some engagements and trade going on. It's hard for the tech communities to connect. As one Palestinian said to me, "Everyone thinks tech has no walls, and that is true at one level. But there is a HUGE wall physically, and an occupation. How does anyone expect us to separate the two?"

How is core infrastructure developing across the Middle East – for example, broadband, wireless, power-supply robustness - and to what an extent is that an issue?

[It’s] excellent. Fifty per cent smartphone penetration is breaking through in many places. More is needed, more affordable data plans; [in] some great hubs of entrepreneurship, like Lebanon, it's still too hard. But they work around.

To what extent are governments even in the more troubled countries trying to support innovation and entrepreneurs?

Even Damascus last year had a startup weekend -- but the issues there are so great and terrible [that] it's hard to support. But where there is chaos, usually, to some degree, also is where entrepreneurs thrive. Every country has a huge youth bubble opportunity/challenge -- they are wise to consider how young people can build economic futures for themselves as governments can't move fast enough. It is unclear how many are [doing so] though.

One obvious way for Middle East firms to grow would be to gain traction in the US/West. In Latin America, groups are emerging to act as brokers or gateways, especially in Miami and southern Florida. Is something similar happening for the Middle East?

There are amazing diaspora doing amazing things here. The co-founder of Cloudera [Amr Awadallah] is Egyptian, for example. There has not been enough connection as was done among Indians two decades ago. But people are stepping up to strengthen these connections now.

 

You can read an excerpt from the new edition of Startup Rising here.

 

Martin Veitch is Editorial Director at IDG Connect

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Martin Veitch

Martin Veitch is Contributing Editor for IDG Connect

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