Fadi Ghandour is one of the Middle East’s best-known entrepreneurs in May. The founder of global logistics and transportation company Aramex, Ghandour has his hand on the pulse of the Arab startup ecosystem from the beginning. He is a founding partner of Maktoob, the Arab/English Internet portal that Yahoo! bought in the fall of 2009 for $164 million.
Established in 1982 as an express operator for the Middle East and South Asia, Aramex became the first Arab-based company to trade its shares on NASDAQ in 1997, and now trades on the Dubai Financial Market.
Ghandour has promoted entrepreneurship in Arab countries as much as anyone. In October, he participated in the Massachusetts Institute of Technology’s Arab Business Plan Competition in Amman, Jordan. Ghandour has been closely watching the political unrest spreading through the Arab world. He hopes the seismic shift seen in Egypt eventually will foster a stronger startup culture in his region. He spoke with Arabic Knowledge at Wharton by phone from Amman recently about how the political and Internet revolutions are intersecting.
An edited transcript of the conversation follows.
Arabic Knowledge at Wharton: So much is changing so rapidly throughout the Arab world, it’s not easy to gaze into a crystal ball and predict the future. But let’s start with the technology itself. You’ve invested in TwitVid, a platform play for Twitter and Facebook and other devices. What will happen as we become more reliant on social media?
Fadi Ghandour: It’s definitely part of the future. It’s a revolutionary tool. I don’t know how people are going to exist nowadays without Twitter. Whether Twitter is going to make money out of it is another story altogether.
Arabic Knowledge at Wharton: When it comes to the political unrest sweeping the region, it leads to uncertainty. But does it also have the potential to lead to something revolutionary in the Arab business world?
Ghandour: I have no doubt about that. This region is a little bit behind Silicon Valley. But it is catching on very fast. The amount of new registrants online is just unbelievable, especially since the Egyptian protest. That is empowering the youth. That is getting youth to understand they have a voice, that they can air their voice, that they can tell their story. And they’re just starting to grasp what it means. Facebook was a place where the youth initially focused their stories, "I went to this party, and I did this or that." Effectively today it became a tool to communicate when normal, traditional media did not allow them to air their voice. They did not find anyone telling the stories they were seeing on the ground. They became the news sources by posting on Facebook or Twitter.
Arabic Knowledge at Wharton: What are your hopes for entrepreneurship? You have such a young population. Is a vibrant startup culture the way of the future in the Middle East?
Ghandour: That is already happening. Jordan has a lot of startups. Egypt did before the protest. I think you will see more. Lebanon is becoming very active. The region definitely has an empowering story. It started when Maktoob got sold to Yahoo! Some of them are coming back from Silicon Valley and the West and copying what is happening over there and localizing it.
The youth finally are going to own their future. And by owning their future they are going to create businesses for themselves, generating jobs, feeling much more responsible about the future. When you’re empowered you have a sense of ownership in your community.
Arabic Knowledge at Wharton: It almost seems as if you see a connection between the mobilization of youth-led protests with creating a more diverse and energetic economy in the future.
Ghandour: When you need 60 million to 100 million jobs in the coming 10 years, and that’s the biggest issue for any country to worry about, what do you do with the youth? When big companies and government don’t generate jobs then entrepreneurship has to be one of the big solutions – and it has to be supported. You must create an environment for it, create the legal environment, bring in venture capital and bring in angel investors. All of these are just starting to happen. It’s going to slow down now because political instability scares capital. As the situation clears up you’re going to see a serious upsurge in entrepreneurship.
Arabic Knowledge at Wharton: You’ve refuted the notion of a cultural wall that discourages entrepreneurship in Arab countries. Did protesters in Tahrir Square in Cairo, Pearl Square in Bahrain and [the newly named] Mohammad Bouazizi Square in Tunis illustrate your point by their fluent use of the Internet to promote their ideas?
Ghandour: Firstly, entrepreneurs in Egypt or Jordan think and act almost like an entrepreneur in Silicon Valley. People feel they can go out and do things. This will drive the whole ecosystem. That way of thinking says there is something there.
There are no cultural barriers, the so-called "Arabs are afraid of failure." I don’t buy that. They’re not scared of failure. These people are going out and "venturing." The more examples they see then the less they are afraid to jump ship from traditional jobs.
Arabic Knowledge at Wharton: And you see that with the protestors?
Ghandour: The youth ventured into it for change. Being an entrepreneur is someone who ventures to something new to create a solution to a problem.
With the Massachusetts Institute of Technology’s Arab Business Plan Competition we had no less than 3,000 business plans. That is staggering in a region where people used to ask, "Where are the entrepreneurs?" In the old days people used to say we have a youth bulge. This is not a bulge, it is a youth hope. They are paying heavily for it with their lives.
Arabic Knowledge at Wharton: What leads you to feel so optimistic about the prospects of entrepreneurship in the Arab world?
Ghandour: I’m telling you because of the Internet and its flatness, and that makes information instantaneously available to people here. Think of an entrepreneur sitting in a basement in Syria. He is as connected as someone in Silicon Valley. In some ways they can be better entrepreneurs. They need to work harder, and be much more tenacious because the support system is not there.
Arabic Knowledge at Wharton: Let’s talk more about the current state of venture capital (VC) funding in the Arab region. What has changed in the past year or so?
Ghandour: Lots have changed in the past two months that will make people realize how important it is to enable entrepreneurs and focus on youth and their issues, from education, to job creation, and freedom of expression. They all go together. What has changed in the Mena region is Maktoob and its sale to Yahoo! It made the VC and angel investing industry wake up and realize that this is a serious market with serious techies who are building businesses from their homes, who want to be like [Maktoob founders] Samih Toukan and Hussam Khoury. At the same time the collapse of the real-estate industry and mega projects got people to think much more seriously about SMEs (small and medium enterprises) rather than privatization.
Arabic Knowledge at Wharton: When it comes to funding what are the recent highlights beyond the Maktoob sensation? Also, what specifically still needs to be done to get to the next step in building a thriving ecosystem?
Ghandour: After Maktoob, we had Rubicon [Jordan-based, it is the Middle East’s largest animation studio]. The deal secured a 30% equity investment from GrowthGate Capital with a three-year plan to allow Rubicon to compete globally. A major highlight that will allow for more interesting success stories is the launch of Riyada Enterprise Development, an Abraaj Capital firm focused on knowledge-based industries in the Arab world. It is a US$500-million initiative focused on investing in SMEs in the region.
But more needs to be done. The private sector needs to invest more in startups and SMEs and provide them with the mentorship needed and access to their networks; they need to encourage them by doing business with them and becoming their clients whenever possible.
For a thriving ecosystem, there are key issues that we need to address and we need all sectors to work together to create an enabling environment for entrepreneurs, from changing the way our educational systems are focused on memorization without room for free thought, critical thinking, questioning and trial and error; to reforming legislative and fiscal policies to addressing critical matters such as bankruptcy laws, tax incentives, lower bureaucracy and intellectual property rights. There also is a lack of proper infrastructure in certain countries, such as the availability of broadband Internet in Lebanon; how can we expect entrepreneurs to thrive in the 21st century if we cannot provide proper Internet access to them?
Arabic Knowledge at Wharton: Are there specific steps Arab entrepreneurs should be taking at this particular moment in time?
Ghandour: At this moment in time, I would say it is more important than ever that they start: Now is the time for them to build their ventures and contribute to their economies and societies. It is important for them to know that it is about the implementation and not just the idea. They also should seek guidance from mentors who will share their knowledge and open up their networks. And most important, they need to focus on building their teams, delegating the work and splitting responsibilities in order to be able to build value.
Arabic Knowledge at Wharton: What are the steps early stage Arab companies need to take to get launched? What specific steps should startups take to keep growing?
Ghandour: At the early stage, it is important that they understand their market and competition — take the time to understand their customers. Once they have identified a niche, they should go for it! They should experiment. They probably will fail but should try again — and they should focus on building a team as well as watching their cash. While growing, they will realize that managing cash flow always will be an issue. Also, they must deliver on their promises to all their stakeholders; it’s not an option. This might entail providing solutions that answer the needs of evolving customers, attracting and maintaining a talented team and keeping them motivated and crafting strategic alliances with business partners. They also need to be prepared for change, and to be agile enough to adopt new technologies and maintain their entrepreneurial spirit. Most important, they always should keep knocking on doors and asking questions.
Arabic Knowledge at Wharton: What are VCs from the Arab region looking for in startups?
Ghandour: Innovation, creativity, solutions – entrepreneurship does not necessarily mean a new product; it could be a new way of implementing a technology or a service – the impact the product or service has. The entrepreneur himself is also very important; it is important to feel that the entrepreneur is in it for the long run and is concerned with building value rather than focused on the exit. Of course, it is important to look at potential for growth, job creation, sustainability and their ability to compete not only locally but also regionally and globally.
Arabic Knowledge at Wharton: Can you name some Arab startups that we should be watching — even if you’re not invested in them? Who out there is creating a buzz right now and why?
Ghandour: There are some impressive startups from the Arab world and this is not about whether they succeed or not but rather that they have tried to do things a little bit differently. Of course, some are bigger than others and they span different industries. Here are a few: The Jabbar Group [Souk.com, Cashu.com, sukar.com, ikoo.com, tahadi.com]; Teshkeel Media/The 99 [Kuwait]; Bayt.com [UAE]; GoNabit [UAE]; Akhtaboot [Jordan]; Jeeran [Jordan]; Woopra [Lebanon]; Yamli [Lebanon/Boston]; D1G.com [Jordan]; Inta Feen, ShooFeeTV, AlZwad, and OMS [all in Egypt].
Arabic Knowledge at Wharton: Where is the VC culture the strongest? Amman, Dubai, Cairo or Riyadh?
Ghandour: Capital is borderless but mostly comes from the Gulf Cooperation Council countries — Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates. But the deals will be in Jordan, Lebanon, Egypt, UAE, North Africa. The big surprise will be Saudi Arabia.