Weekend Business Plan Brainstorming Comes to the Middle East

The auditorium of the Berytech Institute just outside Beirut was packed with young entrepreneurs who proudly identified themselves as geeks. Some travelled over 10 hours by bus to attend the "Yalla Startup Weekend," the first ever Middle Eastern attempt to import the U.S. concept of brainstorming, innovating and executing business ideas over the course of 54 hours.

"Make some noise if you're from Jordan!" the event's organizer and master of ceremonies, Habib Haddad, prompted the audience. A chorus of cheers and whoops rose among the crowd, which also included Syrians, Lebanese, and a smattering of Saudis, Egyptians and even a Palestinian who managed to obtain travel papers to travel to Lebanon.

A year after Yahoo bought Arabic web portal Maktoob.com for an estimated US$160 million, entrepreneurship is on everyone's lips here. But interest has been slow to translate into concrete results in the Middle East and many of the same regulatory, infrastructure and cultural obstacles persist. Increasingly, efforts like the Yalla Startup Weekend are focusing on building a sustainable entrepreneurship ecosystem, in the hopes that more breakout successes like Maktoob will force investors, governments, and institutions to provide the necessary support.

Haddad is best known as the creator of the transliteration search engine Yamli.com, but on this particular November night he was acting in his capacity as co-founder of Yalla Startup, an NGO (non-governmental organization) aimed at promoting entrepreneurship in the Arab world. As Haddad welcomed the roughly 150 participants, he explained that they would have just 54 hours to pitch an idea, form a team and put together a business prototype to present to a panel of judges made up of industry experts. The winning teams received money, workspace and gadgets, and the chance to compete against the winners of 33 other Startup Weekends taking place across the world and co-sponsored by the Seattle-based organization Startup Weekend.

While the event was framed as a friendly competition, it was less about selling ideas to investors than about teaching aspiring entrepreneurs how to sell themselves. Haddad's easy stage presence stood in sharp contrast to most of the participants, who struggled to pitch their ideas in just 30 seconds. "It gave everyone condensed, real-life experience of what it is to sell your idea, and work in teams under pressure," Haddad said afterward. "For most of the people, it was their first time speaking on stage in front of hundreds of people."

Finding Some Motivation

Most participants appeared to be in their twenties and were developers, designers, or marketers. Many were recent college graduates or still in school, while others work for established firms and pursue their own projects on the side. Visitors from out of town either booked hotels in Beirut or slept in the Berytech labs. Due to the breakneck pace of the competition, however, (pitch an idea on Friday, work on it with a team on Saturday and present it to judges on Sunday), many didn't sleep at all.

Waleed Tuffaha, a Jordanian developer whose group finished in second place for their communal data storage system, joked that his team decided to spend the weekend glued to their computers because they "had nothing better to do." He added that the event provided the motivation to execute an idea they had long been working on, as well as networking opportunities. "It's hard to find qualified people," he noted. "Half the people I know who are qualified have left [Jordan] and the other half are planning to leave if nothing works out."

The winning team, Mimix, consisted of three Lebanese and two Jordanians who met for the first time at the pitching session. Mimix would go on to win not only the Beirut Startup Weekend, but the global competition as well, despite dumping their initial idea for an eco-friendly search engine at the last minute in favor of an application that conducts real time translation of audio into sign language.

This kind of ingenuity is exactly what Haddad said he was hoping to encourage when he and the other founders of Yalla Startup decided to put together the weekend challenge — a response, Haddad noted, to a regional Internet technology community that is "all talk and no action." The sale of Maktoob spawned a number of conferences, talks, and workshops, he added, but not the kind of sea change that would embolden entrepreneurs to take necessary risks.

Startup weekends have proven their popularity in cities where social networks of entrepreneurs exist and quickly provide tangible results, said Karl T. Ulrich, vice dean of innovation and a professor of operations and information management at Wharton. "One of the nice things about these weekends or [similar] compressed events is that in a matter of days, you have something you can show people. Often the insights you get from those early prototypes will cause you to redirect your efforts in more productive ways. The sooner you get that feedback, the better it is for the venture."

There is an impulse in entrepreneurship to "do things quickly, to get prototypes done quickly in order to get feedback," Ulrich added. "That is a benefit and a reinforcement of the social fabric. Combining these events with more explicit educational efforts [and] workshops is beneficial as well."

Startups Need Quality

Funds for entrepreneurs in the Middle East are starting to trickle downward through incubators, universities, and a few media and tech behemoths, but frustration remains with infrastructure barriers and political bureaucracies. Slow or expensive Internet connections make working in countries like Lebanon difficult. Despite Saudi Arabia's higher quality infrastructure and regulatory and financial incentives, attracting talent to the ultra-conservative country can be equally tough. Many countries do not have a functioning door-to-door postal service to support e-commerce, and some governments have banned technology seen as a threat to either national security or local monopolies. Moreover, and perhaps most importantly, the region is dominated by a conservative investment culture that fears the very dynamism that fuels innovation.

While the guiding principle of Google and other Silicon Valley legends has been to build something "cool" and worry about money later, regional entrepreneurs and some investors said this model is fundamentally at odds with most of the traditional sources of funding in the region that provide early-stage seed money needed to bring a promising idea to the next level.

This pressure to monetize early on, or at least to have a clear business model, is often transferred to entrepreneurs, making them more likely to copy existing successful models. The result, noted investors, is too many stale ideas that are seeking to create an "Arab" imitation of existing services like Twitter and Craigslist. "The quality of startups that we have around is not effective enough to invest in," said Mohamad Khawaja, the business development manager of National Net Ventures, which sponsored the Yalla Startup Weekend. "Very few are really good, and we're looking at each and every event in the region."

Firms such as National Net Ventures, he noted, are working to provide more comprehensive support to entrepreneurs at an earlier stage in order to compensate for the gaping holes in the startup ecosystem. Proactive incubation models that provide not just seed money but also workspace, salaries and mentorship are becoming increasingly common among investors and institutions that recognize the need to relieve some of the pressure on entrepreneurs in order to foster creativity.

"The giants of Silicon Valley come once every ten years, and this is not enough to create an ecosystem," Khawaja said. "We need more quality startups, so we pick the best ones and we offer … investment, but the biggest challenge we face is that these entrepreneurs are not willing to quit their jobs."

Even VCs are bound by certain region-specific limitations. The lack of regional giants to invest in joint ventures and strict regulation of IPOs in most Arab countries limits investors' options and makes them especially sensitive to exit strategies. Assem Safieddine, a business expert at the American University of Beirut and consultant, noted that some of his clients are starting to move to countries like India where they see more willingness on the part of the government to move towards "smart regulation."

Changing The Culture

But the only way to change the culture at the top, Safieddine suggested, is to start at the bottom, a process that often begins in the classroom. Only when entrepreneurs start succeeding, he added, will governments and institutions have an incentive to reform. "We should be focusing on the young. The chairman of the board — it's too late for him. You will never succeed changing the culture at the top. I want [entrepreneurs] to get out of fear of trying and failing. The only way they can succeed 'Google style' … is by trying and failing."

The Yalla Startup Weekend, which coincided with Global Entrepreneurship Week in Lebanon, is part of a growing schedule of similar events being organized around the region. While some are little more than pitching sessions sponsored by large multinationals, local organizations are becoming more proactive in building self-sustaining networks of individuals who, together, can share experiences and challenge the entrenched business culture. "The talent is always in the places where you least expect," Haddad said. "The entrepreneurs are hidden — fresh graduates, some employee at Yahoo or some other big firm — who dreams of starting his own company and has been thinking about this idea for a year. Those are the ones I think we attracted in our event."

Safieddine described events like the Yalla Startup weekend as a more effective antidote to some of the larger-scale, flashy entrepreneurship conferences that have been taking place around the region. "By the time the conference is done it would have been a lot more beneficial if they had just distributed the money instead to one company, or five." To build a startup ecosystem "all stakeholders need to communicate," he added. "[Events like Yalla Startup] provide a beautiful setup in the sense that you are bringing everybody … under one roof [to] communicate and share ideas and share their vision, and … when people see these successes they will naturally start doing more and talking less."

Pascale Baaklini, one of the members of the Startup Weekend winning team, said her group intends to continue working on Mimix, despite the fact that she and two other members live and work in Lebanon and both of their developers are still in school in Jordan. "We cannot do this full time — we have jobs and university, but now if we don't get a product to show people, there won't be investors and support once we ask for it. It's still early to think about funding: We need a better prototype, but just being the winner of the global startup battle will make it much easier to get funding when we look for it."

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