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Low investment, slow Internet impede startups

BEIRUT: Despite the economic slowdown in Lebanon, many Lebanese entrepreneurs have decided to defy the odds by establishing their own startups, efforts that could in theory help curb an alarming jobless rate of 34 percent among the youth.

But ambitious wishes do not necessarily come true in a country that is easily impacted by other nations’ problems and is often paralyzed by a government that hardly performs its duties.

Lebanese entrepreneurs have been facing major challenges that need to be addressed urgently if the country intends to benefit from this sector.

“Successful startups and businesses in general rely heavily on high-speed Internet connections and it is well known that every increase in the bandwidth of a country has a direct impact on its GDP,” Henri Asseily, a well-known entrepreneur, told The Daily Star, calling on the government to step up its efforts in this area.

Asseily is the co-founder of BizRate.com, one of the world’s largest consumer feedback platforms, surveying tens of millions of buyers each year. In 1999, he expanded the platform to online comparison shopping and created Shopzilla, which today is one of the largest shopping sites in worldwide.

Asseily praised the launching of the Beirut Digital District, saying that he was planning to locate some of his companies there to be able to use the infrastructure. “But I was not able to do so because the fiber optic is not turned on and it needs [Cabinet’s] approval,” he said.

For several years now, successive Lebanese telecoms ministers have announced “imminent plans” to launch a national fiber-optic network that would enable the country to finally catch up to the rest of the world and offer globally competitive Internet speeds and packages.

However, the project is still ongoing, and most Lebanese are still connecting via DSL at one of the world’s slowest data rates of about 1 megabit per second.

“We need politicians to start working for the country as opposed to working against each other,” Asseily said.

His concern was echoed by Ziad Mabsout, co-founder of Ubility Net, a startup providing innovative end-to-end policy solutions for mobile operators, who said that bad infrastructure such as Internet, for instance, was hindering the expansion of businesses.

“Entrepreneurship is often connected with ICT nowadays because this industry needs low capital in terms of innovation and a good developer can achieve his job at home,” he said. “So it goes without saying that a bad Internet connection impedes the expansion of entrepreneurs in the ICT industry.”

“We still don’t have fair and acceptable Internet connectivity,” said Fadi Sabbagha, CEO and founder of Born Interactive, a media agency offering professional multimedia services and online solutions.

Another very important challenge facing this industry in Lebanon, according to Mabsout, is the absence of a proper ecosystem for entrepreneurs.

“You need to be living in a better environment that is more suitable for innovation,” Mabsout said.

He cited the example of Silicon Valley, adding that the proper startup is usually launched from there. “We need to make it clear that Silicon Valley is the ultimate place for entrepreneurs,” he said.

Silicon Valley is home to many of the world’s largest technology corporations, as well as thousands of small startups. “It is not like we have to invent the wheel but we just need to link with them and build better relations,” he said, adding that the security instability in Lebanon makes it difficult for investors to support any innovative ideas.

“When you come up with a good idea in Lebanon they label you as stupid because the security instability does not allow you all the time to be successful with your startup,” he said. “Meanwhile, in a place such as Silicon Valley, you get all the support and advice you need.”

Some of the entrepreneurs interviewed by The Daily Star on the sidelines of the ArabNet conference and exhibition considered that Lebanon lacked the proper culture for supporting industries such as entrepreneurship. “We are not born in a culture that motivates entrepreneurs or push them into more innovation,” Mabsout said.

He added that people in Lebanon did not consider those working with startups as having a regular or a full-time job. “When you work with a startup you don’t have a specific schedule because it is not a regular job. You may work on weekends for instance and may have a lower salary and hence the society looks at you in a different way,” he said.

Mabsout attributed this lack of cultural support partly to universities and schools which do not have innovation on their priority lists. “When you are at the university all you care for as a Lebanese student is to have good grades to continue your master’s or get a regular job,” he said.

Asseily also shared Mabsout’s concern, more effort was needed from universities in improving and modernizing their curriculums.

“It is up to students and to Lebanese people to take matters into their own hands and do the work the way it should be done,” he said. “The problem with Lebanese people is that they are often shortsighted and too lazy to learn on their own.”

Asseily argued that students nowadays have the potential to learn whatever they want over the Internet, a facility which was not available 20 years ago. “The Internet is an insane place to learn on your own but unfortunately kids nowadays wait for others to teach them,” he said.

Asseily also complained about the lack of young people applying for jobs. “Some companies have money and are ready to pay good salaries but they cannot find the right people. They are just not enough and everybody wants to leave to find other jobs elsewhere because they think it is better,” he said.

“Well, it’s not true; just give us your resume.”

In Sabbagha’s opinion, the Lebanese labor law is a bit stiff. “Lebanese people are traveling and the labor law is not flexible to bring specialized people and skilled labor from outside Lebanon,” he said.

However, “when you operate in Dubai, you have the advantage of getting all kinds of resources,” he added.

They praised the initiative announced seven months ago by Lebanon’s Central Bank to set aside a $400 million fund for startups.

The Central Bank (BDL) circular 331, announced in August, aims to give a boost to local startups, giving them a greater incentive to set up shop in Lebanon, keeping their talent and money at home, by making funding more easily available. The $400 million in this new initiative is 75-percent guaranteed by BDL for local banks, equity investment accelerators, incubators, funds and startups.

“Luckily we have this interesting initiative by the Central Bank that would make funds available for banks and institutions to invest in startups and boost entrepreneurship,” Sabbagha said. “This can create a revolution and completely reshuffle things.”

Asseily commented on the new initiative by saying: “Now that the money is coming in, we will have a proper capitalization of the companies. So instead of funding for $500,000, you fund it for $2 million, which enables you to find the right talent and pay them good salaries.”

 
A version of this article appeared in the print edition of The Daily Star on March 08, 2014, on page 4.

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Summary

Despite the economic slowdown in Lebanon, many Lebanese entrepreneurs have decided to defy the odds by establishing their own startups, efforts that could in theory help curb an alarming jobless rate of 34 percent among the youth.

"We need politicians to start working for the country as opposed to working against each other," Asseily said.

His concern was echoed by Ziad Mabsout, co-founder of Ubility Net, a startup providing innovative end-to-end policy solutions for mobile operators, who said that bad infrastructure such as Internet, for instance, was hindering the expansion of businesses.

"You need to be living in a better environment that is more suitable for innovation," Mabsout said.

He cited the example of Silicon Valley, adding that the proper startup is usually launched from there.

"We are not born in a culture that motivates entrepreneurs or push them into more innovation," Mabsout said.

He added that people in Lebanon did not consider those working with startups as having a regular or a full-time job.

However, "when you operate in Dubai, you have the advantage of getting all kinds of resources," he added.

They praised the initiative announced seven months ago by Lebanon's Central Bank to set aside a $400 million fund for startups.


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