BEIRUT: An outdated regulatory framework and aging infrastructure are among the key challenges facing entrepreneurs who struggle to hire talent in Lebanon and secure equity investments to expand to foreign markets.
Overcoming these challenges requires the ratification of new laws such as e-commerce and the amendment of existing corporate, labor and tax regulations, which could take years in a country marred by political gridlock and red tape.
In the meantime, Endeavor Lebanon, a nonprofit organization that is part of a global network of business leaders and mentor entrepreneurs, is trying to shoulder the burden, managing director Tarek Sadi told The Daily Star.
Sadi says Endeavor Lebanon helps entrepreneurs grow their businesses by delivering services through four key channels that comprise mentoring, partnerships, access to capital and networking.
Entrepreneurs have mainly complained, according to the Endeavor Lebanon 2013-2014 Impact Report, of challenges in four key areas: human capital, access to foreign markets, equity financing and a weak entrepreneurship culture.
Sixty-one percent of surveyed entrepreneurs say they face the challenge of finding experienced talent when recruiting and cite brain drain as the main hurdle in talent retention.
Sadi says Endeavor Lebanon is helping those entrepreneurs find talent through an internship program that started last year in cooperation with the American University in Beirut and is expanding this year to include the Lebanese American University and the Lebanese University.
Out of 60 applicants from AUB, 20 were recruited last year, Sadi says, adding that he expects the number to rise in 2014. Endeavor also matches selected entrepreneurs with business professionals from partner organizations.
The 13 companies that have been selected as Endeavor entrepreneurs in Lebanon since the organization was established in 2011 currently employ around 1,100 individuals and generate $62 million in combined revenues, Sadi says.
The Endeavor Lebanon selection process is rather rigorous. Only 4 percent of the 330 reviewed candidate companies in 2011 were selected to be part of the Endeavor network. The tech industry represented 54 percent.
Due to limited resources, Endeavor focuses its efforts on supporting a “small number of established companies with high impact rather than a large number of small companies,” Sadi says.
Sadi explains that globally, 40 percent of jobs created in growth markets are generated by 4 percent of high-impact entrepreneurs.
The cost of failure of startups is also relatively small compared to the cost of an established firm going bankrupt, Sadi says.
“If a startup fails during its first year, it would leave three to four people without a job. However, if an established firm goes bankrupt, a much bigger number of individuals would lose their jobs, which is the why we choose to help established companies grow.”
For established businesses to grow and hedge risks associated with local instability, access to foreign markets is essential to achieve economies of scale as opposed to Lebanon’s small market, Sadi says.
Through its network of partners including facilitators and incubators such as Bader, Berytech, AltCity, MIT Enterprise Forum and Lebanon for Entrepreneur, Endeavor helps entrepreneurs connect with regional decision-makers and Lebanese expatriates to expand their business abroad, Sadi says.
Seventy-four percent of surveyed companies report that their products and services are available in both local and foreign markets, according to the 2014 Endeavor Lebanon Impact report.
The growth and development of an ecosystem supportive of startups and entrepreneurs over the past few years and their expansion abroad should trigger in the medium term a wave of consolidation through mergers and acquisitions.
A recent example is the acquisition by French digital publishing company Webedia of Lebanese-based Diwanee, a digital media company that specializes in content creation targeting women in the Middle East.