Lebanon is at a crossroads. It has been two years since the announcement of Circular 331, and the murmurings of a revitalised golden age brought about by our startup and entrepreneurial system. Whilst it might be too early to speak of the clear tangible benefits to the Lebanese economy, there is obvious traction within the sector which in 2015 witnessed a growth in the number of acceleration programs and non-financial initiatives that complemented the large input from Lebanese venture capital powerhouses. Executive’s special report on the entrepreneurship profiles several of these accelerators, and discusses the current impact circular 331 is having on the ecosystem. Though money is needed and has been well received, deployment has been slow and the central bank should create a centralized database of 331-related investments to keep spending as transparent as possible. How long will entrepreneurs have to wait in line to get the investments and tickets they need, before they gain access to ‘Club 331’?
We stand on the edge of the investment cliff, because the viability and survival of our startup and entrepreneur system in the long run is in question. Though every initiative within the ecosystem need not survive, an overarching sustainability is key, which will see investments feed back into our country to develop a strong and robust asset class which is attractive to the private sector. Whilst the future is bright, and opportunities present themselves with the current financial enthusiasm, it will only remain so if Lebanon as a country chooses to tread the right path, and ensure opportunities are not squandered. This in turn must be coupled with a strong adherence to clear governance that regulates without restricting growth.
Part of the solution
There are many positive initiatives at present to encourage the growth of the Lebanese entrepreneurial ecosystem. The Banque du Liban (BDL) Accelerate conference is one such example of a positive step encouraging collaboration for a more harmonious sector. Lebanon For Entrepreneurs (LFE), an initiative which works both to inform the diaspora on the current status of the Lebanese startup system and to promote sharing of global expertise, is another. However, in order to make this ecosystem successful all players within the sector must contribute and commit themselves to the fullest, which means that whilst competition between funds is beneficial, effective communication across the board is essential to ensure a cohesive ecosystem. More can be done to ensure that all within the ecosystem are in sync with one another, especially here in Lebanon. This is extended to institutions, banks and universities – bodies which are on the periphery and which feed individuals into the Lebanese economy. At time of press there was no unique central portal for the exchange of knowledge, and LFE’s database of private and academic entrepreneurship support organisations was last updated over a year ago. Whilst individual programs are trying to target the gaps within the system, an independently regulated umbrella platform with up-to-date information would undoubtedly facilitate understanding, cooperation and ultimately growth, and potentially promote healthy competition. Though initiatives such as the Global Entrepreneurship Week encourage relations between players, more can be done to improve and centralise collaboration. This includes prioritising the development of an electronic stock market, a central ‘location’ to provide much needed liquidity to companies, and identifying areas in the infrastructure which could be improved and leveraged to attract young talent, such as relaxing required capital for registering companies.
A great deal of money has been poured into, and is earmarked for, the entrepreneurship ecosystem. But if Lebanon wishes Circular 331 to be a success, and ensure the money is not wasted, improvements must be made at the macro and micro level. There is an inherent amount of volatility that cannot be avoided; risks which cannot be mitigated; as our special report will outline, venture capitalists and private equity firms must overcome the steady security of being risk-averse and spend the money raised through Circular 331 without exercising undue caution. We must accept that there is no mathematical financial instrument that can price a startup akin to the way the Black-Scholes equation prices European options; there is no accurate prediction instrument for the future value of a Lebanese startup system. All eyes should be focussed on trying to make the space we have as accessible as possible for the next generation of innovators, improving inter-player communication, and pressurising the government for better infrastructure, internet and entrepreneur-friendly policies is key. Many would argue that this is a fruitless task, seeing as our streets are now swimming with garbage thanks to the rain and the political puppet show playing out in the Grand Serail. However, the beauty of the entrepreneurship sector is its ability to develop solutions which are innovative and effective, which defy imagination even in the face of overwhelming odds, and there is no reason that this cannot extend to macro issues. To ensure our system doesn’t dwindle and fall by the wayside in seven years time, we need to realize that Circular 331 is only part of the framework needed to hold up our ecosystem. The time to act is now, so we ensure that foresight, rather than hindsight, is our ally.