The fast & the furious

Meet Lebanon’s accelerators

Greg Demarque | Executive

SPEED@BBD

After a tumultuous start in 2014, Speed@BDD, Beirut’s tech accelerator, for idea and seed stage companies, has been repackaged and opened to the ecosystem under new management. The program saw the departure of previous CEO Tim Duggan and has been rebuilt under the leadership of Sami Abou Saab, who returned to Lebanon after a career abroad with tech-savvy companies such as Skype and Microsoft. His experience, which includes a personal startup experience, is coupled with a board of five familiar faces from well-known companies in the entrepreneurial scene. Among them, Fadi Bizri, Managing Director of Bader Young Entrepreneurs (a non-profit organisation supporting young entrepreneurs through networking, finance and education), and Abdallah Jabbour, Managing Director of Lebanon for Entrepreneurs (an initiative aimed at accelerating the development of the sector through aligning it with diaspora expertise), are independent of financial backing. The other three board members are comprised of representatives from the funds that provide Speed with financial backing.

Speed takes a ten percent equity slice in each startup it enrols onto its program, and in return offers mentorship, guidance and $30,000 seed investment. “It’s a bit like a Y-combinator style accelerator,” Abou Saab explains. “[It is] a very structured program which is three months [long] that gives a certain amount of cash in return for a certain amount of equity that is predefined. We are valuing every idea at $300,000,” – a valuation he insists is competitive in both Lebanon and the region as a whole. They are also offering “one of the best in terms of ratio of cash for equity.” The money to fund the accelerator has mostly been raised through Circular 331. Berytech Fund II, MEVP Impact Fund and Insure & Match (IM) Capital have all invested in Speed; the former two fundraised money from the banks through Circular 331, whereas IM Capital uses USAID money and matches other investments in a space by offering the same amount. At time of writing, although the exact figures were undisclosed, Abou Saab stated that the investment by each fund was equal.

Sami Abou Saab of Speed@BDD

Sami Abou Saab of Speed@BDD

The program in itself offers capital and mentorship over the course of the acceleration. “We give them the cash as needed during the three months, but we promise to give them all the cash by the end,” explains Abou Saab, who notes that the staggering of money is done to ensure careful expenditure by each startup, but insists that Speed as a program does not wish to audit all financial reports and accounts at the risk of “micromanaging the whole thing.” At the same time, the accelerator provides the startups with a rigorous program of workshops and mentorship and coaching. “Today, for example, we had a session around team contracts, how they need to build their shareholders agreement, what that means for them and how much equity they should distribute amongst each other,” adds Abou Saab.

The mentors total to roughly 50 people, a mix of both local and global experts who are paired with the appropriate startups. These individuals include venture capitalists, management consultants, academics specialising in electrical engineering, such as Professor Ali Chehab from the American University of Beirut, and local homegrown successes such as Hind Hobeika, founder of Instabeat, a startup which creates high-tech tools used to improve swimmers’ performance. The ideal ending to the acceleration is to have a viable product which can be pitched to angel investors and high net worth individuals on ‘demo-day’, a launching event which offers the startups a chance to promote themselves and potentially secure a first round of funding. Additionally, at the end of the program, two startups from the first batch will be provided with an additional money grant of roughly $20,000 per startup, without a corresponding equity slice, for at least a one month post-acceleration Silicon Valley immersion. The selection criteria for the immersion will be based mostly on their product and the quality of their deliverables, but also on their progress during the three month period, business plan and traction with investors on demo day.

There are currently six companies in the first batch of acceleration, down from an original seven which started the program in September. However, there are plans to ensure that future batches hold ten companies. “We have a five year plan – we would run two batches [of acceleration] per year, with ten companies per batch. One hundred startups for five years, with $3 million dollars worth of investment,” says Abou Saab, who explains that the accelerator will become sustainable due to successful exits in roughly seven years’ time, which will hopefully feed back into the acceleration program and cycle. This is the long term plan, in the hope that the business outlasts the initial five year plan set out by founders and investors, whose projected budget is for a total of $6 million, half of which would cover operational costs and the other half accounts for investment. “The way we look at it,” says Abou Saab, “is that we are going to have some exits at some point that will be successful. We will then take our money back and invest it in future startups.”

Although Speed is encouraging homegrown talent, the Lebanese context comes with particular challenges which for Abou Saab have been particularly acute in the legal and infrastructure fields. “Some notions are not defined in the legal structure of Lebanon,” says Abou Saab. “For instance, the notion of a ‘preferred stock’. There are also so many other things that you cannot easily do when writing a contract for a startup in Lebanese law.” However, overcoming these challenges for startups is part of Speed’s mission in the hope that the country becomes more startup friendly.

The ultimate goal is similar to other ventures across Lebanon, tackling a problem which has plagued the country for decades; “Keep the talent in the country and limit, as much as possible, the brain drain,” says Abou Saab. “To sustain an ecosystem that would keep strong entrepreneurs in the country and make them successful, at least from here.”

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