Entrepreneurial fervor among the Lebanese is well established, though the proper support systems to encourage and assist entrepreneurs are only recently improving. Endeavor, a non-profit nongovernmental organization (NGO), which supports high impact entrepreneurs in emerging markets, set up shop in Lebanon at the beginning of the year. It has helped create more than 156,000 jobs worldwide since its establishment in 1997 and now aims to do the same in Lebanon. Executive sat down with Tarek Sadi, managing director at Endeavor in Lebanon, to discuss how to discover the best entrepreneurs, how to help them and what is in it for him.
E What are the main challenges that entrepreneurs face in Lebanon?
One challenge they face is finding the right talent to build up their team. The difficulty in hiring people that are dedicated and motivated consistently comes up in our discussions with entrepreneurs. This is partially due to the brain drain in the country and partially due to a cultural preference to build careers in established and stable businesses.
Another challenge in Lebanon is that entrepreneurship is still not viewed as a viable career choice and failure is perceived negatively. Globally, it is accepted that most entrepreneurs fail a number of times before becoming successful, and the failures are viewed as valuable learning opportunities. In Lebanon we view failure negatively, not as a stepping-stone to success. This is reflected in our laws as Lebanon lacks laws protecting entrepreneurs from failure and encouraging them to start again, such as Chapter 11 in the United States. As they say, the US was built on the back of Chapter 11.
The third challenge is that the economy is not geared towards helping and supporting small and medium enterprises (SMEs), and as such the cost of financing the partnership is still high. Kafalat, which provides loan guarantees to help SMEs, is a very successful pioneer in increasing banks’ support to SMEs and it is a great example of how effective the right programs can be.
Finally, there is a disconnect between the investment industry and entrepreneurs in Lebanon. Venture capitalists tell us that they are not seeing the volume of opportunities to invest in that they would like to see and entrepreneurs tell us that there are not enough investors in Lebanon. There is a schism between the two that needs to be bridged.
E Who do you think is right; the entrepreneurs or the venture capitalists?
I think both are right. From what I see, there are a lot of very exciting businesses and great startups in Lebanon being funded informally by friends but not by the venture capital (VC) industry. Entrepreneurs do not fully appreciate the value VCs bring to the table and prefer to go to sources of capital that are within their comfort zone. A couple of great successes out of the VC industry in Lebanon will do a lot to correct that misconception.
E Since you launched Endeavor in Lebanon at the beginning of this year, you have selected four companies to offer your support to. How did you go about selecting them?
We selected Eastline Marketing, Mobinets, Nada Debs and Printworks. We look for companies that are already in business, and we identify as many companies as possible that are innovative, have high growth potential, a good track record and above all that are headed by entrepreneurs who are ambitious, trustworthy, perseverant and who want to give back. We look for businesses that can be regional and global. These companies then go through a rigorous selection process which culminates with a global event, during which an international selection panel, made up of professionals from different backgrounds, selects entrepreneurs presented by our 13 countries. Historically over the past 15 years only 3 percent of companies around the globe identified by Endeavor offices became Endeavor entrepreneurs.
In Lebanon, we look to select about four companies a year and give them a tremendous amount of support. Our focus is not how many we can select but how many we can support and help create value which translates into new jobs and economic growth for the country. As we build up our capacity, we build up the amount of companies that we select.
E What makes it so attractive to be selected?
First of all, the rigorous selection process is incredibly valuable. Even if the entrepreneurs are not selected, they are still sitting in front of some of the brightest business minds in the world giving them feedback on their businesses. Entrepreneurs that have been through the selection process have told us this is extremely valuable as they have a rare opportunity to have a 30,000 foot view of their business. For entrepreneurs that have their nose to the steering wheel every day, this is a great opportunity to gain perspective.
Secondly, once entrepreneurs get selected, we distill all the feedback we get throughout the process into very clear actionable points that we help them overcome through our global networks.
There are several other attractions to being selected, such as access to international markets, access to a peer network of over 600 Endeavor entrepreneurs from around the world and access to mentorship. Through our relationships with top business schools, we help entrepreneurs secure bright interns from schools such as Harvard Business School, MIT, Insead and Stanford. We also have global partnerships with the top four professional services and consulting firms that help us support our entrepreneurs.
E What is in it for Endeavor?
We have three goals in Lebanon: create jobs, grow the economy and help identify and promote top entrepreneurs to stimulate our entrepreneurial sector. We have a small ‘give-back’ program, which is designed to make sure our entrepreneurs see us as service providers and not as a freebie. In the more mature Endeavor offices such as Mexico, Brazil, Chile and Argentina, the give-back program covers at most 30 percent of the budget so it is not something we will live from. The idea is that as entrepreneurs become successful and exit their businesses, they start sitting on the board of directors and fund Endeavor locally themselves for future entrepreneurs. Our work will also help promote global best practices and the right corporate cultures, giving proper incentives to employees and building meritocracies, which we believe will also help reverse the brain drain. We are part of a global world; we need to think in global terms and act in global ways.
E Booz recently published a report calling for accelerated entrepreneurship in the Middle East to tackle the surge in labor force numbers expected in the region. How crucial is entrepreneurship in helping to create jobs?
Entrepreneurship is the only way we are going to create the 80 million jobs in the next 10 years that are needed in the Middle East. Otherwise where will these jobs come from? The public sector can’t create that many jobs and the large companies are consolidating their workforces in the face of uncertain economic times. There are a lot of great institutions and NGOs helping start-ups and early stage entrepreneurs in Lebanon. And we are starting to see some great stories come out of them.