The month of November is often the most pleasant month to live in Lebanon. The weather is nice, the mood is relaxed (with no holiday shopping stress yet), prices are in low-season mode to invite visitors and National Day is around the corner. It is the perfect month to celebrate entrepreneurship as the most promising new force in our economy. One could even say that we are witnessing the early years in a new Lebanese history, which began with the birth of the entrepreneurship ecosystem four or five years ago. This era, which was born in stages with events such as the opening of the Beirut Digital District in September 2012 and with the all-important issuing of Banque du Liban’s Circular 331 in August 2013, is now progressing from infancy into childhood. We are already in year five of a new calendar, and as with every growing child it is good to make a new pencil mark on the door to see how much the ecosystem has grown in the past few months.
One way to measure this development is to take stock of activities and physical facilities. In the case of the ecosystem, this is a bit tricky because centers of entrepreneurship do not just form at one place but rather anywhere and everywhere. Still, it is worth noting that the BDD has added two new buildings and a plan for an ambitious new real estate project in 2016, bringing the existing building stock from one office tower with 3,200 meters of floor space – in the middle of what was an urban area of derelict properties with no connectivity at the time – to six office buildings (made up of restored and newly constructed buildings) by this autumn.
[pullquote]The most telling measure of the ecosystem’s health is the growth of startups in financial terms[/pullquote]
In terms of activities, the Lebanese talent for partying and socializing is reflected in events, dinners and fundraisers that are increasingly crowding the entrepreneurship calendars. One event, the first Lebanese Entrepreneurship Summit, was held at the end of September. It was followed by anniversary events and dinner celebrations with hundreds of guests by organizations such as Endeavor (a mentoring network) and Torch (a coding initiative). To wrap up the year, the largest new annual gathering for entrepreneurship, BDL Accelerate, is on the schedule for November, as is Global Entrepreneurship Week Beirut.
The most telling measure of the ecosystem’s health is the growth of startups in financial terms. Here, although the valuations are still confidential, Executive has heard of the first companies that have reached serious numbers, growing near to or even breaking the $100 million mark in their valuation by venture capital firms and investors. New, specialized funds are stepping up, such as Phoenician Fund I in fintech, health care and e-government and the Azure fund in fashion. Other funds, such as IM, are seeking to close gaps in financing that we observed in previous years, in particular a lack of funding in the angel investor range.
The names in the fund industry that established themselves in earlier years – such as Middle East Venture Partners, Bader, Berytech Fund and Leap – remain highly active and it is clear that lack of funding is not a problem for the ecosystem in the current peak phase of Circular 331’s life cycle. Risks of inflation in startup valuations always remain, but the ecosystem’s financial stakeholders say these risks have so far been managed. Still, on the downside of the financing environment, greed has crept into the ecosystem, says Walid Hanna, the CEO of stalwart Lebanese VC MEVP.
The slow creep of wasta as a vice often associated with anything Lebanese is being discussed, but it has not been observed by ecosystem stakeholders that Executive talked to this autumn. Complaints about poor and expensive internet service still abound, but more astute observers note that the status quo is much improved when compared with five years ago and does not pose an insurmountable barrier to business for startups.
This leaves the absence of a legal infrastructure as perhaps the ecosystem’s main impediment to healthy and balanced growth (see story here). On the plus side, Lebanon’s academic bodies are moving to institutionalize entrepreneurship in universities and close this gap in the fabric of the ecosystem (see story here).
It would be in line with common business development if the ecosystem’s sometimes chaotic growth in the past five years turns into growth that is better monitored and more thoughtfully structured. Signs of maturity are beginning to show, such as a waning of megalomaniac and overblown marketing activity for the young ecosystem. With these encouraging signs of improvement, it seems that the growth of entrepreneurship in Lebanon will not level off in the near future.