On a typical Saturday morning at Souk El Tayeb’s farmers’ market, Umm Ali, a woman from a village in south Lebanon, sells her now famous saj sandwiches next to Raed, a farmer from north Lebanon who sells fruits and vegetables grown on his land. Meanwhile, at Tawlet in Mar Mikhael, a restaurant that employs female cooks from around the country, one can indulge in typical dishes originating from the Bekaa one day and the Chouf another.

The Souk El Tayeb organization, the brainchild of food activist and entrepreneur Kamal Mouzawak, truly brings together and celebrates the diversity of Lebanon’s rural regions.

Mouzawak, who was born in 1969, grew up during the Civil War when Lebanese were fighting and killing each other over sectarian differences and generations of children were raised knowing only their own area or region of origin.

Founder of the Souk El Tayeb organization Kamal Mouzawak

It is not surprising then that his ultimate goal for Souk El Tayeb is to find common ground among Lebanese, and use it to build “positive and constructive things” while also getting to know and celebrate the diversity among the country’s various regions.

“For me, Souk El Tayeb is just a human development project, nothing else. It’s not just about the food or hospitality or a farmers’ market, it’s about using them and other projects to tell the best of this land, the best of here and now,” says Mouzawak.

Not surprising either is his choice of food as the medium through which to achieve this vision, since Mouzawak believes that, for any given society, food is the one expression of its tradition that has been the best preserved and passed on through both time and space. He gives the example of how kibbeh (a Lebanese dish made with crushed wheat and ground beef) is now a national street food in Brazil, integrated into the local culture by the Lebanese diaspora that lives there.   

Mouzawak sees food as a “sincere and authentic” reflection of one’s identity and has developed a multi-tiered business centered on that belief.

[pullquote]It’s not just about the food or hospitality or a farmers’ market, it’s about using them and other projects to tell the best of this land[/pullquote]

Starting with a small scale farmers’ market struggling to find a consistent location, Souk El Tayeb is today a social enterprise which manages three farmers’ markets, organizes cultural events, carries out capacity development activities, runs a string of restaurants and guesthouses across Lebanon and has plans to branch out internationally in the works.   

The Delicious Market

It all began in late May 2004 when, at the first edition of The Garden Show (an annual exhibition of outdoor and nature objects), Mouzawak was asked to handle the food section. Mouzawak, who was a food writer at the time, gathered a handful of farmers and producers he had been in contact with and created a five day pop-up farmers’ market he called thimar el ard, meaning fruits of the land.

This event did so well it prompted Mouzawak to launch a weekly version of it, and thus Souk El Tayeb was born.

Souk El Tayeb was first held in 2004 at what was then a parking lot facing Ashrafieh’s Centre Sofil, but it moved to Saifi Village’s parking lot (with Solidere offering the space rent free) six months later when the original lot became a construction site. When construction started at Saifi’s lot as well, Solidere offered the market a space in Beirut Souks’ restaurants and cinema area, again free of charge, and it remains there to this day.

Why a souk?

As Mouzawak explains it, the market’s objective is to allow rural farmers and small scale producers to be in an urban setting where there is both a higher demand for their goods (as compared to rural areas where they are just one among many) and a higher purchasing power.

This kind of setting has the added advantage of allowing all the economic return to go directly to the producer, explains Mouzawak.

Fresh fruit and vegetables for sale at Souk El Tayeb

At the same time, a farmers’ market allows urban dwellers to interact with the producers and farmers and realize that food is more than what is found on a supermarket shelf. “This gives the farmers back their dignity because today, in many societies, the word farmer or peasant has a negative connotation. We want farmers to be proud of what they are doing so that maybe their children will continue doing the same and better,” says Mouzawak.

The mechanisms of a success story

Today, Souk El Tayeb is also held in the Gefinor Center’s courtyard every Wednesday and at The Village Dbayeh every Thursday, but the largest market remains Saturday’s edition in Beirut Souks.

Spring and fall are the market’s busiest seasons when Mouzawak says they have up to a 100 participants (between producers and farmers), but things slow down with the summer heat and winter rain, with the number of participants sometimes dropping to 50.    

Mouzawak explains the simple criteria for having a stand in Souk el Tayeb: “You only have the right to sell what you have planted or produced yourself. Otherwise, it has to have a mission such as promoting Lebanon’s tradition or showing people that they can reuse,” referring to how, for instance, second hand books are sometimes sold at Souk El Tayeb.

The participation fee is $25 for the day, which has not changed since the market’s beginnings, according to Mouzawak. This amount is used to pay for the Souk’s main costs: logistics (such as material dividers, tables and chairs), accounting and hired help.

As such, Souk El Tayeb, which is registered as an NGO, is financially self-sustainable, with its expenses covered through the fees paid by the participants.   

From feasts to Tawlet

Emboldened by the successful coming together of urban and rural manifested through Beirut’s Souk El Tayeb, Mouzawak decided to take his social project a step further by taking city dwellers to the farmers’ and producers’ villages.

“In 2007, we thought ‘why are we only bringing producers to urban areas? Why can’t we go to the rural areas of production from time to time and meet the producers in their own environment? This would make them proud of what they do by celebrating their work and giving recognition for what they stand for,’” says Mouzawak, explaining the launch of Food and Feast, an annual summer event that takes urbanites to area such as Hammena or Anfeh where they spend the day learning about the traditions of that village and lunching on foods specific to it.

These lunches were quite successful, recounts Mouzawak, and they sowed the seeds of a more permanent setup that would allow typical native rural foods to be enjoyed in the city: Tawlet.  

The farmer’s table in Mar Mikhael   

The first Tawlet was launched in 2009 in Mar Mikhael, a location chosen by Mouzawak – years before the area became trendy – largely for its low rental fees at the time.

The idea behind Tawlet is that each day a different woman cooks the food of her native village, with the help of villagers she brings with her and of Tawlet’s permanent chef (who oversees the kitchen’s logistics and helps the woman with the regular dishes).

The main objective of Tawlet is the empowerment of rural women by allowing them to generate income in a sustainable manner. Every woman who cooks at Tawlet is paid $100 for her day’s work, plus $50 for transportation costs. She is also reimbursed for all the ingredients she brought with her or used in the dishes prepared at home.

[pullquote]We want farmers to be proud of what they are doing so that maybe their children will continue doing the same and better[/pullquote]

Each woman works at Tawlet Beirut around once a month, but some of them also work with Souk El Tayeb at other locations or events.

With an average bill of $22, Christine Codsi, Mouzawak’s partner who joined the Souk El Tayeb team before the launch of the first Tawlet and whom he credits for “turning his personal initiative into an institution,” says the restaurant is barely breaking even and is sometimes serving only half its 70 person capacity.

Codsi says this is mainly due to Tawlet Beirut’s hefty expenses. “There are a lot of costs involved in the project, almost equivalent to $7,000 monthly for the chef, and the average [meal] check is low. We don’t want to increase [prices] because we still want people to come and enjoy the food,” she says, adding that operating a restaurant in Beirut is tough because people are always looking for something new.

The Tawlets of Lebanon

While there might be clouds over Tawlet Mar Mikhael, it’s sunny skies over the three other Tawlets in Ammiq, Deir El Qamar and the Biomass farm in Batroun.

Similar to the Beirut restaurant, the three other Tawlets support women from the respective local communities in which the restaurant operates by paying them to cook dishes typical to their area.

Tawlet Ammiq and Tawlet Biomass are seasonal outlets which are open only on weekends and feature an all-inclusive buffet with a price tag of $40 (for adults). Meanwhile, Tawlet Beit El Qamar is open year-round with a buffet on weekends and an à la carte menu during the week (average bill is $13).

Beit El Qamar is both a restaurant and a guesthouse

Boasting an average seating capacity of 190, the three restaurants have been fully booked every weekend this summer, with Tawlet Beit El Qamar busy on weekdays as well. Because the outlets are seasonal, salaries are lower than at Tawlet Beirut, while the average check is higher than at the Beirut branch, explains Codsi, making them a more profitable venture.

Partners in food

The first of these Tawlets was launched in summer 2012 in Ammiq, the wetlands area in west Bekaa, on land donated by the Skaff Estate and in partnership with the Arz El Chouf, which manages the project’s ecological activities.

Tawlet Ammiq was the pilot restaurant through which Mouzawak and Codsi tested the ins and outs of operating a restaurant outside of Beirut.

The subsequent restaurants (Tawlet Beit El Qamar in 2015 and Tawlet Biomass in summer 2016) were developed under what Mouzawak likes to call a “social franchise,” whereby Tawlet is approached to set up the restaurant, carry out the hiring, train the cooks and offer all kinds of support (save for the daily operations) in exchange for a franchise fee, which is basically a percentage of sales, explains Codsi. Tawlet makes no financial investments in these franchises.

Mouzawak prefers this model of business for his outlets outside of Beirut, explaining that partnership and empowerment of the local community is the essence of Souk El Tayeb, and so setting up such restaurants on their own as outsiders would defy that spirit. “We partner with people from the region who have ownership. If I go in by myself, through rent and without a partnership, it would be like colonizing. It’s the locals that have to do it. If they know how to do it alone then good for them; if they need help, we’re here to help them by bringing the knowhow and brand that will help us both create a better project,” explains Mouzawak, adding that this model will be followed with Tawlet Saida, which is scheduled to be launched in summer 2017 in partnership with local MP Bahia Hariri.

Spending the night

The Tawlet restaurants outside Beirut are designed to be more than just a place for a quick bite, with small corners here and there encouraging guests to linger over coffee or indulge in a post meal siesta.

For those who want an even fuller experience of the areas where Tawlet is based, Mouzawak developed guest houses called Beit, with the goal of having customers rediscover and engage with lesser known areas across Lebanon. “Many Lebanese used to have mountain homes where they spent their summer holidays. Today this happens less because people don’t have time, energy or even maybe money, so if you can’t do it for the whole summer at least do it for a weekend or in an environment which is more hospitable and personal,” says Mouzawak, explaining that these guesthouses also feed into his goal of creating dialogue between rural and urban communities.

[pullquote]We partner with people from the region who have ownership. If I go in by myself, through rent and without a partnership, it would be like colonizing.[/pullquote]

Similar to the Tawlet model, the first guesthouse, Beit Douma (six rooms), was developed in summer 2016 as a pilot project owned by Codsi and Mouzawak’s company. Meanwhile, Beit El Qamar (seven rooms) and Beit Ammiq (three rooms) are franchises, along with Beit Zafta (an area adjacent to Nabatieh, south Lebanon), which is set to open in late 2017.

The Beit Douma guesthouse

The guesthouses are open all year, but are busiest in the summer when waiting lists grow long and room rates reach $200 per night. Rates drop to as low as $100 during off-peak months and special offers are designed to entice guests.

A successful social enterprise

Despite the diversity of operations, Mouzawak explains that all his activities are under the umbrella of Souk El Tayeb, and have a common vision of bringing the rural and urban together through food.

Practically, the farmers’ market and capacity development program are NGOs, while Tawlet Beirut, Tawlet Ammiq and Beit Douma are owned by the SAL company set up by Mouzawak and Codsi in order to facilitate financial issues related to running a business. The other Tawlets and Beits have a franchisor-franchisee relationship with Tawlet. Operational issues such as accounting, human resource development and marketing are handled by one main office.

It is a vision that has resonated well not only with the Lebanese and foreigners living in Lebanon, but also at an international level. After a successful pop-up Tawlet in Parisian concept store, Merci, Mouzawak will be launching a Tawlet Paris toward the end of 2017 that will celebrate the different traditions and cuisines that make up the French demographic.

One of the factors contributing to Souk El Tayeb’s success is its simplicity and authenticity, which has a certain appeal in today’s fast paced world. “It works because people still have a heart and at some point, beyond all the fakeness we are surrounded by, people have a grandmother they remember, who used to cook well, or an uncle who produced from his own land,” says Mouzawak.

Another reason it works is because it is a social enterprise that supports local communities, while also offering high quality products. Mouzawak explains that at one point being a charitable organization was enough to get financial support, but not anymore. “The only solution today is [a] social business where we are socially and environmentally responsible, but at the same time generate income. Everyone has a product or service to sell; [if] you come here to Tawlet, you are not eating for free. If you go to Douma in the summer, it’s not cheap. But the money will not go only to me and my partners to get richer; it has to be socially and environmentally responsible at the same time,” explains Mouzawak.

From employing women from rural villages when hiring a full time chef would have been cheaper and easier, to their choices of heating methods (gas) in the guesthouses, Souk El Tayeb strives to make the best socially and environmentally conscious choices, while at the same time maintaining a good quality product.

Lebanon is an awful place to start an innovative, new business venture – from a legal perspective, at least. There are a few general rules that apply to startup companies: 1) Around 90 percent are expected to fail; 2) Founders typically have no cash, investing all they have (and all they can raise) into the business; and 3) Founders typically have no assets (especially in the earliest days of the business), making traditional bank loans all but impossible as a fundraising option. While Lebanon’s startup ecosystem is growing by leaps and bounds compared to 10 years ago, the country’s commercial code – established in 1942 – is in need of updating, ecosystem stakeholders report. Archaic regulations make starting up costly, and a labyrinth of administrative procedures mean closing a failed business can take years. Young companies hoping to attract investors by offering preferred shares or trying to lure top talent with employee stock option plans jump through hoops like a lion in a three-ring circus. Given that Lebanon is trying to position itself as an incorporation destination for startups from around the world, legal complexities certainly make it less attractive (in the US, for example, one can incorporate online in the state of Delaware for $500, everyone interviewed for this piece noted). Aside from this, the overall impact of outdated laws on Lebanon’s entrepreneurship ecosystem, however, is difficult to quantify.

“There are always workarounds,” explains Abdallah Jabbour, head of Lebanon for Entrepreneurs. “They might be ugly, but things are possible.” Jabbour likens Lebanon’s legal infrastructure for startups to the country’s internet infrastructure – woefully inadequate. “Broadband and legal are the most important long-term investments [the government could make in this sector]. They’re the real enablers.” While Jabbour describes the workarounds as “not optimal,” he says Lebanon’s legal ecosystem “is not killing ventures before they start.”

Step 1: Choosing a corporate structure

One potentially costly mistake startup founders in Lebanon make is launching business activities before incorporating a company, explains Alain Noujaim, a partner with Noujaim Law Office which works with young businesses. Without a corporate structure for their enterprise, startup founders have nothing to limit their liability should a contract dispute arise. Noujaim’s advice? “As soon as you need to deal with third parties and contracts, incorporate,” he says.

Central bank circular 331 – which made around $600 million available to Lebanese startups that are part of the “knowledge economy” – specifies that investments can only go to joint stock companies incorporated locally (article 1). Noujaim reasons that, while this is an expensive option, it is the best corporate identity for a startup in Lebanon. By law, a local joint stock company, known as a Société Anonyme Libanaise, or SAL, must have a paid-up capital of $20,000, a lawyer on retainer and an auditor as well as an independent auditor appointed by a court. Incorporation and associated fees for forming a joint stock company add another $3,600 or so to the total cost of starting up, Noujaim notes. As a comparison, a limited liability company must have a paid-up capital of $3,333, a lawyer on retainer and only one auditor in certain circumstances (meaning some are not required to have full-time auditors). However, limited liability companies in Lebanon have complicated shareholding rules (shares are known as units, not shares, and are difficult to transfer) and cannot issue bonds or convertibles, which startups frequently rely on when raising capital. The consequence of this, at least in the pre-331 days, Noujaim says, is that several of the startups he worked with incorporated outside of Lebanon to reduce costs and red tape. Companies receiving investments through circular 331, however, must incorporate in Lebanon.

Step 2: Hoop jumping

In the venture capital world, preferred shares are important. Those investing in a startup – whether a venture capital fund or a private/angel investor – typically receive preferred shares in the company in exchange for the cash infusion. This type of share class comes with more privileges than common stock, (perks vary, depending on the agreements between investor and startup), but typically without voting rights, which is not legally possible in a Lebanese joint stock company. There are workarounds for issuing preferred shares without voting rights, Noujaim explains, (such as creating an offshore company to own the startup), but the extra legal maneuvering drives up the cost of the transaction.

The same is true for employee stock options. Given that startups are usually cash poor, they rely on offering employees stock in the company to attract a high-quality workforce. As these shares also do not have voting rights, Noujaim explains issuing them faces the same challenges as issuing preferred shares to investors. On top of that, founders need to protect themselves from anyone seeking to take the equity and run, so employee shares are usually “vested” over a period of time, (five years for example), instead of given all at once, and tend to be based on an employee’s performance. Again, Noujaim says, such options are not possible under Lebanon’s commercial code, so lawyers tend to write several deferred share transfer agreements between startup and employee, driving up the cost of the transaction further.

[pullquote]To date, none of the amendments have been passed by parliament and only a few are ready in a final draft form for the legislature’s consideration[/pullquote]

Step 3: The long goodbye

If a startup fails – as is very common – closing up shop can take years says Rami Alame, head of financial services and ventures at Ororus Advisors, a law firm which works with startups. This problem, unlike the others, cannot be easily fixed. Where some of the other issues startups face from a legal perspective can be mended by updating laws, the process of filing for bankruptcy drags on because of the administrative procedures involved, Alame explains. The complexity and time involved in a bankruptcy is bad for startup founders keen to quickly move on to a new venture. Alame notes that Lebanon also lacks bankruptcy protection, particularly a business judgement rule. While Alame admits it is rare, under the law an investor in a startup that fails can take the startup to court by arguing that the founders made bad management decisions, which led to the company’s demise. A business judgement rule allows founders and management some leeway to make decisions, Alame explains, whereas without it, founders and management can have their every decision picked apart in court. A guilty verdict could even land a startup founder in jail, although Alame stresses this is a rare outcome. He advises startups to include arbitration clauses for potential bankruptcies in term sheets when negotiating investments to avoid the courts, which are overburdened, slow-moving beasts in Lebanon.

No quick fix

Startups are not the only entities that would benefit from updates to the commercial code. Jabbour, of Lebanon for Entrepreneurs, has been helping draft a new law related to private equity and venture capital companies (which Executive covered extensively in June). He says the PE/VC law is part of a basket of 13 updates to the commercial code that the Office of the Prime Minister has been working on since 2010. To date, none of the amendments have been passed by parliament and only a few are ready in a final draft form for the legislature’s consideration, Jabbour says. Executive was unable to reach the Office of the Prime Minister for comment, but with parliament convening very rarely in the past few years – resulting in an ever growing agenda – passing these draft laws is unlikely to happen soon.

A new layer in the entrepreneurship ecosystem is taking shape through the increasing institutional presence of academic bodies, including both top-tier and less prominent universities in Lebanon. Universities have been linked locally to entrepreneurship in the past, but this link was often feeble and limited to teaching a few courses or having an occasional conference. Now, the bond between academia and the ecosystem seems bound to become tighter and take on the structure of intense and mutual interaction as described by American University of Beirut professor and entrepreneurship expert Salim Chahine. “Entrepreneurship as an ecosystem requires a triple helix where you have close interaction between the government, industry and the universities,” he says.

Two Beirut-based universities with advanced plans for rolling out their entrepreneurship centers are AUB, which has a project to inaugurate an innovation park by early next year at the latest, and the École Supérieure des Affaires (ESA), which already has established – in preliminary form – an entrepreneurship center under the name of SMART ESA. SMART ESA was created in Spring 2016 and is currently based in two rooms of ESA’s main building.

“The education and business environments have been changing for the past four years but they are not yet designed in a way to cater to a young person to go out and engage in entrepreneurship,” says Omar Habib, the new head of SMART ESA. ESA’s goal of institutionalizing entrepreneurship within the school has led it to embark on a year-long planning process that will develop an old building on ESA’s grounds into a permanent entrepreneurship center.

The new entrepreneurship center building is part of the historic French embassy compound and will be named after former Lebanese Prime Minister Rafic Hariri. A cornerstone laying ceremony for the center was held in May and excavation works for creating a new building inside the shell of the old one are scheduled for December or January, Habib says. According to him, the building already has a nickname: the SMART building.

The AUB Innovation Park will incorporate as a separate entity from the university and look to find a permanent location off campus. However, in the early stages of its existence, it will use AUB campus facilities for its activities, which will include acceleration programs. The park will seek to utilize AUB’s strong network with industry to build a competitive edge. “All accelerators are working on streaming and supporting, training and mentoring, helping ideas becoming startups. We will do the same thing and we will try to help them grow faster with our corporate network,” says Chahine, who is slated to be the director of the AUB Innovation Park.

Coy on details

When asked about details of SMART ESA activities, Habib coyly suggests waiting until the BDL Accelerate event in early November, when the entrepreneurship center is scheduled to announce its programs and open registration for startups. He disclosed that SMART ESA will seek to incorporate as a business because it wants to tap into funding under Circular 331 and that it has recently signed partnership agreements with a French specialist operator of accelerators and incubators.

“We will have an ideation level program, with sublevels, an incubation level program, an acceleration level program, and an a la carte offer of programs that are according to needs, because startups do not get all that they want from preset programs. Where we want to shine is in helping startups learn something and helping them to meet people,” Habib says.

Shahine and Habib are not ready to discuss numbers and budgets, but both university projects will likely run up millions of dollars in investments. What makes the projects of SMART ESA, the AUB Innovation Park, and plans related to entrepreneurship by other universities noteworthy, however, is the shared desire of higher education institutions to contribute to the entrepreneurship culture in Lebanon.

According to Habib, many families are still ruled by the paradigm of favoring a secure job for their children of university age, and entrepreneurship presents inherent risks for fresh graduates. However, this is not fully timely anymore. The hunger for Lebanese talent by countries in the Gulf is no longer what it once was, and the local market for jobs has been very restricted for several years now.

[pullquote]Entrepreneurship is something that every student can learn, as opposed to a talent which only a few people are born with[/pullquote]

Entrepreneurial activity is the only path that is open to many graduates if they don’t want to accept working for years as interns with a pittance of decisionmaking power and even less remuneration, says Ralph Khairallah, who is an entrepreneurship instructor at the Université Saint-Esprit de Kaslik (USEK). Khairallah teaches his students that if a country is going through a depressed economic phase, this is the best moment to start entrepreneurial activities. He says that through his teaching, he has validated his thesis that entrepreneurship is something that every student can learn, as opposed to a talent which only a few people are born with. His motto is that one can “make the world a better place – one entrepreneur at a time.”

USEK plans to open an entrepreneurship center in Kaslik, with the university being close to launching something that will provide entrepreneurship hosting options as an alternative to venues at universities in Beirut. “We want to own entrepreneurship,” Khairallah says proudly.

There is no single answer to fostering entrepreneurship, but Lebanese universities are keen to try approaches that will offer better opportunities for their students, says Hiba Othman, who coordinates the entrepreneurship project at the American University of Science and Technology (AUST). The university is pursuing a new initiative to introduce students to entrepreneurship through a learning-by-doing approach, and this year it embarked on a program that it wants to develop into a tradition for future semesters.   

“The rationale behind this entrepreneurship program is that we want to build this culture for our students and encourage them to build their own companies, because the job market nowadays is very small and people cannot find jobs as they used to. The youth have a lot of ideas, more than we have, and given the right tools, they can start their own projects, and these can be successful projects,” Othman elaborates.

Student teams are formed and mentored by senior faculty members, but the mentorship does exclude commenting on the students’ business plans or pointing out design errors. The teams, whose only requirement by the university is to be multi-disciplinary, are equipped with $2,500 in seed money and tasked with preparing products that will be presented at a business plan competition later this year. The university focuses this program entirely on its students and does not look to faculty members to offer ideas or present their own entrepreneurial plans.

Another university with plans to establish an incubator in the near future is the Modern University for Business and Science (MUBS). Like AUST, it is a university that was founded recently with the eventual goal of competing with the major universities in Lebanon: AUB, the Lebanese American University and  Université Saint Joseph (USJ).

MUBS first acquired experience with entrepreneurship activity through Tempus, a European Union program supporting modernization in partner countries, which ran from 2010 until 2013 at the university. The program illustrated that there was great interest in entrepreneurship among the students, says Latifa Attieh, chair of marketing and management. “The first thing that comes to the mind of most of our graduates is building their own enterprise. From this, we got the idea that it is essential to embed entrepreneurship education in higher education and also in schools; we have to start from an early age, because entrepreneurship is a culture,” she explains.

According to the dean of the International School of Business at MUBS, Guitta Abou Khalil, the university administration is working on the creation of an incubator at a training facility, which MUBS operates in Jal El Dib. This project is currently in the planning stage and details will be announced later. “MUBS has plans to roll out an incubator by the start of 2017. It will be before the next startup competition, which will take place in February,” she says.   

Many iterations of academic entrepreneurship

The first steps into entrepreneurship taken by Lebanese universities date to the 1990s, when the Lebanese American University inaugurated the Institute for Family and Entrepreneurial Business at its Byblos campus and USJ set up the Berytech Technopole adjacent to its science and technology campus overlooking Beirut in Mar Roukos. This was followed by courses, conferences and competitions on startup ideas and entrepreneurship at AUB and other universities. However, the outcome was not strong in terms of students and fresh graduates jumping straight from university into launching their own companies, many experts on the entrepreneurship ecosystem tell Executive, including Chahine and Nicolas Rouhana, who was director of business incubation at Berytech and is today general manager of the IM Fund.

This time around, however, the iteration of the idea of linking academia more effectively with business and entrepreneurship looks to be better positioned, as the entrepreneurship ecosystem has been nurtured for some years now from the financial, industrial acceleration and incubation angles. The angles under which financial and corporate players view entrepreneurship are viable, but differ substantially from the long-term, community-centric approach taken by universities like AUB. As Chahine points out, AUB will foster entrepreneurship under a time-honored educational and societal mission. “AUB’s goal has always been to impact the community; we will be a good collaborator with other entities in the ecosystem. That is our mission,” he says.

[pullquote]The interaction between academia and national interests also has the potential to address another towering need in the Arab region: research and development[/pullquote]

The proof of the value of interaction between academia and entrepreneurship dates back to the 1950s and to the place that still today is hailed as the global symbol of tech entrepreneurship: the area around Palo Alto, California. It stands to reason that the tech industry hub known as Silicon Valley had to emerge somewhere because the new tech industry of the postwar era needed to find its location. But a factor that was instrumental in pulling it into Northern California was the combination of entrepreneurship, venture capital, research and academia that was created when Stanford University established an industrial park and encouraged close interaction between professors (who could take on corporate work as consultants) and young companies that took up residency in the park (some of which could send qualified employees to take classes at the university). The magic of Silicon Valley has proven resilient to attempts of decoding or copying its successful formula, but one can surmise that the intense interaction between academia and industry was a part of the recipe.

The interaction between academia and national interests also has the potential to address another towering need in the Arab region: research and development (known as R&D). R&D was fostered by Stanford through the creation of a research park, and it played a key role in the development of Silicon Valley. For Lebanon’s future, it will be vital to develop R&D with the participation of academic institutions and with infusion of substantial funds, says USEK’s Khairallah. “[Facilitation of loan guarantees under] Kafalat was the big bang for hospitality and tourism ventures in Lebanon; [funding under] Circular 331 is the big bang for the tech startup ecosystem. We need a big bang for research,” he tells Executive.

According to him, R&D will create returns for the country and Lebanon could develop a triangle between entrepreneurship, academic excellence and research. “We have good entrepreneurs, we have the academic institutions, but we do not have the resources to do research and development. We need to create an ecosystem for research,” Khairallah says, noting that large research universities in the developed world have huge endowments or funds that are sustaining their R&D.

Being more involved with the entrepreneurship ecosystem will also have an impact on the universities. The next generation of young students could differ greatly from the past. “It will be a challenge for universities to adapt and that is why it is important for an entrepreneurship center to be its own entity. That also means that it needs to be a partner to the entire university, from top to bottom [of the administration and faculty], not just with the students,” he observes.

Changes are evident for Chahine in the Arab region, including increasing education levels and new realities at the workplace. He sees the way forward in terms of collaboration with other Lebanese and Arab universities. “Lebanese are not having the same space [to move into regional employment] as they had in the past, but AUB still has its presence in the region and we are still a leading research entity in the Arab world. We hope that we can collaborate with other Arab universities on initiatives such as acceleration programs that will create more and more entrepreneurship; all of us can be entrepreneurs,” he says.

When one broadens the view beyond the budding entrepreneurship ecosystems in Lebanon and the Arab region, the question that concerns academia is how to design entrepreneurship centers and programs to nurture talent so that these centers and programs will survive beyond the current period, which is characterized by an economy-wide infatuation with tech entrepreneurship.

[pullquote]Circular 331 is the big bang for the tech startup ecosystem. We need a big bang for research.[/pullquote]

This concern is driven by the cyclicality of education. Popular areas of study are becoming saturated within a few semesters, producing more graduates than the market can absorb. This problem is potentially exacerbated by globalization of education, which is reflected in a glut of popular programs that lead to supply bulges in several countries simultaneously. Internationally, entrepreneurship may be a candidate for such an unwelcome development. It has already been speculated that entrepreneurship degrees are what MBAs were 20 years ago: degrees in which scores of people invest in vain because they hope that they will secure their future.

The danger for this in the Middle East may be remote and could be overlooked when one only focuses on the difference between local universities and those in markets where institutions of higher education have had entrepreneurship programs for years. Judging by the university rankings for entrepreneurship programs compiled by the French higher education consultancy Eduniversal, these markets are the United States and Western Europe.

Entrepreneurship is one of 17 masters programs for which Eduniversal has put together a global ranking containing either top 50 or top 100 programs. According to the methodology described on the consultancy’s best-masters.com website, ranks are based primarily on three equally weighted factors: reputation among recruiters, starting salaries of graduates and satisfaction of graduating students. The reputation and satisfaction scores are survey based.

According to the Eduniversal list, the US is home to a quarter of the top 100 entrepreneurship masters and another quarter of schools are based in Western Europe. The Middle East has three programs on the list, if one includes the country to Lebanon’s south. The program at the University of Tel Aviv is highest ranked in 25th place and another program at Ben-Gurion University of the Negev is ranked 88th. The sole program from an Arab country is Beirut-based USJ’s Professional Masters in Entrepreneurship and Technologies in 73rd place, which is one of five professional masters offered by USJ’s business department. 

While global trends should be paramount on the minds of Lebanese university administrators and entrepreneurship program managers when they are thinking a few generations ahead, it is positive for the near future of our ecosystem that the odds for institutionalization of entrepreneurship in Lebanon’s academic realm are increasing and entrepreneurship is being enriched by institutions like SMART ESA which, as Habib says, “want to develop programs that are flexible and will answer the needs of people who don’t even know yet what their needs are.”

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.