Hospitality & Tourism

The intricacies of sushi

by Greg Demarque & Nabila Rahhal
written by Greg Demarque & Nabila Rahhal
“The restaurant Mitsu-ya translates to the house of Mitsu, named after its Japanese chef. It follows the Omakase style of sushi, which is more personal and relies on the chef’s skills, creativity and even his mood.” (Fady Achkar, co-owner of Mitsu-ya)
Le Sushi Bar, Shogun and Mitsu-ya are among the few sushi restaurants in Lebanon that use fresh wasabi, which is a root and has a rough texture. Most use a powder mixed with horseradish, mustard and other spices.
“The easiest way to tell the quality of the sashimi or sushi is to eat it plain, without wasabi or soy [sauce]. If it has a metallic aftertaste, chances are the fish is not fresh.” (Aref Saade, owner of sushi restaurants Tropical Bamboo and Shogun)
“Some of the more popular makis were invented by Le Sushi Bar. ‘Crazy’ was called so because of its crazy hair look; ‘Naked’ because there was no nori around it and ‘Volcano’ because it’s spicy. These became staples of Lebanese sushi restaurants.” (Mario Junior Haddad, owner of Sushi Bar)
“Most of the sushi consumed in Lebanon is salmon based, unlike in Japan where 80 percent of the world’s tuna is consumed. Salmon is also a favorite worldwide.” (Mario Junior Haddad)
“Restaurants are experimenting with sushi, introducing new twists to familiar dishes, such as Yabani’s new style sashimi, which includes scallops with truffles.” (Ramzi Adada, general manager of Yabani)
“Some Japanese like to roll the sashimi in green leaves called shiso, along with some wasabi and pickled ginger, and eat it with their hands for an added, close to minty, flavor.” (Aref Saade)
“Bluefin tuna is sold at auctions in Japan. The most expensive Bluefin tuna fish weighed 220 kilograms and was sold for 1,850,000 euros. Bluefin tuna can be found on Lebanon’s shores during May and June.” (Aref Saade)
“Crab sticks or surimi are made from crab meat and other products. They are sold wholesale from $2 to $7 per kilogram depending on the amount of fresh crab meat used.” (Nicolas Rebeiz, sushi restaurant manager and supplier)
“Sushi restaurants mainly work with Scottish salmon because its meat is firmer if you want to use it in sashimi. They also use farmed salmon as wild salmon, which is only available in May and June, is chewier and less buttery than the farmed variety.” (Aref Saade)
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Hospitality & Tourism

What’s in a nationality?

by Nabila Rahhal
written by Nabila Rahhal

Walk into most restaurants serving sushi in Lebanon and you will almost certainly not see a local rolling up your makis. Though the majority of sushi chefs in Lebanon hail from the Philippines, Vietnam or Thailand, there are two or three restaurants that boast Japanese chefs preparing your Japanese meal.

Restaurant owners Executive spoke to all agreed that hiring a Japanese chef for their sushi restaurant is simply too expensive. “In Lebanon, the salary of a non-Japanese chef is around $1,000. If I hire a Japanese chef, whose salary is much higher, how can I compete with the restaurants around me who don’t have Japanese chefs and pay them much less, given that our other expenses are the same? It’s just not cost effective for us,” explains Shogun owner Aref Saade, adding that a Japanese chef would likely find it hard to deal with the way Lebanese eat their sushi all at once mezze style instead of the slow, piece by piece style that Japanese culture is used to.

Moreover, Ramzi Adada, Yabani’s general manager, suggests that Japanese chefs are expensive because the quality of life in their country is so good that they don’t feel pressured to seek employment abroad.

Tsunami co-owner Rita Ekmekjian says that a typical sushi restaurant employs around 10 chefs, so bringing them all from Japan, knowing that the average salary for a Japanese chef is $5,000, is simply not feasible.

Fady Achkar, whose restaurant Mitsu-Ya is one of the only sushi restaurants in Lebanon that employs a Japanese chef, believes it’s an expense worth investing in. “Ok, they are much more expensive, but when people invest $1.5 million to make a sushi restaurant, they should definitely invest in a Japanese chef. At the end of the day, I don’t go to a restaurant to check out the artwork,” he says.

When asked why Lebanese chefs are not employed as head sushi chefs in Lebanon, the answers among restaurant owners varied. Some believe that, perception-wise, Lebanese customers are more confident in the chef’s skills when they see an Asian chef behind the sushi bar rather than a Lebanese, regardless of their rolling skills. 

Others insist that Filipinos, for example, understand fish better than the Lebanese since they live on islands and have many Japanese restaurants in their country.

Restaurant owners interviewed say it would be easier for them to get Lebanese chefs for their sushi outlets as they wouldn’t have to do paper work for them in terms of sponsorship, but for the time being, Asian chefs remain in charge of sushi restaurants.

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Hospitality & Tourism

Sushi nation

by Nabila Rahhal
written by Nabila Rahhal

Back in 2003, T-shirts with the slogan: “Sushi: Traditional Lebanese Dish” were spotted being worn by young fashionistas across Beirut, illustrating the glowing success of this staple Japanese dish in Lebanon.

Thirteen years later and the Lebanese passion for sushi does not seem to be ebbing away. On the contrary, the estimated number of restaurants serving sushi in Lebanon has to date reached close to a hundred individual outlets.

The early years

Japanese cuisine has been present in Lebanon, to some extent, since the 1980s. First through the restaurants Tokyo in Manara, which was operated by a Japanese woman, and Nippon Mare in Jounieh, according to Nicolas Rebeiz, partner and managing director of the seafood and sushi restaurant and supplier Oceanus, who adds that these restaurants were not focused on sushi.

Aref Saade, owner of Tropical Bamboo, a company which offers supplies, consultation, menu development and recruitment for Asian cuisine restaurants in Africa and the MENA region, recalls that when he returned to Lebanon from Saudi Arabia in 1992, sushi was not common in Lebanon, despite it being a global trend. At the time, Chinese cuisine was more in demand.

Slowly, says Saade, young expats returning to Lebanon from Canada and America who had tried sushi abroad began asking around for it, prompting restaurateurs to open their eyes to this opportunity. In 1995, Boubess Group decided to open a Benihana restaurant in their Commodore Hotel and utilized Tropical Bamboo’s services, serving sushi as well as the teppanyaki that Benihanas are globally known for.

The takeoff

But it was with the opening of Le Sushi Bar in Ashrafieh that the sushi craze took flight.

[pullquote]Young expats returning to Lebanon who had tried sushi abroad began asking around for it[/pullquote]

Mario Junior Haddad, who hails from the cinema business, decided to open Le Sushi Bar in 1998 out “of a passion for food” and because there were no restaurants at the time “that focused solely on sushi even though it was an international trend.” He explains that his concept was a bar where people would sit around the chefs and be served sushi that had been prepared in front of their eyes.

Haddad recalls that restaurant openings were not as common as they are today, so people flocked to Le Sushi Bar to discover the new outlet as well as the new concept, generating quite a buzz. “It hit a chord as well because the place was unusual and worth discovering,” says Haddad.

Five years later, in 2001, Yabani opened on Monot Street, then an area booming with clubs and bars. This stylish underground outlet, designed by the renowned architect Bernard Khoury, cemented sushi’s appeal as a trendy cuisine, explains Ramzi Adada, Yabani’s general manager.

3

For the love of rice and raw fish

Indeed, these days sushi in Lebanon can be found on many a menu, including international cuisine restaurants or coffee shops, and can even be consumed alongside your argeeleh in a Lebanese café or bought pre-packaged at some local supermarkets.

Rita Ekmekjian, co-owner of the sushi restaurant Tsunami which has four outlets across Lebanon, says that when they first opened Tsunami in Kfardebian, Faraya, in 2003 (the outlet was closed two years later when they moved to the busier area of Ashrafieh) there were only nine sushi restaurants in Lebanon. Today, she estimates the number has grown to 75 pure sushi outlets in Lebanon. If you include the cafes and catering companies which serve sushi, as well the individual branches of chain sushi outlets, Adada places this number at 150.

These sushi outlets are mainly concentrated in Greater Beirut and Mount Lebanon with only a few outlets in the North and South of the country, says Alain Haddad, sales manager at Royal Gourmet, a wholesale supplier of fish used in sushi (mainly salmon), adding that his company only supplies two sushi outlets in Sidon, for example.

Supply and demand

In parallel with the increase in outlets serving sushi is the increase in suppliers of dry goods and raw fish used for sushi. “At first there was only us supplying the ingredients, the consultation, menu development and chefs for Japanese restaurants from 1992 to 1998 when we stopped our supplying activities in Lebanon to open Shogun,” says Saade who currently owns two Shoguns in Lebanon and a few others in the region while running Tropical Bamboo in the countries where Shogun is not in operation.

[pullquote]In 2003 there were only nine sushi restaurants in Lebanon. Today, the number of pure sushi outlets has grown to 75.[/pullquote]

Le Sushi Bar’s Haddad estimates there are 10 to 15 suppliers of sushi related items today, refuting the popular notion that only one or two companies supply all sushi restaurants in Lebanon. Saade adds that existing food product suppliers also began importing sushi related products when they saw the increased demand for them.

Adada explains that, just as with any other cuisine, choice of supplier would depend on the ingredient, adding that at Yabani they sometimes work with different suppliers for the same ingredient so as to ensure a continuous supply and also to maintain good relations with all suppliers.

2

Sushi for everybody

Sushi has indeed become one of the most prevalent foods in Lebanon. According to Saade and Haddad, one of the reasons for sushi’s popularity in Lebanon is its perception as a healthy cuisine. Ekmekjian explains that sushi remains a global trend and since Lebanese generally follow trends, they continue to enjoy sushi. She adds that since traditional Lebanese cuisine includes raw meat, the idea of eating raw fish was not too much of a transition, culturally speaking.

Adding to sushi’s popularity is its availability across all income brackets, with restaurants serving maki as low as a dollar a piece and as high as ten dollars a roll for the rarest items.

As Le Sushi Bar’s Haddad puts it: “I think it overflowed the boundaries of the elite; everybody wanted to eat sushi, and this is why a lot of places have mushroomed at all levels and they are all working.  It’s democratized, just like burgers,” he says in answering the question of why sushi is so popular in Lebanon.

Having sushi for a dollar a piece, especially when raw fish is involved, sounds risky to many. However, as Saade puts it, not everyone can afford the high-end variety while everyone wants to enjoy sushi. “People want to eat sushi and those who can’t afford it will go for the cheap option of a dollar per piece,” he says adding that in all cases, consumers’ main concern should be hygeine and cleanliness when it comes to consuming raw fish.

Saade, who is also the treasurer of the Syndicate of Owners of Restaurants, Cafes, Night-clubs & Pastries in Lebanon, says that at the onset of the food safety inspections in restaurants initiated by Minister of Health Wael Abu Faour, along with the Ministry of Health and Boecker and GWR Consulting (two companies specialized in food safety), hard work was put into ensuring that Lebanese sushi restaurants were in line with hygiene standards, organizing food safety and preparation seminars across the country as well as encouraging them to send samples of their fish in for inspection.

Cutting corners

While low cost sushi and maki might not make you ill, there still is often a big difference in the quality and taste between them and the more expensive sushi.

To begin with, restaurants can decrease costs by using lower quality dry ingredients, such as substituting Japanese rice with Egyptian rice, according to Saade, or using Chinese dry goods (such as seaweed or vinegar) which are also cheaper, according to Fady Achkar, co-owner of Mitsu-Ya, a high-end sushi restaurant in Gemmayzeh.

Such lower end restaurants can also use larger quantities of rice, avocado and cucumbers than raw fish, thereby appearing generous but stuffing clients with the cheap items, explains Rebeiz. Another cost cutting technique which some restaurants employ is to use frozen instead of fresh fish, explains Adada.

Achkar, who also supplies major supermarkets in Dubai with packaged sushi, calls sushi made from frozen fish “fast food” and explains that it relies on four main and comparatively cheap fish. “They use crab sticks or imitation crab, mayonnaise, avocado, cucumber, treated tuna which comes in fillets, salmon and frozen shrimp, which people love. But, you have to stick to these four products. There is nothing wrong with it, but it’s different quality and not comparable to authentic sushi,” he says.

1

All fish are not created equal

Even among those four items, the standards of sushi, and therefore prices, differ according to the quality and cut of the fish. The most important factor when it comes to fish quality is its freshness, according to Haddad of Royal Gourmet, who explains that they receive four shipments (by airplane) of salmon per week with some restaurants buying from them on a daily basis. Salmon wholesale prices range from $13 to $20 per kilogram for a whole fish, depending on the cut and country of origin, and around $25 per kilogram if cut and cleaned by the supplier into fillet chunks.

While the restaurants Executive spoke to all said they use fresh fish, a lot of the fish used in Lebanon, especially tuna and eel, is frozen for cost efficiency, although the taste is sacrificed. “A kilo of fresh tuna is $30 to $40 while you can get it at $20 frozen. It is more cost effective that way for them because the fresh tuna is three to four kilograms while with frozen tuna, one can buy smaller portions and defrost them, which is good because tuna can quickly darken and go bad,” explains Haddad, adding that Royal Gourmet sells only fresh tuna, mainly to high-end sushi restaurants with a high turnover.

The type and cut of fish also varies with different prices for the belly and under belly of the tuna, which are the more expensive parts of the fish since they are fattier and less chewy, explains Saade. He adds that while the Bluefin tuna is the best type quality wise, it is the yellow fin tuna that is most used in sushi restaurants because it is less pricy.

Whether it’s from the low or high-end variety, or whether packed with rice or made up of only slices of raw fish, it seems the sushi craze is in Lebanon to stay, rivaling hummus and tabbouleh as some of Lebanon’s favorite foods.

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BusinessCompanies & Strategies

The Uni-leader

by Yasser Akkaoui
written by Yasser Akkaoui

When Lebanon-based Fattal Holding, agents and distributors for numerous global brands in six countries of the Middle East and North Africa region, celebrated the 80th anniversary of their partnership with consumer goods multinational Unilever, the occasion was auspicious enough to bring Unilever Chief Executive Officer Paul Polman to Beirut. Executive used the rare opportunity to squeeze an interview into Polman’s hyper-busy schedule.   

E   I would like to start with a macroeconomic question. Multinational producers of fast moving consumer goods (FMCG) are affected by global economic challenges more and earlier than other types of multinationals. How is Unilever dealing with macroeconomic challenges across the globe?

At this point in history, whether we like it or not, we have to deal with an economic system that produces slow growth and many companies are challenged by that. In Europe there is deflation and a geopolitical environment which is seeing more conflicts than we have in a long time; the [Middle East] is unfortunately one example, but there are many others too.

Then we have the effects of climate change which are coming through at an increased rate. All of that causes a social dissatisfaction that we also have to deal with, and all these forces don’t make it easy.

If you think of that at a high level, of what you can do if you are in my position, the first thing is to be sure that your organization is driven by a strong purpose because the stronger your purpose is, and the more people are aligned with it, the more it will permeate these short term volatilities.

The second thing you need to do is be sure that your organization has a certain level of agility. It is now much more difficult to anticipate all these changes that are going to happen. With a company like Unilever, it means creating four different business units; we are more decentralized, driving decision making down, delayering organizations.

The third thing to do [in tandem with creating] agility, which is the ability to react quickly, is to build up resilience. Agility and resilience have to go hand in hand if you want to be a top performing company. So as a company we spend a lot of time building that resilience and one of the ways in which we do that is to look at our leadership development and what type of leaders we need.

E   In their governance, companies today are looking more and more at bottom-up approaches, embarking on inclusive visions and missions, as compared to a top-down approach. How successful were you in migrating Unilever to this culture?

Changing the culture is the most difficult thing for a financial market to understand and it’s also the most difficult thing to do. In many companies, the top level implements something and thinks the rest of the company will behave which is not true; it takes a long time. For every layer in the company, you will need a year to change the culture. And culture is also influenced by many other things. What is happening is that people are looking for a deeper level of job satisfaction. They are discovering that happiness comes from positively influencing others and leaving the world a better place.

When we moved to the Unilever Sustainable Living Plan [ed.: a transformation project aiming to double the business while improving environmental and social impacts], I took a year to first be sure that our internal organization was aware of what we are doing, because they had to be comfortable with the idea. We don’t incentivize people too much which is interesting, it is not in our bonuses or something like that. We just expect people to join us and the more people join us and are there for that reason, the quicker we can advance our cultural journey.

E   Lately we’ve witnessed a shrinking emerging market which contributed to 57 percent of your revenues a few years back. As an executive committee, when you submit your strategy for the next year to the board, to what extent is the board reasonable or unreasonable in terms of market expectations?

In fact we don’t make forecasts for one year; I don’t think they are very useful. You have to continuously work with the board and make them part of the change process that you are applying in the company. As CEO I am part of the board myself. Board members come from a broad variety of backgrounds, from their knowledge base or region of origin, and they only meet six times a year. Because this world is changing so fast and there are many issues, such as cyber security, digitization of society [and] changing emerging markets, you have to spend a lot of time educating and updating the board [on issues such as] why we have the Unilever Sustainable Living Plan, and why this is our business model. The board, on its end, has to be very confident in the CEO and his management team; after all, the main responsibilities of the board are succession plans, governance and protection of the culture. A lot of the other things are actually delegated to management but the way we work is to engage them as if they are part of the company; I believe this is the best way.

E   To what extent do you think shareholders have taken note of the environmental, social and governance (ESG) concerns as factors in evaluating their investments and do they assess you on your ESG?

The answer is, not enough, but the positive thing is, increasingly so. For example, there is an enormous divestment movement worldwide in the financial markets on carbon. So if you take this specific topic, carbon and climate change, the financial committee has been majorly aware. The reason is that if you want to stay within the two degrees [of global temperature increase] which was a clear signal in Paris, this basically means we have to leave in the ground about two thirds of the carbon stock that has been discovered. These are now called “stranded assets”, so all of a sudden the financial markets are interested.

[pullquote]A company like Unilever reaches two billion consumers a day in 119 countries and has a value chain that influences tens of millions of people[/pullquote]

The other reason, on the business side, is that people are starting to discover that the cost of not acting is becoming higher than the cost of acting. A good example is the insurance companies. Over the last ten years [insurers] paid $2.7 trillion more in response to natural disasters than the normal average; 14 of the last 15 years in history have been the hottest years on record, [and] the sea level has risen. Some people are starting to see this as enormous risk that needs to be dealt with. [Also,] the costs of mitigating [climate change risk] are coming down rapidly because of technology; solar is a good example. You have forty countries in the world where green energy is already cheaper than fossil energy.

So we need to change some things like market mechanisms. We need to price in carbon, we need governments to start developing rules and regulations, we need subsidies in many parts of the world to accelerate this process and the financial markets are taking notice of all this.

The other reason why ESG investment is going well is because 75 percent of the money that is invested by these institutional investors is your or my pension money; it’s the money of us all and society is starting to wake up to the need for change. So the ESG investment itself is the fastest growing. People are subscribing to the UN Global Compact and Principles of Responsible Investing (PRI). We are definitely on the right curve and for good reasons; my main concern is how fast we are [acting]. [To achieve] what we signed in the sustainable development goals and [at the COP21 conference] in Paris, we have to accelerate.

E   To which extent can a company like Unilever be an agent in reinforcing this commitment to the ESG?

A company like Unilever reaches two billion consumers a day in 119 countries and has a value chain that influences tens of millions of people who are directly or indirectly working for us. So we have a longer term view. To implement the sustainable development goals (SDGs), it’s going to cost the world between $2 trillion and $3 trillion a year. This is a low investment compared to the global economy and certainly one that would be a good payout to eliminate poverty in the most sustainable and equitable way, but the overseas development aid from all countries is $140 billion – so where is the money going to come from? It has to come from the private sector.

It’s also really difficult now to depend on the governments alone because most of the institutions that have been designed to deal with the global issues of governance were designed at Bretton Woods when 85 percent of the world’s economy was in Europe and the United States. I am talking about the IMF, the World Bank and the OECD. Today it’s so difficult to forge global agreements when governments come together because we haven’t figured out what the governance is in this increasingly interdependent world, and we are living off a system that is over 70 years old. Business needs to step up because there is no business case in enduring poverty. We need to be sure to forge what I call these partnerships for the common good. When developing the SDGs we insisted on goal 17 which is about partnerships, but these are not partnerships working together on products or on technology; they are partnerships for the common good. If we can rise to that level, we can solve any problem; we just need human willpower which is actually a renewable resource. That is why I often say we need more leaders and we need more trees.

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Entrepreneurship

Locking up the key

by Thomas Schellen
written by Thomas Schellen

Identity protection is a huge and ever growing need in the knowledge economy. Ki, which was initially conceived as a hardware authentication token for password storage by its founders Priscilla Elora Sharuk and Antoine Jebara, is a Lebanese solution for identity protection. Executive caught up with Sharuk to see how the startup has progressed since we last met.

E   When we met to evaluate Ki for the 2014 entrepreneurship list, you were about to travel to Helsinki for an accelerator program called Startup Sauna and were a bit worried about the Nordic temperatures there. How was your experience as a budding Lebanese entrepreneur there and what has happened since?

PES: I survived the cold and the program was wonderful. It is one thing to gain credibility here and an entirely different thing to get it abroad, especially when it comes to a field like identity protection. Seeing the concept given credibility by people who have worked in this space internationally and hear them say ‘you are onto something big’ gave me the guts to come back and say that this deserves to be done all-out. From that point I went full-time myki, which is how we renamed ourselves from Ki for legal incorporation reasons and also to make it more personal. The biggest thing that happened since was a massive pivot from hardware to software.

E   In what way?

Ki was a hardware device, a token where I would swipe my fingerprint and select the service from a screen [for storing passwords]. Prototyping and editing the tokens here [in Lebanon] would take time and we found that it was very difficult [for logistics reasons]. In addition, our market research showed that people understood the value of the product but said they didn’t want to carry an extra token in their wallet. So we thought, why not take the same technology and incorporate it into the one item that you always have with you – your mobile phone.

E   How did the change to a software solution impact your business proposition and costs?

We are now totally focused on enterprise software as a service – SAS. This represents different challenges from hardware solutions but it is definitely easier to manage the challenges on the software side rather than dealing with the manufacturing which is a very difficult thing to do, especially when you do not have enough talent around you meaning that you have to outsource [manufacturing]. Not having to produce hardware devices means that I am free.

E   Production of the tokens in Lebanon was never on the table?

It was never an option.

E   What were the main challenges that the shift has brought?

One of the biggest challenges that we noticed in the region is education. Once people see the product they ask, ‘when can I have it?’ But can I say that people understand the value and the risk of a cyber breach in MENA as much as they do in Europe and the United States? No.

[pullquote]It is one thing to gain credibility here and an entirely different thing to get it abroad[/pullquote]

E   Do you see limits of growth and is it your strategy to serve mainly the MENA market or do you want to go global?

No, we are not focused only on MENA and of course we want to go global. We would like to be the leading identity management platform on the market.

E   You have succeeded in gaining equity participations, one of which was announced last month. Can you tell us who the partners are and how much capital they are injecting?

The investment is for $600,000 and comes from B&Y Ventures here [in Lebanon] and BECO Capital in Dubai.

E   The participation is equal between the two?

Yes. We initially wanted to go with one investor but because Dubai is an important market for us, it was strategic for us to have an investment from Dubai and say this is an entry into a new market and access to a new network and more support for the team. Until last year, we were two [people], Antoine and myself. We have since grown to seven. So it is moving at a pretty rapid pace and when we talk about moving global, we are starting here as a test market and then into Dubai and then Europe, the United States and the rest of the world.

E   Was the equity deal driven by Circular 331 or outside of the framework?

The B&Y part of the participation is part of the 331 framework; the BECO portion is not, because it is money coming in from Dubai.

E   Do you already anticipate undertaking later funding rounds?

When doing that round we were looking at an 18-month runway but we already have two VCs who are saying, ‘When you raise again, we would like to be a part of it’. One of them is a Lebanese VC and the other is a Silicon Valley-based VC.

E   Where do you see myki’s future?

A multi-billion dollar company.

E   You want to be a multi-billion dollar company?

We will be a multi-billion dollar company.

E   Moving along that road, where and at what valuation do you expect to be in five years?

That is a very big question. If you ask me where I will be in five years and ask me about a value, that is a question I cannot answer but I know that it is going to be massive. That is what I work for.

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Entrepreneurship

Sharp Minds

by Thomas Schellen
written by Thomas Schellen

Antoine Saab and Nadia Moussouni are the entrepreneurs behind Energy24, a power storage solution which they claim is suited to solving the most challenging electricity supply problems. Since being recognized as a Top 20 entrepreneurial company by  Executive in 2014, their company Sharp Minds has added a solar energy component to its electricity storage product.

E   What has happened at Sharp Minds since we met in October 2014 to discuss the Energy24 project for the Executive Top 20 Entrepreneurs?

Antoine Saab (AS): First, 2015 was a year of stabilizing a version of one of our products. We reached a point where we technically finalized this V1 and moved to another product, version two, in a process of continuous development.

Nadia Moussouni (NM): We perfected V1 and have included all the controls that will help people avoid doing stupid things with it; it is almost unbreakable.

AS: The second issue on which we worked in 2015 was funding on both the equity and the debt side. We reached a deal with CreditBank under which our customers can finance their Energy24 units and made an agreement on our credit lines with the same bank. Also on the debt side, we signed a deal with Kafalat to obtain the highest possible financing amount available under the Kafalat Plus program. On the equity side, we closed our first round of funding through Leap Ventures. The year was basically fundraising.

NM: We finished 2015 with enough funding to look forward to further acceleration and started recruiting. Compared to being only two to three people at the end of 2014, we have since increased to almost 15 and we will be about 50 people by the end of this year.

E   How far has the solar component developed in 2015?

AS: Our portfolio is now almost 50-50 between solar and storage. Half of our customers have storage units only, the other half have batteries plus solar. Since we offer hybrid solar, the half [of our customer base] that has hybrid solar is injecting enough power into the grid to compensate for what the other half is using. If you want, our customer base is grid-neutral in this way.

E   How much has your customer base expanded?

AS: We had a growth rate of about 300 percent year over year between the end of 2014 and the end of 2015, and we think that we might reach about 400 percent this year.

NM: We currently don’t have any salespeople and are only selling thanks to our reputation.

E   But you told me that this is going to change soon.

AS: We are now building our sales force. We have rented a 700sqm office in Sin el-Fil where we will soon be moving. Besides the 15 people that make up our current team, we have just hired five to six people who will join us to build our sales force, starting April 1. Today I signed a lease for our first outlet in Sidon which will be operational on June 1. By the end of 2016 we expect to have two outlets toward the south, in Khalde and Sidon, and one in the Bekaa, plus our outlet in Sin el-Fil. In 2017, we will hopefully tackle Keserwan and North Lebanon.

E   What was your experience in raising funds?

AS: I first have to say that I think that Banque Du Liban (BDL), Lebanon’s central bank, has done a great job. I have looked at how many countries handle startups and I think [BDL Governor] Riad Salameh has really done amazing business. [Circular 331] is a bold move and an approach that many other countries should follow.

NM: In administrative terms, the system in Lebanon is a bit tedious and quite complicated. It took us a year to finish the paperwork. But overall we are very happy with the deal we have made. It gives us a completely new perspective and opens up prospects for reaching much larger numbers much faster. We think we will be able to develop products and are already developing products that can go global. This would have been just an impossible dream without the investment into our equity.

E   This was the investment by Lebanese venture capital firm Leap Ventures?

AS: Yes. It is a relatively small investment but as you know, as a startup you should neither over-raise nor under-raise funds. We got offered lower funding, which we didn’t accept and got offered higher investments, which we did not take; we took exactly the funding that we viewed as adequate. We expect Leap to announce the size of the investment soon and want to leave it up to them to do so.

E   Are you already strategizing for the medium-term future?

AS: Absolutely. From the growth that we are seeing and the way we are looking at the market and how it is developing, we think that this company has a good chance of becoming a very large business. By the seventh year we will probably have had a couple of fundraising rounds, perhaps three. Pessimistically speaking, we believe that the company will be a $300 million business [at year seven]. At that level we don’t see a problem replacing the funding [guaranteed under Circular 331] 331 with traditional investors.

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Entrepreneurship

Economena Analytics

by Thomas Schellen
written by Thomas Schellen

There is a tremendous link between what Lebanon needs in terms of information, transparency and planning, and what improved data can help deliver. In this context, Executive followed up on developments at Beirut-based data services provider, Economena Analytics, with company founder Tamim Akiki and deputy chief executive Amani Kandil.

E   What has happened with Economena since Executive interviewed you for our entrepreneurship report on tech companies which was published in November 2014?

Tamim Akiki (TA): October 2014 was when we launched our flagship product, the Economena User Station. Starting with the launch, we have seen some good uptake of our services from the market. We signed up several more clients in Lebanon, including banks and universities. In the year 2015, we improved the product a lot and added new features, including a cool feature called Tables. This feature facilitates visualization of data from different sources and allows clients to manipulate data to see different rankings and changes. This is a first in Lebanon and it is completely dynamic.

E   Was the development of data and tools your main focus in 2015?

TA: We also launched the Lebanese Economic Outlook survey. We published three editions of the survey where we poll our clients and other economists in the local market about the outlook for the economy to try to separate the good sectors from the bad sectors.

E   Did you take steps in relation to overall business development?

TA: We have invested a lot in our outreach and in the optimization of our platform, some of this based on client feedback. We also grew our revenues in 2015 by around 35 percent. In organizational terms we established two new businesses, an offshore enterprise which helps our foreign clients, who represent two thirds of our revenues, and a joint stock company. For the coming year we are looking to sell more subscriptions to the United States, breaking into the academia sector.

E   What happened on the team development side? How much did you grow?

Amani Kandil (AK): We did not grow much, in Lebanon that is, but we have focused on developing our team. We added a team in Nepal that helps with data extraction and we now have one team member in Egypt as well.

TA: The reason we invested in the Nepalese and Egyptian teams is also because we are focusing on developing our coverage this year. We are going to add a lot more countries with extensive coverage to help existing clients in Lebanon save costs in their expansions and coverage. Thus the banks that are investing in Egypt as a growth market will now have access to a full Egyptian database at Economena. We also did a lot of stuff internally [to upgrade our team’s capabilities] and Amani is now managing the business altogether.

[pullquote]“Our five-year business plan through 2020 foresees annual revenues of $3 million to $5 million from subscriptions and the Economena User Station”[/pullquote]

E   How did that feel, to move into this responsibility?

AK: The nice thing about working here is that it is not a one-person responsibility. It is a shared responsibility. So [being deputy CEO] is just having a fancier title.

E   How large is the Economena team now?

TA: We are 12 full-timers here, five in Nepal, one in Egypt and one sales and marketing in the United States.

E   Did you do any fundraising in 2015, and specifically did you approach any venture capital funds for Circular 331 money?

TA: We did not but we are currently in negotiations with two different parties to raise money or finance part of our expansion into the Gulf Cooperation Council and the US. This would mean either specific financing for our sales and marketing expansion into the US and the GCC or an investment into the core business, which would possibly be through Circular 331. We expect to obtain funding in 2016.

E   Was there a reason why you did not seek to obtain equity finance from local VCs in 2015?

TA: We wanted to wait and see. Circular 331 was issued in August 2013 and has not been in effect for a very long time, so we wanted to see how the relationships between the VCs and the startups develop. Our business is more of a long-term value proposition and we want to be very careful about who we are working with.

E   When someone asks you if you are a startup or an entrepreneurial company, how do you describe yourselves?

AK: As an entrepreneurial company, not as a startup.

TA: One of our key advantages is that a lot of our business is based on contracts that are ongoing and will be ongoing for several years into the future. At the same time, our core product, the Economena User Station, is still very early in its life cycle, so it is a startup project by itself.

E   How large do you see your growth potential in the next three to five years?

TA: Our five-year business plan through 2020 foresees annual revenues of $3 million to $5 million from subscriptions and the Economena User Station. A large part of that revenue will come from North America and effectively international markets, excluding the Middle East. The Middle East will contribute approximately one third of our revenues.

Can you tell us in closing how much in terms of investment amounts you will be shooting for in your fundraising in 2016?

TA: We are looking for anything between $500,000 and $1 million in 2016.

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Entrepreneurship

Tech entrepreneurs update

by Thomas Schellen
written by Thomas Schellen

When hiking through an aging natural forest, did you ever accidentally burst your foot through an old log and see the wood fibers crumble while bugs and worms scuttle away into the moss or wiggle around your hiking boot? That is a moment to not only gaze at the young shoots, but also appreciate the secrets of an ecosystem’s functionality. Effective decomposition is vital, contradictory as this may sound, to every functioning ecosystem. It liberates resources for re-composition into new uses and, eventually, new structures.

Another characteristic of a successful ecosystem is its ability to respond to disruptions and function with resilience. All ecosystems, science says, are exposed to disturbances. They can range from your boot interrupting the decomposition of that rotten tree to a volcanic eruption that spews an ocean of hot ash for miles around. Either event will disrupt the ecosystem and change it but even a mass destruction event might not eradicate it; when Mount St. Helens blew in 1980 in one of modern history’s most devastating volcanic outbreaks, no one was more surprised than the scientists observing the area after that violent event to see how quickly new plants broke through the cover of ash and how tenaciously life grew back in the surrounding mountains in the United States’ Pacific Northwest.

Natural environments will not deliver this resilience if they are put together by a landscape designer. Both the sheer number of constituents and complexities that are encapsulated in an ecosystem, and the unpredictability and specificities of external variables that are testing its resilience, make it a thankless task and fool’s errand to try and construct a perfect biological ecosystem; and quite probably this is equally true for business environments.

Judging acceleration

Because digital ecosystems are human-driven and thus exposed to Murphy’s Law even more than they follow Moore’s law, it stands to reason that their resilience will only be proven after they have withstood the impacts of external disruptors and risks from new tech to politics, geo-economic forces and climate change factors. Developing and proving this resilience, however, is not a short-term task.

In the days of the New Economy, when the media buzzwords were incubator and cluster (instead of accelerator and tech hub), every aspiring economy, including the Lebanese, was talking about emulating the US information technology revolution by having their version of a Silicon Valley. Shortly thereafter, however, the burst of the New Economy bubble eliminated countless dot.com ventures (London-based fashion site boo.com, which failed in 2000, was one of the bubble’s top destroyers of Lebanese investor money). The massive disturbance, in ecosystem terms, taught investors and entrepreneurs important and hard lessons of decomposition and set the digital economy back to square one of the long journey to real profitability.

[pullquote]Resilience will only be proven after they have withstood the impacts of external disruptors and risks from new tech to politics, geo-economic forces and climate change factors[/pullquote]

In the current iteration of the innovation ecosystem concept, the digital economy has shown that the lessons of the dot.com crash did have positive impacts. But this neither means that the current system is perfect in any way nor that it has already reached full maturity or resilience.

A case in point for yet-to-be-proven value propositions are the accelerator programs. According to the 2016 report by the Seed Accelerator Ranking Project (SARP), a research initiative by US-based scholars Yael Hochberg and Susan Cohen, proliferation of accelerator programs in the US in the past few years has resulted in the emergence of hundreds of programs that do not meet the criteria for calling themselves accelerators. “Even within the group of programs that meet the criterion of an accelerator – a fixed term, cohort based program that includes educational and mentorship components and culminates in a public pitch event or ‘demo day’– there are differences on many critical dimensions, including program structure, management, goals and, most importantly, efficacy. For an entrepreneur considering an accelerator program, finding reliable data regarding the performance of programs is difficult, and there is much confusion and debate regarding how ‘performance’ should be measured for an accelerator,” Hochberg and Cohen write in their report, which was published last month.

Entrepreneurs need more transparency on the performance of accelerators because the exercise is prone to incur a high cost in form of equity. “Equity is an entrepreneur’s most valuable currency, so the non-monetary benefits such as mentorship, network and exposure to future investors are an important part of the decision to attend a program,” they note.

Another scholar, visiting fellow at the Brookings Institution Ian Hathaway, concludes from his research that startups which graduated from “top programs” achieved milestones in fundraising and gaining customer traction. “However, these positive effects dissipate when looking at a broader sample of accelerators: many programs do not seem to accelerate startup development, and in some cases may even slow them down,” Hathaway cautions in a contribution to Harvard Business Review.

While these scholarly findings derive from research into US-based accelerators – whose numbers according to Hathaway have skyrocketed from 16 in 2008 to 170 by 2014 with a flattening of the curve since then – the positive implications and the cautions very likely apply to international programs, with the extra remarks that international programs are still younger and much less researched than their US peers. From the Middle East, at time of writing, only two accelerators in Arab cities met the criteria for inclusion in the Global Accelerator Network (GAN) list of members; one in Cairo and one in Jeddah.

Growing with diversity

According to Hathaway’s paper Accelerating growth: Startup accelerator programs in the United States, there are indications that accelerators bring benefits to participating companies and broader startup communities despite little systematic research having been done because of the newness of the accelerator programs. “Regional development leaders need to recognize that ideas, talent, capital and a culture of openness and collaboration are all vital to regional startup communities, which are best thought of as innovation ecosystems involving complex interaction among entrepreneurs, investors, suppliers, universities, large existing businesses and a host of supporting actors and organizations,” he advises.

The recommendation resonates with what Executive has experienced as stakeholder in complex interactions that are shaping and are expected to sustain an innovation ecosystem in Lebanon. Situated outside of the narrow network of organizations and actors with vested interests in running the system, the magazine has for years been committed to analyzing entrepreneurial companies and the system itself, as evidenced by the magazine’s role in the Global Entrepreneurship Week and our annual selection and recognition of the top 20 entrepreneurs starting in 2012.

Thus when examining the current state of development in the Lebanese innovation ecosystem we opted to review perspectives from both stakeholders and companies. We moreover looked at both intrinsic factors such as the latest new investment funds that have entered the supply chain of funding companies in the stage of formation, and at extrinsic and intangible factors that play a role in Lebanon – mindful of the insights regarding complexity that real-life ecosystems afford us.

The first thing that emerges from the Top 20 selections since 2012 is a strong correlation between the Executive list of top entrepreneurial ventures and the company names which one encounters as winners in competitions, funding events and highly rewarding exits. Just to give one reference, the companies Diwanee and Shahiya, which achieved notable exits in March and November of 2014, were recognized by Executive as Top 20 Entrepreneurs in 2013 and 2012, respectively. Fundamentally, companies recognized by Executive as entrepreneurs have since their Top-20 listing created positive impacts in areas from health-tech and fintech to communications, software, entertainment and beyond that to developments in the agriculture, environmental and alternative energy sectors.

For our present reality check on the evolution of the Lebanese innovation ecosystem, we turned to three companies from the Top 20 Entrepreneurs in Science and Technology, which Executive had recognized in November 2014. We selected companies working on three hot topics, namely cyber security, economic data and renewable energy.

One of the companies – cyber identity protection vendor myki (see interview here) – has participated in several startup competitions and acceleration exercises abroad; the two others – Economena Analytics and Sharp Minds (interviews here and here) – have pursued their growth without the use of acceleration programs. Their choices have also differed in financing: Sharp Minds and myki have negotiated fundraising rounds in 2015; Economena has chosen to seek no funding in 2015.

When it comes to their view of the financing environment, the verdict is two-and-a-half-thumbs up between the three companies. The experiences of all three validate the progress that has been made possible by Circular 331 and the gradual diversification of the funding landscape through the formation of additional providers (see story here). The comparatively minor hiccups that still mar the funding side are a certain lack of transparency – as Economena’s Tamim Akiki points out, no such thing as an annual report on Circular 331 has been produced – and cumbersome bureaucratic requirements, which both applicants and fund managers confirm to Executive on or off the record.

[pullquote]Entrepreneurs need more transparency on the performance of accelerators[/pullquote]

Three thumbs are also pointing skywards in terms of access to talent. All three companies speak highly of their human capital; Antoine Saab and Nadia Moussouni at Sharp Minds tell Executive that they found top-notch talents among fresh graduates at local universities and among people in the labor market. “We have been very lucky to find true talent among people who came back from abroad but then found themselves in the crisis in Lebanon,” Moussouni says.

For myki, being located in Lebanon at their present stage of development was an advantage that was too good to give up even in exchange for an investment when this would have come with a requirement to relocate to another country. According to myki’s co-founder Priscilla Elora Sharuk, the benefits of having a strong local network and market knowledge were non-negotiable.

While all three firms confirmed the value of their involvement in the growing Lebanese innovation ecosystem, there were also thumbs-down verdicts in important areas. The insufficient size of the local market made all three firms scoff at the possibility of focusing their growth strategies here. Moreover, using Lebanon as sole operational base is not a proposition from the perspective of a self-respecting tech startup.

As other young entrepreneurs like the goggle-with-heartbeat-monitor producer Instabeat (Top 20, 2012) and automatic-guitar-tuner maker Band Industries (Top 20, 2014) have also found out, Lebanon is not a place for prototyping a hardware device and the industrial logistics are at best cumbersome. This important deficiency seems to have informed decisions of aspiring companies such as myki and Sharp Minds to the point that the latter established a subsidiary to set up what Saab describes as testing & certification and quality control center, plus logistics hub in the city of Burgas on the Bulgarian Black Sea coast.

With respect to the values and lessons of organic development, the entrepreneurship environment is clearly benefiting from the diversity and engagement of its people. Taken all together as a batch of corroboration, the experiences of the entrepreneurial teams both validate and challenge the Lebanese innovation ecosystem.

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Entrepreneurship

A stroll through the ecosystem

by Matt Nash
written by Matt Nash

The most common ecosystem disturbances are fast and furious. Earthquakes. Floods. Fires. Not so Circular 331. The initiative by Banque du Liban (BDL), Lebanon’s central bank, provided a long-awaited capital injection into the country’s entrepreneurship ecosystem. But it’s a disturbance more akin to climate change than a meteor strike. Organisms long part of the ecosystem are adapting to the new disturbance, and it’s acted as a draw to bring new biomass into what is still a relatively small space for the startup-minded.

In late March, central bank Governor Riad Salameh indicated Lebanese banks had committed $243 million to the ecosystem, around half of what 331 makes available (i.e., 3 percent of commercial and investment banks’ Tier 1 capital, an amount that grows year-on-year as bank profits increase). To date, only around $50 million has been deployed.

While Executive heard no shortage of complaints (some of them contradictory), no one the magazine spoke with for this article feared the money would go uninvested. The newness of the idea and associated processes as well as the ecosystem’s relative immaturity, several interviewees say, are among the factors hindering a more speedy deployment. After all, according to Executive’s research on the topic and an engagement with the country’s new Startup Ecosystem Think Tank, Lebanon is the only example of a central bank orchestrating and executing a policy to nurture an entrepreneurship ecosystem (as opposed to a country’s executive or legislative branches of government taking such a policy initiative).   

Clearing the backlog

Prior to 2010, venture capital (VC) and private equity (PE) funds were not doing much in Lebanon. Between launching in 2006 and losing two of its key investors four years later, entrepreneurship organization Bader’s Building Block Fund (BBF) invested in — and quickly exited — exactly one company. And it wasn’t even Lebanese. A local bank’s attempt at a VC fund in the same time period folded before deploying a dime. The only success story during these years was the 2008 launch of Berytech Fund I. For two years, Berytech basically owned VC and PE space in Lebanon. A competitor emerged in 2010 with the birth of Middle East Venture Partners (MEVP), which launched its own MENA-focused fund that same year and took over management of the BBF, currently known as the BBEF.

Combined, these three funds totaled around $23 million. Post-331, both Berytech and MEVP raised new funds focused mainly on Series A investments with a combined total value of $120 million ($50 million for Berytech and $70 million for MEVP). Berytech has deployed around $20 million (announced in one batch in December 2015) and MEVP $29 million, representatives of each tell Executive. Both Berytech Fund II Manager Paul Chucrallah and MEVP Managing Partner Walid Hanna say that these deployments are largely backlog investments, meaning the deals are not exactly new, but neither had the cash available before 331 to make them. Aside from that commonality, the two men have divergent views on the months and years ahead.

Chucrallah says he’s comfortable doing one or two investments over the next few years and is not overtly concerned about deal-flow in the ecosystem. Hanna, on the other hand, focuses almost exclusively on pending pipeline problems in a 30-minute conversation with Executive. “The problem is Lebanon is very small and [existing and new] VC funds are competing for pipeline that doesn’t exist,” he says.

Concerning fund efforts to fill the pipeline in the future, both point to Speed@BDD, to date the country’s only startup accelerator — an ecosystem component meant to help early-stage companies mature at a rapid pace. Berytech Fund II and MEVP’s 331-compliant Impact Fund each invested in Speed, and both Hanna and Chucrallah say they’re hoping for more capital soon. In October 2015, the central bank’s 331 point person, Marianne Hoayek, told Executive that Speed would be receiving investment from local banks with a 100 percent guarantee (even safer than the standard 331 guarantee of 75 percent). She explained that the central bank was giving banks 100 percent guarantees if they invest in ecosystem components like accelerators. Hoayek was not available for an interview for this article. Hanna says Speed’s investors are still pushing for 100 percent guaranteed money. Chucrallah was less specific on how the funds were lobbying the central bank for more capital for Speed. “Whatever happens, we will take it,” he says.

Closing a gap

Seed funding for startups – a need angel investors meet in many other markets – was largely lacking in the first two years after 331 was published. While Speed pumps $30,000 into the companies it accelerates, it became the only game in town after AltCity’s Bootcamp – a pre-accelerator, meaning they nurture entrepreneurs from the idea stage, earlier than the ventures Speed accepts – stopped doing equity investments in late 2015. That won’t, however, be the case for long. Lebanese entrepreneurs – and twin brothers – Ghaith and Abdallah Yafi found success abroad and returned to the country with the goal of raising their own VC fund after doing some angel investments in 2013, they tell Executive.

By the end of April, they say, they plan to formally launch a seed-stage focused fund, dubbed B & Y Venture Partners, making use of around $40 million in 331 money. As the Yafis spoke to Executive in late March, they explained the exact fund size was still being finalized as the fund’s 20-plus investors were busy putting final signatures on the fund’s legal documents. When it launches, it will have a temporary advantage of being the sole seed-only fund catering to the Lebanese market. Moreover, the Yafis describe it as a “hybrid” fund, meaning between $10 and $15 million comes from private investors and will not have the same limitations as the $40 million in 331 money local banks have contributed.

“We understand private investors today will not invest in a fund where only the banks are subsidized,” Abdallah explains. So, he says, they adjusted the risk-reward profile to draw in non-bank money.* 

B & Y may not for long be the sole seed-only fund in the market. Other new players are looking at early-stage opportunities including Cedar Mundi Capital. The fund has an appetite for seed investments, according to Bassel Attieh, co-principal at Cedar Mundi and executive VP at Kuwait’s International Financial Advisors KPSC. Attieh speaks to Executive in a short email exchange, and explains that Cedar Mundi is a joint venture between International Financial Advisors and Spain’s Alma Mundi Ventures. The fund, Attieh explains, received central bank approval in October 2015 and hopes to raise between $50 million and $70 million. He adds that “at least nine banks and one financial institution have firmly committed so far.”

Like B & Y, it will have a hybrid structure, with around 10 percent of the fund’s capital raised “committed by the founders of the fund” and not restricted by 331. “The fund will be investing between $500,000 and $1 million in Seed Stage opportunities and between $1 million and $5 million in Series A&B opportunities,” Attieh says, without specifying how much equity the fund will be asking for.

Cedar Mundi announced its first ticket of $1.5 million in December, investing in ChefXChange, an online portal for finding private chefs. While it will help close the seed funding gap, Cedar Mundi is arguably also the kind of adaptation BDL was hoping for when drafting 331. The managers are foreigners whose expertise will theoretically benefit the entire ecosystem, and their first investment – which has a Lebanese expatriate co-founder – is only now moving its headquarters to Beirut in order to receive an investment under 331. Cedar Mundi has “nine other active deals in the pipeline.”

When Executive last spoke to BDL’s Hoayek in October, she said there would soon be two or three seed-focused funds on the market. Reporting for this article, Executive heard rumors that five new funds would begin operating soon. One, Azure, will focus on fashion with a digital component as was first revealed in Executive in November. The magazine was unable to reach the managers for this report. Executive could not reach the four other funds that will allegedly be launching soon.

VC funds, of course, are not the only funding source for Lebanese entrepreneurs. As noted above, angel investors play a prominent role in seeding startups in other markets. However, as Theo Khoury of AltCity’s Bootcamp explains, “There isn’t an angel culture in Lebanon.” Bootcamp has not seen much interest from angels in the startups it’s incubating. That is not to say there are absolutely none in the country. Sami Abou Saab, Speed’s CEO, says the accelerator has piqued the interest of at least four high net worth individuals, three of whom offered investments which respective startups have yet to accept.

Investing in human capital

Although Circular 331 does not actually include the word “technology”, it mandates that banks (and the funds managing their 331 money) invest only in startups that rely “on knowledge economy and support of creative intellectual skills (Intellectual Capital).” In the field, it is being interpreted as a “tech-only” initiative and there are no shortage of complaints about human capital deficiencies in coding as well as software and application development. Startups can’t grow without the right talent, so the lament goes.

While Lebanon has private coding crash courses — such as Teens Who Code and Le Wagon, founded in 2014 and 2015, respectively, and SE Factory, a Bader and Nawaya Network initiative launched in March — there’s a new player on the market making use of the aforementioned 100 percent guarantee offered by BDL. Also launched in March, Torch offers a free, three-month coding course with an eye on both servicing and helping further develop Lebanon’s startup ecosystem. Co-founder Youssef Jalloul explains that Torch aims to graduate coders with ideas for startups (and would take a 4 percent equity stake in any young companies it graduates) but concedes many coders “don’t have an entrepreneurial mindset.”

He says he expects many graduates to simply look for better jobs in the fields they’re interested in than the ones they have now. Jalloul explains that some of Torch’s first batch of students studied computer science but could only find work answering phones in call centers. Even if Torch does not itself produce a high volume of startups the way Speed and Bootcamp are expected to, Jalloul still sees the program adding value to the ecosystem through these talent investments. He adds, while giving Executive a tour of the company’s expansive top-floor office, that Torch may add startup incubation to their portfolio of services as they certainly have the space.

Scaling up

On its naturalist foray into the ecosystem, Executive also finds an adaption at the UK-Lebanon Tech Hub. Initially focused on accelerating early-stage startups (and taking them to London for international exposure), Director Nadim Zaazaa tells Executive that future acceleration cycles will focus on more established startups looking to scale their operations. Part of the reason, he says, was a feeling at the Tech Hub that Speed and Bootcamp are helping the early stage companies well enough. The initiative, brokered by the UK and Lebanese governments, has a two-year lifespan. Asked if that’s also something that might mutate soon, Zaazaa smiles and says “April”, in reference to an event the Tech Hub was planning at the time of the interview in March.

New market, new model

Flat6Labs, an accelerator founded in Cairo in 2011, will be launching in Beirut this summer, CEO Ramez Mohamed tells Executive. This news comes on the heels of back-to-back announcements in 2015 and 2016 at Arabnet, a regional technology conference hosted in Beirut, that the company would be coming to Lebanon soon. Mohamed says Flat6Labs has been in contact with Arabnet, its local partner, and the central bank for one year. And, unlike in other markets, Flat6Labs in Beirut will not be an accelerator, he says. Rather, it will be a fund but will offer startups in which it invests the same sort of accelerator services it offers in other markets. He adds, however, that because the company will not be registered as an accelerator, it will not be seeking a 100 percent investment. Flat6Labs’ Lebanese fund will total $20 million, Mohamed says.

Elephant in the room

One factor neither the ecosystem nor the central bank can control, however, is the regulatory framework in which the system is operating. Lebanon’s capital markets are laughable, says Henri Asseily of Leap Ventures, which is managing a $71 million Series B fund, and the legal procedures for setting up a fund and making investments are cumbersome and time consuming, he adds.

Since Lebanon actually lacks a law governing venture capital and private equity funds, all funds in this country are legally registered as holding companies. Asseily adds that the risk aversion of pre-331 investors into startups produced complicated term sheets that also make it difficult for Leap to make follow-on investments into existing startups. He says Leap is eyeing two big investments that, if they go through, would mean the fund is more than 50 percent deployed. And aside from the legal troubles, Asseily is worried there is not enough series B money in the system. “We have to go bigger,” he says.

* This article has been modified from the print version.

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