Lebanon goes digital

This article first appeared on The Media Line.

 

“Ironically everything that makes Lebanon a tough place to live makes it a good place for a start-up,” quipped Nasri Atallah, a partner in the Lebanese media publishing firm Keeward. “There are a lot of very talented people who have few opportunities and are pushed into starting their own thing.”

 

Lebanon may not be the ideal place for entrepreneurial growth, but the country has a growing tech-start-up industry that is starting to attract international attention. 

 

At a British Embassy celebration for the Queens’ birthday earlier this month, the UK-Lebanon Tech Hub — a joint initiative between the UK government and the Lebanese Central Bank — announced the winners of a start-up accelerator. Forty-five small and medium Lebanese start-ups had been chosen from over 150 to undertake a 4-month training program. This is on the back of a push by the Lebanese government to foster a healthy tech sector and encourage entrepreneurship. 

 

In a statement at the ceremony, Tom Fletcher, UK ambassador to Lebanon, highlighted the need for the British government to help Lebanese businesses forge strong ties with international firms and networks. 

 

Keeward, who employ around 46 people in Lebanon, was one of the recipients of the UK-Lebanon Tech Hub accelerator. Atallah explained that just a week after being told of their place on the program, the intense program of entrepreneurial MBA style courses, networking and business discussions had already started. At the end of the first phase, 15 of the firms will be taken to London to continue their development.

 

“The education aspect is great and the network angle is great but just having the stamp of approval of the Central Bank and the UK government is a motivating factor,” Atallah told The Media Line.

 

Atallah thinks that the UK government has seen that the next Google, Amazon or Alibaba is going to come from somewhere unexpected, so they are actively looking to support and build links with potential business leaders all over the world. The UK-Lebanon Tech Hub program also has the explicit aim of increasing employment in Lebanon and directly contributing to the country’s economy.

 

Over the last few years the Lebanese government has started to take a proactive approach to developing its own answer to California’s Silicon Valley. The move started in August 2013 when the Lebanese central bank issued a circular providing support for commercial banks and venture capital funds to invest in technology start-ups, incubators and accelerators. Among a large raft of measures, the law assures 75% of the cost of bank loans to start-ups. This lowers the risk to banks for investing in potentially risky but profitable start-ups. The aim was to encourage investment in the sector and to free up credit for entrepreneurs to pursue new ideas. After just 7 months funds in excess of $400 million were available to business leaders with new, inventive ideas. 

 

A second major boon for start-ups came earlier this year with the opening of the Beirut Digital District (BDD). It is located just off the capital’s still recovering downtown area, devastated in the Lebanese civil war between 1975 and 1990. BDD has quickly became the center for the growing digital and creative industries, attracting a number of major business partners such as Touch– a major Middle Eastern telecommunications company. Both small and large firms have moved to the expanding site, which mixes offices, conference space and residential homes into one place.

 

However, despite financing and support there are still challenges ahead for Lebanon’s fledgling tech-firms.

 

Nassib Ghobril, an economist at Byblos Bank – a major Lebanese commercial bank – expressed concerns that the huge funds now available could lead to a bubble. 

 

“Will that encourage creativity and entrepreneurship? I certainly hope so,” he told The Media Line. “I’m fully for this sector but I have concerns – there is too much money for too few deals. You have to assess the quality of the deals and then get the cash to chase them, not the other way around.

 

Atallah also admitted that he too had been concerned about the large scale of the funds the Central Bank were making available. However, when one of the projects that Keeward was running got funding through the system, Atallah says he saw first-hand the rigorous checks and level of due diligence that was required in order to qualify for the money. He says that this went some way to easing his mind that the banks were investing responsibly. 

 

Beyond the scale of the funding now available in Lebanon, Ghobril says Lebanon needs to strengthen intellectual property rights and protection of minority shareholders in venture capital firms. In addition, he said, it is very hard to liquidate a company in Lebanon. “It takes around six years and a large amount of bureaucracy and paperwork,” he said.

 

Ghobril believes the key to fixing these issues is simply political will to improve legislation. However, Lebanon has now been without a president for over a year and parliament is often blocked and inefficient, which doesn’t bode well for changes in these areas. 

 

Despite these concerns, the Lebanese are resilient businesspeople and the achievements to date, even without large levels of assistance, point to a bright future. If these funds and support systems can continue to foster the growing tech start-up economy then Beirut’s Digital District could soon be the home of Lebanon’s answer to Bill Gates.