“I’ve got 20 minutes before I need to present so I would appreciate it if you could take me on an abbreviated tour of Carthage ” I told the cab driver in Tunisia.
“Oh miss, you’re going to need way more than 20 minutes to see Carthage. The minimum is 2 hours” he replied in Arabic.
“Well, drive fast”, I replied.
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Time is measured completely differently in the Middle East than in the West. In the East, time is measured by events, ie “Let’s get together for dinner tonight” rather than “Let’s meet at this particular restaurant at this exact time”.
Needless to say, I did make my presentation on time, but it was only after several passionate explanations about time and punctuality with my taxi driver that I was able to get my point across.
While it took some calibration before we understood each other, we both gave each other what we wanted. He became my photographer, driving at lightening speed to get me in front of the most important sites in Carthage, and I gave him the money he desired — a fair exchange.
It is fair to say that the Middle East is one of the most misunderstood regions of the world, especially today given all the travel restrictions and political instability in the region. As a first generation Iraqi-American who has traveled to countless Middle Eastern countries and spent a short stint living in one, I have formed a few opinions about the people, the culture and the way they think.
But it was only on this recent trip to North Africa, as part of an entrepreneurial delegation hosted by the US State Department, that I really got a chance to explore the startup ecosystem in a part of the Middle East that I frankly have spent less time in; namely Tunisia & Morocco.
As part of the US State Department speaker delegation, we were asked to lead workshops, mentoring sessions, and engage in a dialogue with government officials, and private and institutional investors in both Tunisia and Morocco. (Egypt has a thriving startup ecosystem as well, but on this particular trip we focused solely on Tunisia & Morocco).
The goal of the trip was threefold:
(1) Promote crowdfunding where access to capital is a challenge;
(2) Promote angel investing/venture capital, in order to both encourage wealthy Moroccans and Tunisians to invest in startups but also give young entrepreneurs advice on how to develop business plans and refine their pitch; and,
(3) Share tech knowledge with startups and entrepreneurs
In short, with the support of the US State Department and local embassies, the goal was to create a platform for education, collaboration and growth amongst startups, investors and regulatory officials.
The State Department Delegation
Today, I sit on the Board of Directors of TechWadi, the largest non-profit organization that operates as a bridge between the Middle East and Silicon Valley with their programs and network. The very word “Wadi” literally translates to “valley” in Arabic. TechWadi was founded nearly 10 years ago by a group of very successful founder’s and VC’s who wanted to build a platform of technological collaboration both in the US and across the Middle East.
In addition to the Board seat, I was asked to bring my product marketing, growth marketing and go-to-market knowledge to share with aspiring entrepreneurs and tech founders. I was joined by Chantalle Dumonceaux from WOMENA, an angel investment group in Dubai and Sharif El-Badawi, who is focused on building a 500 Startups MENA (Middle East North Africa) fund.
I attempt to share an overview of the trip along with some general thoughts about the state of entrepreneurship and the role of government and investors in the North African ecosystem today. Disclaimer: I only scratch the surface of the discussion and my goal here is to leave you with a high-level glimpse into the regulatory, investment and startup opportunities and impediments that exist today.
First off, you’re probably wondering, where is Tunisia? While Tunisia hasn’t had the media attention in the same way that other North African countries have like Egypt and Morocco, Tunisia smacks of some of the most beautiful scenery and historical sites like the ancient ruins of Carthage that I alluded to earlier. Tunisia sits in between Libya & Algeria and has a population of about 11 million people.
After visiting close to 15 countries in the Middle East, my initial reaction was one of surprise at how progressive and liberal the country is in comparison to their neighbors in the region. When walking through the infamous Sidi Bou Said, I could have easily mistaken some of the scenery for someplace in Greece.
Morocco’s startup ecosystem is larger than Tunisia’s at a population of about 30 million people. They’ve doubled down on their involvement in startups and issued specific incentives focused solely on the growth of the country’s entrepreneurial ecosystem. Today, Morocco is known as the “best house in a bad neighborhood” due to the period of peace they’ve experienced compared to other countries in the region that have been affected since the Arab Spring.
During our trip, we spent a majority of our time in Casablanca, followed by Rabat and worked closely with the US Embassy partner Startupyourlife — an organization solely focused on building the Moroccan startup tech ecosystem. A news clip about a 200+ person conference with the US Ambassador to Morocco, Dwight Bush, can be found here.
While Tunisia and Morocco both share a Francophile influence after colonization, they also share a somewhat confusing identity as Afro-European-Middle Eastern. This is true even in their conversation: nearly all entrepreneurs we met with were all trilingual and could speak Arabic, French and English. The country is in a unique advantage and disadvantage with this geographical location and could either capitalize or marginalize themselves with this position.
Another commonality shared between Tunisia & Morocco is the entrepreneurial spirit in both countries that is thriving with passion, new ideas, grit and an exchange of information fueled by a younger population’s love of technology and social media engagement.
In both countries, a number of startup founders and teams that we met with were educated in France or other parts of Europe. We listened to pitch after pitch in both countries from some of the more sophisticated accelerator graduates and diaspora. In general, I was very impressed with their level of understanding on how to put together a solid business plan and product launch.
An issue I found in both countries was that some startups were focused solely on their own market for growth, without looking outward to greater Africa, Europe or beyond. While starting small and testing in one market before proceeding to build out a product launch in other markets is usually par for the course, I generally found that many built their business plan with a mindset that their product would only be sold in their country.
Given the size of each country’s population (Tunisia: ~11 million, Morocco: ~30 million), this fact alone acts to nullify any real plans for global scale. After our workshops, the startups we met with were aware that they needed to expand their market reach when launching a product or service and look more globally.
Regulatory influence in both countries seems to be one of the biggest barriers to North African startup growth.
Tunisia’s largest barrier to startup growth is a rule that foreign capital invested in the country cannot be transferred outside of the country. Further, foreign companies to date cannot have majority ownership in local Tunisian startups. This is a major red flag for any foreign investor and the government should do everything in it’s power to remove this barrier for foreign investment.
The Moroccan investment landscape is slightly more investor friendly than Tunisia in that they allow for capital movement in and out of the country and guarantee 60% of any VC investment losses in startups. However, there are still laws that limit the transfer of monetary funds outside of the country.
From an entrepreneurial perspective, government legislation in both countries today is far too bureaucratic and slow for the startup ecosystem and often impedes a product roadmap. Creating a product within the context of an antiquated technological infrastructure is difficult enough, and government laws about patents for instance stand to become a bottleneck for a number of industries in both markets.
New ideas in the startup space are usually tested by direct implementation which proves difficult with strict rules and regulation. We recommended that government relax regulation and allow for a greater experimental environment overall so that startups can move onwards and upwards.
Yes, there have been exits in the Middle East & North Africa. However, exits in Morocco and Tunisia both remain to be seen. A chicken and egg problem exists in these countries as investors are nervous about putting their money into the ecosystem without them. Larger corporations are less interested in buying local companies which exacerbates the problem.
The tech diaspora from the west and other established economies are coming back to the North African region in droves, which is a promising sign for the region’s startup ecosystem. Some of the brightest minds are realizing the opportunity that awaits them in a region that is on the brink of an exciting transformation.
My personal observation is that Middle Easterners have entrepreneurship in their blood. Their long history as a communal society still uses bartering, negotiation and persuasion as a way of life to this day. This is evident in the souqs, the medinas and the endless number of small business owners who can charm you to consider their product with sophisticated tactics.
I left North Africa having felt changed somehow after catching glimmers of hope and excitement in the eyes of the entrepreneurs I met in the region. If given a fair chance to succeed, I personally think that the ingredients for a great startup ecosystem already exist. With the right actions taken by government and investors to mix these ingredients correctly, the outcome will be profound and the menascapes slide might become as crowded as today’s adtech lumascape slide in a mere few years.
The differences in culture, language, and business between the West & the East differ greatly, but with time, patience and understanding — we may discover that there are far more similarities than there are differences.
During my time there, I realized that the entrepreneurs in North Africa are no different than the ones in Silicon Valley today. In fact, their ability to succeed and endure despite their limited access to information, mentorship and capital will be a testament to their resourcefulness, grit and determination.
I wish them well, and look forward to hearing about exits, acquisitions and many more products launched in the region.
I’d appreciate it if you could visit my Patreon page.
*Menascapes.com (opensourced) created by Sharif Al Badawi
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