Startups Rising in the Middle East

Last week my friend Chris Schroeder published a highly engaging article on the state of technology entrepreneurship in the Middle East. If this topic interests you, I encourage you to check him out. Chris is a successful American internet and media entrepreneur turned global startup investor. He’s easily one of the most knowledgable people on the planet about startups and venture capital in the Middle East specifically, and emerging markets more generally.

The article, “A Different Story from the Middle East: Entrepreneurs Building an Arab Tech Economy“, appears in the MIT Technology Review. It highlights some recent successes in the region—including Amazon’s $600 million acquisition of e-commerce platform in March, and the $1 billion valuation placed on ridesharing app Careem a few months earlier—and the psychological impact these breakout companies have had on entrepreneurs there.

The importance of visible, high-profile entrepreneurial successes can’t be emphasized enough, though though they often receive too little attention as a means of catalyzing a startup community versus other factors, such as stimulating risk capital. Changing mindset is especially challenging in the Middle East, where nepotism and legacy pathways to success are deeply ingrained in the social psyche. There’s even a term for it: “wasta.”

I first learned about wasta when reading Chris’s excellent 2013 book, Startup Rising: The Entrepreneurial Revolution Remaking the Middle East, which he wrote after touring the region extensively. In it, he describes wasta as “a display of partiality toward a favored person or group without regard for their qualifications… [whereby] the net effect, culturally, has been an entropy of acceptance that there only could be one way of doing business.” In other words, only the well-connected can get ahead.

Imagine the impact that has on ambition.

But, the internet has taken a giant hatchet to traditional hierarchies, and unleashed a flurry of entrepreneurship in the region. Startup Rising chronicles the irreversible level of transparency, connectivity and access to capital markets that didn’t exist at the beginning of the decade, the increased appetite of global investors to fund startups in the region, and the explosive growth and changing market dynamics that have been underway as the latest generation of young people comes of age. It also provides a useful lens for the cultural dimension of market access and local innovation.

Four years later, the Tech Review article provides evidence that a virtuous, fly-wheel effect has taken hold and even accelerated. Plenty of challenges remain, some of them substantial—poverty, war, and weak institutions. But the seeds of prosperity are there, and these blockbuster successes are crucial for its development. The article focuses on Dubai as the clear leading tech hub in the Middle East—and the region’s representative on the global stage—and touches on critical regulatory reform, liberalization and importance of immigration, and the vibrancy of female entrepreneurship there.

I’ll stop there so as to not give it all away—though there is plenty more to discover. I encourage you to read both the article and the book—both well-researched, well-written, and intellectually stimulating. The story will surprise you, in the best of ways. Here’s also a video of Chris talking about Startup Rising in 2013 around its publication date. Enjoy.