From the dorm room to the global market

With the advent of the Internet, free access to resources, and lowered barriers to entry, students can now start companies with minimal capital.

9 November 2017 | 14:02

Source: Annahar

  • By Yehia El Amine
  • Source: Annahar
  • Last update: 9 November 2017 | 14:02

The entrepreneurial spirit at the university level is willing and eager with nearly 90 percent of millennials believing that entrepreneurship education is important. (Photo Courtesy of Smart ESA)

BEIRUT: Today’s world is full of disruption.

The rate at which new entrepreneurs and fresh business ideas are emerging continues to gain momentum on both the global and regional stage. More often than not, new startups make headlines by pushing the boundaries of technology, exploration, and experience.

The entrepreneurial spirit at the university level is willing and eager with nearly 90 percent of millennials believing that entrepreneurship education is important, according to the Young Entrepreneur Council. With the advent of the Internet, free access to resources, and lowered barriers to entry, students can now start companies with minimal capital.

University students are also known to be better risk takers.

Younger entrepreneurs are among the largest segment current entrepreneurs, both globally and regionally. There are 165 million early-stage entrepreneurs, aged between 18 and 25, according to the Global Entrepreneurship Monitor (GEM) report.

This large number of youthful entrepreneurs may reflect the fact that most college-age startup founders do not have children, spouses, or financial obligations to worry about.

Some of the biggest disruptions in the tech industry were founded by college-aged entrepreneurs. Mark Zuckerberg founded Facebook while he was at Harvard and Michael Dell founded Dell Computers in his dorm room at The University of Texas in Austin.

THAT’S ALL THE GOOD STUFF, BUT WHERE’S THE GAP?

Many experts highlight, however, that this entrepreneurial windfall is largely missing in the MENA region; but nevertheless, it is slowly laying the groundwork for a dramatic growth to take place, since the landscape of technology companies in the region is a good representation of the level of maturity of such an ecosystem.

It is reasonable to note that among the top 1,000 tech companies rated by revenue, only one percent is located in the Middle East, compared to 44 percent in Asia Pacific and 36 percent in the US, a study by Strategy&, a UK-based consultancy firm, said.

According to the report, the region’s governments need to create an environment conducive to doing business and a legal framework for protecting intellectual property. Especially since the 2017 World Bank rankings on ease of doing business considers the MENA region to have a “long way to go to be able to compete globally.”

“About 38 percent of the region’s top 100 startup founders are from Lebanon and Jordan, yet, only 16 percent of entrepreneurial ventures are headquartered there,” the study explained.

One of the greatest major improvements, however, would be to have a significant and tangible bridge between universities, companies, and others institutions.

“This would help spur idea generation and create technology to be licensed for development and commercialization,” said Jihad Bitar, director of Smart ESA, a Beirut-based incubator/accelerator program done by the Ecole Superieure des Affaires (ESA).

UNIVERSITIES’ ROLE

Bitar stresses that university-based startup accelerators/incubators are still lagging behind in both Lebanon and the region, with ESA being the first to actually have a tangible and on-working program that has recently kicked off.

“We are beginning to see activity from other universities in the entrepreneurial domain in Lebanon, be it by providing their students with workspace, mentorship from educators, and even by providing small grants to aid startups that already set-up minimal viable products (MVP),” he added.

A more international example of such cooperation would be Silicon Valley.

Silicon Valley, better known as the ‘gold standard’ of innovation and startup ecosystems by many experts, has had a very symbiotic relationship with Stanford University.

More than 40,000 companies can trace their origin to Stanford, while creating approximately six million jobs and generated annual revenues of $3 trillion, nearly on par with the world’s sixth largest economy, according to a study done by Forbes magazine.

Although the local region enjoys a rich academic heritage, there are simply too few world-class academic and research institutions to anchor the innovation ecosystem that the Arab world aspires to create.

“A robust and sustained dialogue between the corporate and academic worlds is required to underpin this, as well as funding structures that allow people to dedicate themselves to research in a sustainable way,” Bitar told Annahar.

Smart ESA, located at the business school’s campus on Rue Clemenceau, uses a customized approach to guide startups through each stage of their development with four independent programs.

The first program, called “Discover” addresses the less experienced founders who desire to examine their business concept and learn more about how startups work. “Create” teaches young entrepreneurs how to form a business model to grow their idea. 

The third track, labeled “Incubate,” is an incubation period where startup founders work on the strategy and development stage of their business. The final program is tailored for mature startups that are looking toward expanding to regional and international markets.

With links to France’s FrenchTech, Smart ESA helps embryonic businesses and their founders navigate the dynamics of working inside the ecosystem while playing to their strength as a business school by offering mentorship and guidance in business management.

They, however, do not take any equity stake in the startup companies they work with.

“We consider that a university-based entrepreneurship program should not take equity in a startup since this is our role in helping the ecosystem grow; while creating a pipeline between these nascent companies either to reach markets or other accelerators programs,” Bitar noted.

Bitar, who’s also an entrepreneur, highlighted the fact that, usually, business incubators maintain their financial sustainability by taking share within a startup; but in Lebanon, such equity doesn’t offer long-term sustainable guarantees.

“This doesn’t mean that we will never take equity from companies, but we took a philosophical approach to our decision that 80 to 90 percent of what we do has to be in exchange for zero stock and for free, especially in early stages,” he added.

FINANCING INNOVATION

The veteran entrepreneur considers that starting a business inherently requires the need to take risks. While this is not for the faint-hearted, the fear of failure still tops the list of reasons why youth in Lebanon decide against an entrepreneurial venture, according to the GEM report.

“Creating an environment conducive to risk-taking is a particularly tough challenge in a place without a learning mindset, and where failure is considered a permanent condition,” he explained, noting that corporations, governments, and investors all have a role to play in ensuring a shift in mindset.

According to Bitar, the problem is not with university curricula being outdated, but the lack of having a link between both the corporations and educational institutions. “This is where ESA shows its strength since the school is built upon a business ideology in having links with companies,” he added.

Private organizations have a critical role to play in funding entrepreneurial ventures since venture capital can bring much more to the table than just financial support. “Experience, access to specific markets and opportunities, support in recruiting and most importantly bringing R&D to the country,” Bitar stressed.

The Smart ESA director considers that there are barely any R&D programs in local universities because it isn’t part of the region’s culture to invest into research that needs ten years to result in fruitful and insightful data; which is known internationally as “financing innovation.”



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