Entrepreneurial Ecosystem in Lebanon

‘Ecosystems’ are generally defined as a system, or a group of

interconnected elements, formed by the interaction of a
community of organisms with their environment. Like biological
ecosystems, an entrepreneurial ecosystem consists of different
elements, which can be individuals, groups, organizations and
institutions that form a community by interacting with one
another, but also environmental determinants that have an
influence on how these actors work and interconnect; in
entrepreneurial ecosystems, these can be laws and policies or
cultural norms. Neither biological nor entrepreneurial ecosystems
can be created, designed or built by an outside actor.

Lebanon’s entrepreneurship landscape has “leapfrogged” since

August 2013, when Banque du Liban (BDL), Lebanon’s central
bank, released Circular 331 that authorized Lebanese banks to
invest in new startups in the knowledge economy. This policy has
spurred the development of new growth capital funds and the
entry of commercial banks into the equity market, unleashing
(theoretically) more than half a billion dollars into the Lebanese
economy. This sudden abundant supply obviously generated
demand and buzz around startup creation, from entrepreneurs
lining up with business ideas, to support platforms such as
accelerators and business support organizations, and facilitators
such as entrepreneurial networks and universities that promote
entrepreneurship.

First, all are private sector-driven initiatives, with a complete

absence of government involvement so far—despite the latter
being one of the main pillars in the MIT Regional
Entrepreneurship Acceleration Program (REAP) framework. This
framework describes the five main interconnected elements for
an innovation ecosystem stakeholder model: entrepreneur, risk
capital, corporates, universities, and government. Obviously, the
role of the government in this context is, at a minimum, to
provide basic infrastructure. This includes physical infrastructure
like the internet, communications, and electricity, and other
support such as an adequate legal framework and a conducive
business environment.

Second, there is almost a 10-fold difference in the availability of

startup funding in the later downstream stage versus the early
upstream stage, where funding is needed more. For a startup to
receive substantial funding in Lebanon, it is required to initially
thrive on a shoestring budget, in order to reach the later-stage,
“jackpot.” An entrepreneur once said: “I feel like I am on a
lifeboat in the middle of the sea with no water to drink.”

The Lebanese ecosystem is becoming overwhelmed with so-called

startups that are actually just small businesses without much
growth potential. We have observed, mainly young local
entrepreneurs, engaging simultaneously in several
entrepreneurial ventures and neglecting those companies during
their growth phase. The number of startups in Lebanon is growing
each year, yet the value-added of these companies’ remains
usually relatively low; there are many startups in their early stage
of development but few make it to the advanced stages of
growth. In the words of a local entrepreneur, “… the ecosystem
may become oversaturated with startups, programs, accelerators,
incubators, and there will be no success stories… eventually, good
projects will be missed”. Thus, initiatives and programs supporting
the Lebanese ecosystem mainly serve early-stage startups; the
ecosystem’s institutions work to motivate and attract an ever-
increasing number of new entrepreneurs into the community, yet
there is no focus on later-stage ventures and support for a
sustainable entrepreneurial community.
In Lebanon, IM Capital, part of the Berytech group, is a program
funded under the USAID MENA Investment Initiative and has had
a mandate since 2015 to facilitate access to early-stage funding.
As such, it has provided matching capital and equity guarantees
for investors and has also contributed in launching several new
initiatives (including the Speed@BDD accelerator), managing and
building the capacity of four business angel groups (Seeders &
LWAF), and creating and running a mentorship platform based on
the MIT Venture Mentor Service model (Confideo), and a coaching
program based on Stanford Seed methodology—contributing to
filling gaps in the developing Lebanese ecosystem. Imagine the
ripple effect if the local “big” VCs start engaging in further
ecosystem building blocks. They could create more thematic
funds and scale-up programs, tap into the diaspora, structure
maker spaces into hardware accelerators, and more.

Based on the responses to our surveys and interviews, there

seems to be a large gap between university education and the
practical skills required by the ecosystem. There are initiatives,
such as AltCity Boot camp, which are trying to partly address this
gap. However, they do not seem to be enough. Moreover, these
initiatives focus on “white-collar” tech talent, people who have
the education, skills and willingness to be an entrepreneur.
Understandably, these people often want to create their own
startup, not work for one. That is the reason why talented
workers tend to leave as soon as they gain practical and
actionable skills. There are only a couple of nascent initiatives –
most notably SE Factory – that focus on “blue-collar” tech skills.
These are coding boot camps that serve as vocational training for
the lower educated/skilled population whose goal is to work for a
startup or a larger company. This is a large part of the talent that
would stay to support startups as they grow. The current
production of graduates from these programs seems to be too
small for the ecosystem’s needs.

Micro, Small, and Medium-Sized Enterprises (MSMEs) might look

small when compared to large companies, but they make a big
impact in terms of employment, economic growth, and
sustainability. In general, SMEs outnumber big companies while
playing a major role in the global economy and job creation,
especially in developing countries.

Based on the data provided by the World Bank, SMEs account for
about 90 percent of businesses and 50 percent of Gross Domestic
Product worldwide. Further calculations from the WB show that
SMEs have the potential to provide the 600 million jobs that will
be needed to absorb the global workforce by 2030.

MSMEs provide jobs to categories of employees considered

vulnerable such as women, youth, old people, persons with
special needs or disabilities, etc. In a few words, small businesses
have the potential to secure a better future for everyone through
decent jobs and economic empowerment.

Sustainable Development Goal 8 – Decent work and economic

growth require societies to create conditions that allow people to
have quality jobs and employment opportunities for young
people. Those are the categories of people, who tend to feel the
economic impact of the crisis more strongly.

Promote development-oriented policies that support productive

activities, decent job creation, entrepreneurship, creativity, and
innovation, and encourage the formalization and growth of
micro-, small- and medium-sized enterprises, including through
access to financial services.
Given the important role of small businesses and the need to get
them supported by governments and investors, the General
Assembly of the United Nations designated June 27th as the
MSMEs’ Day. This year, the topic of MSMEs Day was on the
impact of coronavirus lockdowns.

On this occasion, the International Labor Organization Director-

General Guy Ryder said that seven out of ten jobs are found in
self-employment and small businesses and the figures can be
even higher in emerging economies. He highlighted that MSMEs
everywhere continue to be crucial in creating jobs and need
ongoing support in the post-crisis recovery. Hence it is necessary
to guarantee that workers can return safely back to their
workplaces and every the smallest business must have access to
information on health safety.

Promoting innovation and entrepreneurship in support to

Lebanon's clean energy transition:

The global objective of this call for proposals is: to address job

creation and growth in support of Lebanon's stagnated economy
(in line with the first priority sector of the Single Support
Framework for EU Support to Lebanon 2017-2020), while
supporting Climate Change Mitigation in Lebanon.
The specific objective of this call for proposals is: to promote
innovation, entrepreneurship and job creation in support of
Lebanon's clean energy transition and Intended Nationally
Determined Contributions (INDCs) for the energy sector.

This new program will simultaneously address job creation and

growth in support of Lebanon's stagnated economy – in line with
the "Vision for Stabilization, Growth and Employment" (the
"Vision") presented by the Government of Lebanon to the donors'
community in April 2018 during the "Conference Economies pour
le Development par les Reforms et avec les Enterprises" (CEDRE) –
as well as Climate Change Mitigation in Lebanon. It proposes to do
so by supporting Lebanon's gradual shift towards a clean energy
transition (gradual phasing out from fossil fuels by switching to
renewable energy sources) and circular economy principle. It will
address the following issues:

 The untapped potential for green jobs and growth (in

particular in the energy sector);

 The inability of the electricity sector to supply reliable

electricity, leaving homes, businesses, public offices and
industries relying on more expensive, unregulated, highly
polluting diesel-run private generators;
 The difficulties for the private sector to get access to credits,
despite the relatively recent introduction of financial
incentives to encourage green enterprise development.

Citation:

https://www.euneighbours.eu/en/south/stay-
informed/opportunities/promoting-innovation-and-
entrepreneurship-support-lebanons-clean.

https://www.entrepreneurship-campus.org/how-do-msmes-
help-achieving-sustainable-development/.

https://www.executive-magazine.com/entrepreneurship/is-
lebanons-startup-ecosystem-sustainable.

https://anaskhattar.com/wakeup-call-for-the-lebanese-
startup-ecosystem/.

https://www.executive-
magazine.com/entrepreneurship/lebanons-
entrepreneurship-ecosystem.