Uber, Twitter trolls and reflections of my first year in Middle East tech

Disclaimer: This is a reflective piece on the MENA tech and startup scene for an audience outside of the Middle East. Many of the players in the local community know about the growth, potential, and struggles of local entrepreneurs and investors. If you have a different perspective, feedback or just general comments, I’d love to hear them in the comment section below. You can also find me at @Ramzyis.

I’m one of those guys who think internet trolls are some of the most clever folks on the inter webs. I’ve had some good laughs from trolls on Reddit, Tinder, and Facebook.

But a few weeks ago I sat back and watched the ugly side of trolls - not the ones that seek to get a rise out of people but the idiots that speak with conviction on topics they are often clueless about.

The topic was Saudi Arabia’s $3.5B investment into Uber’s latest round. The target of trolls was Balaji Srinivasan of 21.co and Andreessen Horowitz.

The tweet that kicked off the heated debate

In the aftermath of Balaji’s tweet, trolls began responding with a barrage of ignorant comments against Balaji, Arab countries, and Uber. While watching Balaji stand his ground from responses that ranged from ignorant to hilarious to downright idiotic, I began to reflect on my own experiences in the Middle East and the misperceptions I brought with me when I moved to the United Arab Emirates last year. In this post I’ll touch on how I got to the Middle East, some points on the current startup scene, and a few observations since being here.

My journey to the Middle East started after I was recruited to join Flat6Labs, the top accelerator and pre-seed investor in the MENA (Middle East and North Africa) region, as they ramped up to launch their flagship program in Abu Dhabi. Before Flat6Labs, I toiled in the corporate world before going through Lighthouse Labs’ (Top 25 U.S. Accelerators ) Spring ’13 class as a founder and CEO of Venuable, A peer- to-peer marketplace for unique venues for personal and professional events.

The story of how I met the Flat6Labs team is one laced with serendipity (and better suited for a bar or cafe), but the allure of being part of a returning Arab diaspora helping to build the tech scene was enticing to me.

For those who think there isn’t much happening in the MENA tech and venture here is a quick overview:

1. Entrepreneurs and enterprising families have been a driver of regional growth for centuries

• 80% of non-oil GDP within the Middle East is accounted for by family-owned businesses and entrepreneurs

2. There have been some solid exits from the regional ecosystem that galvanized tech and help build momentum. Those companies include:

• Maktoob, Fawry, Talabat, Bayt, and Zawya

3. The new crop of startups are continuing the wave and creating value in the process:

• Companies valued over $100M — Careem, Namshi, News Group, Dubizzle, PropertyFinder
• MENA’s first ‘unicorn’ — Souq

4. Regional family offices & Sovereign Wealth Funds have been funding global VC/PE for years

• There’s a good chance your favorite U.S. or European VC has spent time in the Middle East raising money. Many of the largest institutions are LPs in funds such as Peter Thiel’s Founders Fund, Brad Feld’s Foundry Group, 500 Startups, Thrive Capital, and Carlyle to name a select few

5. The acquisitions of Talabat ($170M) and Maktoob ($164M) standout as the largest MENA exits but there have been other exits and buyouts that have created founder and investor liquidity — 90% of them happening since 2011. ( see chart below)

With all of the progress made, it’s been less than two decades of tech entrepreneurship in the MENA region. Some of the first regional tech plays started coming online around the dotcom era with startups like Arabia.com and Maktoob out of Jordan and institutional funds like Egypt’s Ideavelopers. Fast forward to 2016 and the regional dynamics around tech, innovation, and entrepreneurship are front and center in every conversation from government leadership to university faculty. Here are some observations from working with Flat6Labs Abu Dhabi.

1. The MENA market is large but one that is hard to crack without a unique, local approach to each country. Egypt is the largest market by population with over 90M people and Saudi is largest in terms of GDP with an estimated $750B. The 400M people of the region are not homogeneous and the assumption from outside companies is that just translating your product in Arabic or creating an Arabic microsite is enough to tap into local users — it isn’t. Along with over 20 dialects of Arabic, internet access and consumer behavior differs across each country making go-to-market in Qatar very different than that of Egypt or Morocco, for example. Other examples include the French speaking countries of Morocco, Tunisia and Lebanon or the culture of cash on delivery, which accounts for an estimated 80% of the $40B ecommerce market regionally.
2. The startup tipping point is near with increased government investments (UAE, Lebanon, Bahrain) and regulatory reform (Saudi, Qatar) enabling the growth of a ‘knowledge-based economy’ (versus the current export driven economy re: oil). And by tipping point, I mean a deeper bench of venture investors (non-traditional investors — family offices, PE, and SWFs), access to markets through incubators, accelerators, and community initiatives, and the refinement of unique business models and IP (re: less copy cat concepts).
3. Arab women in computer science are outpacing global averages with over 40% of Arab women graduating with a degree in computer science. In the Gulf region, women make up approximately 60% of engineering students in universities, compared with 30% in the U.S. and Europe. Along with CS graduates, the region is producing a growing number of female tech founders and CEOs such as Mona Ataya of Mumz World, Ambareen Musa of Souqalmal, Valerie Konde of Collectionair, and Mai Medhat of Eventtus , all of them venture-backed companies.
4. There is a number growing of angels and VCs (see #2) but the investment gap is yet to be closed. The inability to assess emerging technologies, lack of access to proper deal flow, education in venture investing, and a lack of comfort with software investments (versus hard assets) keeps venture capital a low priority asset class (~0.02% of MENA GDP vs. ~0.2% in the U.S.). Many startups fall through the cracks when they go out to raise their early rounds of $250K to $1M, a range too far out for friends and family and typically too early for institutional money.
5. The upside is promising but difficulties still exist with the lack of regulatory reform around bankruptcy and liquidation laws, company incorporation is still cumbersome and relatively costly, and recruiting tech talent is difficult unless you’ve raised significant funding. With all that said, countries across the region are realizing the importance of economic diversification through tech and the infrastructure needed to make that happen. Regional entrepreneurs are tenacious, creative, and will continue to thrive through adversity.

Since the acquisition of Arab email portal, Maktoob, to Yahoo in 2010, the region has seen a 10x growth in venture investors across the MENA region. According to Arabnet’s latest investment report, $750M has been invested in 480 deals over the last three years. Expect the number and value of deals to increase as we see VCs and accelerators continue to be launched across the region (Younic Capital, Flat6Labs Tunis, 500 Startups’ Falcon Fund, 1776 Dubai, and Algebra Capital to name a few).

I’d love to drop a “seeing is believing” quote here but honestly, you need to just take a trip to Egypt or the United Arab Emirates to understand the magnitude of change and the buzz that’s happening on the ground.

And as far as Balaji and his twitter trolls — I think he’s got that under control.

*Thanks to Chris Schroeder, Nina Curley, and Ramon Gamble for the feedback.

**For more information on the Middle East & North Africa tech community check out some of the resources below:

Startup Rising: The Entrepreneurial Revolution Remaking the Middle East by Christopher M. Schroeder (@Cmschroed)

Arabnet: State of Digital Investments 2013–2015 (@Arabnet)

Wamda Research Lab (@WamdaME)