How Lebanon and its diaspora can benefit in the startup ecosystem?

By: Irene Kapusta (Opinion), October 22, 2015

Connecting a diaspora and its home country can’t be a one-way relationship, whereby the diaspora just gives money and time (and loses) while its home country takes (and benefits).

This would be called diaspora manipulation or exploitation – certainly not diaspora engagement. And it wouldn’t last long. Diaspora-home country ties should aim for a win-win equation.

There are many ways to align the interests of a diaspora and those of its home country – especially its business ecosystem. Here are a few hints for Lebanon.

The startup talent game

Diasporas are at an advantage in the global startup battlefield – especially in the world of technology ventures.

There is a dearth of software engineers and other talent in startup hubs such as Silicon Valley and London, and a rising number of startups simply can’t afford local developers. Inevitably, scarcity drives wages up.

In the US, the median salary for software engineers is about twice that of the median US salary overall.

The title of this article speaks for itself: 'Six figure salaries and hounding recruiters: The war for London's tech talent'. Setting up a back office in a home country is one way to get around this issue.

a) Back offices

There are a number of Lebanese entrepreneurs among the founders of rising startups in Europe, America and elsewhere.

They include Rand Hindi in France, founder of Artificial Intelligence company Snips and named in the Forbes list ‘30 under 30’, and US-based Karim Atiyeh in the US who joined Y-combinator this year as a cofounder of Paribus, a price guarantee platform for online purchases.

Entrepreneurs abroad present a great opportunity for homegrown investors and talent, one that Lebanese venture capital firm MEVP seized. MEVP has invested in startups launched outside Lebanon by diaspora entrepreneurs and encouraged them to set up engineering back offices in Lebanon.

Such MEVP diaspora startups include Fadel Partners (in the US) and Box & Automation Solutions or BAS (in France). Fadel and BAS now both have tech teams in Lebanon, with 30 and 20 software engineers respectively.

For Lebanon, this arrangement is one way to mitigate brain drain and create employment. Yet it is also a nice deal for those diaspora startups.

Lebanon is home to “great engineering talent” said Walid Mansour of MEVP.

Many Lebanese developers are fluent in English and French.

“It is a blessing because communication is key for startups,” Mansour said. The Lebanese are “travellers, very exposed, very connected” internationally – not least because many have relatives abroad.

“They are able to source contracts with companies like IBM and Oracle,” he said, in reference to partnerships forged by Fadel Partners.

All this, for Lebanese salaries that are lower than in the US – around $20,000 to $30,000 per year for a programmer finishing university, according to Mansour. By comparison, US developers without work experience earn an average of $55,000 per annum.

The average monthly salary for software engineers in Lebanon in 2013 was $1,700 – a fraction of the average in the US (23 percent), Germany (27 percent) and the UK (33 percent).

Lebanon’s developers are not the cheapest internationally (especially compared to Asian countries such as India), but they have qualities that Lebanese business leaders abroad are likely to value.

b) Returnees

Repatriation is culturally easy for the diaspora. In addition to setting up engineering offices in Lebanon, many expats came back from abroad to work for MEVP portfolio companies in Lebanon, Mansour noted.

Some returned to Lebanon to launch their startup, such as Shahiya.com’s CEO Hala Labaki. She came back from Paris to start Cookpad, acquired last year for $13.5 million.  

In the pool of 25 high impact Lebanese entrepreneurs selected by Endeavor, 15 previously lived abroad for study and/or work. This is even more impressive considering that Endeavor draws fellows from a range of sectors beyond technology.

However, returning can still be a complicated process and a financial compromise.

Local startups and SMEs have a tough time advertising positions to expats. Some Lebanese abroad are interested in opportunities at home but struggle to identify openings.

Such barriers prove the relevance of campaigns like “Reviens Léon” (literally: “Come back Léon”), launched in May by 10 prominent French startups.

Reviens Léon targets French expats with work experience in San Francisco, New York and London.

The participating French founders (now 14) urge “Léons” to return home and help grow France’s “scale-ups”. The website lists jobs and offers practical repatriation tips. Lebanon could benefit from similar initiatives.

c) Remote talent

Setting up a subsidiary at home or returning to Lebanon can be a physical challenge for diaspora members, hence the convenience of remote projects.

Owing to the cost of developers in Europe and North America, many tech companies opt for remote contractors - especially developers and designers - in emerging markets and even in Western cities where living costs are reasonable such as Hamburg, Germany.

Companies paying for remote workers are not necessarily diaspora-led. Yet remote contracting with countries such as Lebanon remains risky for those who are not familiar with the region.

Instead, many Lebanese diaspora members are able to navigate the business codes and the education system in Lebanon. Many know talent there, or know someone who knows. Everyone wins: businesses get talented contractors at discounted salaries, while remote Lebanese developers receive above-market wages while building their credentials.

Some Lebanese tech companies, such as mobile app developer FOO, benefit from Lebanon’s developer advantage.

Founded in Beirut by Ghady Rayess and Elie Nasr, FOO has served over 200 clients and now has 40 people on its team. About 60 percent of its revenues are generated abroad, and clients include multinationals such as BBC, Heineken and Roche.

Elie Nasr confirmed the role of the Lebanese diaspora in the early days of the company.

"Sourcing of projects took place through the Lebanese diaspora at the beginning,” he said. “Later it was made through word-of-mouth [...] and then we were able to target clients more easily as our brand matured.”

When it comes to remote contracting, much happens informally through word of mouth. Thus, awareness raising and communication would greatly help to highlight both benefits and practical details to the diaspora business community. It is easier for FOO than it is for an independent software engineer.

Some entities, like Lebanon For Entrepreneurs (LFE) and Startup Megaphone, do much to support the Lebanese startup ecosystem and to raise the visibility of Lebanese entrepreneurs internationally, in concert with the Lebanese diaspora. LFE is actually a joint initiative by three Lebanese diaspora networks (LIFE, LebNet and SEAL).

Overall, back offices, talent return and remote projects are complementary to the development of Lebanese startups: they help develop the Lebanese talent pool. Yet all three options could be eased practically, legally and financially.

In the case of Lebanon, internet access and speed remains a priority. Meanwhile, a collective communication effort on diaspora startup opportunities would be welcome.

Not everyone in the Lebanese diaspora business community is interested in a subsidiary, returning or contracting. But some are, and it would be a pity to neglect them.  

 

*Irene Kapusta is the author of a book chapter on Arab diasporas (in 'Social Entrepreneurship in the Middle East') and a startup mentor at Seedcamp.

*Source: wamda.com


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