When Yahoo! acquired Arabic internet portal Maktoob.com in 2009 for $165 million USD, expectations ran high among the Arab world’s tech entrepreneurs that the regional startup scene would be inundated with cash-rich suitors. Instead, the exit market seemed to dry up in the midst of the Arab uprisings. But this past March, Souq.com, promoted as the Arab world’s Amazon.com, received $75 million USD in funding from South African media firm Naspers, putting the Middle Eastern online retailer’s valuation at half-a-billion dollars. The investment is the latest in a string of venture capital (VC) deals finding their way to support the developing e-commerce market in the Arab world. Other online Arab retailers that have won funding include fashion retailer Namshi.com, discount retailer MarkaVIP.com, travel site Triperna.com, and coupon retailer Cobone.com. In 2013, MIH, a subsidiary of Naspers, acquired a majority stake in Dubizzle.com, considered the biggest classified advertising site in the UAE. American entrepreneur and venture investor Christopher Schroeder describes the activity as inevitable, because investors are finally beginning to see the value — and returns — in the Middle East technology market. He is the author of Startup Rising: The Entrepreneurial Revolution Remaking the Middle East, a book on the region’s entrepreneurship movement that was published last year. Schroeder, who has recently returned from a trip to Iran where he “saw an intriguing and nascent startup community,” says he has been exploring the strengths and limitations of the rising entrepreneurial ecosystems of the region. He has looked closely at some of the thousands of young entrepreneurs. “They are all not only innovating, but also [trying] to solve some of their long-ignored social and infrastructural challenges,” he notes. Schroeder is the former CEO of Washingtonpost.Newsweek Interactive and the successful seller of two internet portals — LegiSlate.com and HealthCentral.com. His book is based on articles he had written in 2011. An Arabic version will be out soon, as will other translations and an audio edition. “I wanted to better understand how increasing and ubiquitous access to technology is changing societies in the Middle East and elsewhere,” says Schroeder, a veteran angel investor and advisor to U.S. venture capital funds and many consumer-facing, social media startups. “I wanted to understand also the surprising power of women in startups here and the role of religion among these entrepreneurs. And I wanted to learn more about why many global technology juggernauts are doubling down in the region during this time of uncertainty.” Schroeder’s research also provided insight into the still-untapped investment potential in the Middle East’s growing online market. “Right now, the e-commerce market in the Middle East, broadly defined, is somewhere between a billion and a billion-and-a-half dollars,” he says. “Not including commodities or oil, the entire movement of goods and products is $450 billion. How hard is it going to be to go from $1 billion to $10 billion in three years? Looking at those kinds of factors, knowing full well that terrible scenarios are also quite possible, compared to other emerging growth markets, there’s a lot that can happen here.” Reflecting on the recent market activity, Schroeder notes that the Yahoo! acquisition fired up the potential of would-be tech entrepreneurs in the region. “I think Maktoob showed a new generation that this can happen here, and we need to be thinking about this in different ways,” he says. “The a-ha moment came with the realization that what has been happening in startups, technology, and entrepreneurship is happening everywhere. If it is happening in Latin America, Eastern Europe, Southeast Asia, and Africa, then why not in the Middle East?” There are local efforts taking root to spur tech innovation. This year, Fadi Ghandour, the founder of regional courier service Aramex and one of the region’s best-known entrepreneurs and angel investors [as well as Wamda's Chairman], launched a new venture capital fund for Middle East tech startups with the International Finance Corporation. The fund, which starts with $75 million, has company in Emerge Ventures, which two Dubai-based entrepreneurs launched to invest in tech advertising, mobile, payments and logistics. Another is Middle East Venture Partners (MEVP), a Middle East-focused VC firm that invests in the early and growth stages of companies. According to MEVP managing director, Walid Mansour, they have invested in one accelerator, are building another one now, and have funded 21 companies in the technology space. MEVP is very bullish about the next 12 months, says Mansour, and may invest in as many as eight more companies. Other tech accelerator funding initiatives include Afkar in Dubai and JuiceLabs in Cairo. Egypt’s biggest city is home also to one of the more novel efforts to push tech entrepreneurship — Ahmed El-Alfi, chairman of Sawari Ventures, has leased the old American University campus by Tahrir Square in Cairo and transformed it into the GrEEK Campus, the country’s first tech park and the region’s largest shared workspace. The technology-fueled Arab uprisings catalyzed forces working in parallel, Schroeder suggests. The unrest that spread through the region swept away longstanding regimes in Tunisia, Egypt, Libya and Yemen. “The same desires to have a political voice, a societal voice and a cultural voice were the motivation to have an economic voice,” he says. Few speak of the uprisings now with the same sense of possibility; Egypt’s revolutionary fervor has reverted to popular support for a military ruler; Libya has yet to recover from its violent jettisoning of the Qaddafi regime, and Syria remains mired in a bloody civil war. Schroeder chalks up some sentiment in the region to high expectations of the Arab uprisings not being met. But there is a tangible progression as a result, he says, that is measured in digital access; there are now roughly 90 million internet users in the Middle East, about 40% of the region’s population, according to internet World Stats.
