Why the Next Silicon Valley Will Be in the Middle East

During the Renaissance, Florence was a wellspring of novel thinking. By mid-20th century, Bell Labs in New Jersey was rolling in patents. And, today, California’s Silicon Valley is teeming with entrepreneurial spirit.

So, where will the next hub of invention be?

Christopher M. Schroeder, an internet entrepreneur and venture investor, predicts that with increased access to technology and the connectivity that follows there will be many centers of innovation springing up worldwide, in cities large and small. In his new book, Startup Rising, he makes a strong case for the Middle East, where a surprising number of young men and women are starting tech companies and where global corporations, such as Google, Yahoo and Cisco, are investing.

This story, at least for you, starts with you attending the “Celebration of Entrepreneurship” in Dubai in 2010. What was this event like?

I was at the “Celebration of Entrepreneurship” because [I am part] of this group of American CEOs and Arab CEOs who are really trying to get to know and understand each other. This was one of the first large gatherings of startups in the Arab world, from North Africa to Yemen. 

You get to this incredibly beautiful hotel in this spectacular city of Dubai that didn’t exist for all intents and purposes 15 years ago, and you would have felt as at home as if you were at any tech gathering or conference in Silicon Valley or anywhere else. It was a modern facility with people hustling and bustling, checking their mobile devices, connecting with each other, going from event to event. It was utterly familiar in what was a totally unfamiliar setting.

You argue that a new narrative is playing out in the Middle East. What is this new narrative, and how does it differ from the one that most Americans associate with the region?

I think when Americans think about the Middle East they are really thinking about political instability and sectarian violence. If you are old enough, that narrative might have started with the Iran Hostage circumstance, and certainly for all of us September 11 had a certain narrative.

But, there are other narratives going on. Where people have access to technology, they have access to communication and they have the ability to see how everyone else is living and doing things and can connect and collaborate. You have this capability of seeing opportunity and of seeing that you can make things happen, and it all can be done unbelievably affordably.

I think it is because we have such a single narrative in our minds about the region that sometimes it escapes our understanding. Of course, it is going to happen in the Middle East the way it has happened in India, Latin America, the way it has happened in Eastern Europe, the way it happens whenever anybody has access to technology.

What effect has the Arab Spring had on entrepreneurship in the region?

I went to this gathering in Dubai in 2010. So, it was shortly after the young man lit himself on fire in Tunisia, but was three months before things really heated up in Cairo. It is no surprise to me that the Arab uprisings happened when they happened, and it is no surprise to me that that which has driven people to want a new expression in politics and society also wants them to have a new creative expression in art, in music and in building businesses.

To be an entrepreneur, you have to be a little crazy, to believe you can build something that was never there before. I think in the Arab uprisings, there were a lot of people that said, “Holy cow, if Mubarak can fall, anything can happen. Maybe I can really build a business where it was never built before.” But, secondly, I think a lot of them very movingly feel that in building a business they are actually building a better society, that they are solving problems with technology in their day-to-day lives. It could be traffic, it could be crime, it could be education, and it could be creating jobs. The Arab uprising really pushed people to feel like what they were doing was not only great for themselves but also actually great for their communities, their countries and the region.

Investors and entrepreneurs are always, as you know, asking about the next “Silicon Valley.” So, is the Middle East it?

Every so often a geographic location becomes something that really changes the global dynamics. But, I think the wonder and the awesomeness of technology today is that we are going to be seeing hubs of technology and innovation all over the world. That isn’t to say that being in an ecosystem where you have a lot of smart people and people who inspire you around you doesn’t matter. You may see more of it in some great centers where people like to live and therefore great talent want to aggregate. But, I think around the world you are just going to be seeing ecosystems of innovation pop up on a regular basis in multiple locations because people can connect better and better with technology.

I saw unbelievable entrepreneurs and innovators in Egypt. I saw unbelievable entrepreneurs in Amman, Jordan, because I think the government and the young people there are really focusing on it. And, at the same time, I have seen them in Beirut and other places as well. I think the idea of there being one hub that rules it all is just not going to be as much in the calculus. Silicon Valley is the exception and not the rule.

Which heavyweight tech companies are investing in the region, and how?

A lot of the major tech companies for a long time like Microsoft, Cisco, and Intel have been in the region. The Arab world has 350 million people. A lot of growth is happening in mobile and other technologies. But what I loved and was very excited by is that some of these players and newer ones like Google not only are building their services there, but they are actually embracing the ecosystem and helping entrepreneurs to develop.

For example, Google sponsored one of the largest startup competitions in Egypt. They literally hired a bus to travel up and down the country to encourage entrepreneurs not just from Alexandria and Cairo but all around the country and gave a huge award of money. In the last six or nine months, LinkedIn and PayPal have opened up operations in the Middle East. They view their jobs as not only selling and marketing and developing their services but as really doing what they can to educate the markets about the use of e-commerce and about how to find great talent and employees.

Can you tell me about Internet, cell phone and smart phone penetration in these countries?

It ranges. Mobile penetration almost in every country certainly exceeds 50 percent. In many of these countries, like Egypt for example, it is literally over 100 percent, which means that people have more than one mobile phone. What’s exciting is that in many respects the Middle East, like other great emerging markets, has never known a world of landlines. So, they are native mobile users and thinking about how to use technology in a mobile environment.

Smartphone penetration in the [Persian] Gulf region is quite high. It is over 50 or 60 percent in some countries and probably less in a place like Egypt, where the proportion is more like 20 percent. But almost everyone I spoke to in the mobile community expects smartphones to have 50 percent penetration in Egypt in the next three years. As Marc Andreessen wrote in the foreword of my book, the world will have 5 billion smartphones in the next eight to ten years. I think in the Middle East you are going to see 50, 60 or 70 percent smartphone penetration within that time.

Is that 50 percent smartphone penetration a number that you’ve seen to be an indicator in other parts of the world? Once you hit and surpass 50 percent, is there a guaranteed spike in innovation?

I don’t think there is any question that if you look at Asia, if you look at parts of Latin America and Eastern Europe, that as greater and greater technology is available not only did you see a rise in middle class and economic output, but more and more companies that are being driven by and innovated around technology. I think there is definitely precedent for it. 

When you dug into specific statistics about Internet use, what were the biggest surprises?

I would not have told you before I got into the data that the number one per capita YouTube consumer on Earth is Saudi Arabia, that the largest plurality of people watching video on YouTube in Saudi Arabia is women and the largest category of videos that they are watching is education. You stop to think about it and it makes perfect sense. If you are in a society where it isn’t easy to get an education in certain areas or the quality of education may not be everything that it could be, and at your fingertips is the ability to be able to get access to any class anywhere in the world, as more of that is starting to get translated into Arabic, it all really kind of fits. It doesn’t seem that surprising anymore.

You have interviewed hundreds of entrepreneurs in the Middle East. How would you describe them? What are the demographics of this population?

The younger generation, 20s, early 30s, has never not known technology and therefore is very comfortable using it and being mobile first in terms of its innovation. A lot of the young people I met had exposure at some point to western education or the West, but hardly a majority of them. 

Probably the biggest thing that hit me like a two-by-four, and in hindsight should have seemed obvious, is that at every event I went to anywhere between 35 and 40 percent of the participants were women. Again, I think a lot of the narrative in the West is to think, well, how can women be participating in this in the Middle East? The fact of the matter is I saw more women on average at a Middle East gathering than I would see on average at a Silicon Valley gathering.

You divide the entrepreneurs into three types: the Improvisers, the Problem Solvers and the Global Players. Can you explain what you mean by each?

Improvisers are taking something that is tried and true and successful elsewhere in the world and saying, how can I make this a success in the Middle East? One of the first companies that was a perfect example of this is a company named Maktoob—the Yahoo! of the Middle East that got bought by Yahoo! for almost $200 million. If you get into the Maktoob experience, it is not just Yahoo! It is not just an Arab putting in Arabic that which is in English. There are lots of sensitivities about the Arab world—cultural things and television shows, music, that is unique.

Anyone who has been to Cairo or any major city in the Middle East knows that the street traffic is mind-blowing. So, of course, a bunch of young Problem Solvers said, “Okay, that’s unacceptable. There are alternative routes. We can figure this out. We are going to create a crowdshare to be used so that people can do the best they can to navigate traffic.” There is no cab dispatching service in many cities in the Middle East so young people have built Uber-like abilities to allow you to find a cab that is near you, which of course helps you in bad traffic and, with GPS, makes you feel safer.

The Global Players are folks who realize the world is one click away so why be limited by any one market. Amr Ramadan from Alexandria, Egypt, was pitching this beautiful weather app, WeatherHD [at a startup competition]. The data it had was interesting. The user interface was interesting. The visuals of it were fantastic. As he was talking about it, I looked down at my iPad and realized I downloaded it six months earlier. I had no idea that it was 7 young people at the time—now it’s like 50—in Alexandria, Egypt, who built it. There are lots of folks who are building solutions that they think are not only interesting for a regional context. There is a wonderful woman from Beirut, Hind Hobeika, who was a college swimmer. She has invented these goggles that are almost like Google Glass; they are heart and breath monitors that are visually in your goggles. That’s not a Middle East-only solution. Any swimmer or trainer anywhere in the world would kill for these. She has manufacturing happening in Asia and distribution happening in the fall in the United States.

What measures are being taken to support entrepreneurs and help ensure their success?

The King of Jordan has helped create and put a lot of weight behind one of the great incubators in Jordan called Oasis500. That has spawned other companies, activities, competitions and gatherings. You have these amazing gatherings. They can be as large as thousands of people, at an ArabNet gathering, or hundreds of people at a mix-and-mentor gathering by Wamda.com. There are startup weekends that happen everywhere from major cities like Amman to Nazareth. There is this bottom-up movement of young people helping young people and seeking out mentors and building connectivity as well as raising capital and the other tactical necessities. It’s viral. It’s everywhere.

Of the hundreds of entrepreneurs you interviewed, whose story sticks with you the most?

Ala’ Alsallal was raised in a refugee camp in Amman and got affiliated with Ruwwad, a totally indigenous, of-the-community youth center that Aramex and Fadi Ghandour [its founder] helped create. He got exposure to computers, which just blew him away, and also got to see mentors and other business people. He got a vision.

With his natural drive and that experience, Ala’ was able to effectively start, out of a scrappy office made with his family, Jamalon, the Amazon of the Middle East, which has a real shot at being the number one online book seller in the region. He eventually got a little bit of money from Oasis500. He just got another round recently. He must be 27 years old or something. To see him come from literally a refugee community with almost no vision of a future to taking advantage of the resources is very hopeful.

Megan Gambino | | READ MORE

Megan Gambino is a senior web editor for Smithsonian magazine.