As I discussed in my last post, building an entrepreneurship ecosystem that consistently empowers small and medium-sized businesses (SMEs) in Lebanon will have to involve helping startups reach international markets; the local market is simply too small to support a rapidly scaling business.
Yet it’s critical to create an easier environment that will help companies migrate from the informal to the formal economy, and will help boost government tax revenue in the process.
imagine an environment where one can register a one person company within 24 hours on the internet at a cost of LL 75,000 (or even less), all included, and pay a low flat yearly tax until the company reaches a certain size and income level. Making registration simple will also fuel the enterprise service economy (auditors, lawyers, etc.), and everyone will gain from the increased number of business start-ups.
At the other end of the business lifecycle, closing a business must also become less burdensome. The regulatory environment should allow for mechanisms where bankruptcy can be avoided, as failure is an integral part of the lifecycle of a business.
Risk and Failure
Most highly entrepreneurial economies have accepted the fact of failure; however, in Lebanon, failure is stigmatized. While Europe has still a conservative approach to entrepreneurship, compared to, for example, the U.S., it’s a sign of progress that in a recent set of 10 principles set forth in Think Small First: A Small Business Act for Europe, the European Union has designated a principle focusing on bankruptcy: “Ensure that honest entrepreneurs who have faced bankruptcy quickly get a second chance.”
We learn from our failures. When one talks to entrepreneurs from the Silicon Valley, more often than not, entrepreneurs have failed at least once before succeeding in a business. Indeed, it is the ones who have not failed that are looked at suspiciously. Having a culture that is tolerant of failure is critical.
Furthermore, we need to address the issue of risk. The level of risk taking in Lebanon is very low. When we hear of academics advising students to get jobs instead of trying to develop an idea or an opportunity, we can only wonder. Often it may be the case that the idea pursued is not ideal for a variety of reasons, but it is vitally important not to dampen the passion and aspiration of our young talents. If they don’t have the necessary experience, then let them find it or hire it.
Which is riskier, trying to start your business after university (with the proper support that exists in Lebanon) when one has few immediate responsibilities, or starting it 5 or 10 years later when one has a family and financial obligations? Not everyone will become an entrepreneur and start a business. But those who have the drive and passion should be given all the support necessary. We have started to see a change in behavior in the past couple of years but there is still a long way to go.
Leveraging the Diaspora
When it comes to building organizations that will live on after the departure of the founder, Lebanon is also lagging behind. Why are Lebanese are so successful outside of Lebanon, in countries where the ecosystem allows them to be innovative and entrepreneurial? Why not give them the same chances in Lebanon and have them stay or come back here?
That said, the diaspora is potentially one of our biggest assets. With so many Lebanese abroad and quite often in important positions within societies, Lebanese entrepreneurs have a formidable ally in the diaspora. The biggest challenge is determining how to connect and leverage them. The model of having a sales and marketing arm in a foreign country with a large market while housing the headquarters, back office or research and development center in Lebanon, employing local talent, is one approach that has proven successful (for instance, for Amphipole).
We can also leverage the diaspora as a source of funding, a reservoir of expertise, a market or as a source of innovative ideas that can be transplanted back home.
Back home, it’s not all stagnation, however; efforts are being made to improve the business environment. The private and public sector are aware of the need for change. Some issues can be dealt with in the short term, helping to bring our ecosystem up to par without reinventing the wheel. However, we need to take a long term view, as I mentioned in my previous post.
Specifically, I suggest we create a “Lebanon 2020” vision process, to determine what kind of economic environment Lebanon can achieve. We need to assess what sectors can be boosted to bring the most sustainable results to our economy, and what kind of advantages can be leveraged, beginning with our educated and talented population. This vision should not prescribe rigid policies, but rather should create the environment to generate a buoyant and innovative economy.
Despite all difficulties it has faced, the entrepreneurial ecosystem has made great progress in the past 5 years with more organizations supporting startups then ever before. Yet if we don’t do anything, we will continue to regress and our momentum. But if we collectively create a shared vision for the future, we will be able to meet the challenge that is facing us.
Lebanon is a diamond in the rough. Every one of us recognizes it. But if it stays in the rough, we will have missed our chance. As the old Asian adage says, “The best time to plant a tree was 20 years ago, but the second best time is now.” So it’s time to act. We owe it to the youth and the children of Lebanon.