Only 10 years ago, internet penetration in Iraq was incredibly low, hovering around 1-2%. Globally, development experts worried that the digital divide could be insurmountable. For example, in 2006 Microsoft and the Indian government planned “internet kiosks” to get more people online. This effort seems quaint now (although smartphone penetration is still low) however, in the next decade India is looking at the prospect of a $1 trillion digital economy.
Similar to India and many countries with a very limited landline network, Iraq leapfrogged to mobile communication and eventually, more affordable smartphones. Countrywide, wireless internet penetration now stands around 52% but is far higher among younger Iraqis in some areas, perhaps approaching 90% in Baghdad.
Nonetheless, Iraq’s economy still faces challenges before it can maximise the benefits of its digital economy. To begin with, access to banking is particularly low and there are still significant barriers to business. But with the emergence of app development, small to medium size enterprises in can now inject a competitive edge into their business model. As our series has illustrated, there are now Iraqi companies that have been quicker to adapt to this new era than some companies in the West, where some SMEs are not taking advantage of new trends. Iraqi tech startups can now utilise trends that are still being adopted globally, such as deep learning “recommendation engines” and digitised market research.
The transformative potential that has been seen worldwide now awaits Iraq. Consider that at the end of 2009, there were a total 100,000 apps on Apple’s App Store and there are now at least 60,000 apps added every month. There are almost 3 million apps available on Google Play.
To unlock more of this potential, organizations such as Techstars’ Startup Weekend are helping inspire and mentor young entrepreneurs across the world, with branches in 150 countries. IEI spoke with Ibrahim al Zararee, program facilitator at Startup Weekend, Iraq, to gain some insight into the processes behind this effort.
IEI: Tell us about your work with Startup Weekend.
IZ: Startup Weekend is an international program led by a company called Techstars, they have different programs including Startup Weekend, which is a three day event catering to people interested in entrepreneurship. Often, they’ll come to these events with a range of different skills like software development, marketing, designing and business development and they come together to pitch their ideas and then form teams. Potentially, this can then lead to the formation of a startup.
So, first we do some activities to break the ice between participants, then we start the workshop. Anyone who has an idea for a startup, especially a tech startup, can go onstage and pitch their ideas for one minute, like an elevator pitch. Then the top ten ideas go to the next round, where they form teams and start working on the next idea.
Because weekends in the Middle East end on Saturday night, on Friday and Saturday we start planning for the startup, and its execution, developing the business model. Here, participants have to validate their idea, they have to do market research, asking people whether there will be a need or demand for the product. We also have mentors during the weekend working with the different teams to help with marketing, business models etc.
And on Saturday, at the end of the event, we have around three to five judges, where each team pitches their idea for 3-6 minutes and then the judges have three minutes to ask them questions about their ideas, then they choose the top three teams, and sometimes we give them some money to start. It’s not much, around $3000, but of course that’s very welcome at that early stage. So, we’ve been doing this since 2013, and right now we’ve held eight events here in Baghdad, as well as holding events in Basra, Najaf, Sulimaniyah and Erbil. We’re looking to start work in Anbar as well.
IEI: In Anbar too. Would that be in Ramadi?
IZ: Yes, in Ramadi. In Ramadi, we are working to mentor a team, so they can open a chapter there. So, the active chapters are Baghdad, Basra and Najaf. And we’re also trying to work something out so we can open a chapter in Mosul as well.
IEI: That’s fantastic. The energy from young people in those cities to get involved will be huge. And you’ve already seen that.
IZ: Exactly. Before Startup Weekend came to Iraq, we’d see a limited understanding of what entrepreneurship is. When we first took Startup Weekend to Baghdad, we looked at Baghdad and Basra at the same time. After our initial meetings, people started to think differently about business. People who were previously thinking about opening a bookstore or a restaurant, and thinking very much in terms of physical stores, imports and exports of goods. But increasingly, people are thinking more about tech startups, they are thinking outside of the box.
IEI: You talked about the funding element. $3000 is an important amount of money for any business. But what’s the situation with new companies, new startups getting access to funding in Iraq, how difficult is that?
IZ: It’s really difficult. We are still struggling, especially since the govt. has not been very cooperative, until very recently. When you talk to the government about opening a small business or startup, they immediately think about working with importing or exporting goods, or opening a shop or a restaurant.
So the mentality that there are other things aside from this is evolving, and in the past six years we’ve been working more closely with government officials, we even met with the former PM Abadi three or four times to talk about startups. He was really open minded about our ideas because he had some background in private sector business from his time in the U.K. But of course, he needed a lot of political support to move things forward, in the Council of Ministers and parliament in order to change the environment for entrepreneurs. And during that period, the government was more focused on the war on Daesh.
IEI: Are you optimistic, now that the war is almost over, except some ongoing insurgency in areas like the Hamrin mountains? The Iraqi govt. has established a fund for new businesses, is that right?
IZ: I am enthusiastic about what will happen in the future. We don’t just have the government Involved, there are different NGOs, foreign governments supporting our efforts, including the Netherlands, Germany and Italy, working with young people and communities in Iraq, to foster new business ventures with the youth. The government began a new fund with the Central Bank of Iraq where they release up to $40,000 for new business. But accessing this fund is still very hard, it’s a long process that can take around 6 months or even a year, and the interest rate is still too high. Most of the startups don’t go that way, it’s crowd-funded or self funded.
IEI: And what about foreign investment, are we seeing that? If there’s a good idea, such as a Miswag (online retail in Iraq) or a Sandoog (online logistics platform) we’d see potential for foreign investment right?
IZ: If you asked me this a year and a half ago, I’d have said no, the war on ISIS was really deterring a lot of people from thinking about going into business in Iraq. But now it’s easier, if you have a good idea, you can get investment. It’s still hard, and regulations are still not clear, and there needs to be a major cultural change and there are still significant bureaucratic hurdles including the long processes required to register businesses. But we are increasingly positive about government engagement here.
IEI: Yes, there still needs to be leaps forward in terms of reducing the number of processes involved in starting a business and the time it takes to complete them. If this doesn’t change, do you see these new tech companies successfully circumnavigating regulation or will it be a major problem?
IZ: Most of the startups are quite small. We’ve been working on entrepreneurship for several years and so far the real successes are Miswag and Sandoog but bureaucracy is holding things back. But some startups are not officially registered but they are finding alternative approaches, moving forward until they get revenue flow moving and then registering. So, they are finding ways to move forward.
Two or three years ago, when people were thinking of starting a business, the challenge of bureaucracy was quite daunting. But right now, it’s not their first concern, that is changing to a focus on the profitability of their business model. So, I am really optimistic about that because people are finding alternative ways to do business. And the government have become more aware of the problems of over-employment in the public sector, a part of that is due to conditions from IMF loans. So, I am hoping that things in Iraq are changing, slowly.
The views expressed in this article are personal opinions and do not necessarily represent the views of Techstars Startup Weekend or Iraq Energy Institute.
IMAGE CREDIT: TECHSTARS/STARTUP BAGHDAD