The economic and financial meltdown coupled with the Covid-19 confinement restrictions have dealt the final blow to the start-up ecosystem that have flourished in the previous years as a new form of economic development. Many entrepreneurs have closed their startups, others decided to relocate and move their business to the regional and international markets, and those who remained are battling to withstand the evolving challenges. What worsens the situation is the absence of any governmental support which is mandatory for creating an appropriate investment environment and setting the regulatory and financing frameworks that motivate entrepreneurs to take the initiative.
Absence of internal fundings
Before the economic crisis that started in 2019, the startup sector was witnessing a tremendous growth, as the stimulus packages allocated by the Central Bank to support this sector have contributed to the birth of a new startups. However, the financial crisis, accompanied with bank restrictions which led to withholding the depositors’ money, and halting loans affected the sector dramatically. In this context, Ramy Boujawdeh, Deputy Director General of the Berytech told Sawt Beirut International (SBI), “A large number of entrepreneurs benefited from the Central Bank’s Circular 331, which at the time allocated $400 million to support startups in the technology sector.” However, support for start-ups is currently limited to external fundings provided through programs and funds such as Berytech. Some international organizations also provide support for a number of projects that serve their development goals.
According to Boujawdeh, Berytech supports more than 120 start-ups, small and medium-sized companies. “Donors have reduced support for start-ups and are focusing on small and medium-sized companies in the market,” he said. But the percentage of support doubled for this year compared to 2019. These companies receive financial and technical support to help them withstand and reduce costs in light of the current crisis. The support is focused on technology, agriculture, industry and the environment sectors, according to Boujawdeh.
Looking for new markets
Support at this stage is directed to innovative new projects that present creative ideas to solve problems and challenges facing Lebanon, such as waste management and how to benefit from it, as well as ideas that can be applied abroad. The Lebanese market no longer secures the required revenues and profits, according to Abdel Kader Jawhar, Founder and CEO of “Akel Tech” startup, which sells a machine that prepares the Lebanese ‘Mankoushe’ automatically and deliver it to the customer without human intervention. The machine can be used in universities, hospitals, and commercial markets. Jawhar took advantage of the financial support he received prior to the crisis to create the prototype machine. The machine was available in Beirut, but the port explosion, the lockdowns due to the Covid pandemic and the currency’s deterioration forced him to stop working.
Gains and challenges
Jawhar is preparing to show his machine in Dubai, and is looking for a new market for it. But he will keep the manufacturing process in Lebanon, benefiting from his friends and acquaintances to complete the work. He said, “I trust the Lebanese talents, and i work with engineers and workers on contractual basis to manufacture small quantities at a reasonable cost.” But he pointed out that he is facing many challenges in Lebanon, most notably the electricity crisis and the bureaucracy in public administrations.
On the other hand, Jawhar pointed out that start-ups benefit from their low operational costs and the possibility of changing the business strategy at any time, compared to major companies, but like others, they are struggling amid the unstable work environment, the absence of financial facilities, the instability of the exchange rate of the lira and political instability.
Despite the impact of Covid, which exacerbated the crisis in Lebanon, communication and remote work enabled a large number of young people in the Lebanese countryside to develop their ideas and turn them into start-up projects that secure new job opportunities, according to Boujawdeh. It also helped companies in those areas to obtain financial and technical support.