Technology and the Middle East

I recently became a contributor to Zawya, the leading Middle East business news source, here’s my post for them reproduced below. My Zawya blog can be read here.

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The Middle East nowadays doesn’t evoke a sense of technology development, and innovation or much of anything else unrelated to a few things in the imagination of most: Iraq, oil, terrorism, and increasingly the question “will the Bush administration or the next American government bomb Iran?” Over the next few days and weeks, this blog, will seek to change that (to some extent), and provide a fresh perspective on the overall technology landscape in the region.

As the inaugural post, I’ll begin with a few starting observations that are important when considering technology (or most other businesses). More than half of the region’s population is under 25 and internet penetration is increasing rapidly. Purchasing power in on the rise with the introduction of readily available credit. In short, the Middle East over the next few years will have a key target demographic, that is widely sought by most everyone, and with money to spend.

The MENA region extends from Morocco in the West to Iraq in the East, including wide swathes of Asia and Africa. To simply say the “region is this” or “the region is that” would be to oversimplify the complexity of various histories, peoples, cultures and religions that reside in it. Yet, to some extent it becomes necessary to have some general observations as a starting point for discussion. As such, please pardon any generalizations from my end, and I encourage readers to please participate in the comments section to share their views and opinions in keeping my perspectives grounded in the various realities that comprise the Middle East.

Having put that disclaimer out there, let’s continue. In this post, I hope to provide a general overview of the region’s technology landscape that will frame future posts, and assist in understanding the region. As such, I offer the following points of observation:

1) Technology is widely misunderstood in the region. If you’re talking about a technology business in the region you might as well be talking about Jack and his beanstalk. With the exceptions of familiarity with Google, and to a lesser extent YouTube and Facebook, very few people know what a technology business is. As such, building a successful technology business in the region is particularly challenging.

2) The greatest success in the region with tech. has been in IT services. The largest private players in the region have been outfits providing support, sales and consulting services for the region’s various large industries and companies. This is an area that has shown considerable growth and success. It remains largely privately owned. The largest global software and hardware players (Microsoft, Oracle, IBM, Sun, etc…) have all played in this space.

3) Funding? Fuggetaboutit. Investors in the region are loathe to invest in technology businesses. The region has experiences a real estate boom where itinerant Bedouins that had land once considered worthless have emerged as the landed elite. As such, investors in the region look to investments with “guaranteed returns.” There is no such thing as early or seed stage investing. Angels remains a religious phenomenon, very few to be found as investors. And those that do exist, entrepreneurs view as their piggybanks with no rational reason as to why.

4) The Tech bubble also burst in the Middle East. Many individuals don’t know or have simply forgotten that investors in the region lost billions in the tech. bubble. The largest investors in the Middle East invested across the board in some of the world’s most known venture funds and lost a great deal of money, in companies that evaporated as soon as they went public (think WebVan). This is a memory not easily forgotten.

5) Politics? Who said anything about politics? As I mentioned earlier this is a region known globally for things that go bump in the night. It’s often known for its wars, its instability and horrific acts of violence that either happen here or originate from it. Some refer to it as an “unfriendly neighborhood,” quite the euphemism. It would be naïve to ignore the region’s global politics and those of respective nations that make up the Middle East.

6) There is a nascent public financial market. While the possibility of IPO’ing was non-existent a few years ago, the Dubai stock exchange has provided the ability for companies and investors to have meaningful liquidity events.

7) We’re still at the very beginning. Although the technology sector is fairly mature in the U.S., particularly in Silicon Valley, it remains in its infancy in the Middle East. While this may strike some as self-observant, I can’t overemphasize this point. It’s often said that Europe is 2-3 years behind the U.S., and Asia 3-5 years. If that’s to be believed the Middle East is a good 5+ years behind. Bearing in mind that those time gaps are shortening over the years, the region globally lags behind. There remain abundant markets to be served and opportunities to be found for the plucky entrepreneur, it just means getting accustomed to the region’s particular uniqueness which isn’t without its perks.