April 21st, 2015
The Surprising Start Up Culture in Jordan
By Danielle Fiorino: The Middle East recently has been no stranger to turmoil and protests since the advent of the Arab Spring. However, one small country in the Levant has managed to hold its own and remain stable. Surrounded by conflict, Jordan’s government has managed to maintain a calm sailing ship in the midst of a violent sea. This stability is one of the many reasons that has made Jordan a hotbed for entrepreneurship in the MENA region.
To find out more about entrepreneurship in Jordan, I spoke with:
Abed Shamlawi, CEO of the Information Technology Association in Jordan
Salwa Katkhuda, Investment Manager at Oasis500
4 entrepreneurs from Oasis500 Ahmad Hammad (Co-founder of Buttercloud), Samar Shawareb (CEO and Co-founder of Arabia Weddings), Ala’ Kamal Alsallal (CEO and founder of Jamalon), Ala Suleiman (CEO and Co-founder of Masmoo3)
The State of Jordanian Entrepreneurship
Currently in Jordan, it is widely reported that over 50% of startups are in the ICT (Information and Communication Technology), including telecom, IT, mobile online businesses, and game development. The other 50% are mostly related to energy, water, and tourism. However, there are not many statistics available on these companies.
In the ICT industry, both Shamlawi and Katkhuda claimed, many entrepreneurs are customizing and localizing models and ideas working in other markets. These entrepreneurs have succeeded in adding something to the original idea instead of completely reinventing the wheel. This localization of ideas becomes very important when taking into account 60% of internet users in the Arab world prefer content in Arabic. This shows that localizing certain concepts is not only language but also relevance. If the concept is not relevant, as some entrepreneurs have found out, then the local language content is useless.
Despite this caveat, many have found success in ICT. This influx of entrepreneurs has made ICT a budding industry in Jordan that only started in 1999. Since then, the number of start-ups in the sector has skyrocketed. In the past two years alone, the rate of new start-ups has doubled. This upward spike in the entrepreneurial spirit in Jordan is most likely due to the sale of Maktoob, an Arabic email service and portal, in 2009. Currently, Oasis500 is the most active seed capital funding source in the region. Another advantage for start-ups is that the government in Jordan takes entrepreneurship very seriously and these efforts have full support of the King of Jordan himself.
General Barriers to Entrepreneurship
Most of the biggest challenges are rooted in a lack of financing. There are not too many facilities for seed capital today in Jordan. In addition, many startups, particularly ICT companies, cannot go to a bank and take out a loan since they do not have any physical assets, a key requirement to obtaining loans in Jordan. Furthermore, most investors do not know what they are investing in, so they tend to shy away from start-up companies. However, according to Shamlawi, more angel investors are becoming receptive to start-ups. Another challenge is lack of market access. The amount of data in the region is minimal, and as a result, many entrepreneurs are unable to conduct market research.
Another big challenge is finding qualified resources. Jordan graduates five thousand ICT graduates from universities per year, yet this still does not provide the kind of people required for most businesses. At the moment, there is a big gap between the private sector and academia. Shamlawi says this could be because academia is having trouble keeping up with the private sector due to outdated technology or outdated teaching programs. In addition, Ala Suleiman (CEO and Co-founder of Masmoo3) claims that the methods of teaching are also outdated, and that many universities do not teach about entrepreneurship. “At university in Jordan, they teach you how to become an employee,” he said. Unlike other universities such as Wharton, where becoming the next generation’s leaders is a main focus of the curriculum, many of Jordan’s universities seem to be teaching students how to stay in the mold rather than break it.
Another part of the qualified resources problem is the language barrier. While it is possible to do business in Arabic at a small-scale, local level, it becomes tougher to do so once the company because regional or international, especially in the ICT sector. The internet is mostly in English today, and communication with third parties outside Jordan is mostly done in English. As a result, a working knowledge of English is a must.
However, despite the lack of people and financing, one of the toughest barriers for all entrepreneurs is the culture. According to the Oasis500 entrepreneurs, failure is not an option. They claim the culture is very pessimistic about start-ups, and it is an uphill battle for young people in a country with little disposable income.
With all of the aforementioned obstacles, being an entrepreneur in Jordan can be a challenge. However, for women, there is a whole host of extra challenges.
Barriers for Women
The biggest barriers for women are culturally related. “When women get married and have children, they leave their jobs to take care of their children. Then, when some of them want to reenter the workforce, it is hard for them to get rehired since Jordan is a country with high unemployment. As a result of women’s choices to leave for maternal reasons, they are not first priority for hiring,” Abed Shamlawi said. He also said that, especially for married females, it is difficult to find daycare for the children while she and her husband are working.
Another cultural barrier is that women cannot work late hours. I was once speaking with a Jordanian student at the University of Jordan, and she told me the story of a friend of hers who tried to open a bakery. She had to stay in the bakery every night until eleven o’clock, and as a result she had to close down her business. This restriction on working hours is a large challenge for women entrepreneurs since many start-ups require countless hours of manpower, depending on the stage of the enterprise.
The Oasis500 entrepreneurs pointed out that though women’s small businesses are better accepted at a local level, it becomes much harder should the business become a fast-growing start-up and become regional or international. At this level, there may be a lot of traveling involved, and for married women especially with families, this is a difficult task. They also claimed that there tends to be more family support in Jordan for a male in the family starting a business than a female.
Improvements Made and Improvements Needed/A Step Forward A Step Backward
Despite the challenges men and women entrepreneurs face in Jordan, some improvements have been made, and some improvements are still lacking.
According to Abed Shamlawi, the culture is becoming less conservative, and it is becoming more permissible for women to be in the workforce, especially in ICT. ICT is preferred for females since it is considered to be suitable for them. It would be rare, for example, to see a female working in manufacturing or packaging, he said. In addition, Shamlawi said that social security now pays for maternity leave, which helps women in the workforce tremendously. There has also been a new law passed recently that will allow small businesses in about thirty different categories to obtain business licenses to work out of their homes. This is a big game-changer for women, as this will allow them to balance their work life and family life better. However, according to a female entrepreneur who attempted to register her business under this new law, there has yet to be strong implementation.
In terms of government regulations, the banks have made it easier for start-ups to open up accounts. Five years ago, the minimum was thirty thousand Jordanian Dinars (JD), and one had to deposit fifty percent initially. Now, an entrepreneur only needs a minimum of one JD to start a business. However, the laws in place state that if an entrepreneur loses fifty percent of their capital in the first year, the government will warn you. If he/she loses more than seventy-five percent, then the government has the right to shut down the business. Buying a pen could take away seventy-five percent of the money in the bank if there is only one dinar in there. As a result, there still needs to be some changes in the regulations to accommodate the new minimum. An additional regulatory issue is that a business with less than five employees cannot register for social security. Along those lines, a start-up with no physical premises has issues obtaining the necessaries such as an internet line, a phone number, and business license due to the vocational law in Jordan. This is a zoning issue, and many start-ups in incubators, for example, have no physical premises or assets maybe except their computers. In addition, there while Jordan just recently passed an e-commerce law, it is still not in effect.
Another helping hand for entrepreneurs has been help from associations. While there may be a large amount with overlapping goals, there have been some steps in the right direction. Oasis500, for example, is the first seed capital investing company in the MENA region, and it is on the ground creating new companies in the ICT sector. What is unique about them is that they train companies from the ground up, and they teach investors in the region about the benefits of investing in early stage companies. To date, in their first 18 months of operation, Oasis500 has trained over 620 entrepreneurs in their training boot camps, invested in over 52 startup companies, and entered them into their acceleration/incubation program. However, more companies like this are starting to mentor and invest in start-ups.
While a lot has been done and many laws have been passed in Jordan, there is more need for implementation to facilitate start-ups. Despite this needed change, as a country with a good safety record and even support from the top (the King Abdullah II Fund for Development is an anchor investor in Oasis500 though it is a completely private sector initiative upon the request of the King) Jordan seems to have its benefits for budding entrepreneurs. Hopefully, these initial successes will pave the way for future endeavors in entrepreneurship in Jordan.
April 20th, 2015