a real arab city

I took a 24-hour detour to Damascus (Al Sham as the Arabs call it), and I was blown away. Admittedly, I had never been to Sham and didn't know much about the City. Further, when I would mention to a Lebanese person that I was going to Sham, the typical response was, with nose up in the air and a downward lip curl, "Oh...why do you want to go there?" as if it's a desolate backwards place that the refined Lebanese do not visit.

Thus, to my surprise, Sham is simply amazing. It's a beautiful, clean city that is full of life and so much history. What I liked most is that people are genuine; truly genuine in the full sense of the word. In Beirut and Amman everyone wants to be "Western." It's as if they work hard to deny their heritage in order to be what they perceive as something "better" - more American or European. In Sham, this is not the case. People are true to who they are and proud to be Syrian. They are also generally well-educated, friendly, pleasant; simply top-class.

(From top left, clockwise) Our hotel courtyard, Old City, Ummayad Mosque, Old City Souq

Sham is what I dream a real Arab city should be. Full of beautiful architecture that tells its rich history, respectful of its heritage; yet modern, intellectual and comfortable. The University of Damascus, with over 85,000 students, is at the heart of the City. Society is very open. People from a mix of religions coexist and collaborate daily.

With so little time, I didn't have a chance to experience its nightlife. But a close friend who was visiting at the same time stayed a couple of extra days and partied with a Syrian friend, the Syrian way. When he went home at 4am, his friends were still going strong. He explained it as the most fun he had during his entire trek through the Arab World. Fun clubs, great music, reasonably-priced alcohol, approachable people. And the girls.... Compared to the often harsh glamour of Lebanon, the girls have a delicate natural beauty. They seem less preoccupied with their appearance and more interested with the quality of conversation.

The food is also amazing. I believe the Syrian kitchen is unparalleled in the Arab World. Some of my Palestinian and Lebanese friends may beg to differ, but as a Palestinian myself, I think the Syrian kitchen is #1. I'll share with you one of the Syrian delicacies "Habara Neye" (raw meat). The pictures from left to right show the progression from serving plate presentation, to composed on my plate, to fully eaten - all in under 5 minutes. Yum!

In all, this is definitely a place I want to return to and experience more fully. As harsh as this may sound, I think Damascus puts the rest of the Arab world to shame.

other entrepreneurial initiatives

I want to give mention to other initiatives supporting entrepreneurs in Lebanon:

1. American University of Beirut Olyan School of Business Entrepreneurship Center. This Center has received $5 million in start-up funding from the Al-Maktoum Foundation. Tony Feghali, PhD and Lecturer in Business Information, is the Director of Corporate Relations at the Business School and interim Director of the Entrepreneurship Center. He's energetic, pragmatic, and modest. He's the kind of guy that believes in what he is doing and isn't above working to get done whatever needs to get done. Tony is wary of all of the entrepreneurship competitions in the region. "I don't know if they are good or bad," he said. In Tony's opinion, there is so much buzz around these competitions but little focus on what institutional and policy change is needed to help these entrepreneurs succeed. I agree with him. I've seen lots of competitions but little discussion of policy. During the Spring semester, he hopes to have a gathering of all regional entities interested in promoting entrepreneurship to discuss these issues: venture funds, non-profits, government entities, and entrepreneurs. Tony also offered to be a regional advisor for my masters thesis and we're applying to analyze data and author a report for an organization that just conducted some exciting regional surveys on entrepreneurship. I hope we win the RFP bid. I'm looking forward to working with him.

AUB Main Gate at Night

2. The Rootspace (http://www.therootspace.org/). This non-profit supports entrepreneurship, innovation and social entrepreneurship in Lebanon. The organization organized Global Entrepreneurship Week events in Lebanon, provides an online collaborative space for entrepreneurs and provides consulting services to small businesses and NGOs. Its founder, David Munir Nabti, is also a graduate student at AUB. We have very similar regional interests and might work together on a project with Tony.

3. The Bader Young Entrepreneurs. I mentioned them in my last blog post. You can check them out here: http://www.baderlebanon.com/. I briefly met Bader's Director, Joelle Yazbeck, and plan to connect with her again.

4. Capital Trust - MENAVEST and EuroMena Funds. This European investment bank and investor has focused on the Middle East and North Africa (MENA) region. They have three funds investing in growth-stage opportunities across the region and seek emerging market returns over the medium to long term. They particularly look for companies with the potential to scale from a single country market to a regional market, and they help them to realize this potential. Thus, their aim is to take already established entrepreneurs to the next level. Unfortunately, I didn't have time to meet with anyone from Capital Trust but am tyring to set up a conference call with them.

5. Manara Capital (http://www.manaracapital.com/). This is a family fund investing in the Middle East, Europe and the U.S. As a family fund, their mandate is very broad. They invest across geographies, industries and stages of companies, investing in both private and public entities. Thus, their aim isn't to support entrepreneurs per se. However, the guys managing the fund are smart investors and support of entrepreneurs is often a by-product of their activities. For example, as investors in Al Rifai Roastery, the leading provider of nuts in the Arab World, they are helping the Company expand globally.

nothing ventured nothing gained

"It's the office building right behind the large smashed building," said Nagy (pronounced Na-Jee) on the phone. "You can't miss it. See you at 10:30."

Indeed I didn't miss it. I walked directly into his office, which in scrappy start-up fashion had no receptionist, to the sounds of Nagy ending a Skype call with Paris. He greeted me enthusiastically, "Can I offer you some tea? We are tea fanatics around here. I have 80 different types of speciality teas."

Luckily, I love tea. "Yes please," I said. "Choose according to your taste." He served me a delicious green tea, apparently from China, which he steeped for me himself.

"I'm starting a company that sells speciality teas," He continued. "We're trying to prove that with the right marketing and execution, you can easily build a successful company out of Lebanon."

Nagy is an entrepreneur turned venture capitalist running the Building Block Equity Fund with his partner Fadi Daou. I've written about how Lebanon is a land of "flash and no cash" and how there's little opportunity here. Together, this duo is trying to change that. They recognize the large gap between (1) microfinance and small business loans available for the mom & pop shops and (2) private equity available (largely from outside of Lebanon) to fund large companies and real estate development projects. The entrepreneur who wants to build a scalable growth business is simply out of luck unless he has large sums of family money to support him.

"We've screened over 70 companies during the past year," said Nagy. "If a company is not venture-fundable, we still try to help them by connecting them to the right people or providing some strategic guidance." Nagy and Fadi are also involved with the Bader Young Entrepreneurs Program, which provides mentor ship and connections for young entrepreneurs and promotes entrepreneurship education in unversities in Lebanon. Often, Nagy and Fadi guide entrepreneurs to the Bader program for help.

The Building Block Equity Fund itself is structured as a "real" venture fund and has already made several investments with several more in the pipeline. It has limited partners, standard fund terms, and invests using standard preferred securities. This is actually rare to see in the Levant. Most of the other funds I have met with are either (or a combination of):

1. All family money. Thus funds are all coming from one source and often managed by family members. This typically means the fund mandate is very broad and the investment strategy lacks focus.

2. Evergreen. There are no capital commitments on the part of investors. As opportunities come up, investors have the option to fund. This means there is no critical mass of capital dedicated to funding a particular investment strategy.

3. Not raised. Surprisingly, many operational funds haven't actually raised most of their capital yet. An example is a fund with a $50m goal that only has $2-$5m of capital committed for investment. It's very difficult to have an investment strategy with risk diversified across various types or stages of companies when the amount of capital and number of possible investments is unknown. This can lead to a failure of the venture model before it is even given a chance to succeed. Very bad for a region just starting to experiment with venture capital. I'll write more about this problem later.

In my opinion, the Building Block Fund has the right strategy: take a pool of committed capital and invest it in early and growth stage Lebanese and Lebanese-related companies with charismatic entrepreneurs and the potential to scale. Granted, narrow geographic focus in a country that has been prone to conflict in the recent past is risky. However, if your goal is to promote economic development in Lebanon via entrepreneurship, this is the right way to do it. And who better to execute on the strategy and manage the risk involved than a couple of experienced Lebanese entrepreneurs and investors?

I'll keep my eye on the Building Block Equity Fund during the next few years. I anticipate hearing some good news coming out of their portfolio companies.

a beautiful country

Today is my first wedding anniversary. In celebration of that, my husband and I spent the past two weeks in Lebanon. While I've mentioned in several posts how beautiful the Country is, I haven't done its beauty justice in pictures. Here are a few shots from some of the things we did together.



Mountain View North of Beirut

Seaside South of Beirut

Mountainside North of Beirut

Mountain Castle North of Beirut

Newly Renovated Downtown

Southern Landscape

Southern Seaside Sunset

no opportunity

Lebanon is packed. The airport, the ground border crossing, the streets, the tourist attractions, the restaurants, the clubs, the pools and beaches; all packed. Lebanon is such a vibrant country. So full of life and beauty. However, the energy of the place in the summer belies the true economic state of the country. Regardless of whom you speak to, the conversation often reverts back to the same statement, "there's no opportunity here."

Out at dinner with some friends, I couldn't help but notice, as people sat with elbows on the table, the row of designer watches on both men and women: Cartier, Rolex; Tag Heurer was the low-end. Wine constantly flowing, vodka bottles bottomless, I had to wonder, "where is all of this money coming from ?!" Rooftop bars and restaurants are the "in" thing in Beirut. I think the Lebanese are so numbed by the wars they have been through that demolished buildings simply fade into the nighttime skyline. But to me, things look different. I've never seen a contrast as striking as a beautiful glowing bar against a backdrop of destruction:

So where is all of the money coming from? How is it that the food and alcohol and designer watches are in such abundance while so many buildings remain destroyed and people continuously claim, "there is no opportunity?"

Standing at a rooftop bar, I leaned over and asked a friend, "How many of these people are NOT living in Lebanon?"

"90%," he responded. "Most of them are Lebanese, but very few actually live here."

Most of the money in Lebanon is coming from outside of the Country - the US, Europe, and the Gulf. Many beach clubs and real estate developments are actually owned by people from the Gulf. Some are owned by a handful of traditionally wealthy Lebanese and Syrian families. But largerly, the self-made Lebanese made himself outside of Lebanon.

This same friend told me that a recent college graduate is doing very well if he earns $1,000 per month. That's less than 1/4th of what a U.S. college graduate who is "doing very well" earns. However, the major cost of living components are very high. Apartments in Beirut cost $300-$400 per square foot - you can't buy anything decent for less than half a million dollars. Gas and cars are more expensive than in the U.S. And private school education is essentially required if one wants to go to college.

The people are generally very well educated. But industries are small and there's little opportunity to build a business beyond family money. There is virtually no venture capital - Building Block Equity Fund is the only real venture fund I could find.

While electricity is out 3 hours per day in Beirut and 12 hours per day in the South, politicians are busy playing to sectarian interests rather than working to fix the Country's problems.

Having a drink at the rooftop bar, enjoying the energy of the place and the stunning Beirut skyline, my friend said, "Lebanon is such a rich and beautiful country. I love it!" He paused and continued, "If only there was opportunity here, I would come back."

united under one sky

"All of us under the Lebanese sky" (pictured) and "Our future together." These were two of new Lebanese Prime Minister Saad Hariri's campaign slogans during the June elections. And you can't miss them. They appear on billboards with bright blue sky backgrounds all over the country, particularly in the more Sunni areas. The slogans express a nice sentiment - that of unity, an undivided nation. But for a country with a sectarian government and fresh civil war scars, most visible of which are war-torn buildings all over Beirut City, the slogans are a bit ironic.

When I talk to the Lebanese about Lebanese politics, they say that no candidate has a real political platform. The candidates don't discuss social or economic issues, or political reform. Rather, they use broad slogans like the ones mentioned above. "People simply vote along sectarian lines," they say.

Lebanon's government is a parliamentary democracy structured under a framework of Confessionalism, whereby the highest offices are constitutionally reserved for representatives of certain religious communities. Thus the President must be a Maronite Christian, the Prime Minister a Sunni Muslim and the Speaker of Parliament a Shi'a Muslim. Seats in parliament are also divided as half Christian and half Muslim, with Druze considered Muslim. While the various Muslim and Druze parties tend to command loyalty, the Christians tend to be more divided.

Thus, can a country with a sectarian political system by design, a 15-year history of civil war, and a new generation that continues to vote based on sectarian affiliation rather than political platform really be united under one sky? Traveling around the Country one clearly sees divisions based on the election posters in the area. The East and North are full of Hariri posters. The South is full of posters for the Shi'a Amal movement and for Hezbollah. Afterall, when the Lebanese government failed for years to provide basic services to villages in the South, it was Hezbollah as a civil organization that provided healthcare, education, infrastructure, and defense. Despite the fact that Sa'ad Al Hariri's March 14 Alliance won a majority of parliament seats (71 of 128), the Hezbollah and Amal-led March 6 Alliance won the popular vote (55% vs. 45%). Is this a nation united or a nation divided?

War-torn buildings like this one abound in Beirut

I have some reason to think things will gradually change in Lebanon. First, The Lebanese Army has strong and positive relations with the Hezbollah militia. It's the Lebanese Army that mans checkpoints throughout the South, not Hezbollah. Second, Lebanon was united in 2006 against the Israeli attacks. The Lebanese felt a sense of oneness against an aggressor, minimizing their own internal divisions. Third, Saad Al Hariri won the elections with his unity campaign. Perhaps the March 14 Alliance didn't win the popular vote, but election day was largely uneventful and the results were accepted by all sides. The violence that was so feared did not materialize. Finally, parliament passed a law requiring that all election posters be removed from the streets. Posters signify sectarian affiliation and the new government wants these visible symbols removed. Walking around Beirut one can already see where posters have been torn down.

Thus, while some people might say Lebanon will always experience strong sectarianism and the new generation doesn't differ from the old, I disagree. I see signs of change. The change will be gradual. It will take more than one generation. But I think it is already coming.

flash and no cash

I quickly stamped my passport and grabbed my bag from baggage claim. The lines were long but not for Americans, so I managed to get through quickly. As I walked passed customs in a single file line with dozens of other people and headed for the exit, a couple of teenage girls handed me a shiny little flier: Crystal Night Club - Paris Hilton Party. Tickets: $100 VIP, $150 Prestige. "Paris, why are you following me around the world?" I thought to myself, "I don't care to see your skinny, skanky self everywhere I turn." As I walked through the double-doors I was greeted with the largest crowds I had ever seen in an airport arrival terminal. "Welcome to Lebanon!" I thought to myself. "The most beautiful land of flash and no cash."

Three days later I had only seen a sliver of Lebanese society. Four night clubs, three nice restaurants, two beach resorts, and one newly renovated downtown. Valet parking abounds for $3. The majority of conversation is in English. The people are truly a cocktail. I don't even feel like I am in an Arab country.

However, I did see some signs of the Country's poor infrastructure. Many bridges, beaches and power plants were destroyed by the Israelis during their 2006 war on Lebanon. Thus the country is borrowing electricity from Egypt and Syria, and the power is out for 3 hours every day, even in some office buildings. But the power never goes out at the nightclubs. After all, the expatriates, tourists and upper class Lebanese must be satisfied. Dancing at a rooftop club with the Beirut skyline extending along the water as far as the eye could see, my husband leaned over and told me that during the war people danced as missiles lit up the air. The Lebanese never miss a party!

Wednesday Night - Bubbles Rooftop Club

Thursday - La Plage Beach Club. In quintessential Lebanese style, the writing on the wooden planks in the background says: "It is ok for me to have everything I want."

Thursday Night - Sky Bar. Rooftop club, outdoor air-conditioning, reservation only, $25 Belvedere Vodka drinks, beautiful Beirut skyline.

Friday - Riviera Beach Club Party.

Friday Night - Sky Bar Sean Kingston Performance.