How The Arab Spring Planted Seeds Of Innovation In Egypt by Knowledge@Wharton
Entrepreneur Dina Sherif talks about innovation in Egypt.
The 2011 uprising in Egypt that saw the overthrow of longtime President Hosni Mubarak was more than just a grass-roots political movement for the country. The historic event ushered in a new era of thought about how to rebuild Egypt’s struggling economy. Government jobs that were once the backbone of society are no longer a reliable option for the burgeoning masses of youth, who are turning toward the private sector and entrepreneurship — finding opportunities their parents never had.
Dina Sherif, CEO and cofounder of Ahead of the Curve (ATC) and an advisor to the Egyptian president, wants to guide that youthful energy through her enterprise. At ATC, she seeks to promote entrepreneurship and sustainability through innovative business models. Sherif is also the director of the Entrepreneurship Center at the American University in Cairo and an Eisenhower Fellow. She talked recently with Knowledge@Wharton about the profound changes taking place in Egypt and discussed her vision for the country’s future. What follows is an edited version of that interview.
Knowledge@Wharton: What is the level of entrepreneurship and sustainability in Egypt and the Arab world right now?
Dina Sherif: I’ll talk a little bit about Egypt, but I’ll put it more broadly in the context of the Arab region. Sixty-five percent of our population is under the age of 34. In Egypt, we have the highest youth unemployment rate in the Middle East. I would say it’s one of the highest in the world right now.
Job creation is the top challenge that we face across the entire Arab region. Our private sector in comparison to other emerging markets is still relatively small. Traditionally, in a country like Egypt, our youth depended on the government to employ them after they finish college. That’s really no longer a possibility, especially with the huge youth bulge that we have right now, so we’re looking to the private sector to create those [needed] jobs.
As you might know, the majority of jobs are not created in already existing large businesses and multinationals. You really need to see jobs created through an explosion of small and medium enterprises. For the past decade, I think there’s been a lot of focus on how do we create an entrepreneurial culture within Egypt and then the Arab region to solve the job creation problem? How do we create the policies in an enabling environment required to see fast business growth?
Knowledge@Wharton: Is the idea of entrepreneurship one that is starting to catch on?
Sherif: One of the biggest challenges for our youth is they really want to transition to adulthood. If you can’t find a job in a company and you can’t find a job in the government and civil society is not going to create the kind of jobs required, you’re going to go out there and create your own job.
“Job creation is the top challenge that we face across the entire Arab region.”
I think definitely Egypt has a booming startup culture. There’s [also] a booming startup culture in Jordan, one that is growing in Dubai. Saudi Arabia is starting to see a lot of focus on entrepreneurship and new business growth.
Obviously, we’re also looking to the United States for a lot of knowledge, experience and expertise to be able to jumpstart and do it quickly. I think the U.S. has one of the most advanced and sophisticated ecosystems to support new business growth in the world. You have the Small Business Administration that really pushes forward small business growth from the government level. We need to look at those models to help ourselves move a lot faster.
Knowledge@Wharton: Are countries within the Middle East working with each other on a plan for the region?
Sherif: That’s a great question, and it’s definitely one of the challenges that I talk about at Ahead of the Curve. One of the biggest problems for entrepreneurs in the Middle East is that it’s very hard to cross markets in the region. It’s very hard to move from one market to the other, not just in the region but elsewhere. Very few entrepreneurs are able to reach that kind of scale, and oftentimes when they do they’ll leave Egypt and come here to the U.S., for example. We have quite a few Egyptians who come and start a business out of Silicon Valley, those who work in tech.
In order for entrepreneurs to cross markets to scale their businesses, we really need to open our markets. We’re still, by and large, protectionist economies, which is now hindering our own ability to create sustainable economic growth. [But] we’re seeing some changes. There is a lot happening in the ecosystem with a lot of us. At the Center for Entrepreneurship at the American University in Cairo and at my company, a lot of people across the region who are working on entrepreneurship are really trying to find ways to build a collaborative ecosystem to see faster growth.
“One of the biggest problems for entrepreneurs in the Middle East is that it’s very hard to cross markets in the region.”
Knowledge@Wharton: Tell us about Ahead of the Curve.
Sherif: Ahead of the Curve was founded not too soon after the revolution in Egypt. I and my cofounder really wanted to work on developing economies through the private sector because I had a background and focus on philanthropy and looking towards civil society to see developments happen. Prior to that, I did a lot of work at the African Development Bank and with big donors, and I just realized that development from that angle was too slow.
The private sector has a lot of potential to solve social problems at a much faster pace and using a lot more innovation. Ahead of the Curve was built to work with the private sector to help them create inclusive, profitable business models that are sustainable and to build our societies in a much more shared, value-driven way. We do a lot of work with large companies and multinationals. But then we realized that’s a top-down [approach].
What are we going to do [from the] bottom up? We created a subsidiary called Entrepreneurship with Impact Ventures, which is the first impact investment fund in the Middle East to work on early stage startups with social impact. It’s been a really cool journey so far. We’ve invested in a number of [ventures that work on] business, health care, retail and transportation issues. I see a lot of potential in that specific startup space.
Knowledge@Wharton: Is it at a stage where it’s getting off the ground and the impact hasn’t been fully felt at this point?
Sherif: I would say that we have a couple of really good examples of businesses that have moved into their growth phase. I think when it comes to impact entrepreneurship, investors are starting to catch on that this is a space that can be very lucrative while at the same time solve major problems. I mean here’s the story in the Middle East — we don’t have the luxury of time. We just really don’t. We have too many problems.
And if we don’t create jobs fast, you know what happens? Youth become disillusioned, they are recruited by people like ISIS and the Muslim Brotherhood, and we really don’t want to see that. We want to give young people the ability to transition into adulthood and have a good livelihood. I think right now we’re really encouraging young people to start businesses that will be profitable with the potential for fast growth, but that will also simultaneously solve a major problem in society.
“If we don’t create jobs fast … youth become disillusioned, they are recruited by people like ISIS and the Muslim Brotherhood, and we really don’t want to see that.”
Go back to the roots of capitalism, which is really creating value for the business and for society. We somehow have drifted from that during the 20th century and our industrial revolutions. [Right now,] we have become so focused on tech and creating the next new app we forgot that businesses are meant to really solve problems. I think [the idea of social business is one] that’s growing in the Middle East, which is really interesting in comparison to the rest of the world. We’re seeing a lot of these businesses emerge.
Knowledge@Wharton: In terms of innovation, changing the business model of health care is something that is talked about a lot here in the U.S. How much of that do you see in the Arab region?
Sherif: Health care is something that’s very close to my heart. I’ve seen a lot of people suffer as a result of dysfunctional health care systems, specifically in Egypt and in many other Arab countries. We have a heavy focus on health care and finding businesses that are innovating in health care. We created a program called The Impact. It’s a five-day boot camp to train young people on how to design, build and create a sustainable, scalable, social business where we always use health care as a challenge in the hope that we’ll find businesses that we can invest in.
We do have a couple of rising stars in the Middle East in health care. One of them is a company called Smart Medical Services. A big problem for Egypt is that we’re a population of close to 95 million, and most people are falling through the cracks. It’s very hard for them to get access to quality health care, and our health care system is still mainly built on a pay-cash-get-service system. A lot of them don’t have health insurance.
We invested in this business with an entrepreneur who created an amazing new model to provide affordable health care insurance to those who are middle class and below, targeting specifically small and medium enterprises who can’t afford the big health care insurance providers. He created a cash card, which means basically anybody could buy this cash card, get into a system and get access to these services at a discounted rate. He’s at a point where he has grown so fast and is doing so well that a lot of other global players are looking to buy him out right now. That’s a great success story and an example of real innovation within our health care system.
Knowledge@Wharton: What is the state of philanthropy there?
Sherif: The Middle East has one of the richest cultures of giving in the world, but it’s largely charitable in nature. I would say over the past 15 years we’ve seen a shift from charity to philanthropy that is really strategic and very institutionalized and focused on getting to root causes. We’ve seen a rise in foundations, both in the Gulf countries and outside of the Gulf that are really tackling serious issues in education, women’s issues, health care issues. I think just like in entrepreneurship where we’re seeing a real shift to creating fast-growth businesses specifically in tech and impact entrepreneurship, we’re also seeing a shift within the philanthropic sector where people are thinking that with this wealth we need to quickly do something strategic with it. I think it’s been a bit slow, but it’s coming together. It’s a very important part of our society. We do give back a lot.
“Egypt is a great place to do business. It’s a huge market. There’s a lot of potential for American businesses.”
Knowledge@Wharton: Are there many companies like yours that are looking to help the cause of so many startups and entrepreneurs?
Sherif: I think we do need to see a lot more people working in this space. I think we need to see a lot more of, ‘it’s OK to make money and do good at the same time.’ The Middle East has a culture and Egypt has a culture that if you do good, you have to do it quietly. You can’t be very open about your giving or you can have a successful business, but your philanthropy is something else.
But I think all of this is being disrupted because there’s an urgency. We just don’t have time. This is the age of technology. Change is not going to be incremental anymore. It just can’t be [the same] because technology is going to accelerate everything. I think the Middle East is getting into that game of really capitalizing on great wealth. There is a lot of wealth in the region, and we just need to capitalize on that and channel it properly and really support the potential that our youth have to create solutions to our problems through viable, profitable business models that can be scaled.
Knowledge@Wharton: But the challenge that you run into is the fact that one country won’t do business with another.
Sherif: Correct. And this is where policy comes in, which is part of the reason why I also base myself out of a university and have a heavy focus on doing policy-related research. We do need our policy makers across the region to be creating environments and ecosystems that are collaborative, that will allow real job creation to happen and to see an exponential growth in startups if we really want to see our economies grow in the way that we need them to.
That requires policy, and it requires the governments being willing to create that environment. It’s a slow process. But I think what’s interesting in the Middle East right now — and this is common in the U.S. — we have a lot of really successful entrepreneurs who have created very successful businesses, and we’re pushing them to step up and really support these young entrepreneurs. For the businesses that have succeeded in working across markets, we really push them to pass on those lessons and that experience to new entrepreneurs and to help them access other markets.
“What the uprising did in 2011 was that it really showed people that if they join forces they could create change.”
At Ahead of the Curve, we have a regional mandate, and one of our visions for the future is to be able to create multi-node accelerators. To have an accelerator in Cairo running at the same time as an accelerator in Malaysia running at the same time as an accelerator in the U.S. and in Pakistan, and having all of these cycles of entrepreneurs being accelerated at the same time and connected to each other in the hope that they will help each other move into the markets that they already exist in. That requires resources and fundraising. We hope that we’ll be able to make that vision a reality because I think that’s another solution to helping entrepreneurs move into different markets and to scale.
Knowledge@Wharton: Beyond health care, what are the other sectors that should be focused on?
Sherif: Energy. Education. Water. Environment. Infrastructure for sure. Transportation. We have huge issues related to traffic and transportation, specifically in Egypt. Our problems are endless. It’s pretty much you could do anything and it will have real societal impact if you’re focused enough.
Knowledge@Wharton: Is there a market for entrepreneurs in the U.S. to be able to scale their ideas and take them to Egypt and other places?
Sherif: Absolutely. I was here with a private sector mission in Washington, D.C., about three weeks ago lobbying on behalf of the business sector in Egypt, and that’s exactly what we were saying. Egypt is a great place to do business. It’s a huge market. There’s a lot of potential for American businesses there. There are a lot of fears that I think are unfounded, but for the American companies that exist there and the American multinationals, they’re still there and they’re still thriving and they’re making quite a bit of money there because it’s an untapped market. I think there’s huge potential for American businesses to come to the Middle East. And I think there’s huge potential [as well] for the opposite.
Knowledge@Wharton: As you look back on it, how important was the uprising in terms of starting Egypt on a different path?
Sherif: It’s a sensitive topic for me because I was there. The uprising, I think, was an awakening because for the longest time people felt they had no power to create change. Prior to the Egyptian revolution, we had seen a … rise in volunteerism [among the youth]. There was a rise in social activism, and that will inevitably always become political at some point. I think what the uprising did in 2011 was that it really showed people that if they join forces they could create change. Transitions are cyclic, so there are ups and downs. I think we’re in a difficult point in our transition right now, but I think our hope [lies with the] Egyptian youth. I do not see them as a problem. I see them as a huge asset that can really create positive change.
I think that’s what we’re trying to do through Ahead of the Curve, through the Center for Entrepreneurship, through all of the players that have emerged in our ecosystem, is to really harness that potential and really help these young people take ownership of their societies.
“I believe in tipping points, and I think we’re getting there.”
Knowledge@Wharton: I’d be very interested to know what millennials are like in Egypt.
Sherif: I think it’s the same [as the U.S.] In Egypt, 65% of our population is under the age of 34. We have a very young population right now. I’m a professor. I teach, so I deal with millennials every day. I don’t think they have had the kind of impact that we’re seeing here in the U.S., but I think their time is coming. We will see these millennials doing things very differently. We see them through the social entrepreneurs that we support.
A lot of them say, “You know what, we don’t care what the government does or doesn’t do, we’re going to take matters into our own hands and we’re going to create parallel systems.” And that will inevitably have a whole other impact. You don’t see my generation or those after me talking like that. These [young] people use technology, and you don’t need to get government permission to use technology, per se. And that goes viral.
I believe in tipping points, and I think we’re getting there. This is why we’re all working so hard to support the ones that are succeeding to create those role models and to hopefully turn that ripple that we’re seeing into a massive wave. I think the Egyptian government will eventually realize that these people can really create positive change and learn to support them.
Knowledge@Wharton: Going back to something you said at the beginning, if some of these young people don’t have the expectation that working for the government is a possibility, they have to think of something else to do.
Sherif: That’s exactly where everyone is right now. What we’re all really rushing to do is to help them channel that energy into something that will lead to a positive growth trajectory for Egypt. That needs a lot of resources, a lot of commitment, and we’re working really hard and trying to do that because I think Egypt has huge potential.
It’s a great country. It’s a beautiful country. It has heritage — and some of the best diving in the world. Beautiful people. And I think there’s a lot of potential to really build up our economy in a sustainable way and to actually be a leader in that space. I think we could really be a leader in impact entrepreneurship — and for the world across emerging economies. I think what’s happening in Egypt is fascinating.
Knowledge@Wharton: Is it your hope that 10 years from now we’ll have a much different discussion?
Sherif: Ten years from now, I promise you there will be so many stories of success and innovation and awesomeness coming out of Egypt, I won’t know which to choose from.