A (Silicon) Valley Grows in Algeria
Young entrepreneurs are hoping to break Algeria's tenuous dependence on oil by starting new businesses and expanding the Algerian marketplace.
But oil prices tumbled to nearly half their value a year ago, and have remained stuck there ever since. Algeria is now struggling to find a way to make up lost revenue, since the country heavily subsidizes electricity, food, and other necessities for their citizens.
Some Algerians are hoping to use the crisis an opportunity to form companies of their own. Their obstacles—as well as the potential payoffs for the government, entrepreneurs, and investors—are considerable.
Their projects include launching the first video production studio complex in Algiers, advising Algerian advertisers on media planning strategy, and creating their own startup consultancies, think tanks, and conferences, where the more battle-tested among them can coach and coax newbies through the growing pains every entrepreneur endures, and those that are more unique to Algerians.
Indeed, budding Algerian Sergey Brins and Elon Musks face many hurdles their counterparts in the developed world do not. "As a young entrepreneur, I had to make many mistakes and waste money and time I could have avoided wasting if I had had access to more information about how to found and manage a company," Abdellah Mallek, an Algerian entrepreneur, told VICE.
And unlike the flush corridors of Silicon Valley, Silicon Alley, and Silicon Roundabout, securing funding for technology ventures is often prohibitively difficult. Algerian companies are not allowed to take on foreign debt, and as a result, funding is primarily raised through family, personal savings, or a few government programs and startup competitions. "Unfortunately, in Algeria we don't have venture capitalists or business angels," Otaku Events co-founder Chouaib Attoui told VICE. Like a true entrepreneur, Events spoke to me in the early hours of the morning, Algiers time, after his tech conference FtoorCom had just wrapped. He proudly relayed that #FtoorCom had been the top trending hashtag in Algeria that day.
"It is really difficult to find funding for new tech businesses," Mallek agreed, "especially compared to fields like small industries and services, where government funding programs are doing the job. These kind of programs should be adjusted for startups."
Another barrier to engineering a roaring Algerian tech scene is internet access. According to the World Bank, only 16.5 percent of Algerians are connected to the internet, a figure roughly on par with Honduras, El Salvador, and Libya, and far below Algeria's neighbors Morocco (56 percent) and Tunisia (43.8 percent). "We have immense Internet connection issues," Marhoun Rougab, co-founder of communications consultancy Allégorie, wrote in an email. "We thank God for the emergence of the 3G that has changed our lives (this email was sent using my 3G). The government must at all costs work on a strategy for the future. High speed Internet should be available for all."
But Mallek pointed out that for tech startups to be a real game changer for the Algerian economy, connecting more people isn't enough. Despite the millions of connected Algerians, he said, "We're not producing that much, we're just consumers. To switch to producer status, we need to boost e-payment, fund programs for startups, and support the development of tech culture in the country."
But some cards are better stacked in Algerian startups' favor.
Mallek is a passionate blogger, chronicling his experiences in the Algerian startup world and offering prescriptions to investors and inventors. He has blogged elsewhere that "North Africa is a promising market, with little or no competition, where everything has to be built: a real opportunity and a fertile ground for innovation. The tech market is really at its early days, and the one who will penetrate it first will have the biggest market share." (For that to happen, Algeria will have to remove protectionist restrictions on foreign investment.)
Geography is on Algeria's side: It is a "gate to Africa," Rougab said. "Europe is in front of us, and flights are short to most European cities."
And notwithstanding two recent and gruesome terrorist attacks, Algeria is also safer than many of its neighbors. The country went through its own version of an Arab Spring in the 1990s as the Algerian government squared off in a protracted and bloody civil war against Islamist militias that left 200,000 dead. The experience left Algerians wary of upheaval, for better or worse. "People want to live peacefully and normally now," an Algiers doctor told NPR in the early days of the Arab Spring. "And we want to become more prosperous, too. I think once we've done that, we'll think more about democracy."
But despite its stability, proximity, and blank slate of a market, necessity may prove to be the ultimate mother of invention in Algeria, as its formerly oil-reliant economy is forced to diversify or wither on the vine.
Before the drop in the price of oil and gas, the government was "still thinking old school and along the lines of the classic economy," Attoui said. "Now the government is trying to think differently and reshape the private sector's scene and regulations. Since the economic situation became so critical the government has not had the choice of avoiding the startup ecosystem in order to boost the country's economy and break its dependence on oil and gas."
"Since oil prices dropped, the government has started to promote other industries," Mallek said. "Before that they were talking about diversification but without actions. And I think everyone—politicians, the media, universities, developers—has to contribute in raising political interest."
There is no shortage of good foot soldiers. "The younger generation in Algeria is very creative and full of energy," Rougab said. "Their potential is immense and we trust in them to transform this country sooner or later."
The government has begun to do its part. One program, ANSEJ, provides funding and extremely competitive financing for entrepreneurs whose companies will employ at least three people. Another, the Incubateur at the Sidi Abdellah Cyber Park, offers free legal and business development advice, entrepreneurship and marketing training, and low-cost state office space.
As Rougab pointed out, these are not particularly revolutionary ideas, nor do they need to be. "We do not need to reinvent the wheel; models like free economic zones exist everywhere. Why can't we just copy what has worked around the world?"
He sees all the conditions for a startup-driven retooling of the economy in place, and popular mobilization as the final step that must be taken before Algeria can join the ranks of the world's great entrepreneurship nations. "Customers exist and the market is virgin. If you have customers, and you are an entrepreneur, everything else becomes peanuts. So execution becomes your challenge. Relying on governments and large companies will not allow for scalable change. It must be a bottom-up process. It is the only way."
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