Iraq has been in a conflict situation for many years. How can an entrepreneurship ecosystem start and grow in these conditions? What is the future of this ecosystem? Sarah Dhafir, lead for Startup Huddle in Iraq, writes.
An entrepreneurial movement started gaining momentum in Iraq in 2013 when activities and programs began raising awareness of the entrepreneurship field. Since then, one of the country’s first makerspaces, FikraSpace, opened; Startup Weekend was hosted for the first time in Baghdad, and Innovation for Development, a program to help individuals and organizations upskill, was launched by the United Nations Development Program. As young people were introduced to the concept of entrepreneurship, it spread wildly across Iraq.
Before this movement took hold, common career goals for Iraqi youth included graduating from school and securing a job in the public sector. Today, many have their minds set on the private sector and entrepreneurship, with young people joining incubation and training programs to start their businesses.
Bubbling with Entrepreneurial Potential
The country’s entrepreneurial potential has grown in recent years, as several startups successfully raised seed investment – milestones that have encouraged other founders to innovate, work harder on their ideas, and enter the market.
Miswag, for example, is Iraq’s first e-commerce platform. Founded in 2014, the company was designed and implemented by local talents including web development and commercial experts. It started as a website, evolved into an app, and continues to grow. This rising startup received its first seed investment in 2019, raising its investment value to more than USD 1 million. In 2021, Miswag raised an additional $1.6 million in a Pre-Series A round, considered the first of its kind in Iraq.
Miswag is not the only startup to get investment in Iraq. Teami, a customer relations management (CRM) company providing solutions to manage in-field operations for medical agents, is another. It raised a five-figure investment round through the Iraqi Angel Investor Network, led by KAPITA, in addition to a $20,000 grant from the Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH through its project “ICT for Youth in Iraq”.
Alsaree3 Group, the first on-demand food delivery company in Iraq, closed a seven-figure bridge round in late March 2021, coordinated by Iraq Tech Ventures and Innovest ME.
Iraq-based greentech startup KESK raised a six-figure seed funding round in 2021 from Euphrates Venture Capital Fund. KESK offers green building materials to construction companies as well as solar energy products. As the third company to receive investment from Euphrates Venture Capital Fund, KESK joins the growing group of strong startups that call Iraq home.
These are only a few examples.
Growing the Entrepreneur Support Ecosystem
While Iraq has significant potential for founders and startups, there are many challenges and roadblocks that entrepreneur support organizations are working to eliminate. Business registration, for one, is a very costly and time-intensive process in the best of times, and it is made more difficult in Iraq with the lack of laws regulating online or technology businesses. To be registered, a business must have a physical location – leaving many web-based companies without the protection and freedom provided to registered startups.
This issue has been a key topic for many business and entrepreneurship NGOs, including The Station Foundation for Entrepreneurship which is working on a related policy paper. The Station successfully cooperated with governments in Baghdad and Erbil to get an exception that allows startups to register using the address of a co-working space. This result demonstrates the willingness of some government departments to support early-stage startups.
The Global Entrepreneurship Network, in partnership with the United States Embassy in Iraq and the United Nations, has also been working with the government on implementing a new system that makes it easier to register and operate a business. In September 2021, they collaborated to launch a new "online single-window” government portal that links all relevant agencies in a one-stop interface, improving and simplifying the registration and regulatory processes.
Another challenge facing entrepreneurs is access to funding, as there are few investment channels, though there are signs this may be changing. Some banks, such as Ashur International Bank and The National Bank of Iraq, offer grants and low-interest loans for small businesses, which shows the willingness of the finance sector to support startups. Major investment initiatives, such as Iraq Venture Partners and the Iraqi Angel Investor Network, led by KAPITA and Euphrates Venture Capital, are also emerging.
Iraq Venture Partners, a new fund, plans to invest in early-stage startups, from the seed stage to series A. The fund will focus on Iraq’s innovation and knowledge economy across several industries. Investments will be shared between new startups and follow-on investments.
There are other financial challenges, too, including financial literacy and trust in the financial industry. The lack of international e-payment options makes international expansion challenging without a foreign bank account, which in turn limits the use of e-payment gateways in Iraq.
Support organizations are also working to address levels of local entrepreneurial education and experience. As the ecosystem is still new, few experts are available to share their experiences with founders and mentor them to scale up. In 2021, the Station Foundation launched a GEN Program, Startup Huddle, in Baghdad and Mosul, to help address this challenge. The program provides an opportunity for the ecosystem to connect and learn about local startups, their growth, and the hardships they face. Since 2021, the program has supported 32 startups at 16 events that engaged over 700 attendees and helped build a community of help and support.
Embracing New Opportunities
2022 has been a strong year for the Iraqi ecosystem. For the first time, Iraq participated in the Entrepreneurship World Cup, a global pitch competition reaching founders in 200 countries. The competition is showcasing Iraq’s startups to the world, alongside the ecosystem heroes who are building this ecosystem from scratch. Most of all, it showcases the potential of these businesses, their willingness to grow, and their appetite for investment.
Despite challenges, startups in Iraq are growing, founders are working on scaling their companies, and the opportunities are only growing in number.