When Arab explorers traversed the deserts and seas centuries ago, they relied on an astrolabe, an astronomical navigation tool, to find their way.
Technology entrepreneurs finding their way through the complexities of the Middle East are turning to a modern-day version of the ancient instrument: AstroLabs, a startup accelerator in Dubai.
The Google Inc.-backed technology hub opened for business in October, with 42 startups plucked from among 250 applicants calling the sprawling ground-level space their home. Inside, there's a cafe, desks, video-conference rooms, access to blazing-fast Internet and a "coding cave"—a scene straight out of Silicon Valley or San Francisco. A device lab designed by Google is littered with iPhones, Android smartphones, tablets and computers, used by startups to test their mobile applications and content.
One of the aspiring entrepreneurs is Lamia Tabbaa-Bibi, creator of IReadArabic.com, a digital library with more than 100 books for children. She got a business license, work space and access to mentors at AstroLabs. About 30 schools in Jordan, Saudi Arabia and the United Arab Emirates have subscribed to the website, which has its roots in videos that Tabbaa-Bibi began producing to teach her toddler son Arabic.
Tabaa-Bibi is trying to address what she sees as an unmet need in the Middle East: insufficient educational Web content in Arabic at a time when many private schools in the region are putting more emphasis on English.
"I'm trying to hire now, and can't find someone who can write an e-mail in Arabic," Tabbaa-Bibi said. "It's quite tragic."
While the Middle East and North Africa have about 200 million Internet users spending an average of six hours a day online, they mostly turn to providers outside the Middle East to access apps, content and business tools, according to Mohamad Mourad, managing director of Google Middle East and North Africa. AstroLabs' goal is to remove some of the barriers that startups face so they can create new homegrown businesses and target customers globally.
"It's very simple: supply and demand," Mourad said in a speech last month. "The MENA region requires a lot of products and services, just to satisfy the demand in the region."
A bronze astrolabe hangs in the entrance of the new accelerator, located near Dubai's media and technology hub, just off its main highway, Sheikh Zayed Road.
"We've used that symbol really to symbolize the journey of the entrepreneur and the type of help we try to provide," said Muhammed Mekki, who co-founded AstroLabs with Louis Lebbos. The duo are behind Namshi, a Dubai-based online shopping portal with about $100 million in annual sales. They ran startup workshops across the region for several years before teaming up with Google to open the tech hub last month.
Launching a startup in the Middle East isn't easy. Entrepreneurs can face a mountain of legal and regulatory red tape. Workspace is expensive and it's hard to find skilled staff. Funding is also scarce because of the lack of a developed venture capital industry.
Entrepreneurs from 27 countries, from Morocco and Australia to India and the Philippines, have signed up. AstroLabs and Google were especially interested in startups with ambitions beyond Dubai, Mekki said. Among them: Deliveroo, a U.K.-based online food delivery portal, which recently received $70 million in a funding round and is looking to expand in the Middle East. The Irish founders of Lovin Dublin are replicating their popular online publication featuring restaurant reviews and lifestyle content for their new site, Lovin Dubai.
Startups pay for packages that range from a "moonlighter" deal that includes access to work space for 1,000 dirhams ($270) a month, to a one-year contract with perks such as a company license, a mailing address and reserved desks and storage, for 3,500 dirhams a month. All have access to mentors. The space is inside a free zone, which allows foreign ownership and doesn't impose taxes.
AstroLabs helps alleviate some of the hurdles of opening a business in Dubai, which has transformed itself into a regional hub for trade, finance and commerce. Tarig El Sheikh, a former investment banker and founder of Beneple, a cloud-based human resources management platform, said the cost of failure is still too high in the region.
"If you're in the Middle East, you're really putting yourself out there." said El Sheikh, who recently sold his startup. While the infrastructure to help entrepreneurs is rapidly evolving, he said there's more to be done.
Google is betting that its investment in Dubai's startup scene will help entrepreneurs connect with venture investors, and each other. Members of AstroLabs also get access to more than 20 other Google-backed tech hubs around the world with similar facilities. Next month, Google is bringing a dozen startups focusing on travel and hospitality from across the world to Dubai for an immersive program on how to access new markets.
Bigger technology companies are starting to take notice, said Yasar Jarrar, an adviser at Bain & Co. in Dubai.
"They identify places where there has been a small trend over the last five years of new startups making some money," Jarrar said. Success stories include Dubai-based Souq.com, co-founded in 2005 by Ronaldo Mouchawar and two Jordanian colleagues, which says it's the largest e-commerce site in the Arab world with more than 30 million visitors a month.
Iran, on the other side of the Gulf, could prove to be another potential market for startups, after an accord with world powers in July paved the way for the end of sanctions on its economy. Faranak Askari, founder of ToIran.com, a tourism portal for hotels and transportation in Iran, said demand on her site from hedge funds, retailers and other businesses traveling to scope out the country has seen "the hugest jump ever."
"Tourism is becoming so huge because it’s a mysterious country—and that's our slogan," said Askari, who has a team in Iran, consultants in the U.K., web operations in Singapore and an office at AstroLabs.
The $25 billion initial public offering of Chinese e-commerce giant Alibaba Group Holding Ltd. last year was a wake-up call for global investors, who saw a non-Western tech company make history with the largest-ever U.S. IPO. Alibaba proved how companies with local knowledge and regional expertise have the potential to make it big, according to Christopher Schroeder, a U.S. venture investor and author of Startup Rising: the Entrepreneurial Revolution Remaking the Middle East. The number of Silicon Valley investors seeking advice on breaking into emerging markets, including Iran and the Middle East, has climbed in the past year, he said.
"People are trying to figure out how they might have to play in these markets," Schroeder said. "That's where the future economy and where new technology and innovation will come from."