Why 2016 is a big year for Morocco's startup culture

By Kelli Rogers 06 September 2016

Entrepreneurs gather at the Moroccan Center for Innovation and Social Entrepreneurship in Rabat, Morocco. Photo by: MCISE

Oussayd Bouayad balances his computer on his lap while lounging on a well-worn couch. The telltale long tables and mismatched chairs of a coworking space litter the room. The building, located in an alley near Rabat’s rambling medina, is the headquarters of the Moroccan Center for Innovation and Social Entrepreneurship, a 4-year-old nonprofit that’s assigned itself the overwhelming task of “finding entrepreneurial and innovative solutions to every social challenge in Morocco.”

On the MCISE COO’s computer screen are the inner workings of what will be Morocco’s first pre-sale crowdfunding platform, he told Devex.

The platform — named Wuluj, or “access”— will act much like an e-commerce site. Pre-orders allow consumers to guarantee immediate shipment on release, manufacturers can gauge how large initial production runs should be, and sellers can be assured of minimum sales. This should help jump-start an online market for Moroccan startups such as Marginol, which produces soaps using the castoffs from olive oil production, Bouayad explained.

Entrepreneurs in the U.S., for example, have successfully turned to crowdfunding for low-cost, risk-tolerant capital to help them bridge the gap between microfinance and commercial lending. But regular crowdfunding, or the practice of funding a venture by raising monetary contributions from a large number of people, is currently illegal in Morocco. Legislation to create a legal loophole that would allow crowdfunding platforms to request to legalize operations was prepared, but hasn’t been introduced to parliament. Now, it isn’t expected to make headway before parliamentary elections in October, explained Eric Asmar, the director of programs at MCISE.

Wuluj sidesteps this problem by attaching crowdfunding with e-commerce, which is legal in the country. But if Bouayad’s optimistic pitch of Wuluj captures entrepreneurship’s potential, then this stalled — and potentially failed — legislation is representative of the slow, frustrating progress of most serious entrepreneurs and investors in Morocco.

Entrepreneurship — and the policy, cultural shift, funding and skill sets and that will allow it to thrive — is still at its beginning stages in the country. Enabling legislation is close to nonexistent and “professional pitchers” — those who pitch ideas, win prize money, then don’t deliver — remain rampant. But in a nation strapped with a 20 percent youth unemployment rate, several groups are determined that entrepreneurship will be the path to greater social capital and job creation. And this, they tell Devex, is an important year.

A burgeoning culture

For MCISE, progress means forging ahead by supporting 15 startups — initiatives ranging from telemedicine to recycling — as well as launching their pre-sale crowdfunding application in September, if they get the payment system up and running. Already, the group has received nearly 50 applications from startups interested in selling their products on the site. They’ve shortlisted 22 by selecting innovative, impact-driven products or services that already have a functioning prototype.

Leyth Zniber, co-founder of Moroccan incubator Impact Lab, thinks it’s likely too soon to be having the crowdfunding conversation. The entrepreneur doesn’t think funding is the biggest barrier to entrepreneurial success in Morocco right now, he told Devex, rattling off a list of funds and loans available to small startups.

Zniber founded Casablanca-based incubator Impact Lab in 2014, then partnered with Paris-based accelerator NUMA when they expanded operations to Morocco in 2015.

“Getting $100,000, $200,000, $500,000 is hard, but the initial $10,000 isn’t the problem,” he told Devex. “I think the biggest thing we lack is skills and expertise.”

An entrepreneur will quickly be discouraged by the lack of options for a local external accountant or lawyer, for example, or put off by outrageous prices if he or she finds one, he said. But more broadly, the culture — both of investing in long-term projects and of investing time in a new idea — isn’t present yet in Morocco.

“There is no glory in being an entrepreneur,” Zniber said. “If you are an ‘A player,’ you still want to go work for an ‘A’ company.”

That company, he said, is still in the traditional private sector.

The small wave of cool that has struck the entrepreneurship scene is shaky, with “professional pitchers,” as Zniber calls those who only pitch for prize money then fail to devote the time necessary to establish a successful business, souring the reputation of others.

Take a look online — or even a walk down the street in Morocco’s quiet capital or it’s shinier big brother Casablanca — and you can’t help but see names of the myriad incubators, and handful of accelerators, already present. The number of technology hubs across Africa has ballooned from 117 to 314 just in the past year, according to comparisons of World Bank data collected in 2015 and numbers recorded by global telecoms body GSMA this year. More than half of the hubs are concentrated in only five countries: South Africa, Egypt, Kenya, Nigeria and Morocco.

It portrays the idea that Morocco’s startup scene is booming. In reality, the same entrepreneurs are working with multiple incubators — and very few are leaving incubation stage, Nawfal Fassi-Fihri, managing director of Endeavor, told Devex.

“There aren’t enough entrepreneurs to go around,” he added.

Endeavor — which chooses just two to three entrepreneurs a year to provide mentoring, access to key networks and introductions to sophisticated investors who bring not only money, but also knowledge — classifies startups into different categories based on indicators such as clear revenue models, growth trajectory, estimated jobs created and brand potential.

“You can see we don’t have any ‘diamonds’ yet,” he told Devex, referencing the six entrepreneurs they’re currently working with. Diamonds, according to Endeavor, are “tech-savvy dreamers who start innovative and disruptive tech companies that create a brand new way of solving problems.”

“We hope to get there,” Fassi-Fihri added.

Funding future

Many in the Moroccan entrepreneurship space are quick to lament the lack of angel investors, affluent individuals who provide capital for a startup company. The dearth of private investors is in part due to cultural barriers — “of always wanting to screw someone out of a deal,” Zniber quipped — but it can also be traced to lack of legislation that would make it more attractive for investors to invest in Morocco.

A simple legal and tax system, like Germany’s 20 percent tax-free subsidy on investments in a young, innovative company, or Spain’s program to support the development of angel networks, could help stimulate this effort. The Caisse Centrale de Garantie, a Moroccan financial institution that aids in the financing of small and medium-sized enterprises, does guarantee loans for entrepreneurs up to 70 percent and 100 percent for nonprofit organizations, providing small honor loans to networks supporting entrepreneurs such as Réseau Entreprendre Maroc.

“This isn’t the future,” Zniber said of the loans, which might set up an individual for success but likely won’t produce the “diamonds” — to borrow from Endeavor’s language — the country needs to disrupt a sector and create jobs.

A new World Bank fund could help. It’s expected to provide $50 million of funding for entrepreneurs, $20 million in technical support in early stage capital and $30 million of seed money and will be managed by Caisse Centrale de Garantie.

It could help weed out incubators operating in name rather than function by setting certain standards of operation to qualify, as well as create a support ecosystem for the types of startups Endeavor is on the hunt for. But it could also hurt — especially if money is handed to mediocre startups not ready for a funding boost. After the initial consultative process, the World Bank has been silent on updates on the fund, both Asmar and Zniber told Devex.

The World Bank declined to comment about the fund.        

Running out of time?

The private sector will also play a key role in establishing the solid Moroccan startup culture of the future.

“If you’re a startup in Morocco, 99.9 percent of companies will not work with you,” Zniber said. “You don’t have a track record of three years, you can’t show assets and liabilities … profit and loss, you cannot prove you are viable in the long run.”

Zniber cited the Boston Consulting Group’s “The Most Innovative Companies of 2015” report, where 79 percent of respondents ranked innovation as either the top-most priority or a top-three priority at their company. By contrast, in Morocco, there are “maybe four or five big companies starting to think about innovation,” Zniber said “And having a Facebook page is considered ‘innovation.’”

Impact Lab is currently working with RATP Dev, the parent company of Casablanca’s tramway system, on an open-innovation program around mobility and interoperability of transport systems. This project is an example of tackling barriers to entrepreneurship such as access to corporate experts and data, as well as access to markets for market-driven solutions, Zniber said.

And now is as good a time as any to make things happen since by Zniber’s estimation, they’re running short on time.

Morocco’s King Mohammed VI voiced his support for entrepreneurship at the Global Entrepreneurship Summit, an annual event organized by the U.S. government that promotes entrepreneurship, in Marrakech in 2014. The energy the king injects in an initiative usually “lasts two or three years,” Zniber told Devex.

“We are at the end of the second year,” he said. “We have one more year to make things happen.”

So will crowdfunding be part of it? Zniber noted that the strategy targets a population rich enough to pre-buy something, which gets back to cultural readiness: “We look fancy,” he said of Casablanca’s buildings and highways. “But we are a poor country.”

The notion of expertise exchange, though, is growing richer and quickly changing the economy. If a marketing expert has an idea for an app, for example, he or she might take that to a tech savvy individual. One will build the platform, the other will help get the word out.

This is just what MCISE’s Bouayad plans to capitalize on to support startups who wish to sell on Wuluj.

“The ecosystem is not mature enough, so we have to provide a lot of support,” he said of the startups pitching their products for sale.

Already he’s discussing partnerships with local communications and video production organizations that will help companies create product pitches and videos for a launch on Wuluj. They’ll take the risk with the product holders and receive payment through commission if the company’s Wuluj campaign is successful.

“I said it’s up to them, but most want to take the risk,” Bouayad said.

Morocco, he said, is ready for crowdfunding.

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About the author

Mechosen
Kelli Rogers@kellierin

In her role as associate editor, Kelli Rogers helps to shape Devex content around leadership, professional growth and careers for professionals in international development, humanitarian aid and global health. As the manager of Doing Good, one of Devex's highest-circulation publications, she is constantly on the lookout for the latest staffing changes, hiring trends and tricks for recruiting skilled local and international staff for aid projects that make a difference. Kelli has studied or worked in Spain, Costa Rica and Kenya.


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