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Patricia Letayf is a self-described realist. Despite growing up in New England, her personal ties to the Arab world, like her professional experience there, run deep. She readily admits that the region’s political problems will likely stick around well past her grandchildren’s generation. Rather than dissuading her from working in the Middle East though, this challenge fuels her desire to generate economic opportunities there.
After traveling to Kurdistan, the United Arab Emirates, and Kuwait (among other places) to conduct academic research as an undergrad, Patricia worked in Dubai as a political risk analyst, mainly consulting for oil and gas companies and governments. While her work immersed Patricia in the politics of the region, she found it difficult to discern its “on-the-ground impact.”
Back in the U.S. in 2016 for grad school, Patricia connected with her future cofounder (Alice Bosley) and set out on the journey of launching Five One Labs, Kurdistan’s (and Iraq’s) first start-up incubator.
Check out my interview with her below…
Could you start by introducing yourself and Five One Labs?
I’m Patricia and I’m the Cofounder and Director of Operations of Five One labs. Five One is a startup incubator whose mission is to use entrepreneurship to enable young people in conflict-affected areas to rebuild and thrive. The name Five One comes from the 1951 Refugee Convention giving refugees the right to work.
How did the idea for Five One come about?
My cofounder Alice and I started doing research for Five One in 2016 and officially launched the business in 2017 when we were both in graduate school. The idea came from Alice’s professional experience at the UN Refugee Agency (UNHCR), in the innovation office, where she worked on innovative ways to address the humanitarian crises across the world, including the peak of the displacement crisis from the Syria conflict in 2013-2014.
Alice observed that, while UNHCR had these innovative ideas, they usually came from UNHCR staff, rather than the refugees or internally displaced persons (IDPs) themselves. She applied to grad school with the idea of launching an incubator for refugees. Alice pulled me in because she had started to hone in on the idea of launching Five One in the Kurdistan Region of Iraq. I had worked in political risk analysis, mostly advising businesses on the risk of their operations in the Middle East, specifically in Iraq and Kurdistan.
At the time, refugees didn’t have the right to work in places like Jordan and Lebanon, but they did in Kurdistan, which presented quite an interesting environment. Also, there was no incubator in all of Iraq at the time. Compared to places like Lebanon, Jordan, Dubai, where there was already a burgeoning ecosystem, there was not that much going on in Iraq beyond a few initiatives in Baghdad.
How did it go from idea to reality?
We spent the second year of grad school doing very little homework and doing a lot of research. We did our dissertation on empowering entrepreneurship in conflict-affected areas, and went to Iraq twice to do research and pilot our programs. We were both familiar with Iraq from our previous jobs, but we needed confirmation on the ground of what the needs were, and what incubator models would fit.
Why an incubator?
Refugees face a unique set of challenges, including unemployment, underemployment, lack access to capital, and lack of access to local networks. Oftentimes, they cannot transfer their university certifications (a pharmacist license, for example) to the new country. We identified this niche of skilled individuals unable to work and we dug into it. We found interesting data showing, in Erbil, for example, that those displaced individuals who had the highest unemployment and underemployment rates in the city were the ones with university degrees.
We also devised the model to work with the local community as well. For one, no incubator like this existed for them either, but more importantly, we wanted to ensure that the community didn’t hold suspicious or negative views of refugees and IDPs.
You grew up in New England, how did you end up deciding to work in the Middle East?
When I was a student at Tufts, I traveled to the Middle East a few times doing research on various topics. In 2011, I traveled to Kurdistan to study the dynamics of disputed territories. Another year we traveled to the UAE and Kuwait.
Each year though, I kept asking the question “So what? I’m looking at the political dynamics of these countries, but how does it impact day- to-day life?”
I spent several years working as a political risk analyst in Dubai focused on Iraq. The rise of ISIS in 2013 to 2015 made it a really tough time for this kind of work. Every day, I was watching, reading, writing, and answering questions about the Islamic State.
I realized that the Middle East will always have its problems. I’m very much a realist. I really believe that these problems are not going to go away. To take Lebanon just as an example – the same families have been in power for generations – and this is a dynamic that exists across multiple countries. When I thought about these problems, the “so what?” came up again. These families are going to stay in power until I die, until my children die, until our grandchildren die probably. So how do we navigate the dynamic in each country, despite the challenges?
Yes, fundamental political or business environment changes could improve life for everybody, but like I said, I’m a realist. I don’t think any of that is going to happen any time soon.
I left my job in 2016 and I said “OK I have this knowledge now, how can I shift more towards economic development?” Of course, the Middle East has no shortage of conflict and trauma, but people still have to live. Young people still need jobs. So how do we build upon what is a very fragile foundation? You need to build something. The ties to the Middle East are very much personal and that will never go away.
What led you to focus on entrepreneurship as a means of economic development?
It was a slow drip sort of thing. Alice and I traveled twice to Kurdistan with our third cofounder Sophia. Entrepreneurship means devising solutions to real-world problems, and we definitely didn’t want to just impose the solution of entrepreneurship, but conversation after conversation cemented for us that people on the ground wanted this. In 2016, while we were laying Five One’s groundwork, Iraq was going through an especially tense and uneasy time. There was a fierce battle for Mosul, political tensions were high between Baghdad and Erbil, and feelings of hopelessness came up often in our research. The hopelessness, though, was fueling this desire to do better things. I think that was what clicked for us – we hoped that the situation could only go up from there.
Traditionally in Iraq, most individuals relied on government employment. You graduate and get a job with the government or your political party, but that just isn’t happening as easily anymore. Young people couldn’t find jobs and they saw that their parents, who had worked for the government, weren’t getting paid. The private sector didn’t offer a robust alternative either because it relied solely on oil and gas. I had the fortune of seeing Kurdistan in 2011, during its economic boom. By 2015-2016, things were different. Society had paused, the growth had stopped, and I saw a desire on an individual level, especially among young people, to take matters into their own hands. People started saying “I want to start my own business, I want to be my own boss.” We capitalized on that sentiment. Five One Labs wouldn’t have worked without that innate desire from people.
What were the main challenges that you faced in setting up Five OneLabs?
Put simply, it’s not easy to operate in Iraq. The regulatory environment is really difficult to navigate.
Putting that aside though, since that’s a given in the Middle East, we faced the challenge of being the “first-mover.” To use a silly example, we opened a coworking space in Sleimani in 2018 and found there was no word in Kurdish for coworking, so we had to make one up.
We also dealt with mistrust and suspicion, not of us, but of the concept of entrepreneurship. Business collaboration and exchanging ideas for feedback was not necessarily a common concept among young people in Iraq at the time that we launched. I remember very clearly in August of 2017, we were running a series of events in Erbil and one young man came up to me after the event, he was so excited, and he said “Ma’am, I have the best business idea ever” and I said “I’m so happy to hear that. What is it?” and he goes “I can’t tell you!”
Plus, there are familial barriers to being an entrepreneur – your mom or dad thinks you should be a doctor, engineer, lawyer, or work for the government. Telling your dad “Dad, I want to start my own company and not have a stable job,” is daunting for a child in the Middle East, to say the least. People are very risk averse, especially to something like startups, where the failure rate is already so high. This exists to some degree in the U.S., but I think it’s far more of a problem in other parts of the world where there is often a greater pressure to succeed.
Design thinking is at the center of everything that we do at Five One, but again, it was quite new to Iraq at the time. We’ve brought it in because getting to know your user, empathizing with your customer, iterating on your product or service, are all essential steps to building strong companies. It’s not easy to tell someone “go to a mall and talk to thirty random people to get feedback,” but it makes your product that much better.
Fast forward three years and we have people launching companies, getting up on stage and pitching at competitions, and conducting dozens of user interviews. The dynamic has really changed. People are learning that failing is OK, that they need to test things out. When donors ask us “what’s your impact?” I wish they had called in 2017 so I could have told them what this ecosystem was like then. Now, it’s burgeoning, but it was an uphill battle at the beginning.
Are there any specific achievements that stand out to you?
Working backwards from today, we just launched Five One Invest in October, which included a launch event with a regional VC, a local angel investor and a startup that recently raised investment. That’s a big achievement for us; it’s been three years in the making. We’ve followed the entrepreneurial journey since we started. At the beginning, we were working with early, idea-stage entrepreneurs, and we still do, but as the ecosystem grows, we’re also working with later stage entrepreneurs, which has led us to identify a real funding gap for founders looking to scale.
We hosted two investor trips to Iraq – the first one was in 2018, and introduced Western investors and donors to the ecosystem. In 2019, we hosted another one and we were oversubscribed, mostly with regional investors. In both cases, we wanted to showcase the ecosystem as a whole, not only entrepreneurs working with Five One.
We’re also very proud of the Female Founders Fellowship, which we’ve run twice. Women face additional challenges when it comes to starting a business everywhere, not just in the Middle East. The program aims to create a supportive community around female founders of growth-stage companies – they’re beyond the idea stage, they’ve been running their business for six months or longer.
Finally, Laylan, one of our founders, pitched at the Arabnet annual conference in Beirut. She launched the first babysitting app in Iraq – Dada. Seeing her on stage pitching with some really advanced startups from around the region, putting Iraq on the map, was really amazing for us and for the ecosystem as a whole. Building the ecosystem overtime and watching it flourish has been really rewarding.
What would further unlock the potential of Iraq’s ecosystem?
I have a very long list!
- Legal reform: The main one is reforming the business environment. It is just super hard to start a business. Registering a company takes a long time and there are no tax breaks for startups. The German government is actually pushing an initiative to write a “Startup Act” for Iraq, modeled on Tunisia’s. Right now, many companies operate unregistered, which means they don’t legally exist. They don’t have legal protections, they can’t open bank accounts. This creates so many challenges.
- Digital skills: Increasing digital skills would also really help. There are wonderful organizations doing that across the country – teaching coding and web development, promoting digital literacy, and these are all super helpful. From a startup perspective, there just aren’t enough CTOs right now, which often forces people to look abroad to build something like an app.
- Funding: There’s a certain amount of small grant funding that exists for seed capital, but once an entrepreneur is looking to scale, there is a funding gap in the $50,000 to $250,000 range. Most entrepreneurs can’t get loans from the government, and those that can get loans, need collateral, or must be a government employee. We’ll talk to regional VCs who say “we only invest at the one million (dollar) mark,” but Iraq only has one or two companies ready for investment of that ticket size. To address that gap, we’re trying to develop local investors. There are a number of wealthy businessmen and women to tap into, but increasing knowledge of investment “best practices” is important as well. You may have money, but investors can be predatory when capital is in short supply. An investor may say “here’s $10,000, I want 51% of your company.”
- Data: The last thing I’ll say is that data is very hard to find. Startups who try to raise money internationally struggle with investors when it comes to market-sizing and because they can’t exactly say “there are X number of consumers in Y sector.” They try to go to ministries – for example, the Ministry of Health to get data on the hospital system – and the government won’t give them the information. This hinders their ability to expand internationally.
I’ve framed these as challenges, but they also all present opportunities!
That actually leads perfectly into my next question – what are the opportunities that get you excited about entrepreneurship in Kurdistan and Iraq?
First of all, the market is very large, and not just domestically, but also in neighboring countries. Companies from Jordan and Lebanon are interested in expanding into Iraq, which creates a lot of partnership opportunities. Mobile usage is on the rise, mobile payments are increasing, even the government is trying to reform and digitize. While Iraq’s ecosystem may be a few years behind other places in the region, it is flourishing quickly which makes it exciting to watch.
Alice sat on a panel in Riyadh last year with a number of investors and they were asked “what is the most exciting country in the Middle East right now?” They unanimously answered Iraq, because it has so much untapped potential. You have so many opportunities to tap into the market given the nascent ecosystem. Young people in Iraq use technology all the time and are eager to adopt technologies they see used in other places.
There are also so many talented young people turning their eyes away from government employment. They have increasing opportunities to join programs like ours, which means there’s support out there for anyone who’s ready to take advantage of it.
Perhaps most importantly, you have international brands starting to come into Iraq. Careem, among other larger regional tech companies, now operates in Iraq. They hired some talented Iraqis, and those employees may eventually leave to spin off and start their own companies. They raise the bar from an employment and skills perspective.
This gives confidence to investors and people who are launching businesiness. They go “Oh, Careem is there, how have they been doing?” Marketplace business OpenSooq and online food delivery company Talabat of other companies expanding to Iraq. Some of these companies use regional VC money, which draws investor’s eyes to Iraq.
Are there any dream projects that you want to work on or challenges you’d love to tackle?
My job is all consuming (laughs). Five One Labs is so professionally and personally intertwined for me. I would love to do something like the Startup Act, and work on a policy level. As I said, I think those are the fundamental barriers to entrepreneurial growth.
At the same time, policy moves slowly. I’m lucky because I get to see the faces, and know the names of the people we impact, even if it’s one startup or one person at a time.
I think when you only see the region from afar, you’re more likely to get hung up on the challenges and frustrations. I applaud what you’re doing with StartMENAup because we need to get more people to really listen to the stories of the entrepreneurs that we’re working with; to hear not just the challenges, but the positive impact that entrepreneurship has made on their lives, their communities and their families.
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