Why We Love the World’s Startup Underdogs

Justin Ledbetter

January 24, 2017

Several of us at 500 are matching donations to Gaza Sky Geeks until January 27. If you would like to support Gaza Sky Geeks, donate at www.powerupgazageeks.com to help them keep the lights on and launch Gaza’s first coding academy. Here’s why we’re supporting.  

At 500 Startups, we’re countercultural investors.  We became the most active seed-stage investor in the world (1600+ companies and counting), because we pioneered a value approach to startup investing – using a quantitative approach to discovering wins rather than gambling large checks on fewer companies.

500 Startups operates microfunds around the world, extending our approach to emerging startup markets, such as Southeast Asia, Middle East and North Africa, Latin America, Japan and others.  We have also announced a fund focused on Black and Latino founders that we’re currently raising.  These funds help us develop expertise and presence in markets underexposed to startups and grow into a fixture in developing ecosystems.  500 believes great entrepreneurs can be found anywhere, and by focusing on these markets, we are capturing undervalued assets – underfunded or overlooked founder talent that will grow large companies.

This is why 500 Startups loves Gazan startups and Gaza Sky Geeks, Gaza’s startup accelerator.  Supported by Google, TechStars Foundation, Skoll Foundation (John Skoll founded e-Bay), Stripe (a 500 company), and others, Gaza Sky Geeks connects Gazan founders with the financial, knowledge, and technical capital to build regionally competitive startups.  They are providing Gazans with new economic opportunity – women in particular, as they make up 50% of GSG founders.

Gaza Sky Geeks is growing a maverick startup industry, launching the first startups in one of the toughest environments on earth.  Gazan founders face low access to capital (no startup investors locally because Gaza’s tech sector is new), limited electricity (4 hours of electricity per day from the grid)  and instability (there have been 3 wars in the past 7 years). Their biggest challenge, though, is isolation – Gazans are unable to leave Gaza, an area of land as small as Silicon Valley (32 miles by 7 miles).

Beyond the challenges are opportunities – Gaza has an educated, tech-savvy population, growing smartphone penetration, and excellent broadband infrastructure.  Most importantly, it has passionate, hardworking, adaptable people eager to take risks to launch new products.

Gaza entrepreneurs see strong market opportunity: Arabic is the 4th largest language online but only ranks 15th in content and the MENA region has high smartphone penetration and a population of 380 million.  And startups’ living online lends itself to surviving conflict more than a brick-and-mortar business. Startups are actively taking advantage: Baskalet, a game studio has received nearly 1M downloads across its game portfolio (80% of them from Saudi Arabia), 5QHQH, a 9Gag for MENA, has over 250,000 page views, and Zumrod, a platform for health and beauty products that just received Gaza’s largest-ever startup investment @ $50K. They showcase Gaza’s ability to create products that address the entire region.

If someone launches a startup successfully in Gaza, they can do it anywhere. One of 500 Startups’ investments in the MENA region is  a startup in Egypt that launched during the Egyptian revolution, Wuzzuf. We made that investment, because the company was operating well and generating revenue despite the circumstances. Dave and I have visited Gaza, and Gaza has the startup DNA to build great companies. Founders there will continue to face tough conditions they know they cannot change, but they still want to build.  They want to talk about user acquisition, cross-platform development, and fundraising.  They’re like founders anywhere.

Gazan companies are the world’s startup underdogs. We’re inspired that Gaza Sky Geeks is growing valuable startup assets in one of the unlikeliest places. When we see the challenges they face, we stop complaining about ours: having to raise a fund pales in comparison to waiting for weeks for a permit to exit Gaza to travel to Silicon Valley.  500 believes in finding talent on less-traveled paths, and Gaza Sky Geeks like 500, will prove the value of this approach.

Dave McClure, one of 500 Startups’ founding partners and is an advisor to Gaza Sky Geeks.

Justin Ledbetter works on ecosystem development at 500 Startups and is a former staff member of Gaza Sky Geeks.

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