From protests, COVID-19, to the explosion of the Beirut Port, Lebanon has definitely seen better days. It all poured on top of the country’s already-ailing economy. The investment sector had been already suffering from a recession due to the devaluation of the currency and debt. According to the BBC, there is a debt burden of up to $75 billion, and Lebanon has the highest debt-to-GDP ratio in the world at 140%, the highest in debt after Japan and Greece. Interest payments consume nearly half of the government’s revenue and little is left to invest in public infrastructure. That’s in addition to the displacement of about 1.5 million Syrian refugees in Lebanon, that took a further toll on the Lebanese economy.

But how are startups and investments holding up amid this series of misfortunate events in Lebanon? To find out, we speak to Nadim Zaazaa, the managing partner of Nucleus Ventures, a flagship seed program backing Lebanese entrepreneurs with local and international support

Capital controls hit the digital economy hard by severely curbing foreign spending on digital marketing and critical enabling services such as hosting, cloud computing, etc. Instability and lack of opportunities is dramatically accelerating brain drain. Zaazaa feels the latter especially in the tech sector where competition for good talent and experience is big. “Cash-strapped companies will struggle to keep their edge,” he says. “Even if they are generating foreign inflows, it is hard to operate in a fast-paced industry through severely decrepit banking services.” 

Lebanon’s ecosystem has scaled back from being a factor-driven ecosystem to a subsistence-driven ecosystem. To Nucleus Ventures, this means prioritizing resources and efforts to survive existing businesses over supporting new ones. It also means helping traditional sectors leverage technology and innovation to survive, while looking at new emerging markets to run Nucleus Ventures as a service to donors, corporates and governments.  

The ecosystem is receding into universities as entrepreneurial safe havens. The diaspora and donors are stepping in and stepping up to fill the gap left by BDL, the VCs, small-scale corporate venture capital, family offices and angel investors.

There is a silver lining though: it is a battle-hardened and experienced ecosystem that will self-correct to become more sustainable and expand beyond geographic Lebanon.

Nadim Zaazaa, Managing Partner, Nucleus Ventures

With anchor hubs in Bossa Nova Hotel and Lebanese American University, Nucleus Ventures is working on expanding their digital footprint through a web-platform that can support their entrepreneurs, investors and corporate partners anywhere, anytime. This automatically means they expand their reach too by having access to cash, customers and an enabling community from anywhere around the world – and not just in their immediate geography.

Paying their dues as stakeholders of the Lebanese startup ecosystem, Nucleus Ventures is pushing to strengthen their network of mentors and investors through counterpart UK Tech Hubs around the wold as well as the Lebanese diaspora in the US and the GCC.