@seth

I helped create a CD-ROM with William Forsythe and the Frankfurt Ballet almost twenty years ago.  It is one of the best things I have worked on, as it uses technology in a simple way to express something that exists but which we cannot experience otherwise.

Improvisation Technologies Extruding & Collapsing Points from UNSW iCinema Centre on Vimeo.

Amr Ramadan is the founder and CEO of Vimov, the iPad company responsible for the beautifully elegant, bestselling “Weather HD” app and the soon to be released “Precious Time.” When Chris Schroeder @cmschroed and I were in Egypt in January, just before the Tahrir uprising, we met with over 30 promising startups.  Of all the CEOs we met, Amr struck us as having a unique blend of product focus, technical elegance and something that can only be described as preternatural calm.  We emailed back and forth with him as the situation unfolded across the country, and found his reflections to be personal without being melodramatic, visionary without being polyanna.  Now that the situation in Egypt is settling (although still far from settled) we wanted to share his reflections with a broader audience.

I want to tell you first about what life was like in Egypt before January 25th…

There was this common saying that has been around since the 50s, “thrown behind the sun”, which described the disappearance of an activist, taken from his home at dawn while people were asleep and thrown into a jail, only for no one to hear about him again. This was very common in Abd El Naser’s rule, and this type of oppression continued throughout Mubarak’s ruling, except that the Secret Police no longer came in the dark, it became bolder and could take anyone in clear daylight and with little to no reason.

I was born in 1984, a few years after Mubarak’s took office. While Mubarak was a tyrant in his ruling, he did some reforms in the late 90s that probably are the cause of what has happened today, opening up communications and freedom of press a bit more than it used to be, and a lot more than it was in the 50s and 60s. This resulted in a generation that it extremely aware of what is happening around the world, and it became quite evident the social, economic and political disparity between Egypt and elsewhere. And even worse, as world economies started to rise while Egypt stayed still, economies in Southeast Asia and Dubai for example, the young people felt betrayed, and felt jealous of why their country is not growing like this. Countless times I have heard the statement, “why did not grow like Dubai or South Korea”.

Our economic state was dwindling, while the whole world seemed like improving. Besides, the political life was completely overtaken by the ruling party, NDP (National Democratic Party). As the press got more freedom, the crimes of the government became more known, and the party became more bold and resilient to change. When El Salam ferry sank in 2006, and more than 1,000 people lost their lives, and then the government patted on its owners and let them go since they are close to the ruling party, events like these, and there are countless of such examples, made Egyptians feel of very little self-worth. And the younger generation felt more desperate, as it seemed the older generation has already gotten used to tyranny and absence of fair law. Along the years, the young people increasingly hated the situation in Egypt, and the phenomenon of escaping, even through deadly means, was in the rise.

Since there was little opportunities to lead a good life, some started fleeing through ferries to cross the Mediterranean Sea to a neighboring country in Europe like Italy. Just imagine this situation, a pregnant woman taking a ferry that is no good for crossing deep seas, and dropped kilometers away from the shores of Italy, and then has to swim in cold waters to reach the lands. Imagine the level of desperation one have reached to accept this situation.

What Happens Now?

I am hopeful that all Egyptians will now have a chance for each of them to realize their potential. There are no more barriers, all have dropped. It was not possible, or easy, to look forward to a better future before. And I think everyone now will be looking to a better future. This I believe will alone be the driver to a great new country.The young people of this currently, my generation, has often, and frequently, been rediculed and thought of as lazy and ambitious-less. The events of the past two weeks, will, or in fact has already, changed this look. We are entering a new era were the youth will be empowered to rebuild their country, and charge with utter confidence and hope.

How has what happened made you rethink your startup?

I am holding back a bit from thinking about how the events of the past two weeks will affect my startup. While tyranny and dictatorship had me living my entire life in fear, caution and oppression, the one good thing Mubarak had made was political stability. And I believe that this political stability, even though it was a dictatorial one, is something very important for a high-risk technology startup. No one knows what will happen in the next few hours, let alone months, so it is quite difficult to assess how this will affect our work. However, I think we’re in a better position than most businesses. Since we’re not focused on the local market at all, our distribution channels have and will not be affected, and our revenue stream will not be affected since it is in foreign currencies, so even if economic turbulences occurred, in a weakening Egyptian Pound for example, I think we will not be affected at all, which is something most businesses can’t say.

What has surprised you about the role of social media these past few weeks?

First of all, the events that led to the January 25th demonstrations, while were all social media based, similar events have been going on for months and years. Protests have been ongoing for a while, and always increasing in numbers, but the numbers were in the dozens, or hundreds at most.  What happened in January 25th is that people believed there could be hope given the events of Tunis, so the numbers were in the tens of thousands, a dramatic rise. The protests were actually walking through the streets across the city, so the entire country knew of their existence, something again that has never happened before.

I think the major element technology has had however is not its existence, but its disappearance. On Friday morning, the government had completely shutdown the Internet and mobile phone networks. This really was the biggest mistake they made. They gave the protests a huge legitimacy. And people, all people, were infuriated beyond imagination of how the government could take this step. To the older generation, mobile phones is a way of life, and to the younger generation, the Internet is with a bit of exaggeration, as important as the air they breath. I recall people were joking on Friday that the government’s next step would be to shoot down pigeons, and that even then, they are over. This act of cutting-off communications, this was the government saying, “I am trembling”, and I think was what gave people the feeling of an upper hand.

If you were in charge of technology for Egypt what would you be focused on now?

Promoting that starting up a small business will have a better outcome on the future of the country than joining an established large corporation. We have long had the point of view that “small companies” mean instability and insecurity, and that it’s better to join in a large company. This precipitated from decades of believing that a government job is superior as it offers a stable life-time position.  This can be done by implementing meritocracy everywhere, even government jobs. We practically don’t have the concept of a “lay-off” and virtually all salary raises and bonuses are time-based and not merit-based. This has to end.

What is the most inspiring / frightening thing that happened to a friend or loved one?

Getting tear-gased. On Friday, my brother in law, my father and I went to join the demonstrations. As soon as it started, after only a few chants, the Police forces started firing tear gas. One land right below us, so we got a quite good of an inhale.  Now I thought that tear gas is something that would cause one person to… have tears, something like slicing an onion. It’s not. It should be called a Kill Gas. This has probably been the worst feelings I had in my life. It became extremely difficult to breath, and as other shots starting to get fired, I was inhaling more as I was blindly running through the streets. It was beyond terrifying, and as I was barely breathing I thought that this was it, this was the end. 15 minutes later, we continued the protest, and were shot a couple of more times with tear gas! It’s quite inhumane really. My father is a 56-years-old University Professor, and he was tear-gased 4 times in that day. If we were cows, they would’ve treated us better! Oh, thinking about it, that’s likely a fact really. A cow costs about $US 1,500. When someone dies in a train crash, the government gives his family about $800, and if he didn’t die and suffered an injury, something like his two legs cut-off or something, that would be about $300. So yeah, a cow is more valuable in the government’s eyes!

Do you think differently now about the US?

Not really. It was a smart move for the U.S. not to heavily interfere, or else people will immediately take it as a conspiracy or an attempt to take control of the upcoming government.

In the 90s. The United States was a dream to every young man in Egypt. They looked at it as the land of opportunity and freedom and many had the dream of going there. If someone would get a work visa, or an immigrant visa, he would’ve been envied by everyone. That all changed after September 11. As the United States cast the entire Middle East as terrorists, and Islam as the manifesto of terror, and invaded countries the People felt its citizens were their brothers, that all changed! Everyone felt it was an exaggerated violent response. All the People of Egypt really want is to live a fair life, and to be judged for who they are and what they do.

When I visited the U.S. in 2007, the 10s of people infront of me, and the 10s of people after me, were all treated similarly. But for me, probably for no reason other than being Egyptian or Muslim, each item in my handbag was tested for explosive residuals, something that took 15 minutes, and right infront of everyone in the airport. It was extremely humiliating. And then, I was taken to a large, and empty, room, in which I was questioned why I was coming to the U.S. So travelling from tyranny only to be judged as a terrorist, this was something very heart-breaking. As you saw from the protests, the Egyptian People are extremely peaceful. As I was walking through the protests, when someone were to cut the lines and goes to break down a sign related to Mubarak, people would immediately grab him while chanting “Peaceful… Peaceful…” Had the government not killed over 300 people with rubber bullets, live fire, and under the knives of thugs, this would’ve probably been the most peaceful revolution in history. So, to know yourself as being like this, and to be treated as someone that is always just about to put his finger down on a trigger, that’s quite unjust!

What can the US do to help your business?  to help the broader Egyptian economy?

What I would like the most is for the U.S., and the rest of the world, is to stop regarding us as terrorists. I wish for the day when I no longer hear about someone missing to attend a technology conference because his VISA took 8 months to process. This is a very peaceful nation, too peaceful in fact that they stood up quite late to tyranny in fear they would cause trouble, and when they did, they did it in a demonstration of restraint and peace. I really hope the International community would acknowledge this, and to give us the chance of being treated for who we really are.

I want to add something…

I dream of a bridge to Silicon Valley. A bridge that could potentially speed up and foster innovation in Egypt, and create new jobs, both in Egypt and the U.S. Silicon Valley carries decades of experience, and no country has ever managed to build something like it. However, everyone is trying, and the competition is rising. I think it’s high time the U.S. would embrace the competition, rather than compete with it. So even though I would love to have a presence for my startup in the U.S., I can’t avoid thinking about the residency nightmares. The new Startup Visa Act is promising, but only in the name. It’s quite difficult for someone in a developing country to raise capital, let alone find a way, remotely, to raise $250,000 from a U.S. investor. I think a better model would be to require an entrepreneur, for example, make $250,000 in revenue in his country, and then he’s given temporary x-year Visas in which then he would be required to raise the $250,000, make the $1,000,000 in revenue or hire the 10 employees. Even if the U.S. gave just 100 Visas like this for Egypt each year, a negligible number compared to the several thousand lottery Visas given away each year for Egypt, it could open up the creation of great new companies that before were never possible.

“We will create a new corps of business volunteers to partner with counterparts in Muslim-majority countries. And I will host a Summit on Entrepreneurship this year to identify how we can deepen ties between business leaders, foundations and social entrepreneurs in the United States and Muslim communities around the world.” Barack Obama, June 4, 2009, Cairo, Egypt

In past 8 days at least 12 #Egyptians set themselves on fire out of desperation: unemployment, poverty, corruption. #Jan25 #Egyptprotest @monaeltahawy, January 25, 2010, Cairo, Egypt

I will keep on saying this. Youth Entrepreneurship is key in creating a long lasting impact in the Arab world! #Jan25 #Lebanon #Sidibouzid @habibh, January 25, 2010, Beirut, Lebanon

As we left Cairo ten days ago to travel home to the U.S. after taking part in the first delegation of the State Department’s Global Entrepreneurship Program, we saw Egyptians huddled around TVs in the airport watching video of the Tunisian uprising on Al Jazeera. We had no idea then that a single “slap to a man’s pride” in Sidi Bouzid, Tunisia could lead days later to fierce protests in Cairo and the defacement of posters of Mubarak. While there is a good chance that the protests will settle down in the coming days in the face of a growing military presence, it’s clear that Egypt is at a tipping point–politically, socially and economically.

The pent-up frustration that Egyptians feel about the current regime is felt in different ways across the population. Our focus in Egypt was on a growing class of educated, tech-savvy entrepreneurs. While the frustration they feel may not be as intense as that of a fruit vendor subsisting on two dollars a day, there are a number of economic and cultural impediments that have historically limited their chances for success. Based on what we found, the promises of Egypt’s start-up scene lie in stark contrast to the desperation of its poor. The next few weeks and months will tell us a lot as to whether there is enough stability in the country to make external investors comfortable with its prospects.

Amr Ramadan is the kind of entrepreneur investors look for: he started his company Vimov with only $1,060 and begins his investor pitch by openly admitting the failure of his first product. His next product was a simulator for iPad developers that sold thousands of downloads at $32 each. His third product was the most popular paid weather app on the iPad, with over 350,000 users paying $.99 each. The next product in his pipeline, an ingenious take on personalized news, sounds even more promising. In Silicon Valley he would have a few hundred thousand dollars of angel money in the bank, and a couple of Series A term sheets from VCs in his pocket. But Amr is not in California, or even the United States. He is in Alexandria, Egypt, and he’s just one of a new class of young, educated and Internet-enabled entrepreneurs in the region.

We watched this narrative unfold firsthand in Egypt, which was selected as the pilot country of theU.S. State Department Global Entrepreneurship Program. The GEP is the government’s effort to promote and spur entrepreneurship around the world, led by passionate advocate (and successful entrepreneur) Steven Koltai. We met with a series of senior government officials, including Prime Minister Ahmed Nazif, who are committed to building a startup-friendly business environment. The Egyptian government recognizes that a nucleus of successful entrepreneurs is critical to catalyzing a sustainable middle class. While no single company is going to cure unemployment or increase the poverty line, an inspiring story of upward mobility could be an important populist spark.

Over the course of four days, we reviewed 32 presentations–culled from over 100 applications–from a variety of Web, mobile and hardware startups. Our delegation included the former CEO of CarMax; an investment banker, an MIT management scientist and a Silicon Valley VC. After two rounds of interviews, we awarded $20,000 to two companies: semantic search engine kngine and hardware accelerator SilMinds.

Haytham AbdElFadeel, the creator of kngine, is a 20-something hacker. His older brother works for him managing servers, while his father works from home as a day trader. “Search engine” are two of the most halting words known to investors. As a prominent VC emailed us, “a direct assault on Google doesn’t strike me as the right approach,” but Haytham doesn’t know any better than to pursue his passion for creating a better Google. He is using the prize money to purchase more servers, since the two desktop computers at his home are limiting his ability to index more of the web.

Dr. Hossam Fahmy is the co-founder and CTO of SilMinds, which has created the only decimal hardware financial accelerator card available in the market. He is a Stanford PhD, a professor at Cairo University, and he helped formulate the IEEE standard for floating point arithmetic. By shifting number processing from general software to specialized hardware, SilMind’s card increases server performance for certain financial service applications as much as 5X.

As an emerging market, Egypt doesn’t suffer from the irrational behavior seeping into the U.S. Internet market (unproven ad technologies raising $30mm, local discount services selling $20 gift cards for $10, etc). Instead, the start-up community in Egypt reminds us of the U.S. Internet market circa 1995, when it was tough to raise capital and when there was less glamour in being a technology entrepreneur; as opposed to the U.S. where Facebook raised $1b at a $50b valuation and “The Social Network” is poised to win an Oscar.

Some investors, sensing that the U.S. Internet equity is “priced to perfection,” are turning their sights towards emerging markets like Egypt. Usually, they look for foreign applications of successful domestic business models, like who is the “Facebook of Africa” or the “Groupon of Indonesia”? Many entrepreneurs (including freshly minted MBA grads returning to their native lands) are quick to adopt this strategy. About half of the start-ups that we saw in Cairo were localized versions of successful U.S. models.

The impressionability of these emerging market startups raises important questions. Although there may be a clear opportunity for the “Zynga of the Middle East” to get acquired in the near term by its namesake, one cannot build a sustainable business based on somebody else’s vision. Will those entrepreneurs who define themselves based on our business models look back at us, years from now, as startup imperialists? If so, will they shut us out from participating in their own economic transformations, just as they begin to scale? One need not look any further than China or Russia for cautionary tales of markets closing down to foreign investors at the most inopportune times.

There are a variety of reasons why Egypt could fail in its attempt to become a start-up mecca: poverty, political instability, poor education, lack of rule of law, difficulty to raise capital and cultural norms that do not embrace risk. For example, it takes two days to form a new company in Egypt, but takes two years to dissolve one, which is problematic because without bankruptcy reform, it is impossible for entrepreneurs to “fail fast” and move on to their next venture.

Despite these risks, there are a number of advantages that Egypt has in its favor: innovation is real, valuations are reasonable, engineering talent is available, real estate is cheap, and the government is motivated to help foster entrepreneurial success stories as a means of inspiring its disaffected youth. Egypt represents a market of more than 80mm people, and is the gateway to the broader MENA market of 320mm people (larger than US, Brazil or Russia). The region’s growth rates of mobile penetration and Internet usage are among the highest in the world.

In recent months, a few venture funds have started to finance these early stage opportunities: Arif Naqvi, founder of Abraaj Capital, the largest private equity firm in the region, recently announced multi-hundred million dollar funds dedicated to early and mid-cap technology companies in the Middle East; Ahmed Alfi, after two decades of successful investing in the United States, returned home to Cairo to form Sawari Ventures, complete with a SoMa style incubator housed in a classic 1940s building on the Nile.

Is it time to invest in Egyptian startups, or will the current political and social instability inhibit exits and investment returns? Who knows if companies like kngine and SilMinds will ever exhibit the same power in Egypt that Google and Intel exhibit in the US–what matters now is that there are Egyptian entrepreneurs with the drive and skill sets necessary to compete in global technology markets. With the Egyptian government’s support, and the organic growth of the population and its technology adoption, we believe that a framework is now in place for Egypt and the broader MENA region to emerge as an important market for early stage investment.

(This essay was written in collaboration with Christopher M. Schroeder, a Washington, D.C.- and New York-based angel investor and CEO of the online health start-up healthcentral.com.)

I remember that Monday morning, January 10, 2000.  The day that AOL announced it was buying Time Warner.  The word starting seeping out the night before, Sunday night.  I went to sleep like it was Christmas eve, and couldn’t wait for what market madness the morning would bring.  I was working at Flatiron Partners, and Fred, Jerry, Bob and I had a standing Monday morning breakfast at the Mayrose Diner.  We all looked at eachother that Monday morning with our mouths agape, shaking our heads in amazement that this was really happening.  In retrospect, that deal was a watershed for the Internet.  It announced that new media was going to be bigger than old media.  It also marked the final inflation of a bubble that popped painfully only a few months down the road.

I came home tonight to a techmeme filled with news about Amazon’s boffo earnings, rumors about Yahoo! and Microsoft’s interest in acquiring Foursquare, and a Bloomberg Business Week analysis of whether Pincus’s Zynga can continue to extract hundreds of millions of dollars from people buying virtual hoes in his games on Facebook.  Brad Stone’s story about sharing credit card transactions in public was already filed for tomorrow New York Times.  Waiting for me on the kitchen counter was a copy of this week’s New Yorker, filled with an essay by Ken Auletta “Publish or Perish:  The Ipad Takes on the Kindle.”  Next to it was New York magazine, whose cover “Life is Tweet” features Sam from drop.io, Karp from Tumblr and Dens from Foursquare.  All the while, my mind was still adjusting to the new contours that had been etched into it, first by Twitter’s annotation feature announced at its Chirp conference last week, and then by Facebook’s Open Graph blitzkrieg yesterday.  It feels like something big is about to pop, something on the AOL-buys-Time Warner richter scale.

All of which begs the question, what gives?  The great recession of 2008 is a distant memory, as we move through the Spring of 2010 with stocks like Apple and Amazon up more than 100% from their lows.  The Nasdaq chart from the financial crisis up until now looks something like this:

And to think, the seminal stock of the social media era, Facebook, has yet to trade a single share in the public market.  One can only imagine how much pent-up demand there is from mutual funds, hedge funds and retail investors for stock in this company that has established the default identity system for what will soon be over 1 billion people around the world.  One could argue that the value of this resource on a macro economic basis is commensurate with that of oil (ie Exxon Mobil) or of the two primary computer operating systems (Apple and Microsoft), and that the “mature” value of Facebook in 2012 might be closer to $300b than $30b.

And yet, against the breathlessness of what might be, is the reality of what once was.  All we need to do is look at the Nasdaq chart from the 1998 Russian financial crisis through the dot com bubble of 2000 to give us pause:

Although I am not a market technician, my spider sense is tingling.  The wheels of capitalism are back in motion, and liquidity is flowing from the top to the bottom of the cap structure.  University endowments are trying to distinguish deal flow quality from the PayPal mafia versus the Xoogler community; Web 1.0 bankers are reuniting to capitalize on the coming Web 2.0 IPO liquidity, and startups with big ideas, hockey stick user growth, but relatively little revenue, are commanding eight figure Series A valuations.

Markets tend to overact on the way up and on the way down, so we may well see an extended period of bullishness over the coming months or even years.  The Nasdaq has another 100% to go before it gets into the same trough to peak range we saw 10 years ago.  The bubble needs to wait for companies like Facebook, Groupon and Twitter to transition from privately held to publicly traded before bursting.  But burst it will, as it always does.  Not before, however, some very fortunate entrepreneurs, investors and bankers make out with new fortunes.

*

In light of all this, it hadn’t occurred to me until now how uncanny my experience last Saturday night was.  Tina and I ventured out from Marin into SF to join Kara Swisher and Quincy Smith for what we thought was going to be smallish dinner honoring Bob Pittman.  Yes, that Bob Pittman.  The one who, along with Steve Case at AOL, bought Time Warner.  The one who made us all shake our heads in amazement that Monday morning ten years ago.  As we walked into the back room of Tres Agaves, we quickly realized that this was no small dinner party.  There had to be at least a hundred friends and colleagues milling around: Google execs, angels, VC’s, Public and startup CEOs.  Everybody was enjoying the open bar and free flowing conversations.  As I made my way to the back, to take a breath, there was Bob Pittman, off to the corner, looking fit as ever.  The only noticeable difference was a fresh shade of sandy gray stubble matching his sandy gray hair.   Every few minutes, somebody would venture up to him and shake his hand and reminisce about the last time they met.  The younger startup folks seemed to have no idea who he was and were more concerned with putting together their tacos from the cart.  Little did they know, however, how much their future will be shaped by his past.