Yes, Global Hardware Innovation is achievable from Lebanon!

Posted on September 17, 2018

Designed in Lebanon. Manufactured in China. Sold in the world.”

Hardware Innovation in Lebanon - Cover Image

Instabeat, Band Industries, White Lab, Meacor, Dermandar, Slighter, these are the Lebanese startups which are at the forefront of the newly emerging hardware ecosystem in Lebanon. Hardware innovation is difficult everywhere in the world, and more so in Lebanon for all the reasons we know and deal with daily. But in the past few years, thanks to the efforts of some brave people, hardware innovation is becoming a possibility in the country.  

 

Bassam Jalgha is a young man passionate about music who revolutionized the life of thousands of musicians around the world. Back in 2008, he had the idea to develop a small device which would allow him and all his fellow musicians to easily tune any string musical instrument. He convinced his friend, Hassane Slaibi, who is gifted with absolute pitch, to help him.

Fast forward to 2018: their company Band Industries manufactures Roadie Tuner in China and sells its products in 80 countries worldwide. These young founders are the living proof that, even if hardware innovation is no easy feat, it is still achievable from Lebanon to the world.

“When we started ten years ago, there were very few mentorships, very little help,” says Hassane Slaibi, co-founder at Band Industries. We faced a lot of problems that we had to solve alone. At the time there were not any fabrication labs. It took us a year and a half to build the prototype. We went to electrical shops, ordered items from the United States, imported the machines… We had to learn how to operate the equipment alone, we had to do everything alone. Now designing and prototyping hardware is getting easier.”

Indeed, innovation in hardware is starting to become a thing in Lebanon, as we are witnessing the beginning of an ecosystem, in a country which has an untapped potential.

 

A skilled yet affordable labor force

Hassane and Bassam may have started on their own, but they eventually benefited from one of the main competitive advantages of Lebanon: a highly skilled labor force.

Indeed, not only does Lebanon provide the top-notch engineers that hardware design and innovation requests, but it also provides the other talents needed to develop hardware in the knowledge economy. Because hardware is more than the stereotype of an engineer working in his garage. The world is all about connected devices these days, and hardware and software go hand in hand. This requires software engineers who integrate big data and connectivity to hardware, as well as the designers, creative people, writers, that make the hardware piece relevant to customers.

All skills that we have in abundance in Lebanon.

And to top it all, this highly skilled labor force is affordable: “The labor base is relatively cheaper than the United States, Europe and the GCC countries, with the average wage of a software engineer nearly 27% lower than in the Gulf countries and 55% lower than in selected developed economies,” according to IDAL’s figures.

This skilled yet affordable workforce is actually the reason why White Lab, which produces Sensio Air, an air-quality and allergens tracker device, produced the prototype of the shell of their device in the country. “We have very skilled and affordable designers and craftsmen,” says Cyrille Najjar, co-founder of White Lab. “We actually requested quotations from China and the United States, and the prices we were given were 10 times higher than the ones we got in Lebanon. We managed to produce our first 20 units for less than $3,000, which is a really correct price.”

So, all in all, in Lebanon we have the human skills to design and start a hardware project, but things get complicated when it comes to execution.

 

Lebanese entrepreneurs struggle to manufacture hardware

“When we started, we wanted to mass produce in Lebanon,” says Bassam Jalgha. “But, no one could help us achieve this goal, so we had to go to China where we now manufacture our products.”

Indeed, “today, we can do parts of the hardware in Lebanon,” confirms Paul Chucrallah, Managing Director at Berytech Fund II;  “we can build a prototype, sometimes we can demonstrate that the concept works, but at one point, we need to get help from abroad, especially for the production part.”

Lebanon is actually not alone in this case:  worldwide, production in hardware tends to be concentrated in China, Mexico and Turkey. “Even hardware companies in the UK and the US produce in China,” says Cyrille Najjar.

The problem also is that “nobody knows how to do design for manufacture (DFM) in Lebanon,” says Paul Chucrallah.  “It’s one thing to have a prototype but it’s another thing to have a market-fit product,” explains Bassam Jalgha. “I think one of the biggest lacks in the market is the know-how. Not finding the manufacturing and designing expertise is a huge problem.”

To complicate things further, the regulatory and administrative environment in Lebanon creates additional problems that entrepreneurs could live without.

“Let’s say you have an idea,” explains Paul Chucrallah. “You want to produce it but the components do not exist in Lebanon, you have to order them, wait for them to arrive, they get detained at customs for two months, then you end up going there and paying fees, then you discover it is not exactly what you needed, so you send the items back, pay again, get new ones, and same thing all over again. The whole process can take you months.  Whereas if you were in the United States, you could order online and get them delivered in 24 hours!”

That’s what White Lab’s founders discovered the hard way. “At the beginning of Sensio Air, we relied a lot on friends coming from abroad to bring us the components we needed with them,” confirms Eve Tamraz, co-founder at White Lab. “When we had to bring them in through customs, not only would it take months, but they charged us customs and forced us to become VAT-registered for R&D material that we would not sell later!”

 

Electronic Circuit Board

The beginning of a solution for prototyping in Lebanon

The good news though is that, in recent years, the multiplication of fabrication labs in Lebanon have made the life of hardware entrepreneurs a little easier. 10 years ago, there were no fab labs in the country. Today, we know of six spaces, Berytech’s being the only one which is accredited by the international Fab Foundation and is part of its 70+ network of labs worldwide.

Berytech’s Fab Lab provides entrepreneurs with the machines and resources needed to build a prototype. More importantly, it provides them with the trainings necessary to master the machines and get educated about hardware. Berytech’s Fab Lab is contributing to the creation of a makers’ community built around collaboration, sharing and increasing the collective knowledge about hardware in the country.

And that is vital, because one of the major problems Lebanese entrepreneurs face is the general lack of knowledge about hardware.

A culture problem for Lebanese entrepreneurs

“We need an ecosystem”, says Paul Chucrallah. “We need people who have completed the whole journey from idea to a product-to-market in order to share their experiences with others.”

But it’s not that easy: “We have a culture problem in Lebanon”, say Cyrille Najjar and Eve Tamraz. “Instead of helping each other for the ecosystem to grow and Lebanon to become a hub, we have a selfish and divisive mindset. It doesn’t work. When we first got to Silicon Valley in the United States, we were ‘nobody’, but people believed in us and helped us regardless and that took us by surprise. And we realized:  it’s the only way to go, you can’t move forward if you waste your time fighting your competitors left and right.”

This problem of culture also means that Lebanese investors are wary of hardware startups, because they follow a different set of rules and timing than what they’re used to.

“We need venture capitalists to understand that hardware takes time”, explains Cyrille Najjar. “You need at least 5 years for a product to reach the market – compared to 2-3 years for a software product.”

But for the investors that are ready to take the risk and invest time, the rewards can be immense. “If you have a cutting-edge innovation, or an idea that no one had before, if you manage to get funding and manufacture a new product that customers can identify with, you can be in a very good position to seduce big players that could want to integrate your technology, and you become very interesting to investors,” says Paul Chucrallah.

Yet very few Lebanese funds have dared invest in hardware companies, Berytech Funds I and II being among the only ones: “Overall we have done 7 hardware investments or investments in startups with hardware components,” confirms Paul Chucrallah. One of them, Instabeat, is on its way to conquer the hearts of swimmers all over the world, with its water-proof display unit that monitors a swimmer’s vitals.

These few investments are a very good beginning and they will hopefully influence other investors to be interested in hardware innovation in Lebanon.

 

The birth of a hardware startup ecosystem

For now, Berytech seems to be leading the way. According to CEO Maroun Chammas, Berytech is looking into developing a hardware accelerator in Lebanon in which around $5-7 million would be invested. This should come as great news to the new generation of Lebanese hardware startups that are emerging, inspired by the success of their elders.

A startup such as Slighter for example, which produces a smart device that helps smokers reduce cigarette consumption, and whose founder has been invited to appear as a featured attendee at TechCrunch Disrupt 2018.

Or Meacor, a biotechnology startup developing a novel catheter that aims at treating without open heart surgery a very serious heart condition called ‘mitral valve regurgitation’.

Or Reef Kinetics, an IoT-based automated aquarium monitoring and testing platform. It aims at changing the face of water testing and aquarium maintenance and simplifying the management of aquariums by automating their monitoring and maintenance.

Or Dermandar, a company specialized in digital image technologies, whose latest innovation includes StereoStitch: real–time 3D 360 video stitching.

All in all, these are sure signs that an ecosystem is slowly but surely being built. The “designed in Lebanon, manufactured in China, sold in the world” that Maroun Chammas preaches constantly might very well become a reality.