Another 5 Reasons Why Startups In Iraq Fail

In December 2021, we talked about the reasons why some startups in Iraq fail. It’s difficult to provide accurate explanations of course – data and numbers on the startup scene in Iraq isn’t available, and with a nascent and small ecosystem, we don’t always have enough stories to learn from. But this is exactly why this conversation is important.

Reasons ascribed to startup failure may be debatable, but without sharing experiences, thoughts, and knowledge, we’ll go nowhere in resolving the potential reasons for failure that current and future startups can either avoid or learn to face effectively. Based on our team’s experience with startups in Iraq and globally, as well as our conversations with entrepreneurs and incubators in the country, we kickstarted the conversation, proposing five reasons why a startup in Iraq may fail. We loved your feedback. It was thought-provoking, insightful and motivated us to go back to the drawing board and think of some more potential obstacles that entrepreneurs face when running a startup in Iraq.

So here goes another five reasons that a startup in Iraq may fail. We want to hear from you again. Tell us what you can add, what you think makes sense and what you completely disagree with.

1. Startup Culture is Disrupted by Bureaucracy

To start a business, entrepreneurs need an open environment to ease the registration process and thrive. The problem is when the legal and regulatory infrastructure is painfully bureaucratic. Startups will continue to lag behind on the world stage if the right conditions for new businesses, particularly tech-based ones, are not put in place. 

Running a startup is exhausting on its own and needs continuous grit and motivation to keep it going. If entrepreneurs need to face red tape and continuously changing regulations, people will only be discouraged to start new businesses or to commercialise innovative ideas. It’s not just the initial stages of starting a business that is disrupted by bureaucracy, startups in the EU have also struggled with attracting talent or scaling their services because of bureaucratic culture and endless paperwork.

What distinguishes startup culture countries like Estonia from other European countries is bringing the voices of startups to the table when new policies and regulations are introduced; in addition to helping startups fast-track applications. It means opening a bank account, getting a mobile subscription or renting an office space should be easy and ideally, only take a few clicks. 

2. Access to Funding is Wayyy Too Limited

Several of you mentioned this one and we completely agree. That’s why we’ve raised the issue of startup funding in Iraq several times. The need for access to funding is desperate.

Fundraising, even in countries where there is capital and funding opportunities for new startups, is one of the biggest challenges for entrepreneurs. It’s emotionally draining having to give endless pitches to numerous investors, only to receive repeated rejections. Just when you’re giving a sigh of relief that one fundraising round is closed, you find yourself needing to raise again to cover the costs of growing. Entrepreneurs in Iraq face a different challenge. The number of pitches they can give to investors willing to listen aren’t in abundance. 

Investment channels are also few. Most funding from pitch competitions focus on the initial ideation stages and are hardly enough to cover costs to hit the ground running, let alone scale or grow. Whilst banks have begun to launch initiatives to help new businesses, the banking infrastructure in general is slow to develop and difficult to navigate. 

3. Are We There Yet? Trust in Tech-Based Services

Yes, there are loads of Instagram and Facebook likes on business pages. That’s an encouraging sign, but it’s not enough for tech-based startups to thrive. Credit is far from common, not everyone has a bank account, and restaurants and malls will still shake their heads if you pull out a Visa card. Many startup stories in Iraq are particularly inspiring because of how they’ve managed to navigate these hurdles.

However, the issue here is the lack of trust in technology which seeps through every domain of running a startup. From opening a bank account to actually getting customers to sign up for your services, especially when your idea is tech-based. Technology, when celebrated, is seen as the ends rather than the means through which the core value proposition of almost any service or product can be delivered. 

Without trust in technology to ease delivery, payment and access, most businesses are limited to non-scalable solutions. 

4. It’s About Staying Small…at First

Startups have to be scalable. But the problem with the Silicon Valley image of entrepreneurship is that unless you’re looking like Amazon in the first two years of setting up, most founders think they’re failing. We often forget that Amazon started very niche by only selling books, and Facebook initially began by only connecting Harvard students. Without a niche solution for a niche market in the beginning, it will be difficult to truly understand what your customers want and how to give it to them.

We find it difficult to believe when giant tech companies are celebrated, but most of the founders started their journey by knocking doors and running after customers by testing various marketing strategies. You build, yes, but assuming that customers will magically come will not take your startup anywhere. We said this last time. It’s all about the grind. That’s part of the startup game. That’s not failure. 

5. Burnout and Mental Health Awareness is Real

Many entrepreneurs will roll their eyes at this one. Again, thanks to the Silicon Valley stereotype, unless you have no social life, are hardly sleeping and living on Indomie noodles everyday, many entrepreneurs don’t classify themselves as running a startup. With the daily struggles of post-conflict environments and lack of infrastructure, being productive in a traditional employee job is already challenging let alone running a startup. Burnout has been scientifically proven to increase the chances of inefficient decision making, job dissatisfaction, demotivation, depression and even heart disease. 

Running a startup needs a growth mindset and a positive state of mind that is resilient. With the hurdles in Iraq’s infrastructure and exceptional challenges entrepreneurs face, mental fatigue is even more of a reality for Iraqi entrepreneurs.

Most of the time, mental fatigue is treated as an individual problem that can be solved with yoga or deep breathing. Though these can help, it is more important to raise awareness of the consequences of mental fatigue amongst employers, incubators, NGOs and all those involved in the startup ecosystem. This requires self-awareness for entrepreneurs, but also ensuring that entrepreneurs take the time to think of their values as a startup. What culture can they foster to prevent burnout? How can they ensure that a workaholic culture is avoided? Burnout drives entrepreneurs away from their own startups, and top talent away from working at a startup.