Qaf Lab: The Iraqi Incubator Doing Things Differently For Startups
Mohammed Al-Samarrai and Mohammed Al-Hashimie are two Iraqi entrepreneurs and business visionaries from Baghdad and Mosul respectively, with experience in the entrepreneurship scene. In 2019, they established Qaf Lab, a private sector development innovation hub with the goal of bringing a non-conventional investment and incubation model to the Iraqi ecosystem.
After ISIS invaded Mosul in 2014, there was a need to revive the private sector in the city. Traditional methods tend to fail in untraditional environments, and many of the investments and business approaches that we were used to seeing in Iraq and especially in Mosul, needed to change to adapt to this new environment. Qaf Lab aims to fill this gap and provide a unique business model compared to other incubators and hubs in Iraq.
A New Approach to Develop Iraq’s Private Sector
Qaf Lab has a new approach to private sector development in Iraq, beginning with the structure of its innovation hub to the programs and incubations they offer.
The traditional method of incubators is to raise funds from donors, implement an incubation program and then disburse seed funding to the incubated businesses. However, this approach leaves much to be desired. This incubator model is limited by the amount of funds it can raise. Sometimes, these funds may not be enough to support all of the businesses. Another challenge is the limited support given to incubated businesses after the program ends, which is evident by the high number of failed startups after they receive an initial seed fund.
There are many initiatives and institutions in Iraq which are helping to support entrepreneurs and startups, but we see that their business model is traditional and hasn’t changed. We wanted to be the first institution that takes risk and invest with our own funds in Iraqi businesses to leave our mark on the Iraqi private sector.
Mohamad Al-Sammarai, Co-founder of Qaf Lab
The founders of Qaf Lab are focused on a new method of developing the Iraqi private sector through long-term support, direct investment in the startups they incubate, and by utilising new technologies to revolutionise traditional sectors and open new business opportunities. For this they established the Innovation Hub which has a self-sustainable model that runs like a business with ongoing projects and clients from across Iraq.
The Hub’s business model is divided into three streams:
1. Funds from Donations
Although a traditional method of raising funds, Qaf Lab uses this in conjunction with other funding methods to support the businesses they incubate.
2. Internal Funds
The Qaf Lab consists of multiple micro teams which function as an independent business under the guidance of Qaf Lab Management. These teams include media, finance, coordination, virtual reality and research, and work on projects for external clients in Mosul and other cities.
3. Investment Portfolio
As startups scale, Qaf Lab expects a return on investment either through equity or a profit-share.
Incubation of Iraqi Startups
Incubation programs are increasing in popularity in Iraq whereby innovative Iraqis apply for training and funding to help establish their business.
But that is not enough. The entrepreneurship ecosystem is new in Iraq and startups need long-term support alongside seed funding and initial training.
Qaf Lab’s approach to incubation means that startups not only have access to training and seed funding, but also to the micro-teams at Qaf Lab. Startups can receive support in areas such as social media management, business development, finance, technology and research data. This added value is important to founders as many startups tend to fail after incubation programs end.
In 2021, Qaf Lab organised Business Shortcut, an incubation program with funding from Asiacell where 10 Iraqi entrepreneurs were trained to establish their own startups. In addition to seed funding provided by Asiacell for qualifying startups, Qaf Lab invested an additional 300% of their own money into increasing the funding amount – making them a shareholder in the businesses.
Investment in Iraqi Businesses
Investment in the Iraqi private sector is an uncommon phenomenon due to Iraq’s beginnings as a feudal system and then a socialist one. This resulted in the country not having much of a private sector culture. However, investments in startups are on the rise since 2021 and startups are making a name for themselves and even creating new industries in Iraq.
Despite this growth, more still needs to be done. A long-term commitment to startups needs to be established socially in the face of regional and international companies expanding into the Iraqi market and putting local business at risk or buying them out.
Qaf Lab’s founders emphasise investing in startups with potential and being part of these businesses as investors – not only financially, but by providing the Hub’s resources and its network.
There are many emerging sectors in Iraq that can positively contribute positively to the Iraqi private sector as a whole, such as smart solutions, AgriTech and sustainable power. Qaf Lab focuses on investing in new business and traditional sectors but with updated methods.
When we invest, our focus is 20% on the business itself and 80% on the people that run it. We check if the person is capable of running the business and if s/he is capable of growing the business and their skills. Ideas come and go but the person and their capability are there to stay.
Mohamad Al-Sammarai, Co-founder of Qaf Lab
Qaf Lab’s Investment Portfolio
Qaf Lab has a diverse portfolio of investments which include:
1. ZAD
Animal farming methods in Iraq have not changed much since the domestication of animals. Iraqi Farmers are yet to fully adopt technology in their day-to-day work. In some regions, particularly in the North, some farmers still even us the old Iraqi currency from the 1980s.
Yet the benefits of using technology are slowly becoming understood because of global warming and its impact on animal grazing, in addition to the increase in fodder prices because of the conflict in Ukraine. These factors are affecting Iraqi farmers and is reducing their profit. To increase the profitability of their businesses, farmers are beginning to adopt technology to optimise their operations.
Understanding this need for technological innovation in the cattle industry, Muhammad Al-Hashimie created Mosul’s first technology-enabled farm named ‘Zad’ or ‘food’ in Arabic.
ZAD deploys technologies like the Internet of Things (IoT) and artificial intelligence (AI). Powered by sensor technology, IoT devices collect real-time cattle data that allows farmers to make data-driven decisions. Farmers can use this information to optimise the type of food they give, predict when an animal becomes unprofitable to keep, and identify issues early on.
ZAD also takes an individualistic approach to the animals. Farmers treat the herd as a unit where the individual weight gain and health of each animal is not measured and left to the farmer’s keen eye and experience to detect. An animal may have a health issue and still be within the herd, resulting in eventual loss.
Qaf Lab’s tech team developed a software and hardware which creates a profile for each animal and detects abnormalities. It notifies the farmer if there is an issue and this way, the farmer will know of issues early on and can decide to sell the animal before it’s too late.
ZAD is the perfect example of local solutions developed for local problems by local talent and investors.
Golden Mushroom
The Golden Mushroom project is a mushroom farming project which includes the growth, harvest, storage, and selling of mushrooms. It aims to grow mushrooms of various kinds and distribute them in the market as a local product that is available through all seasons. The main focus of this project is to remove the market dependency on imported mushrooms and provide the nutritious product at more affordable prices.
Golden Mushroom is the brainchild of Muhamad Al Rawi, a Mosul-based entrepreneur with a degree in Mathematics but a passion for mushrooms. Muhamad is a self-taught mushroom expert and spends his time learning about mushroom production and the industry in Iraq. While at college, Muhamad began testing the production of new types of mushrooms and building a knowledge base of what works best in the Iraqi environment. His self-funded operations attracted the attention of innovators and investors in Mosul.
The Mushroom industry in Iraq is exclusively controlled by imported produce from neighbouring countries like Iran and Turkey. Muhamad wanted to change that by creating a strong mushroom production in Iraq, a country which is well-suited environmentally and logistically for such an endeavour.
Like many other businesses, Covid-19 affected Golden Mushrooms heavily to a point where it caused the project to be paused for a time because of the financial burdens and logistics of working under curfew for a small business. After a partial recovery, Golden Mushroom restarted production but with a small amount that didn’t exceed 100 kilos per year.
In 2021, Muhamad joined the four-month Business Shortcut incubation program held by Qaf Lab.
I was offered a lot of investment opportunities from many investors throughout Iraq but the problem that I had was the investors approach as the way they functioned was to give the funds and expect returns. The thing that attracted me to Qaf Lab was their unique approach where I felt the entire innovation hub was supporting me and they are directly invested in the projects success and not only the financial side.
Muhamad Al Rawi, Founder of Golden Mushroom
With the investment and support offered by Qaf Lab, Golden Mushroom is opening a new production facility in Mosul with an impressive capacity of 40 Tons per year, utilising environmentally friendly production methods and producing organic fertilisers for farmers.
Overall, Golden Mushroom is an interesting and delicious project that is budding an entirely new sector in the Iraqi economy.
Smart Connect
Smart Connect was founded by Omar Ahmed, a telecommunication engineering student at the University of Mosul. Omar was inspired to start this project from the issues faced by nearly all Iraqi households. He wanted to automate tasks that can make life easier for the household owner, such as remote control of appliances, smart climate control and retrofitting old buildings with smart devices. Omar decided to participate in the Business Shortcut program, seeing a need for business skills and knowledge to expand his idea.
The smart home concept in Iraq started as a luxury commodity that was only affordable to the middle class, but Omar believed that the time had come to change this with affordable technologies and methods. Smart Connect managed to lower the costs of smart solutions for households with a good reputation for quality and professionalism.
With the investment from Qaf Lab, Smart Connect positioned itself as a strong competitor in the smart solutions market in Mosul and secured many projects and clients with the staff growing to 15. The company provides:
- Electrical installation for buildings
- Security camera installation
- Access control
- Smart homes
- Smart Agricultural and Gardening systems
- On-demand custom solutions for clients
Smart Connect is a promising smart solutions business that is aiming to change the niche to a more affordable and mainstream one.
Qaf Lab for the Win
Qaf Lab is one of our favourite initiatives when it comes to private sector development. What makes Qaf Lab unique is the way it approaches investment and skill building – this trend needs to be emulated by other investors and incubation programs if we want to see more success stories in Iraq.
Another thing that sets Qaf Lab apart is its emphasis on training and mentorship. This combination of financial support and expert advice is crucial for successful private sector development – something which incubators tend to overlook entirely!
