An article by Melissa Graham, Manager of Global Development and Partnerships at Five One Labs

Iraq’s entrepreneurial landscape has evolved in exciting and positive ways over the past several years. However, despite the presence of growth-stage startups and a rich ecosystem of upskilling initiatives, bootcamps, and startup support programmes, Iraqi entrepreneurs still grapple with significant barriers to accessing investment. However, we know that developing a thriving and dynamic investment ecosystem is critical to boosting private sector entrepreneurial activity, which drives job creation, reduces unemployment, and provides new opportunities.

That’s why Five One Invest, an initiative of Five One Labs, launched its first annual research in 2023 to uncover the bottlenecks and opportunities facing Iraq’s investment ecosystem. The research results, published in our The State of Investments in Iraq report, provide a snapshot of the current realities, opportunities, and potential pathways forward for increased access to investment for startups and high-quality deals for investors.

As Five One Invest Manager Azza Yehia shares, “We’re thrilled to share the State of Investments in Iraq report to further deepen our understanding of the priorities, questions, and concerns of both founders and investors, which have uncovered clear opportunities for the entrepreneurial ecosystem to respond to.”

Surveying the Landscape

The report is grounded in a multi-pronged research approach, including a quantitative survey of over 70 startup founders and two deep-dive roundtable discussions, one with founders who have received investment and the other with investors who invest in Iraq. Key focus areas for this process included funding availability, investor trustworthiness, and obstacles to business growth.

The Founders’ Perspective

The demographic profile of surveyed founders reveals a young entrepreneurial community, with over half between 25 and 34 years old. Most entrepreneurs who responded to the survey are headquartered in Baghdad, Erbil, and Sulaimani, suggesting opportunities to provide more support for startups outside these geographies, such as in  Mosul and Basra. A significant gender disparity also existed in respondents, underscoring the need for targeted support programmes to empower women entrepreneurs to launch enterprises.

Founders shared several key challenges, from a lack of access to practical information about the investment process to difficulties accessing often closed investor networks. Despite these obstacles, it was clear from our survey and conversations with founders that they see an ecosystem populated by many investable startups facing risk-averse investors. This contrasted with the perspectives shared by investors, who indicated they see the challenge as a lack of an adequate pipeline of startups that fits their investment criteria.

Investor Insights

Investors provide a crucial lens through which to contextualise and deepen our analysis of not only the startup founders’ experience but also identify priorities, considerations and potential ideas for ways to strengthen Iraq's investment ecosystem from the investor perspective. Through a closed-door roundtable, investors shared insights on regulatory complexities and the dearth of reliable data from businesses that increases the risk of investing in startups. Investors shared learnings for entrepreneurial support organisations on ways to prepare startups to successfully secure investment, such as through targeted training and advisory support,  as a key opportunity for the ecosystem.

Looking Forward: Strategies for Growth

The report identified actionable recommendations to advance Iraq’s startup ecosystem. Key strategies include:

• Educating on Business Funding: Explain and identify the different funding mechanisms available to entrepreneurs based on their industry and business model.
• Tech and Digital Upskilling: Close the tech and digital gap through upskilling initiatives.
• Federal Iraq Registration Process: Promote awareness of regulatory requirements for MSME business registration in Federal Iraq.
• Female-Focused Entrepreneurship Programmes: Level the playing field through female-focused knowledge-sharing and capacity-building programmes.
• Promotional campaigns and endorsements: Present Iraq’s startups at regional events and conferences to build networks, raise awareness, and create opportunities for more regional investment in Iraq.
• Laws and Regulations: Support increasing and actioning investor-as well as startup-friendly regulations, politics and legislation.
• Engaging HNWI and Family Offices: Familiarise high net-worth individuals and family offices with Iraq’s startups.
• Engaging Local Startups with Regional Startups and Vice-Versa: Expose local Iraqi startups to regional startups, and vice-versa while assisting startups with scalability and growth.

Through this report, we hope to provide a useful tool to support the entrepreneurship ecosystem in catalysing Iraq’s investment landscape, with all its immense potential. The report will be published annually to capture evolving perspectives, challenges and opportunities for catalysing startup investment in Iraq in years to come.

We also invite further collaboration and dialogue to reflect the ongoing evolution of Iraq's startup and investment ecosystem. Please contact Five One Invest if you would like to learn more or discuss further.

About Five One Labs and Five One Invest:

Five One Labs, an international startup incubator that has been working closely with impressive entrepreneurs throughout Iraq since 2017, has witnessed entrepreneurs' challenges in accessing growth capital. Five One Invest was launched to respond to these challenges, creating more efficient deal-making and matchmaking opportunities for local investors and increasing entrepreneurs' access to capital as they scale. Five One Invest also provides capacity-building and undertakes research to uncover new insights and lessons.