Due Diligence, in Arabic

Islam and the start-up industry go hand in hand: Islamic ethics strive for investment into ventures whose returns on investment vary with entrepreneurial success.

Last week, I wrote about the emerging links between the American and the German start-up industries, and about the relationships that are being forged between Berlin and Silicon Valley. When I wrote the article, I kept thinking back to a speech by the former German Chancellor Helmut Schmidt, who argued that Europe and North America must cultivate their common culture to remain viable players in the global arena during the 21st century:

“We will uphold the values of the old Greeks and of Hellenism, we will hold onto Cicero and Marcus Aurelius, onto European basic values and basic texts, onto the heritage of Alghieri Dante and William Shakespeare. We desire to relinquish neither Rousseau nor Montesquieu, neither Erasmus nor David Hume nor Immanuel Kant. We want to remain loyal to the legacy of Abraham Lincoln and close to North America.”

According to Schmidt, our long and common cultural history remains important glue that binds those regions of the world that we usually group under the heading of “the West.” The cultural self-assurance also makes it bearable to think about our declining share of the world’s population and the resulting decline in geopolitical relevance. Schmidt: “We will have to learn to endure the rise of China, India and Brazil with calmness – and, in addition, the rise of Indonesia and other Muslim countries.”

Among the “Next Eleven” emerging countries, several have populations with Muslim majorities: Indonesia, Egypt, Turkey, and Pakistan. In Nigeria, 50 percent of the population is Muslim. Ironically, the start-up industry has the potential to achieve success where politics has failed for decades: The creation of an area of cooperation, a digital Andalusia.

In European history, Andalusia is often cited as an example of the peaceful coexistence of Christians, Jews, and Muslims. But inter-religious peace in Andalusia ended in 1492, when the last emirate on the Spanish peninsula surrendered to the Catholic monarchs. No comparable area of cultural exchange has emerged since then.

Until today: Islam and the start-up industry are remarkably suited for each other. Islamic ethics and laws prohibit investments with fixed interest rates and fixed returns on investment. According to Islamic teachings, money is a vehicle for economic success, but no end in itself. Money fuels our economy and our trade networks – and both of those are highly valued within Islamic tradition. Thus, entrepreneurship also holds a prominent place: Those who expose themselves to the risk of founding a new company, who believe in their ideas and strive to turn them into reality, can hope to collect investment money in accordance with Islamic ethics.

A successful investment exit is possible as well. Islamic teachings don’t prohibit profits: Tradesmen and salesmen can earn their money because (and this is especially true for the start-up industry) profits are far from guaranteed. Business partners must share manageable risks, operate with due diligence, and prevent contractual snares.

One might assume that vast amounts of money from the oil-exporting countries of the Middle East – Saudi Arabia, Dubai, and the Emirates – has already swamped the start-up industries in the West. But investments from the Middle East remain rare – why? Have we failed to beat the drum sufficiently to attract foreign investors to our cities and companies? Have we failed to present ourselves as capable entrepreneurs?

Just last week, TechCrunch featured Mike Butcher’s visit to the first start-up incubator in Lebanon. It’s good to see that the industry is kicking off elsewhere. Our lesson must be to build networks and, whenever possible, cooperate. Additionally, we must strive to attract investors from the Arab world. And let’s not forget: Four million Muslims live in Germany alone. Some of them might have an interest in investing in a start-up enterprise as well.

Who would have thought that the perennial debate about the role of Islam within Western societies could be nudged into a positive direction by the start-up industry? Who would have expected the cultural bridge to emerge from a newly emerging economic sector? One thing is certain: Responsible entrepreneurialism is highly valued in Islamic culture, and in the start-up industry as well.

Newconomy is the new weekly column for the start-up industry. It focuses on the intersection of classical and new economies and of politics and entrepreneurialism. Newconomy is sponsored by Factory, the new start-up hub in Berlin.

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