RSM Egypt

The Rise of Emerging MENA Startups

The MENA Region has seen a huge boom in the number of emerging startups, as well as the amount of capital invested in these new startups.

In the first half of 2019, investment funding increased by 66% when compared to the same period in 2018. Moreover, according to Ivo Detelinov, Head of Private Equity Funds, RTF, the volume of investments is expected to significantly grow in the next 5 years amid increased government support for SMEs across the MENA region.

In a Venture Investment report by Magnitt, the MENA region has witnessed emerging startups from two countries who were successful at driving investment in 2019. Egyptian startups led the pack in terms of number of investment agreements with 25% of all agreements going towards Egyptian firms. Regarding the total investment value, however, startups from the UAE had completely dominated the competition with 60% of investment value going to them. As for Egypt, it ranked second on the list with 14% of the total investment value.

In terms of arising industries, FinTech maintained its pole position with 13% of investments going towards startups in the sector. E-Commerce followed closely with 11% of investments, followed by Delivery & Transport and IT Solutions. These figures show how important investors perceive new and emerging industries such as FinTech and E-Commerce to have a higher potential for growth and profitability than other more traditional industries. This could be due to the novelty factor of these industries, or perhaps due to their unique business models which allow them to scale quickly and efficiently.

While many barriers to entry have been removed or diminished over the past year to enable startups to flourish in the MENA region, such as the advent of startup advisory companies, many challenges still remain that potential entrepreneurs should prepare themselves for:

  • The costly, time-consuming and bureaucratic process to get startups off the ground, especially due to paperwork, licensing fees, and other complexities.

  • The increasing need for capital influx at the early stages of a startup’s lifecycle.

  • The lack of reliable, accurate data.

  • Entrepreneurs in the region may have “Tunnel Vision” as they are fixated on their product or service which may lead to a lack of long-term visions such as regional or global expansions.

Overall, the current financial situation in the MENA Region is extremely favorable for startups when compared to past times and other, less growth driven regions. Moreover, local governments have increasingly focused on entrepreneurship. We have seen the launch of funds, matching programs, accelerators, as well as startup & VC licenses. As the number and value of investments increase in the region, more startups are bound to appear and disrupt their respective markets. Ultimately, the success of the current generation of startups could be the platform which catapults the MENA Region towards future economic growth, prosperity, and stability.

 

References:

https://magnitt.com/news/49645/mena-startup-ecosystem-rise-mena-funding-66-compared-first-6-months-2018-revealed-magnitt-h1-2019

https://afrikanheroes.com/2020/01/07/egypt-ranked-highest-in-mena-for-number-of-startup-deals-sealed-in-2019%E2%80%8A-%E2%80%8Afirst-time-ever/

http://english.ahram.org.eg/NewsContent/3/12/357269/Business/Economy/RiseUp-Summit--discusses-prospects-for-tech-entrep.aspx

https://enterprise.press/stories/2020/01/13/mena-startups-break-records-in-2019-egypt-top-country-by-number-of-agreements-9742/

https://scenearabia.com/Money/Challenges-MENA-Startups-Data-Pioneer-Magnitt-Philip-Bahoshy-Iraqi

http://www.mcit.gov.eg/Upcont/Documents/Reports%20and%20Documents_9102019000_EN_State_of_MENA_Startups_2019.pdf

 

 

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