The startup ‘El Dorado’ in MENA

The Middle East region and its natural extension North Africa, is a vast land rich in resources and opportunities. But the most valuable capital in the region is people and their talent. I met brilliant entrepreneurs in the Sultanate of Oman, able to look at the future with an eye on culture and heritage. A perfect mix of innovation and wisdom to foster startup growth and attract foreign investment to the country. An industry that in the region is barely at the beginning and this year is set to attract over $1 billion in investment.
Not long ago Hasan Haider — one of the partners at 500 Startups — stated that:
“The Middle East and North African countries are among the last large regional ecosystems to rise up, and emerging markets tend to leapfrog adoption of innovations and technology at higher and higher frequencies. Being a latecomer does not mean staying behind, and the Arabic speaking world is 500 million strong — young, resourceful, wealthy and a yearning to thrive.”
He was indeed right in snapping a clear picture of one of the most exciting regions for startups at the moment. It is like an information revolution that has brought the Arab speaking world into the headlines of tech media outlets all over the world.
In 2015, the region attracted 204 investments summing up to $291 million, out of which, $60 million were split between Souq and Careem, the jewel startups in MENA that somehow spearheaded a new wave of investment.
In fact, the subsequent year, Souq and Careem attracted more than 10 times more investment, hitting an unprecedented $625 million, while the industry as a whole did not grow much, with only 6 more deals closed compared to the year before: 210 vs 204. However the collective value of all startup investments in 2016 set a new record with a total funding of $972m.
When a year later, in 2017, Souq and Careem reduced their investment attracted to $150 million “only”, the industry overall experienced a steep growth through a democratisation of investment distribution. In fact, the total amount of funding received in the region topped an impressive 356 deals, up 146 compared to the previous year. 2017 was also the year when other industries went back to growth after the crisis that affected the countries with oil output in 2014 and 2015.
Looking at the investment attracted by startups in the Middle East and North Africa in 2015 compared to 2017, the growth is stunning.
In 2015, $231 million were attracted in 204 deals, making the average ticket size at $1.14 million. In 2017 the total funding hit $529 million which divided by the 354 deals (without counting Souq and Careem), brought the average ticket to $1.49 million. An encouraging sign of confidence in the region. Including the 2 startup giants, the average ticket size would have been $1.9 million per deal.
In 2018, the total investment in startups in the Middle East and North Africa reached $893 million, up $214 million from the previous year, including Souq and Careem that attracted $200 million together. Up also the amount of deals, from 356 to 366, just 10 more in nominal amount, but with such a growth in total investment, the average ticket size grew further to $ 1.9 million excluding Souq and Careem and an outstanding $2.4 million including Souq and Careem. This showed a growing strong confidence in the startups of the region.
In early 2019 the game changed completely when Uber made an offer to acquire Careem for $3.1 billion, a number that alone was worth 3 times the whole industry. The deal has just closed recently, after nearly one year of regulatory steps to address the presence of the new owner in the 15 countries where Careem operates, from Algeria to Pakistan. The deal was paid for $1.7 million in convertible notes and $1.4 billion in cash.
“Many governments in the region have been playing an active role in growing ecosystems conducive to entrepreneurs, including technical and financial support programmes and policy reforms,” said Ali Abu Kumail, senior private sector specialist at the World Bank.
It is expected that the region throughout 2020 and excluding Souq and Careem, will attract $1 billion in investment. This is a great opportunity for the Sultanate of Oman to shine through the myriad of talented developers and entrepreneurs located all over the country. Thanks to the state of art infrastructure provided by the Government and world-class education through the Omani prestigious institutions, the youth of Oman has a tremendous opportunity to make an impact in the economy of the country and the whole region, echoing the name of Oman all over the world.

stefano@virgilli.com