The past two years has transformed the Middle East’s entrepreneurial evolution into a revolution.
Regional governments had been planting the seeds of this nascent industry for years, but it kicked into fourth gear over the past 18 months to combat the challenges of the pandemic.
As our physical world was brought to a shuddering halt, the digital world took over.
Healthcare, digital banking, food service and e-learning apps, which were on the periphery of our daily lives before the pandemic, became front and centre – indeed our lifeblood.
Entrepreneurs, investors, government entities and venture capitalists pounced on the opportunity to propel the region into the digital world.
Robust startup activity in the latter half of 2020 and the first half of 2021 is testament to that transformation. New MENA entities raised more than $1.2 billion in funding in the first half of the year, a 64% year-on-year growth, and a 12% increase from $1 billion raised in all of 2020, according to research firm Magnitt.
“Recovering from COVID-19, transactions in MENA grew by 23% and investment tripled between Q3’20 and Q2’21. Yet, number of deals closed in H1’21 saw a 20% decrease YoY,” Magnitt noted.
The UAE, Egypt and Saudi Arabia were the most popular hubs for VC activity, accounting for 71% of all capital deployed in the region.
And in a sign that food and financial services was top of mind of consumers, the first half saw food & beverage sector took the biggest share of funds invested while the most amount of deals were closed by fintech startups.
The robust performance builds on last year’s hectic activities, despite the slowdown in economic activity at the height of the pandemic.
MENA saw a record $1.03 billion in venture capital funding last year, breaking the record of $941 million set in 2016. The number of deals in 2020, at 496, was lower than the 573 deal record set in 2020.
“Contrary to 2020 being a challenging year for the entire world, it was a spectacular year for technology startups. 2020 saw many rising stars in the FinTech, Education, Healthcare, Gaming, Logistics, E-Commerce industries which are by design leveraged on scaling up through technology,” said Marie-Therese Fam, managing partner at venture capital firm Flat6Labs, in a report by Magnitt.
The UAE, Egypt and Saudi Arabia accounted for 68% of the total number of deals announced last year, while they garnered 88% of the share of funding amounts.
Ecommerce and real estate businesses accounted for 16% each in total funding, with fintech (14%), food and beverage (12%) and healthcare (7%) making up the top five most popular sectors.
If the first half of 2021 is any indicator, the regional digital landscape will see more hectic activity, with Saudi Arabia set to surpass Egypt as the second most active hub in the region, according to Magnitt.
Nurturing an entrepreneurial culture is one of the several planks of the Saudi Vision 2030 platform that aims to diversify the economy.
The launch of a new SME bank in the kingdom, and the efforts by many Saudi corporations to fund the next wave of national champions is starting to bear fruit.
“The SMEs Bank brings together all financing solutions under one umbrella to enable the small and medium enterprises sector to access appropriate financing and achieve stability and growth,” the Ministry of Commerce tweeted.
The Global Entrepreneurship Monitor 2020/21, a survey comprising 43 countries, conducted by the Switzerland-based non-profit Global Entrepreneurship Research Association, also underscores the progress made in Saudi Arabia to nurture entrepreneurial culture.
“In six of the 43 participating economies, more than three out of four adults agree or strongly agree that it is easy to start a business in that country, peaking at more than nine out of 10 in Saudi Arabia,” according the GEM report.
The GERA also lauded the kingdom’s framework conditions for entrepreneurs, with Saudi entrepreneurs most positive among their global peers about their government’s support for entrepreneurs.
Among the entrepreneurs surveyed across the 43 nations, respondents from Saudi Arabia was most agreeable to the notion that starting a business in the country was easy, and also most optimistic among their peers when noting that, “There are good opportunities to start a business in the area where I live.”
The entrepreneur bug among the region’s citizens is unlikely to go away any time soon. Indeed, governments are actively encouraging the development of new businesses and see them as a major diversification strategy that’s spearheaded by the private sector, and create well-paying jobs in the knowledge economy.
And the region is emerging as a hub for small businesses. The UAE, which boast 657 startups, is ranked 19th among countries with the most number of new companies, according to StartupRanking, with Egypt not far behind with 604 new tech entities, placing it in 22nd place. Saudi Arabia ranks further down below with 72 new enterprises – but that should change quickly as Saudi Vision 2030 programs roll out over the next few years. ©