Let me start with the elephant in the room.
Why do we focus on the MENA region?
It is one of the hottest emerging markets in the world. By 2034, 95% of the world population will be in emerging markets. In 2020, 80% of all smartphones were located in emerging markets such as MENA. Not only that, but 89.8% of the world population under 30 years of age lives in these regions. What does it mean?! A huge pool of untapped talents.
And regards eCommerce, today 80% of young Arabs shop online, compared to 71% in 2019. Besides, 50% of those aged 18-24 in the #MENA region are shopping online after the pandemic. That resulted in the e-Commerce sector reaching a value of $22B by the end of 2020. And the prediction for each year increases by 7.3%.
Although their outstanding progress and bright future, the SaaS community is not coherent enough to sustain itself and grow even bigger. Let's see how.
🪢 Problems to solve:
I believe our ecosystem is currently facing the Middle East and North Africa (MENA) region as below:
Insufficient institutional growth capital: I strongly believe that there is a funding gap in the market in the Series B stage or the stage where companies are raising growth capital in the range of $30m-$80m. Let me explain why. The majority of the funds that operate in MENA are focused on early-stage, Pre-Series A, and Series A stage funding rounds, with the median funding amount of $1.9m in 2019. There is a natural evolution of our still young VC ecosystem and as more companies mature, we will see more institutional growth capital available for these companies. So what happens when VCs do not invest, for whatever reason may be, you are left with two options, you try to raise from other non-institutional players on the market or you try to raise internationally.
Insufficient foreign capital: Top-tier VC funds are not focused on investing in the MENA region, and although some of these funds have made investments into early-stage and early growth-stage companies, we lack the ecosystem maturity like South East Asia (SEA), India or Europe has, where names like Sequoia Capital, B Capital, Lightspeed Venture Partners, Accel Partners, and others have investment teams and offices.
Absence of international scale-ups in MENA: when it comes to tech companies scaling different markets, they go after sizeable ones that have a large enough population to support their strategy. These are usually the US, Europe, Asia (China in some cases), South America, and SEA markets. MENA is rarely the top choice for these companies when considering opening new markets after their home region and there could be several reasons for this, with some being:
Not enough knowledge of the market potential and opportunities that MENA presents for companies.
Absence of GTM (Go To Market) strategy to enter and scale in the given region.
Inadequate amount of MENA investors co-investing with global VCs to support these companies regionally.
Struggles scaling from MENA internationally: Scaling is one of the most important aspects of any startup. Most companies when achieving PMF (Product Market Fit), look at scaling markets before they consider scaling products. There are very few companies in MENA that have ventured out into other regions after capturing this region and were able to sustain their growth. Careem (acquired by Uber for $3.1b in 2019), Fresha, Swvl, and The Luxury Closet are a few to name.
Regulatory hurdles: our region is a very fragmented one, and although a common language is shared (English and Arabic), the cultural, regulatory, and monetary policies (each country has its own currency) that are present, make it extremely difficult for companies to scale efficiently.
Limited pool of highly skilled talent: Careem is a great example of the number of startups and founders that one company can generate and boost the ecosystem. From a macro level, our region is one of the youngest (more than 60% is under the age of 30 years old) and most digitally savvy regions globally (Gulf Cooperation Council region has one of the highest smartphone, internet & social media penetration per capita). In addition to that, MENA has great engineering talent pools coming from Egypt and Jordan, but what we do lack (and I would assume most scale-ups would agree), is a large pool of people in the C-level and managerial level positions with experience in scaling companies. It takes a whole set of different skills to take a company from 1–9 employees, 10–100 as it does from 101–1,000, and then beyond. Attracting international tech companies to expand into MENA is one way of addressing the knowledge transfer that can tackle this issue.
🎯 Solution:
Create a community, because we don’t have one.
We must all work together. We need to support each other so that we as a region benefit not only financially, but also create a highly skilled workforce and a booming economy that can weather the ups and downs of the future. If we don’t take any substantial steps to close the funding gap we will fall behind and most likely never catch up with other regions that are competing to be the next tech center of the world. Working together, sharing ideas, meeting, and networking in one place strength our ecosystem (similar to Kernal). As it matures, institutional VC funds and fund managers in the MENA region will need to start raising larger funds that will have the ability to deploy and lead rounds to support the Series B and C types of deals. Doing so would attract top-tier venture funds, to start deploying capital more actively in our region. Right now, policymakers have already started working on frameworks that help new and first-time fund managers with the ease of setting up these vehicles. And our ecosystem would push and encourage them to do work more to support our community. We should support and invest more in women-led startups and venture capital funds. Just earlier this year the UAE announced that at least one female director will be required on the boards of all listed companies, as firms around the world face pressure to boost gender diversity. The MENA region has an abundance of women that have exceptional talent, we just need to back these ladies.
🛠 Building:
The community would help:
Startups create profiles where they showcase their product, services, finance, and SaaS metrics to attract investors.
Startups have access to serious members, and talent profiles to hire.
Talents build strong direct relationships with key people in desired startups to meet and become new members.
Founders have the ability to connect one-to-one with investors and prospects.
Have access to industry news as it happens.
Provide comprehensive data about Startups, Investors & SaaS metrics, Funding/Investment Rounds in the region and elsewhere, and more.
Investors show their profiles and connect with startups and founders.
Create a Startup acquisition marketplace for founders who want to sell their business, it’s anonymous, private, and with no middlemen.
Connect with same-minded and interested people.
Founders create and engage with others via virtual events.
To get the ball rolling, I've created a home for everyone to participate, share ideas and give feedback. Besides that, I've shared the idea on kernal to get feedback and support. And it gets good upvotes.
Feedback is appreciated 🙌🏼