Paving Startup Fortunes in MENA

The year was 2013. The location Cairo, Egypt.

In the aftermath of the Egyptian revolution, at the country’s 1st major entrepreneurship conference, a young starry-eyed first-time founder hobbled onto the stage with trembling knees and sweaty palms.

He proceeded to deliver a pitch that seemed epic at the time, but in retrospect was pure cringe. But somehow, it worked!

A group of angels voted to invest and he received seed funding of $100,000 for his startup, a milestone that had only been accomplished a handful of times in the country’s fresh startup scene.

That founder was I, Basil. Those sweaty palms were mine.

Since then, I have watched the region go through several evolutions, with new tech hubs emerging, some disappearing, some flourishing, some bubbles popping, but overall growing.

Back in Cairo, the startup scene thrived against all odds for a long time, yet is currently facing a truly catastrophic set of challenges. At first, post-revolutionary turbulence gave way to a robust ecosystem, nurturing ventures like Swvl. What started as a solution to the chaotic public transport system, Swvl had expanded its wings across borders and even IPO’ed on Nasdaq.

However, the vibrant entrepreneurial spirit that once dominated Cairo’s streets is now tested by a series of financial headwinds that affect both startups and the investment climate. The Egyptian pound has faced severe devaluation, which has a two-fold impact on startups. First, the cost of importing technology or goods has skyrocketed, burdening startups that rely on foreign tools and online services. Second, this devaluation has deterred foreign investment, as investors are cautious about currency risks affecting their returns. This hesitance from investors is crippling for startups that depend on external funding to scale operations.

Yet even in the face of such challenges, great startups continue to emerge from Egypt. Some of the most successful include startups such as Trella, MaxAb, RabbitMart and MNT-Halan, which just reached unicorn status, supported by a large and highly skilled local software development community.

In the region, VC firms and accelerators play important roles in shaping the startup ecosystem. Among the top VC firms, STV stands out with significant investments in technology-driven companies. Wamda Capital also continues to influence the startup landscape through strategic funding and support. 500 Startups' MENA Fund, known for its wide reach, invests across various stages and sectors, propelling a diverse range of businesses. MEVP (Middle East Venture Partners) and Flat6Labs further anchor the investment scene with their focused portfolios and regional expertise, driving innovation and entrepreneurship across MENA.

Over the last year, the MENA region has seen a significant influx of investments into startups, totaling approximately $2.67 billion with a notable focus on early to growth-stage startups. The region has also seen high-profile exits, such as Careem acquiring Munch:On. Mergers and acquisitions (M&A) continue to be the most common exit, increasing by 30% in 2023.?This trend reflects a broader pattern of increasing consolidation within the region's startup ecosystem, where companies are acquiring competitors (especially those finding it difficult to survive tough economic times) to expand their geographic presence and enhance their product offerings.

Accelerators are equally crucial in nurturing early-stage startups, providing them with the mentorship and resources needed to scale. Flat6Labs serves as both a VC and an accelerator, with multiple programs across the region that fast-track growth for new ventures. Techstars Hub71 in Abu Dhabi is renowned for its global network and tailored support, helping startups achieve new heights. AstroLabs, operating in Dubai and Riyadh, offers specialized programs that empower startups. Seedstars is another notable accelerator, focusing on impactful startups in emerging markets. Lastly, Plug and Play ADGM in Abu Dhabi connects startups with large corporations, enhancing their development through innovation and collaboration.

The recent emergence of KSA as a tech-hub and funding hotspot has forced the surrounding markets like UAE to continue to level up their game to attract top talent and simplify the process for businesses with more benefits and accelerators, which can only benefit founders in the long run.

I myself first moved to Dubai to join the “Dubai Smart Cities” accelerator, part of the ‘Silicon Oasis’ free zone. It was a great way to have a “soft landing” into a new market, to have the runway to build my network and start generating local revenue. And I’m still here years later, actively mentoring new startups across MENA and throughout Europe.

So as someone who is currently based in Dubai, I see so many positive developments in the MENA startup ecosystem despite the global economic downturn and regional challenges.

If you have any questions about the region or considering moving here, reach out and I would be happy to help!

Basil & Mark

Our previous post walking founders through an overview of how VCs operate was inspired by a wild Twitter debate last week on whether startup founders should talk to Associates in VC firms.

Our advice? Just take the meeting with a VC Associate.

If you do not have a prior relationship with a Partner or any potential warm intros into a Partner, your best shot is to talk to an Associate. VC firms have Associates for a reason, to source deals. Many deals that get reviewed in Investment Committee meetings to decide on who to fund start off as deals initially championed by an Associate.

And many of the best VC Partners today started off their careers as Associates, rising in the ranks of VC because of their ability to source and lead deals. Even if you do manage to pitch a Partner, there is zero guarantee they follow through, submit to the Investment Committee, and push the deal through.

Startup fundraising is a long game. Often the best strategy is to work lower down the food chain, build relationships, learn how the firm works, get advice, earn trust, tweak your startup & pitch, and position your startup as a high-quality, backable deal. Any decent Associate will have the patience, curiosity, passion, bandwidth, and incentive to help a founder along the journey.

Taking the transactional approach of only speaking to Partners means you will 1) miss out on potentially great VC partners, and 2) reduce your chances of a successful raise.

If there is FOMO for your deal, you secured your lead, and you are closing your round, take the transactional approach. In all other cases, play the long game, build your VC network, and increase your odds of securing a deal with the right VC partners.

We had a big drop this week with the launch of MVP Lab, our YouTube channel dedicated to sharing advice and tips about building and scaling startups. Check out the first episode of MVP Lab and subscribe!

On the travel front, Basil was rocking the stage at the Startup Loft during AWS Summit Netherlands last week talking about how AI can be your startup co-founder and using Generative AI services to accelerate the process. He also had a chance to meet with a ton of amazing startup founders!

Meanwhile Mark was in Miami for Miami Tech Week and just wrapped up a week in San Francisco to attend Startup Grind Global and Llama Lounge, one of the top AI meetups in the Bay Area! Startup Grind is a community close to our heart having participated in many of their events over the past decade. Hats off to Derek Andersen , the visionary and leader of Startup Grind for creating such a welcoming nad supportive community.

While there are many AI meetups across the Bay Area, few match the star power and quality of Llama Lounge. Many props to Jeremiah Owyang who is one of the best community organizers we know and also a shout out to 500 Global for hosting a pre-event get together. It was amazing to meet so many awesome AI startups and founders in one evening!

Where to next? Mark will be in Morocco for the Connect Summit Morocco while Basil will be hunkered down editing a bunch of new MVP Lab videos, so make sure you hit that subscribe button!