Analysis Mena region has record year for startup investment By Andy Sambidge June 16, 2022 Creative Commons Tel Aviv is a consistent leader in the 2022 Global Startup Ecosystem Report $13bn raised in venture capital rounds over 890 deals in 2021Israel has won reputation as “startup nation” with focus on tech Other top Mena startup ecosystems include Egypt, Saudi and UAE The geographic location of the Middle East and North Africa (Mena) provides access to large markets in Europe, Africa and Asia, and is home to a large, young population. In a context of geopolitical instability and high unemployment, many of these young people are increasingly seeking new opportunities and looking to improve the world via entrepreneurship. According to the 2022 Global Startup Ecosystem Report (GSER), published on Wednesday by policy advisory and research organisation Startup Genome in cooperation with the Global Entrepreneurship Network, the Mena region saw a record year of startup investment activity in 2021. Opening a bank account still the ‘biggest hurdle’ for UAE startupsIndian Web3 startups migrate to the UAE A total of $13 billion was raised in venture capital rounds over 890 deals while the region also experienced a 23 percent increase in the number of Series B+ deals from 2020. SMEs make up 94 percent of registered companies in the region and are vital to Mena’s economy. However, only three percent of these have access to global funding. Since the first GSER in 2012, Mena has experienced rapid transformation – it has doubled its global share of early-stage funding to four percent, a value of $3.8 billion while in 2021, Mena also saw a 640 percent increase in the number of $50 million+ exits compared to 2012. Israel has made a name for itself as a “startup nation” with a particular focus on tech, and Tel Aviv is a consistent leader in the regional GSER rankings. The ecosystem saw three $1 billion+ exits in the period analysed, and its value crossed $100 billion, helping it to secure its global seventh place, just behind the likes of Silicon Valley, New York, London, Boston and Beijing. In fact, Israel accounted for 84 percent of the region’s share in total VC funding in 2021, followed by the UAE with an eight percent share. Last year, the UAE experienced 144 percent growth in the dollar amount of Series B+ rounds compared to 2020. The strategic importance of startups and SMEs is apparent in the UAE, accounting for 53 percent of the national GDP and 60 percent of the employment. According to the data, Mena’s other leading startup ecosystems include Egypt and Saudi Arabia. Cairo has seen a 156 percent increase in total VC funding-round dollars from 2020 to 2021, while from 2017 to 2021 the overall number of VC funding rounds increased by 60 percent. Fintech startups are also thriving in Saudi Arabia with Tamara seeing the region’s biggest 2021 deal in a $110 million Series A. Saudi Arabia also produced its first fintech unicorn in late 2020, when STC Pay was valued at $1.3 billion. According to the GSER, the Mena region saw a 60 percent increase in early-stage funding from 2020 to 2021. Regional top performers, apart from Israel, were Dubai, Cairo, Riyadh and Abu Dhabi while the report listed the top regional challengers as Amman, Sharjah, Casablanca, Bahrain and Tunis. In Abu Dhabi, at Hub71, the emirate’s ecosystem, tech startups secured AED30 million ($8.2 million) across more than 20 corporate deals in 2021, with startups ramping up AED1.5 billion ($40.8 million) in venture capital investment since its inception in 2019. The aggregate valuation of Hub71 startups soared to AED5.9 billion ($1.6 billion). “Abu Dhabi’s innovation ecosystem is an undeniable catalyst for achieving sustainable economic growth,” Mohamed Ali Al Shorafa Al Hammadi, chairman of Hub71 and the Abu Dhabi Department of Economic Development, said. “Advancing diverse sectors through the creative minds of entrepreneurs stems from our work of building a self-sustaining ecosystem that startups, investors, businesses, and government can capitalise on in the pursuit of scaling disruptive technologies with real-world impact.” In Bahrain the number of startups has grown at a compound annual growth rate of 46 percent since 2018. Blockchain and cryptocurrency are fast growing areas, with Bahrain-founded crypto exchange Rain raising a $111.85 million Series B in January. Bahrain’s ecosystem is steadily moving towards maturity as its total valuation increased by four folds this year – from under $100 million to $564 million, a 468 percent increase compared to the previous year. In addition, the average follow-on funding a startup receives rose from $0.9 million to $3.1 million. “The growth within the ecosystem is another example in Bahrain’s long history of economic dynamism, bolstered by an attractive environment, ease of business set-up, dedicated and talented workforce, innovative regulation and a readiness to embrace entrepreneurship and innovation,” said Husain Mohamed Rajab, CEO of Tamkeen, which supports the private sector to deliver a highly-skilled workforce. Globally, the same five ecosystems remain at the top of the ranking as in 2020 and 2021, but Beijing has dropped one place, with Boston taking its former place at number four. Silicon Valley is top, followed by New York City and London tied in second, and Beijing in fifth. Several Indian ecosystems have risen in the rankings, most notably Delhi, which is 11 places higher than in 2021 and entering the top 30 for the first time, while Bangalore moved up one place from last year to 22nd. Overall, China’s ecosystems have declined in the rankings, a reflection of the relative drop in early-stage funding in comparison to other ecosystems while the dollar amount of exits in London grew 413 percent from 2020. London’s Series B+ rounds increased 162 percent in terms of dollar amount from 2020, and it saw 55 percent more $50 million+ exits in 2021 versus 2020. Since the GSER 2021 there has been an overall increase in the growth of exits and a general slowing in the growth of Series A rounds. Of the emerging ecosystems – startup communities at earlier stages of growth – Dubai was ranked 15th behind Oslo which topped the list after producing two unicorns – industrial IoT platform Cognite and online grocery Oda. The top 100 emerging ecosystems are collectively worth over $1 trillion, which is a 96 percent increase from last year. Europe and North America still boast the majority of emerging ecosystems, and Latin America, Mena and Africa have held steady in the number of ecosystems in the top 100 from last year, with five, four, and three respectively.