The Middle East and North Africa (MENA) region is fast emerging as the new fertile ground for a startup explosion, with the region predicted to see as many as 100 unicorns and 250 soonicorns by 2030, a latest research said.
The region is also projected to see digital ventures of over 30 companies going public through the initial public offer (IPO) route during the period, research by RedSeer Strategy Consultants, a global consultancy in the digital sector, said.
Apparel’s 6thStreet, Landmark Group’s centrepoint, al tayer’s OUNASS, Mashreq’s mashreq neo and STC’s stcpay are among the likely candidates listed to go for IPOs in the coming years.
Unicorns are unlisted startups with $1 billion valuations and soonicorns are those in the $500 million-$1 billion valuation bracket.
MENA is currently home to just six unicorns – with four in the UAE alone – but has as many as 45 soonicorns.
“With MENA’s digital economy expected to cross the $500 billion mark by 2030, the region is set to see emergence of a plethora of startups across sectors, with a fairly large number of them making it to the unicorn and soonicorn clubs in this period,” RedSeer said.
The e-tailing sector is projected to see the emergence of the maximum number of unicorns – at 26, closely followed by the fintech sector at 25. The other sectors together could produce 49 unicorns during the period, the study said.
Ventures such as noon, SharafDG, centrepoint, 6thStreet.com and JUMIA are tipped to be among the e-tailers to become unicorns in the coming year, while Fawry, paymob, tamara, tabby and stcpay are among the fintechs.
MENA advantage
“The MENA region has been gaining significant traction as a hub for startups in recent years due to many reasons, the primary one being the significant economic growth and investments in infrastructure in the region, creating opportunities for startups to establish and scale their businesses,” Rahul Dasgupta, an angel investor in multiple ventures in the UAE and head of education and skills verticals at the Kolkata-based Globsyn Business School, told Arabian Business.
He said another contributing factor is the healthy rise in the young and tech-savvy population eager to adopt new technologies and products.
Also, this region harbors a rich gold mine of untapped markets that are ripe for innovation, particularly in areas such as e-commerce, fintech, and healthcare, Dasgupta said.
“Combined with a large and growing consumer market worth over $2 trillion, startups in this region have the potential to reach significant success – and this make MENA an attractive destination for startups and investors alike,” said Dasgupta, a Wharton Business School and IIM alumni.
Dasgupta said factors such as the active support of the region’s governments for entrepreneurship and innovation, and its strategic location – connecting the Eastern, Central and Western parts of the world – also add to attracting global talents and investments.
Zaid Mohsin Kidwai, founder & CEO of STRABL, a Dubai-based fin-tech startup that enables ‘try now, buy later’ (TNBL), said MENA’s startup ecosystem could see a major take off, since there has been a growing inclusion of new ideas in the region.
“Also the market seems to be ready to accept newer initiatives and ideas,” Kidwai said.
He said though the region has the market size and purchasing potentials to support so many startups to lead to unicorns and soonicorns, it will depend on the quality of startups that are being backed by regional investors.
“If regional investors do not back newer ideas and startups, those startups may not be able to gain enough recognition or traction to attract global investors,” Kidwai said.
“The market always has the final say in which startups pop and which startups flop,” he said.
Road to IPO
The RedSeer study said despite the expected surge in startup success stories in the region, there must be a highly calibrated and goal-based approach for them to be IPO ready.
“Higher revenues, demonstrable and defensible moats and better positioning levers are part of the approach required,” RedSeer said.
Market experts, however, said companies will need to carefully consider the benefits and drawbacks of each option before making a decision on how they want to raise funds and where they want to get listed.
“Comparatively, the stock markets in the MENA region are still developing and may not have the depth and liquidity required to support such large IPOs. In such cases, international listings may be an attractive option for start-ups from the region, as they offer greater visibility and access to a wider pool of investors,” Dasgupta said.
Kidwai also agreed with this view and said: “I believe most will be looking for international listings.”
Dasgupta, however, said the exponential growth in the VC ecosystem and presence of large VCs like Wamda Capital, SPV, MEVP, RAED Ventures and MENA Venture Investments in the region does allow companies access to funds without having to get involved with the challenges associated with listing on international stock exchanges.
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