The startup ecosystems in Middle East & North Africa continue to grow. 2017 was big and 2018 has turned out to be bigger in some aspects at least. Yes, we didn’t see a Souq exiting but Jollychic – a Chinese ecommerce company that’s focused on MENA became a unicorn after raising money from Sequioa.
The year had a lot of action. Fall of a giant. A massive cyber-attack. Legislation for startups. Big investment rounds. And more. We’ve tried to put together some of that stuff in this piece, highlighting some of the biggest stories from the year. Just like last year, it is not an exhaustive list.
The rankings represent our understanding and how audience engaged with them. Please don’t take them very seriously. Maybe think of them as a round-up of some of the biggest stories from MENA’s startup ecosystems as it is very likely that we still have missed some important ones.
1) Fall of Abraaj’s PE empire
Why it matters: Abraaj was one of the biggest names in PE & VC of MENA
Started by Arif Naqvi with a capital of $3 million in 2002, Abraaj went on to become the leading private equity firm of the region and had almost $14 billion of assets under its management until late 2017 but all of that changed the following year. The downfall of Abraaj started when some of its investors including Bell & Melinda Gates Foundation and World Bank Group’s International Finance Corporation complained that Abraaj had misused investor money. All of this led to Arif Naqvi, who used to be referred as top deal maker of the region, surrendering control of Abraaj in June last year. A report by Bloomberg later that year discovered that Abraaj’s main revenues didn’t cover its operating costs and the firm borrowed to fill gaps, “Once lenders turned off the taps, the firm collapsed, leaving losses, lawsuits and shattered reputations in its wake,” noted the report.
Not many VCs are saying it out loud publicly but many in off the record conversations confirm that that Abraaj’s collapse has made already fundraising that has never been easy even more difficult for almost all the investors in the region. Abraaj’s newly launched VC arm Bakery that was being led by Faris Naqvi also ‘disappeared‘ before any real action.
If there’s one thing one could learn from the fall of this PE giant, its the fact that no one is too big to fail.
2) Careem’s data hack
Why it matters: First even of its kind where data of 14 million customers in MENA was stolen in a cyber attack
Careem, one of the biggest tech startups of the region, in April last year revealed that they were hit by a cyber attack in January 2018. The company said that data of all its 14 million customers and captains was stolen in the attack. The information that was stolen included names of customers, email addresses, phone numbers, and trip data.
Data breaches are very common these days – so common that even such a big breach where data of 14 million customers was stolen ranks on thirteenth spot in Business Insider’s list of biggest data breaches of 2018. But the way Careem dealt with the entire situation can be questioned. It took them more than three months to disclose this after they first learned about it. It is normal for companies to take time after any such hack to assess the damage but three months by any standard is a bit too long.
The company had also received some warnings by independent cyber-security researchers about their security vulnerabilities. In a blog that he had published in June 2017, the researched had said that the was able to access information of more than 1.4 million customers and captains of the company. It’s not clear whether Careem’s data hack in January 2018 was result of the same vulnerabilities.
3) Tunisia’s startup act becoming a law
Why it matters: First country in the region to draft and pass any such law
Tunisia became the first country in the region to draft and pass a law that aims to make it easier for the local entrepreneurs start and run their ventures. The law includes 20 measures including exemption for startups from corporate taxes for up to eight years, special custom procedures, exemption from capital gains tax on investments made in startups, up to one year of time off from their current jobs (for both private and public sector employees), and salary for up to three founders during the first year of operations.
We’re yet to see if the law has actually helped entrepreneurs in the country but involving startup community of the country in the legislation process and then passing a law with measures that aim to solve some of the pain points of local entrepreneurs is a big achievement for the government.
4) Startups from Egypt, Jordan, Algeria, Tunisia, Kuwait, Saudi raised the biggest-funding rounds in each one of these countries
Why it matters: It’s the first time
Startups from six countries in the region, Kuwait, Egypt, Saudi, Jordan, Tunisia, and Algeria, raised the biggest-ever funding rounds in these markets. As we explained in our detailed piece about this development, it shows that the tech ecosystems almost all around the region are growing in one form or the other and both institutional and non-institutional investors are putting their money into startups.
These six investment rounds include: Kuwait-based Boutiqaat’s $45 million, Egyptian transportation startup Swvl’s tens of millions, Saudi startup Unifonic’s $21 million, Amman-based Mawdoo3’s $13.5 million, Tunis-based Expensya’s $4.5 million, and Algerian startup TemTem’s $1.6 million.
5) The Entertainer’s $100 million exit
Why it matters: The first big exit of a female-founded startup of MENA
The Entertainer, a Dubai-based publisher of discount books with ‘buy one get one free’ offers for restaurants, spas, entertainment, and more, that was founded by Donna Benton, in 2001, was acquired by Bahrain Islamic investment bank GHF Financial Group. The bank had acquired 85% stake in the company. At the time the deal was announced, financial details were not disclosed but in an interview with a local radio show, Donna, had disclosed that it was a nine-figure deal, confirming that the company was acquired for $100 million at least.
It is the first big exit by a female founder of the region. The Entertainer’s exit is also important because it did not start as a technology startup. The company until 2013 did not have a digital product. It started its transition from a voucher book provider to a lifestyle app with discounts in 2013 and went completely digital last year. It’s not very often that we hear about traditional companies from the region transitioning into digital successfully, The Entertainer seems to have pulled it off quite brilliantly as evident by their $35 million revenue last year and the exit obviously.
6) A15 exited Tpay
Why it matters: First dragon exit of the region
A15, a leading early-stage investor of the region sold 76% of stake in the Dubai-based fintech startup Tpay last year for an undisclosed sum to an African private investment firm Helios Investment Partners. The firm claimed that with the exit they have become the first fund in Middle East and Africa to have created a dragon – a term used for an investment that returns the value of entire fund when exited. Tpay according to A15 returned a multiple value of the entire fund to its investors.
Tpay was a startup that was started by A15 as a corporate founder and since the beginning, they had majority stake in it. The startup since its launch has been led by Sahar Salama who was previously with other portfolio companies of A15.
7) Samsung acquired Kngine
Why it matters: A global company acquiring MENA-based startup for its tech
Samsung acquired Egyptian artificial intelligence startup Kngine, in late 2017 but made the announcement in 2018. The company acquired Kngine to improve its virtual assistant Bixby. Samsung through its VC arm SamsungNEXT Ventures had previously co-invested in Kngine with Vodafone Ventures Egypt in 2014. Kngine also had Sawari Ventures among its investors and total disclosed investment raised by the startup was $775,000. Founded by brother duo, Haytham and Ashraf ElFadeel in 2009, Kngine was “an intelligent engine that understands, answers questions and performs actions and can be used to automate customer service, power voice interfaces and drive enterprise search.”
Normally, when a non-MENA based player acquires a local startup, its because they want to expand in the region or kill the competition or in some cases acquihire. In Kngine’s case however, it appears that Samsung was interested in their technology. Another similar exit last year was Wrappup – a Dubai-based AI voice-to-text note taking startup Wrappup that was acquired by a similar American company Voicera.
8) Bahrain & Jordan launched funds of funds
Why it matters: Two new big funds of funds for the region which means more capital for VCs
Bahrain and Jordan launched two big funds of funds last year. $198 million.
Bahrain’s $100 million fund of funds, Al Waha, was launched by Bahrain Development Bank and is led by their Senior Vice President Areije Al Shakar who has been leading different other VC initiatives of the bank during the last few years including Rowad. Al Waha was closed with $100 million in June last year and it was reported that $35 million of that has already been approved to be allocated to different VC funds. Al Waha aims to attract VCs to Bahrain and boost the startup ecosystem in the country and Middle East.
The Jordanian fund was first announced in 2017 but was launched last year. The $98 million fund has been established by a $50 million loan from World Bank and $48 million from Jordan’s Central Bank. It is a private fund being led by Mohab Murrar who was previously with Seed Equity Venture Partners. ISSF or the Innovative Innovative Startups and SMEs Fund, as its website notes, aims to promote entrepreneurship and contribute to job creating in the country by increasing early stage equity finance for innovative SMEs. The fund will make investments in both startups and VC funds.
9) UAE launched ten-year visa and 100% foreign ownership
Why it matters: It could have a big impact on startups in two areas; incorporation and attracting/retaining talent.
Government of the United Arab Emirates last year announced a new ten-year residence visa and 100% foreign ownership (of businesses) to attract international investors and professional talent. The 100% foreign ownership in the country was previously limited to companies operating in the freezones only.
The implementation of the new rules is supposed to start this year. Some publications have reported that it has already started but we have no confirmation.
The new residency system will grant ten-year residency visas to investors and specialists in medical, scientific, research, and technical fields, as well as for all the scientists and innovators, government of UAE had said at the time of announcement.
10) Sawari Ventures raised $35 million for its $70 million fund
Why it matters: The largest VC fund dedicated for North Africa
Sawari Ventures, one of Egypt’s leading and oldest VCs, that is also behind Flat6Labs, announced in December last year that they’ve closed $35 million as first tranche of its $70 million fund. Named Sawari Ventures North Africa Fund I (SVNFI), the fund will invest in growth stage technology companies in Egypt, Tunisia, and Morocco. Investors in the fund include European Investment Bank (EIB), UK’s CDC, French Development Agency’s private sector financing arm Proparco and the Dutch Good Growth Fund (DGGF) managed by Triple Jump.
SVNFI ill make investments with an average ticket size of $1.5 million in 25 growth stage companies in different sectors including ICT, Deep Technology, FinTech, Education Technologies, HealthTech, and Renewable and Green Energy.
11) Wadi’s pivot to groceries
Why it matters: The most expensive pivot of the region
Wadi.com, a Dubai-based ecommerce startup that was founded by Rocket Internet in 2015 pivoted into an online groceries platform early last year. The company before this had raised $67 million in its Series B in 2016 from Saudi-based Al Tayyar and Rocket Internet, which makes it perhaps the most expensive pivot of the region. The company until September 2017 had been claiming that it has been operationally profitable since early 2017 and is moving towards net profitability. Whatever happened to that.
Eventually, after the pivot, Wadi raised $30 million from Majid Al Futtaim who now power its groceries through Carrefour. After the investment, two of Wadi’s three co-founders, Ankit Wadhwa and Kanwal Faraz, have stepped down. The company is currently being led by a regional Rocket Internet executive. Wadi during these last three years has been able to build its own fleet for last mile delivery and that is probably one of the reasons for MAF’s interest in the company.
12) Property Finder’s $120 million at $500 valuation
Why it matters: Property Finder now second most valuable startup in the region, General Atlantic’s first investment in the region
Property Finder, the online property classifieds company that owns property portals across the region announced its massive $120 million funding round at $500 million valuation last year in November. The investment came from New York-headquartered private equity firm General Atlantic. The firm has companies like Slack, Uber, BuzzFeed, Lenovo, Indian edtech unicorn Byju’s, Bytedance in its portfolio. Property Finder is their first investment in Middle East & North Africa.
The $500 million valuation makes Property Finder the second most valuable startup in the region. It’s a jump of 150% in company’s valuation in less than three years. When Property Finder had raised $20 million from Vostok New Ventures in 2016, it came at a valuation of $200 million.
13) BECO raised $15 million from IFC, announced second fund aiming to raise $100 million
Why it matters: BECO is one of the very few firms from the region to launch a $100 million fund
One of region’s leading VC firms BECO Capital raised $15 million from International Finance Corporation last year, $10 million of this was for BECO’s new fund that it aims to close with $100 million and the rest of $5 million for firm’s first fund. The portfolio companies from BECO Capital’s first fund include two most valuable startups of the region, Careem and Property Finder. BECO also has three exits under its belt including JadoPado, RoundMenu, and Wrappup but it’s obviously not clearly if the firm has made any significant returns from these exits.
IFC was also an investor in Wamda Capital’s first fund.
14) Careem’s expansion into new verticals
Why it matters: Careem looks for new verticals to grow and continue raising capital at higher valuations.
Careem, the Dubai-based ride-hailing company had it’s biggest year yet. Bigger than 2016 when it became a unicorn. More on that probably in a dedicated piece. This one’s about their expansion into new verticals. As MENAbytes first reported, the company started its expansion into payments with the launch of its credit transfer feature. They also expanded into food deliveries with the launch of Careem Now and mass transportation with the launch of Careem Bus. The company has already raised $200 million as first tranche of its $500 million at a reported valuation of over $2 billion for the expansion into these new verticals.
The company also expanded to new markets and cities to reach 100 cities in the region, way higher than number of cities Uber operates in, in the region.
15) Kuwait continued producing big stories
Why it matters: Kuwait is one of the smallest countries in the region but that doesn’t stop entrepreneurs in the country to create massive companies
Kuwait’s tiny startup ecosystem is perhaps the best one in the region – at least if we look at the number of success stories it has produced. And it continues doing that. First Talabat then Carriage and now we have Boutiqaat from Kuwait which seems to be on its path to become one of the biggest tech companies of the country. With their massive $45 million funding round and a 250-300m valuation, they’re already among the most valuable companies of the region.
But that was not it. More details on Kuwait to follow in another piece very soon.
15) Cairo emerged as battleground for TransportTech
Why it matters: The increased interest in TransportTech of Cairo will have a ripple effect on startup ecosystem of the country
The last few months of 2018 were dominated by TransportTech news coming out of Cairo. The year had started with Swvl raising $8 million Series A. Few months later, they announced raising tens of millions in Series B for the global expansion and then came the battle of buses.
Careem announced the launch of Careem Bus a day before Uber announced it. The announcement of Uber Bus was made by their CEO Dara Khosrowshahi who had especially flown to Egypt to do this – goes on to show how serious/invested they’re in the mass transportation play.
But the most notable player (last year) that came out of nowhere was Halan. The ride-hailing startup for masses that allows them to book TukTuks and motorbikes raised over $4 million in their Series A and had Uber’s founding CTO join them as an investor and board member.
16) Launch of multiple mobile wallets in Saudi
Why it matters: Mobile wallets and other fintechs could disrupt the banking sector of the country (not anytime soon though)
It was raining mobile wallets in Saudi last year. The country that didn’t have any before 2018 saw the launch of multiple players in this space. Saudi Telecom Company, country’s leading telecom operator launched STC Pay and smaller licensed players like Halalah also launched their mobile wallets after acquiring license from Saudi Arabian Monetary Authority. Apple Pay is also expected to debut in the country this year.
Mobile wallets in the country at the moment don’t replace bank accounts. You still need to have a bank account to add money to these wallets but that may change in the future.
17) Banks launching fintech-focused programs and funds
Why it matters: Some banks are finally realizing that if they cannot beat them, they must join the startups
Egypt’s biggest private bank, Commercial International bank, late last year announced the establishment of CVentures, its venture arm to invest in fintech startups in Middle East & Africa. The firm will make investments in seed, Series A and Series B rounds in Egypt, Middle East, and other highly regarded cross-border market economies.
Amman-based Arab Bank also said that it will soon launch a $30 million fintech-focused fund to invest in fintech startups that are relevant and useful to the the bank and use latest tech including blockchain, artificial intelligence, machine learning and robotics.
Another Jordanian bank, Jordan Ahli Bank, also announced the launch of its fintech accelerator. The accelerator is part of Ahli Fintech, a subsidiary of Jordan Ahli Bank that was launched in August 2017. The seed accelerator program is open to startups from all across the world and will run for six months in Jordan. It is divided into two parts, with the first three months focused on helping startups validate their business and the next three months to help them scale, Rami said, announcing the accelerator.
18) Launch of Wamda’s fellowship program for entrepreneurs Wamda X
Why it matters: Copy-pasting Silicon Valley or international accelerator programs doesn’t seem to have worked for MENA. Wamda X is trying to do things differently.
Wamda, one of the MENA’s leading entrepreneurship platforms announced the launch of their fellowship program, Wamda X, to invest in entrepreneurs. Even those who don’t have any idea of what exactly they want to build yet. The four month program will offer entrepreneurs a grant of $16,000 (converts in 16% equity if a business is formed) and $100,000 follow-on funding from Wamda Capital plus in-kind support including mentorship and a working space in Dubai Design District. Many in the region have raised their concerns that it will attract wrong type of crowd but some remain optimistic about its prospects. If it works, Wamda will end up helping many of those who may have not started their companies without this safety net and obviously create a great source of deal flow for Wamda Capital. If not, the firm will probably just shut it down after three or four cohorts, losing maybe a million or two.
Finish this off with with one (obvious) prediction: 2019 will be bigger.