Atlantic Council: How Can MENA Become The Next Leading Venture Capital Attraction?

Feb 24, 2021

The Middle East and North Africa (MENA) is the birthplace of many innovative entrepreneurs and is garnering more and more attention from investors. There were multiple acquisitions that contributed to the attention drawn – the regional e-commerce leader by Amazon and rideshare platform Careem by Uber have gathered $600 million and $3 billion respectively. As of 2020, venture capital funding in MENA has exceeded $1 billion. 

This area possesses enormous advantages to be the dreamland for venture capital firms and investors: young population and a higher rate of women entrepreneurship. But MENA would need to do more in order to attract investors to cash in. 

Nurture local innovation and talent

There is a misconception that having an idea is the most important element for a startup to be successful. Investors are interested in the implementation and commercialization of an idea. This means MENA should focus on transforming education and boosting R&D investment to nurture talents and cutting-edge innovation. 

According to El Alfi at empowerME event, not many companies in the MENA region can reach a global scale without international talent. Moreover, technological infrastructure and regionally-focused R&D are also necessary for a region to become a successful startup incubator. 

Back venture capital firms

Despite the steady growth of venture investing in the MENA, the proportion of venture capital funding is still relatively low (10 times less than in the US). Entrepreneurs are now able to access early investment but later rounds of funding for them to accelerate and thrive are still limited. 

To improve the situation, authorities will need to support the investors. Solutions to mitigate the risks should be implemented, laws and regulations regarding funding should be clearer and favorable to venture capital firms.

Exits, exits, and exits

Investors are more invested in the best returns on their capital. With a large pool of opportunities from all over the world, exits are deemed essential in attracting more capital and investments for these start-ups. 

Two primary channels for exits are M&A and IPO. Unfortunately, both of these channels are undeveloped in the Middle East which is a disadvantage for venture capital givers. 

If the MENA region were to expect more funding, it needs to be determined in developing more exits for investors and continuously improve the regulatory environment.

Source: What it takes for MENA to be the next leading venture capital opportunity

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