How the region’s startup sector has kept ticking along

While the Covid-19 pandemic may have challenged individuals and institutions worldwide, small businesses were dealt a particularly harsh blow due to the sheer size of competition, low economic activity, and the need for continuous support. The region’s SME and startup ecosystem were also not entirely immune.

Several e-commerce platforms shut shop last year, as the pandemic-induced economic downturn haemorrhaged demand and consumer confidence. UAE-based online marketplace Sprii went into liquidation late 2020, while local e-commerce portal Awok ended its operations, a year after closing a $30m funding round.

Despite the effects of the pandemic and the hovering economic uncertainty, the GCC’s startup ecosystem did manage to garner substantial attention. Bahrain and the UAE featured among the top 100 countries for startups worldwide in 2020, while Dubai made it to the top 100 cities’ club, as per the StartupBlink rankings. Meanwhile, Bahrain and Sharjah were listed among the world’s top five fastest growing ecosystems with fewer than 1,000 startups, according to The Global Startup Ecosystem Report 2020.

Looking at the wider Middle East and North Africa (MENA) region, startups attracted investments worth $1.03bn in 2020, marking a 13 per cent year-on-year increase, according to a report by startup data platform MAGNiTT. The UAE led the pack with 56 per cent of the funding, equaling $579m, and 26 per cent of the region’s total deals, totaling 129. Bahrain, Saudi Arabia and Egypt registered the highest year-on-year increases in 2020, at 200 per cent, 55 per cent and 31 per cent respectively.

However, the region’s total deal count dipped by 13 per cent to 496 transactions in 2020. Innovation hotspots – the UAE, Egypt, and Saudi Arabia – accounted for 68 per cent of the deals disclosed last year. E-commerce and fintech led the sectors race, securing the most number of deals (12 per cent each), followed by healthcare, delivery and logistics, F&B, and education, recording 5 per cent each. E-commerce meanwhile bagged the highest amount of funding, equaling $162m. F&B and healthcare more than trebled their funding to $122m and $72m respectively, the report added.

“2020 was a tipping point for the venture-backed technology startups across MENA, Turkey and Pakistan as digital adoption hurdles were rapidly overcome in industries that saw unprecedented surges in demand as a result of the ‘new normal’ of social distancing,” opines Philip Bahoshy, founder and CEO at MAGNiTT.

“More than ever before, we are seeing tech’s total addressable market grow in these countries, and we’re seeing founders, investors, governments, and enablers capitalising on new opportunities as venture-backed startups look set to play a key role in national economies, employment, and GDP returns in the immediate future.”

As individuals and businesses continue to operate in the ‘new normal’, a transition to digitisation and disruptive technologies, propelled by convenience and a change in consumer behaviour, is well underway. Given that the call to innovation stands, the regional startup ecosystem appears well-placed to grow and thrive.