Scaleups: density and capital raised
In the MENA region the Scaleup Density Ratio is an average of 0.1 scaleups every 100K inhabitants, given a 400M population. On the capital side, the Scaleup Investing Ratio is equal to 0.08% (capital raised by Scaleups as a percentage of GDP). These figures appear to be far both from more established areas (e.g. Europe, with 1.4 and 0.64%, and the UK, 4.4 and 1.97%) and emerging ecosystems (e.g. South Korea, 1.3 and 0.74%, and China, 0.8 and 1.39). Not to mention the US, Israel, and Silicon Valley.
On the other hand, if we look at the “United Arab Emirates”, the ratios (2.0 and 0.63%) are comparable to the European average as well as to emerging ecosystems such as South Korea. Particularly the Scaleup Density Ratio (2.0) is even higher.
In the “Tech Scaleup World Matrix” the MENA region is positioned in the bottom-left sector (low scaleup density ratio, low scaleup investing ratio), including countries or regions that are still at the beginning of their innovation journey.
On the other hand, if we look at the “United Arab Emirates”, the ratios (2.0 and 0.63%) are comparable to the European average as well as to emerging ecosystems such as South Korea. Particularly the Scaleup Density Ratio (2.0 ) is even higher. Same as for Lebanon and the Kingdom of Jordan (respectively with 0.64 and 0.19%%, and 0.22 and 0.12%).
Most of the local ecosystems, except the UAE which aggregates 44% of MENA scaleups, are still in their infancy. Despite the growing dynamism of the local startup arena, thus far only a handful of scaleups have emerged in many countries.
“To access them foreign corporations or investors will have to put in place a time consuming scouting effort, compared to taking a more effective look at countries and hotspots with higher Scaleup Density Ratios – commented Alberto Onetti, Chairman of Mind the Bridge – We are not just referring to Silicon Valley, home of almost 7,500 scaleups, or Israel, counting more than 2,000 scaleups, but also fast growing ecosystems such as South Korea with 650 scaleups, mostly in Seoul.”
Also in terms of capital raised, the MENA region presents figures that are more comparable to runner-up scaleup economies of the European continent e.g. Spain ($7B), Switzerland ($7.5B), and the Netherlands ($10.3B).
“Up to December 2020, big tech is starting to bloom in the MENA region, as we recorded 11 Scalers and 1 Super Scaler in the region, that attracted $3.4B out of a total $6.2B made available to local scaleups – added Marco Marinucci, CEO & Founder of Mind the Bridge – With regards to the first, we record a significant gap from the UK (95 scalers), but also Germany (50) and France (46). But when we talk about Superscalers, the UK alone hosts 6 Super Scalers, while Germany and South Korea host 3. From a broader perspective, the gap with other global tech innovation regions remains large.”
Dubai Is the Main Tech Hub of the Region hosting, alone, 178 scaleups (40% of the total amount recorded in the MENA region), which collectively attracted $4.2B in funding (about two-thirds of the total amount of funding made available to MENA scaleups). It’s followed by Cairo, hosting 52 scaleups that raised altogether about $0.6B, Beirut (44 scaleups, $0.2B collected), and Riyadh (42 scaleups, $0.5B).
38 scaleups (about 8% of the total of the MENA region) relocated abroad to boost their growth, choosing the US (13, half of which favouring New York rather than the Silicon Valley), France (4), and the UK (4) as the main targets.
A VC-Fueled Scaleup Region
Almost the entirety ($6.0B, 96%) of capital raised by MENA scaleups comes from VCs, including private equity funds, family firms, CVCs, public-supported equity funding vehicles, and governmental organizations. On the other hand, the IPO channel still has to be exploited (only 2%) as well as the ICO channel (2%).
Corporate to VC Investments
In addition to the government support, companies – either through their CVC arms or directly (off-balance investments) – participated in about 20% of the total VC rounds involving scaleups that equal 61% of the total capital raised by MENA scaleups.
65 scaleups (15% of the total), including the tech behemoth Noon ($1B raised alone) operate in Ecommerce. 11% (49 scaleups) are Fintech (cumulatively raising $0.8B, 13% of the total, roughly on par with Ecommerce scaleups, not counting Noon), while 8% (34) operate in Logistics ($0.3M raised). The digitalization of the enterprise sector is well represented by HR Tech and Business and Productivity Software scaleups (62 scaleups in total, about $250M raised altogether).