The UAE may be considered as the crown jewel of the Middle East for start-ups, but both Egypt and Saudi Arabia offer promising futures for new companies, according to a panel of regional venture capitalists.
Speaking at the London Business School Middle East Conference, Omar Almajdouie, founding partner and chief executive at Saudi Arabia's Raed Ventures, said: "There are several reasons why the UAE is the hub for start-ups right now. You had early venture capitalists in the region establish their offices in Dubai and they started investing."
Another reason is that being a tax-free environment, the UAE is a good place to establish new businesses.
“I believe the large countries in the region that have huge potential are Egypt and Saudi Arabia. Those two will be the biggest inception points of the next wave of start-ups in the region. Not medium or small-scale start-ups, the big start-ups like Careem,” Mr Almajdouie said.
Careem is a ride-hailing app based in Dubai, which operates in more than 100 cities in 14 countries in the Middle East, Africa and South Asia. The company was valued at more than $2 billion in 2018 and is often heralded as a start-up success story globally.
In 2018, Raed Ventures and Beco Capital invested in a company called Swivel in Egypt, which is looking to solve a global transportation problem in emerging markets.
“This company came out of Cairo to solve a global problem and they are growing super-fast and super-healthily,” said Mr Almajdouie. “They’re doing a great job in Egypt and now have expanded to Kenya and Ethiopia.”
The chief executive of the Saudi venture capital company said that a large number of start-ups are likely to emerge from Jordan, Lebanon and the UAE.
Amir Farha, co-founder and managing director at Beco Capital, agreed with Mr Almajdouie that Egypt and Saudi Arabia are the ones to watch.
"When we first started in 2014, what we mainly saw was copycat business models. Eighty per cent of the companies in our funds were those kind of models," he said, adding that off the back of Careem's success, some of the company's employees left to start their own ventures.
FinTech has also been evolving in the Mena region. Mr Farha mentioned Wahed Invest as an example, a company using FinTech to provide Sharia-compliant banking services to millennials.
Dana Shaheen, Middle East club President and conference co-chair, told The National that there is a rise in the number of students at the London Business School MBA programme looking to start their own businesses to solve issues, as opposed to joining large corporations.
One problem is the issue of financial inclusion – according to the Global Findex Database, more than 1.7 billion adults remain unbanked globally.
“In the Middle East, this remains a big problem,” said Ms Shaheen. “A lot of students at LBS are looking at FinTech solutions that are tackling this problem, to increase the number of people banked across the world, to get these wallets, facilities and digital solutions that allow people to bank where the traditional infrastructure is not in place.”
Omar Sati, managing director at Dash Venutures, also spoke at the conference. He said in Jordan, employees of successful start-ups have been leaving and establishing new ventures.
“There’s a record number of deals and money flowing into the ecosystem, many people are on their second and third funds,” he said. “The holes in the supply chain are thinning up, it’s looking very positive and very hopeful.”
Although Egypt had been "quiet for a while" on the start-up front, the Dash managing director has seen an increase in ventures in the country.
“We’ve also been hearing a lot of news coming out of Saudi Arabia in the last few years. There’s obviously a latency, it takes time, but we can actually see it and feel it. Those two markets are going to be crucial going forward and will play a big role in the entrepreneurial ecosystem in the region,” Mr Sati said.
