These Are Not Predictions

2020 has taught us that our predictions for the future are based on aspiration and are as ephemeral as our affinity for “new year resolutions”. 

On the sunny side of practicality, there are immediate business changes we need to address as the pandemic continues. Think of them as your checklist to guard you against being the victim of obvious blind-spots:  

1- Your cybersecurity should be on the executive agenda! 🔐 

This pandemic has driven more business transformation adoption than the hundreds of millions of dollars spent on consultants in the past decade, especially in government and vital sectors like healthcare and education. This means more data, comms, information, and operations are now happening online. A recipe for disaster. 

This year you need to start taking your cybersecurity practices seriously, put in place security hygiene processes across all your teams and personal accounts, and train your team on these protocols. Don’t believe me? Check out how the SolarWinds breach is shaking up the cybersecurity industry and the US government as you read this!

According to IBM’s annual Cost of Data Breach Report, the average cost of a data breach in the Middle East is the second-highest globally at $6.52M! We are also the slowest in the world to identify a data breach, 269 days. 

Don’t leave your door unlocked on the interwebs. Secure it.

2- Create client experiences not hurdles 😃

Have you been to a retail store to browse, feel, touch, and try products in 2020? Neither have we, and we don’t plan on doing so in 2021 either. Products on your online store need to: answer customer needs and queries, get delivered (on time), returned, and a happy relationship maintained, without a smiling store attendant and cheerful store manager. The main advantage? You can track a bounce on your online store down to the boring instance and then fix that, so please do. 

Customers of 2021 will be doing even more of their transactions and communication on their smartphones. The instances of in-person interaction will be revered and intentional. This means, smaller purchases, pre-seed to seed investments, and average experiences will likely stay online. We will also expect everything that can be automated and virtualized to be, not 100% in 2021, but at least over 50% and rising. 

High-value experiences, investments (think Series A+), and purchases may still need in-person attendance, but we will cherish a better-designed experience

What does this mean: It’s a big year for B2B Saas. If it’s not your core business consider what solutions you need to make your business better: build it or buy it! APIs, Cybersecurity (again), UX, customer support, and all else that makes the customer journey that much better is key to your success.

3- Watch the content market unravel 🎙️

Spotify and Anghami are now podcast platforms, as well as music. Amazon acquired Wondery, a US-based podcast network, for a rumored $300M. Netflix is introducing an audio-only playback mode. The intersection of content formats has never been more tangled. 

Have you seen ♟️ The Queen’s Gambit? It’s a Netflix original, that’s now also on Audible, and somehow ended up being amazing branded content for the chess industry! 

“On Netflix, a record-setting 62 million households chose to watch The Queen’s Gambit in its first 28 days.” – Netflix

Netflix then took the show’s success to an unlikely place: Audible. While it is common for books produced as shows and audiobooks we rarely see the copyrights of both formats sold to one entity. (The world of copyright laws requires freshening up). We expect we will see similar cross-overs between written, audio, video, and gaming content in 2021. 

We are seeing an uptick in activity in the MENA region’s content space. Netflix has signed deals with Saudi’s Myrkott. Variety has crowned “Paranormal”, the Egyptian Netflix original based on its name-sake books, the Best International TV Series of 2020. Kerning Cultures podcast network partnered with Anghami to produce a new thriller. While Thmanyah’s podcast network acquires the long-running youtube and podcast show “Swalif business”. 

While we are not seeing the same level of entanglement in the regional media production space yet. It’s only a matter of a short wait. Since this pandemic is speeding us through trends.

This trend confirms the industry’s motto: Content is king, and distribution is queen.

4- Find your tribe 🙋🏻‍♂️

As you reflect on 2020, what interactions stand out to you in the sea of zoom calls and timeline scrolling? Who took the time to connect with you, share their knowledge, or organize an online get together? A few names may come to your mind, maybe a few companies or platforms as well. 

Massive conferences had a hard time competing with local or digital-first events. Transitioning online was not a click away. Smaller frequent event communities thrived though. Why? You may visit a CES or a Saastr once a year, but your local coworking space’s community is there for you all year round. They are more relevant, in touch with your locality, and your struggles than CES was ever likely to be. 

Amazon bailed on their third-party sellers in the pandemic to focus on essential goods, leaving many store owners in ruin. Airbnb provided refunds to bookers and set up a fund to help hosts survive the worst downturn in tourism’s history! What’s the difference between the two? Community values.  

Why would a brand or startup invest in building a community? To improve brand perception, attract talent, and increase loyalty within their team and clients. Find what your clients or team need to reach their goals and build around it. 

Unfortunately, we have not seen businesses in the MENA region embrace community yet. A massive opportunity. One we are particularly passionate and happy to chat about if you are!

In summary, invest in building solid roots and relations that will sail you through 2021 and beyond ⛵️

In The Spotlight: A Boom in Funds for MENA Startups

This October, we have seen the announcement of 4 new VCs and 2 new funds, among other investment vehicles such as SME-loan platforms and SME public exchanges. 

Investors are geared up for the anticipated growth in the sector since late 2019, and while some fundraising plans were delayed due to the pandemic, this has not derailed the sector. The rush to digitize and implement real business transformation has finally brought digital startups and providers into the spotlight, an overnight success many were not ready for, yet funding is a key component missing from the equation. 

We tracked 20 new funds and firms that have been announced since January, which announced a cumulative of $176M in secured funds, as well as plans to raise at least $195M more by March 2021 (only 8 of the 20 vehicles disclosed the target or closed funds sizes). Of the twenty, 3 angel networks were announced: Emirates Angels Investors Association, Iraq Angel Investor Network (IAIN), and Alex Angels Fund. While the majority of funds are located in the UAE, Egypt, and Saudi, the funds’ mandates are regional for most.

Alternative Financing

Even with these new funds, the region does not have nearly enough financing vehicles and alternatives from which founders can tap into to sustain their growth. Sadly it took a pandemic for SME lending platforms like Beehive to get government endorsement, which was allocated $5.4M through The Mohammed Bin Rashid Fund for SME loans in the UAE (May 2020) and expanded to Saudi in partnership with the Social Development Bank and Gulf International Bank (GIB) to improve their SME loans facility (July 2020). 

Additionally, Foodics, the Saas provider for F&B and retail, launched a $100M micro-lending platform: Foodics Capital in Saudi just this week in partnership with Maalem Finance, a sharia-compliant financing firm. 

Meanwhile in North Africa, Tunisian SMEs seeking loans can tap into Tamweeli.tn, a platform that connects founders with financial institutions, launched in July by the U.S. International Development Finance Corporation (DFC), in partnership with the Middle East Investment Initiative (MEII). Google re-kindled its investment in Egypt with a $3M micro-loan program ($2M dedicated to Egypt only) and an accelerator-driven grant scheme announced last week. 

Funding Growth

The launch of the Nasdaq Dubai Growth Market just this week heralds in new alternatives for SMEs. This grants access to SMEs in the UAE or abroad, valued at over $250M with a minimum operating time of one year, to list 25% of their company’s shares on the dedicated exchange, tapping into a whole new world of financing previously inaccessible to founders. Tunisia also announced plans to launch a dedicated exchange for startups earlier this month, although no timeline was revealed. 

Saudi Arabia has launched a similar platform in 2017, Nomu-Parallel Market, which allows SMEs of a $2.5M market value to list 20% of its shares on the exchange. Nomu Market has not attracted tech startups as of yet. 

More funds, check
More financing alternatives, check
More growth vehicles, check
More business going online, check
More consumers living online, check

Bring on 2021!

Announcements from the Global AI Summit in Saudi

Saudi Data and AI Authority (SDAIA) unveil the “National Strategy for Data and AI” which involves the following key initiatives:

  • National Information Center (NIC), national data bank, hosting all government data, and acting as the main government insights provider
  • National Data Management Office (NDMO), manages national data as a digital asset and is responsible for the development of standards, policies, and regulations as well as driving compliance
  • National Center for Artificial Intelligence (NCAI) drive AI strategy execution, orchestrate AI research focused on innovations in the field of Data & AI
  • Two research institutes were established: Thakaa (AI Center of Advanced Studies) and Data Analytics and AI Center by KACST
  • Ministry of Communications and Information Technology (MCIT) to introduce training programs focused on machine learning to be infused into the Ministry of Education (MoE) curricula [strategy’s website]STC and NVIDIA to build “AI and Deep Learning Cloud Infrastructure” in Saudi Arabia by acquiring and NVIDIA DGX AI supercomputer, also, STC will be the first regional telecom to join NVIDIA Partner Network (NPN).Saudi Data and AI Authority (SDAIA) announces 3 strategic partnerships with Alibaba Cloud focused on smart cities, IBM to focus on AI research, solutions development and education with the National Center for Artificial Intelligence (NCAI), Huwaei to focus on improving AI for Arabic language analysis and solutions.

 

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In The Spotlight: The Delivery Oligopoly

Delivery Hero, which is now one of the emerging market leaders in food delivery, started in 2011 in Germany and has raised $2.8B in funding before it went public on the Frankfurt Stock Exchange in June 2017. 

The company has grown immensely over the years by acquiring its way into market dominance (or taking down their websites with DDoS-attacks); in 10 years the company has acquired 26 companies according to their crunchbase profile, of which 23 are food aggregator and delivery platforms.

Now Delivery Hero seems to have embarked on a new tangent: value chain acquisitions. It acquired Instashop in September, UAE’s grocery delivery marketplace for $360M, and Glovo’s LATAM operations in August, last-mile delivery provider for $270M, both verticals that the company has not been active in. Also, last week Sweetheart Kitchen, UAE-HQ cloud kitchen operator already 60% owned by Delivery Hero (in Saudi it owns 100%) announced a $17.7M capital injection which we can only speculate increases the stake of Delivery Hero, especially since the investors of the round were not disclosed. 

**Rocket Internet stake in Delivery Hero reached 39% in 2014, but it has since decreased its ownership to less than 6% as of December 2018 according to Rocket Internet’s latest Investment Report (Pg 116)

According to Statista, UAE’s online food delivery market for 2020 is estimated at $1.1B up 30.6% from 2019 of which direct platform-to consumer represents 30% ($768M). At the same time, revenue growth for food-delivery-aggregators has been plummeting globally (also according to Statista) as more players enter the market, and F&B outlets adopt in-house solutions that facilitate delivery and customer retention. 

Since Talabat’s acquisition in 2015, Delivery Hero has taken over the food delivery space in the UAE with Talabat, Carriage, and Zomato (MENA operations only) in their portfolio. However, after Instashop’s acquisition, Sweetheart Kitchen’s high equity stake, and Delivery Hero’s latest partnership with Mastercard which was clearly activated in their cash-back partnership with Booking.com revealing more uses for Talabat Wallet, an unavoidable question surfaces: what is Delivery Hero cooking up? …and does it plan on turning Talabat into a super-app?

 

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Edtech Learning Tools & Platforms in MENA 2020

So far schools in Jordan, Egypt, Iraq, Sudan, Lebanon, UAE, Saudi, Bahrain, and Kuwait, Morocco, Libya, Qatar are shut for at least two more weeks to a month (schools in Oman, Tunisia remain open), as COVID-19 locks down cities and countries whole.

We aggregated education tech companies from across MENA in a reference chart to help teachers, school management, parents, and professionals with their remote-learning efforts and maximize their time.

Educational Technology Startups in MENA by DigitalDigest.me
This is the updated version of the diagram shared in the Week #73 Newsletter

We only covered products produced in the Middle East and North Africa in this table, I’m sure many use Coursera, EdX, Khan Academy, etc, however, these platforms get enough coverage as is and do not necessarily cover the needs of the average student, teacher, and parent that has to home-school and remote-teach over the next few months.

The most important note is that Arabic remains the dominant language of education in MENA and the most language parents and the majority of professionals are comfortable with. Arabic is vital for mass, inclusive, and equal reach.

Interesting observations:

  • All the Academic Distance Learning solutions in MENA are primarily in Arabic.
  • 80% of Professional Distance Learning Solutions are in Arabic, the rest are English first.
  • 9 of Distance Learning Platforms, Academic and Professional, are funded by governments in the UAE, Saudi, Oman & Jordan.
  • All Early Learning Content is Arabic first, and 50% provide English content as well.
  • 75% of all services are available in Arabic, while 49% of services are provided in English.
  • Most of the solutions and services are headquartered in Saudi (22) and the UAE (21) of a total of 85 services listed
  • 69% of solutions are geared toward empowering the Education sector (Academic Distance Learning, Teaching and Tutoring tools, eLearning infrastructure)
*this chart is compiled through hours of online research and some online recommendations, we are likely to be missing some services especially in Early Learning Content as that's a space that publishing houses are increasingly involved in. We have also not included platforms that are no longer active and ones that are based heavily outside the region (UK is a popular HQ for Edtech companies it seems). 
If you have questions about the graph feel free to tweet me or farah.