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.