Silicon Valley has maintained its position as the world's best start-up ecosystem but cities in the Mena region are on the rise even amid a global market correction that has scaled back funding, according to a report from Startup Genome.
“For more than a decade, near-zero per cent interest rates proved a safe haven for start-ups with ample VC [venture capital] funding sources,” the San Francisco-based research company said.
“This led to the overvaluation of start-ups, generating record funding and exit valuations, and a high number of unicorns [start-ups with a valuation of more than $1 billion].”
That all changed in the first quarter of 2022 when Russia's invasion of Ukraine, an energy crunch and supply-chain disruptions, as well as rising inflation and interest rates, combined to create widespread uncertainty.
Overall, 2022 registered an annual decline of 35 per cent in VC funding.
Startup Genome looked at more than 3.5 million start-ups across 290 locations and found that the top three ecosystems from 2020 weathered the storm and maintained their positions into 2023, based on metrics such as start-ups' business performance, funding, market reach and talent.
Silicon Valley remained at the top, followed by New York and London in second place despite a shrinking market share as emerging ecosystems gained traction.
The Mena region held steady in the correction from 2021 to 2022, with only a very slight decrease in the amount of early stage funding (minus 5 per cent), a decline of 19 per cent in fund-raising totals for series B rounds and beyond, and a 14 per cent decline in total VC funding.
Even during the downturn, the region remained above 2020 funding amounts.
Tel Aviv remained the region’s leading ecosystem. It moved from seventh in the rankings to fifth, buoyed by several exits valued at more than $1 billion.
FinTech Pagaya reported the highest exit at $8.5 billion. The number of unicorns also rose with 33 new entrants bringing the total to 57, including Blockchain company Fireblocks, valued at $8 billion.
Meanwhile, the UAE also ranked favourably in the region.
“The United Arab Emirates has made significant strides in diversifying its market from oil and gas, establishing itself as an innovation hub and hot spot for entrepreneurs,” Start-up Genome said.
“The nation prides itself on having a strong talent pool, ample funding opportunities and both legislation and infrastructure that nurtures the growth and success of start-ups. Abu Dhabi and Dubai are both global hubs for entrepreneurship.”
Dubai moved up three places and is the highest ranked Mena entry in “emerging ecosystems”, in 12th place.
The number of exits valued at more than $50 million has grown by 50 per cent while the number of exits exceeding $1 billion doubled, with Swvl at $1.5 billion.
The number of unicorns increased from two to four, with Astra Tech and Fenix Games joining the club in 2022. Early stage funding deal numbers also increased in 2022 by 45 per cent.
Abu Dhabi returned to the ranking in 2022 after dropping off in 2021.
The emirate landed in the 81 to 90 range amid emerging ecosystems. The city has experienced a 134 per cent increase in ecosystem value to $3.9 billion, partly attributed to the growing number of exits valued at more than $50 million, with Agtech Pure Harvest Smart Farms at $1.3 billion.
“I call it the North Star of data and insights into start-up ecosystems all around the world,” Amer Aidi, head of marketing and operations at Hub71 in Abu Dhabi, told The National, in reference to the ranking.
“We're in a prime position today to attract start-ups that are looking for new geographies to expand to because there might be a correction in their respective countries where they operate,” Mr Aidi said.
The government-backed start-up centre has more than doubled the number of applications it has received from founders seeking to join the community, attracting more than 1,400 applicants in the last cohort.
Cairo shot up from the 71-80 range to the 51-60 range in the emerging ecosystems ranking. Its ecosystem value grew by 97 per cent to $8 billion.
Riyadh also jumped from the 91-100 range to the 61-70 range in emerging ecosystems. Food delivery platform Jahez is valued at $2.4 billion while the number of unicorns doubled to two, with Foodics valued at $1.2 billion, increasing the ecosystem value by more than 100 per cent.
Artificial intelligence and big data accounted for a little more than a third of series A deals in the region between 2018 and 2022.
Startup Genome emphasised that 2023 was a year of opportunity.
“A recession is a good time to invest in start-ups,” it said, pointing out that start-ups that fundraised during the global financial crisis had slightly higher exit multiples than those funded during economic expansions.
“Tangible examples of successes born in a recession include Spotify raising a series A in 2008, Twitter doing the same in 2007 and Flipkart in 2009.”
TOP 5 DRIVERS 2019
1 Lewis Hamilton, Mercedes, 10 wins 387 points
2 Valtteri Bottas, Mercedes, 4 wins, 314 points
3 Max Verstappen, Red Bull, 3 wins, 260 points
4 Charles Leclerc, Ferrari, 2 wins, 249 points
5 Sebastian Vettel, Ferrari, 1 win, 230 points
Zayed Sustainability Prize
Killing of Qassem Suleimani
Killing of Qassem Suleimani
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The years Ramadan fell in May
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The five pillars of Islam
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At a glance - Zayed Sustainability Prize 2020
Launched: 2008
Categories: Health, energy, water, food, global high schools
Prize: Dh2.2 million (Dh360,000 for global high schools category)
Winners’ announcement: Monday, January 13
Impact in numbers
335 million people positively impacted by projects
430,000 jobs created
10 million people given access to clean and affordable drinking water
50 million homes powered by renewable energy
6.5 billion litres of water saved
26 million school children given solar lighting
UAE currency: the story behind the money in your pockets
Key facilities
- Olympic-size swimming pool with a split bulkhead for multi-use configurations, including water polo and 50m/25m training lanes
- Premier League-standard football pitch
- 400m Olympic running track
- NBA-spec basketball court with auditorium
- 600-seat auditorium
- Spaces for historical and cultural exploration
- An elevated football field that doubles as a helipad
- Specialist robotics and science laboratories
- AR and VR-enabled learning centres
- Disruption Lab and Research Centre for developing entrepreneurial skills
Specs
Engine: 51.5kW electric motor
Range: 400km
Power: 134bhp
Torque: 175Nm
Price: From Dh98,800
Available: Now
'Munich: The Edge of War'
Director: Christian Schwochow
Starring: George MacKay, Jannis Niewohner, Jeremy Irons
Rating: 3/5
Profile Box
Company/date started: 2015
Founder/CEO: Mohammed Toraif
Based: Manama, Bahrain
Sector: Sales, Technology, Conservation
Size: (employees/revenue) 4/ 5,000 downloads
Stage: 1 ($100,000)
Investors: Two first-round investors including, 500 Startups, Fawaz Al Gosaibi Holding (Saudi Arabia)
Women%E2%80%99s%20T20%20World%20Cup%20Qualifier
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Zayed Sustainability Prize
How will Gen Alpha invest?
Mark Chahwan, co-founder and chief executive of robo-advisory firm Sarwa, forecasts that Generation Alpha (born between 2010 and 2024) will start investing in their teenage years and therefore benefit from compound interest.
“Technology and education should be the main drivers to make this happen, whether it’s investing in a few clicks or their schools/parents stepping up their personal finance education skills,” he adds.
Mr Chahwan says younger generations have a higher capacity to take on risk, but for some their appetite can be more cautious because they are investing for the first time. “Schools still do not teach personal finance and stock market investing, so a lot of the learning journey can feel daunting and intimidating,” he says.
He advises millennials to not always start with an aggressive portfolio even if they can afford to take risks. “We always advise to work your way up to your risk capacity, that way you experience volatility and get used to it. Given the higher risk capacity for the younger generations, stocks are a favourite,” says Mr Chahwan.
Highlighting the role technology has played in encouraging millennials and Gen Z to invest, he says: “They were often excluded, but with lower account minimums ... a customer with $1,000 [Dh3,672] in their account has their money working for them just as hard as the portfolio of a high get-worth individual.”
Company%20profile
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Mica
Director: Ismael Ferroukhi
Stars: Zakaria Inan, Sabrina Ouazani
3 stars
Essentials
The flights
Etihad and Emirates fly direct from the UAE to Delhi from about Dh950 return including taxes.
The hotels
Double rooms at Tijara Fort-Palace cost from 6,670 rupees (Dh377), including breakfast.
Doubles at Fort Bishangarh cost from 29,030 rupees (Dh1,641), including breakfast. Doubles at Narendra Bhawan cost from 15,360 rupees (Dh869). Doubles at Chanoud Garh cost from 19,840 rupees (Dh1,122), full board. Doubles at Fort Begu cost from 10,000 rupees (Dh565), including breakfast.
The tours
Amar Grover travelled with Wild Frontiers. A tailor-made, nine-day itinerary via New Delhi, with one night in Tijara and two nights in each of the remaining properties, including car/driver, costs from £1,445 (Dh6,968) per person.
The five pillars of Islam
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The five pillars of Islam
1. Fasting
2. Prayer
3. Hajj
4. Shahada
5. Zakat
Zayed Sustainability Prize
Tightening the screw on rogue recruiters
The UAE overhauled the procedure to recruit housemaids and domestic workers with a law in 2017 to protect low-income labour from being exploited.
Only recruitment companies authorised by the government are permitted as part of Tadbeer, a network of labour ministry-regulated centres.
A contract must be drawn up for domestic workers, the wages and job offer clearly stating the nature of work.
The contract stating the wages, work entailed and accommodation must be sent to the employee in their home country before they depart for the UAE.
The contract will be signed by the employer and employee when the domestic worker arrives in the UAE.
Only recruitment agencies registered with the ministry can undertake recruitment and employment applications for domestic workers.
Penalties for illegal recruitment in the UAE include fines of up to Dh100,000 and imprisonment
But agents not authorised by the government sidestep the law by illegally getting women into the country on visit visas.
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