There is no dearth of success stories in the startup economy of the Middle East and North Africa (MENA) region. Even though there are many that have reached enviable dollar marks, MENA has fallen short of the big one – Unicorn. The region’s startups are close but not one has grown enough to become a Unicorn.
Where does the region lag? Pointing out the basic requisite, Abdulaziz Al Loughani, Founder of Talabat, says much depends on the market itself. “Market conditions are very important for an exit. The timing has to be right, various pieces have to fall in place and that is yet to happen in the region.”
Kuwait’s Talabat is an example of a successful exit in the region, given that the online food service company was sold out to Rocket Internet for USD 170 million in 2015. Elaborating on how the company saw investments coming in over the years, Mr Al Loughani explained, “It saw multiple exits beginning in 2007 and then later in 2010. The new management has leveled more than their growth despite the falling oil prices. The first round of investment was less than USD 20,000. It was in late 2010 that a lot of money was pumped in the company.”
Some have already begun to see the pieces come together in the market. Walid Hanna, Managing Partner at Middle East Venture Partners (MEVP), stated that the region will hear more good news. “Shahiya’s acquisition was MEVP’s first exit, and it was a small one. We have been seeing many exits since then and it is only increasing. We are expecting more exit news in 2017.”
Comparing examples from other markets, Vinay Subramanian of Boson Ventures, who has worked with ecommerce player Flipkart in India, said “In India we have seen companies buy companies for acquiring the technology or talent. We also saw the same category company acquiring competition platforms. However, the startup scenario is much more profitable in MENA.”
Unicorn Sans IPO
Investors in the region have strongly expressed in the past that the region should back its potential Unicorns. Is IPO the way to achieve this? “IPO comes every four to five years in this part of the region. If you look at who’s investing in a knowledge-based economy like this, trends indicate that some offline element are important,” observed Mr Al Loughani.
Unfortunately, this does not do much to add to the promise of IPOs. Given this, what will lead to MENA’s own Unicorns?
Mr Hanna said, “An IPO may not be happening anytime soon in the region but we do expect Unicorns from the region. All the signs are there. We are already gearing up for three exits by the end of this year. We are seeing serious efforts in KSA to switch the economy from the dependence on oil. The unfortunate part is that while we have seen USD 100 million coming from the region, these startups have been set up in the US. It’s tragic and our loss. We are seeing huge transactions in the region like in Souq and Careem, so we are getting close. It will take time but we will have a Unicorn soon.”
