According to Wamda, investment in women-founded startups dropped to just $34.6 million or 1.2 per cent of the total raised across 52 deals in 2021 in the MENA region. But there’s hope for the growing number of women startup founders looking for venture capital, although, a very long way to go.
“Support should also continue beyond the first few funding rounds as the competition only grows bigger with the startup stage. There is still a lot to be accomplished, but the future seems bright as all ecosystem players have recognised the gap in funding to women founders,” says Medea Nocentini, co-founder of C3 and COO at Global Ventures.
“There is still a lot to be accomplished, but the future seems bright as all ecosystem players have recognised the gap in funding to women founders,” she added.
In this interview, Nocentini also talks extensively about key challenges in the MENA startup ecosystem, sectors that need increased investments and the criteria for investing in startups.
Excerpts from the interview:
How do you see the growth of startups in the MENA region?
Venture funding is booming globally, fueled by entrepreneurship and innovation. With an increase of 156 per cent in global funding, it hit an all time high in 2021. There are huge markets and opportunities for startups in the MENA region. The H1 2021 report for the MENA Startup Ecosystem showed that UAE led investment growth for the region by number of deals and funding, acquiring 61 per cent of all MENA investments. Together, the top 3 MENA Hubs, UAE, Egypt, and KSA, accumulated 71 per cent of capital deployed.
The future looks brighter, with some very good signs in 2021 in terms of exits. International investors are appreciating the value of mergers and acquisitions instead of building from scratch. The volume of mergers and acquisitions in the Middle East surged 59 per cent annually in the first half of 2021, as appetite for investment returned despite pandemic-related uncertainties, according to a new study.
The region recorded 307 M&A transactions in the first six months of 2021, 48 per cent higher than the number of deals completed in the second half of 2020.
What are the key challenges in the region in creating a more vibrant entrepreneurial ecosystem?
The MENA region is unique, with very tight cultural similarities, but still fragmented from a trading perspective.Funding availability is still limited compared to global markets; fierce global competition with global players. More collaboration is needed to overcome these challenges across startup ecosystem players, investors and founders.
Talent is a challenge as well, it is difficult to find a startup with a full suite – right team, a solid idea and business model and with access to the right markets. M&A’s can be a solution to consolidate efforts and to build on synergies.
Women-led startups received just 2.3 per cent of VC funding in 2020. Why is the funding scenario dismal for women entrepreneurs?
Women founders, globally and in the MENA region specifically, lack support from a very early-stage. The percentage of funding going to startups with women founders is growing but still very limited, and inversely proportional to the startup stage. In fact, 23 per cent of seed dollars, 19 per cent of early-stage funding, and 9 per cent of late-stage funding went to companies with at least one female founder in 2020. These numbers are even lower for sole female founders.
At C3, we help build an ecosystem in a way that is more inclusive, diverse, equitable and accessible for women founders throughout their life cycles. Our accelerators also play a huge role in giving women founders a competitive edge from the very start. This can even go a few steps back, empowering women to jump on the entrepreneurship journey and providing them with the necessary grounding to launch their own businesses.
Support should also continue beyond the first few rounds of funding as the competition only grows bigger with the startup stage. There is still a lot to be accomplished, but the future seems bright as all ecosystem players have recognised the gap in funding to women founders.
The challenge now is to apply this within investment decisions and across the support offered to women founders. Here’s a relevant C3 number: The ratio of men to women who went into one of C3’s acceleration programs was 3:1 and the ratio of men to women who made it to the finalist stage was almost 2:1; out of the five startup-winning founders, four were women.
What are the main things you look for in a potential investment in a startup?
- Addressable market for the business ideas
- Uniqueness of the idea and team
- Resilience of the company in the marketplace; and
- Adaptability of the team and business model in the face of common challenges.
Plus, a true passion and genuine intention to make a change in the world.
Does data play a big role in investment decisions?
Data plays a major role when assessing the market, industry, and the traction to date. Usually used more in growth-stage and established startups. Some see investing as an art more than a science, especially for early-stage startups and go back to assessing if the team has what it takes to go into a specific market and grow. Different data points can be used as insights that can later be used to orient investment decisions.
What are the top three sectors that need increased investments in tech innovations in the region?
After COVID-19, there has been more focus on impact-driven startups in Envirotech, Edtech and Healthtech. And the importance of tech in enabling solutions in those sectors specifically has grown over the past couple of years. These sectors are tackling major global problems and can provide very effective solutions, given that they receive the necessary funding.
Real estate, F&B and eCommerce sectors are already seeing a rise in the amount of funding allocated.
eCommerce in the Middle East is seeing exponential growth. What are the largest trends you see taking hold in the region in 2022 and beyond?
From a consumer perspective: flexibility and efficiency. Fintech solutions are pouring into the eCommerce sector accelerating the growth of the sector – 60 per cent of consumers in MENA now prefer to pay for eCommerce via a digital payment method. Also, Buy Now Pay Later is encouraging buyers to shift to eCommerce – 24 per cent of consumers in MENA have used the buy now, pay later option in 2021 compared with 23 per cent of consumers across the UK and Europe.
The emergence of Q-Commerce: The current and upcoming generations are convenience-seekers. While this trend is seen mainly in the food and grocery segments, it is expected to grow into other segments like electronics, fashion, home and furniture, books and newspapers, toys, gifts and flowers.
Also, big retailers are shifting their attention towards startups in the space. We will see more M&As of established online businesses. Last year, Mumzworld was acquired by Tamer Group.
Tell us about the C3 I.D.E.A. Accelerator that you have launched with Accenture. What are your main objectives?
The C3 I.D.E.A. Accelerator, powered by Accenture, supports 10 startups across the MENA region that are working towards achieving inclusion, diversity, equity and access across different communities including women, youth, and people of determination.
Through our curated accelerator programs and our network of experts, trainers, VC firms, we support impact-driven entrepreneurs in growing their impact and accelerating their growth.
Entrepreneurs across the region have been providing innovative solutions that create a more inclusive and diverse society. We believe that with the necessary support, these startup founders can achieve new heights and become pioneers in advancing the inclusion, diversity, equity and access agenda.
Finally, when and how can the MENA region produce a ground-breaking, original global platform such as Twitter, Uber, Airbnb?
We are seeing a big move from emulation to innovation in the region and emerging market founders are strengthening their position on the global technology stage. Entrepreneurship is becoming a pathway for the young and tech-savvy generations, while founders from the region are addressing problems that international companies have either avoided or haven’t tapped into yet. We will see many more exits and acquisitions from international players in a couple of years that will prove just that.
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