NORTH AFRICA | MENA Startups – From Underdogs to Leading Innovators in the Global Fintech Arena

Recent data indicates that MENA valuations are either holding steady or increasing. For instance, in 2023, the average EV/revenue multiple for SME lending fintechs in MENA was an impressive 29.19x, compared to an average of 8.88x for similar companies in other regions.

CryptoGuru··5 min read

In recent years, the startup landscape in the Middle East and North Africa (MENA) region has undergone a dramatic transformation.

Once considered underdogs in the global venture capital (VC) arena, MENA startups are now capturing the attention of international investors and tech enthusiasts. This shift is exemplified by the prestigious Websummit, one of the world’s largest technology conferences, now hosted in Doha, Qatar, marking a significant milestone for the region’s burgeoning tech scene.

 

The Evolution of MENA Startups

Just 5 years ago, the MENA region struggled to attract interest from European and U.S. investors. Startups from this region were often overlooked in favor of their counterparts in more established markets.

However, the narrative has changed significantly.

Today, Western investors are increasingly drawn to MENA’s dynamic startup ecosystem, driven by a series of compelling factors that highlight the region’s growing potential.

 

The Fintech Boom

Among the various sectors experiencing growth, fintech stands out as a particularly notable success story.


Globally, the fintech sector has faced challenges, including:

  • Reduced funding
  • Market oversaturation
  • Diminishing returns, and
  • A decline in unicorns


In contrast, MENA’s fintech sector is on an upward trajectory. In 2023, fintech startups from:

  • Saudi Arabia
  • Egypt
  • The UAE, and
  • Turkey

collectively raised nearly $2 billion in funding.


Remarkably, five of these companies achieved valuations exceeding $1 billion.

Pakistan’s fintech startup, Abhi, provides a noteworthy example of the region’s success. In just two years, Abhi’s valuation surged to $90 million, and the company expanded its operations beyond Pakistan – an impressive achievement that many Western startups would envy.

 

Changing Valuations

The valuation dynamics for MENA startups have also evolved. A few years ago, MENA startups faced valuations that were 30 – 40% lower than their Western counterparts. Today, however, this gap has narrowed significantly.

Recent data indicates that MENA valuations are either holding steady or increasing. For instance, in 2023, the average EV/revenue multiple for SME lending fintechs in MENA was an impressive 29.19x, compared to an average of 8.88x for similar companies in other regions.

 

Opportunities and Challenges for Local Startups

The rise of MENA startups is supported by the region’s strong economic fundamentals. The area benefits from a robust economy, a growing and youthful population, an expanding banking sector, and a thriving e-commerce market.


Despite these advantages, many local startups still encounter difficulties in attracting venture capital investment, often due to challenges in effectively communicating their potential.

 

Strategies for Attracting Venture Capital in 2024

For MENA startups looking to capitalize on the surge in VC interest, several key strategies can enhance their appeal to investors:

 

   1.) Present a Bold Vision for the Region: Venture capitalists are typically attracted to investment opportunities in large, addressable markets with substantial growth potential. MENA startups should emphasize their plans for regional expansion, even if they are currently focused on smaller markets like Qatar or Bahrain. Demonstrating a clear roadmap for growth across the entire MENA region can make a compelling case for investment.Startups should conduct thorough market opportunity analyses for different countries, develop localized value propositions, and present a detailed go-to-market strategy and timeline. By showcasing ambitions for broader market penetration, startups can position themselves as future leaders in the regional market.

 

   2.) Craft a Compelling Narrative: Effective storytelling is crucial for capturing investor interest. Many Middle Eastern businesses have historically struggled with presenting their story in a way that resonates with Western investors. A well-crafted narrative can differentiate a startup from its competitors and sustain investor interest.Key elements of a strong pitch include:

    • Brand Essence: Articulate the core inspiration and vision behind the company. This foundational narrative should reflect the startup’s unique value and mission.
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    • Powerful Presentation: Start with a striking opening slide to capture attention. Ensure that the presentation maintains a coherent narrative and that each slide effectively contributes to the overall story.
    • Connect the Dots: Avoid presenting disjointed data. Instead, create a seamless narrative that helps investors easily understand and follow the startup’s vision.

 

   3.) Emphasize Financial Metrics: Many MENA startups are experiencing rapid growth and high capital efficiency, which are attractive traits for investors. Startups should highlight their financial achievements, such as impressive revenue growth and profitability, as these metrics can be more persuasive than detailed product descriptions.For example, a fintech startup in Saudi Arabia that reached $1 million in revenue within a few months while maintaining profitability is a rare and valuable asset in the startup world. Showcasing such financial milestones can significantly enhance a startup’s appeal to venture capitalists.

 

Looking Ahead

The MENA fintech sector is entering a promising phase of development, with increasing foreign capital inflows and significant growth potential.


As the region continues to attract global attention, local startups that effectively leverage their unique advantages and demonstrate their potential for high-impact growth are well-positioned for success.

The coming years hold the promise of even more high-profile deals and soaring valuations for MENA startups. By focusing on strategic growth, compelling storytelling, and strong financial performance, MENA startups can capitalize on the region’s burgeoning potential and play a leading role in the global tech landscape.

 

 

 

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