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In recent years, the Middle East and North Africa (MENA) region has witnessed significant growth of scaleups, defined as startups who have raised US$1 million in capital, or more. In 2022 alone, 158 new scaleups were added, bringing the grand total to 749 scaleups across the 19 countries in the MENA (excluding Israel), that have cumulatively raised a total of over $19.5 billion since 2010.
We see the same trends continue. Dubai was the first entrepreneurial hub in the MENA (excluding Israel) for startup activity, and it continues to maintain this leadership position. It has acted as a safe harbor for many regional startup founders to relocate to, and to get better access to talent, capital, and mentorship. Every year, more and more investors have also been flocking to the city on the Arabian Sea, setting up funds, and looking at opportunities to invest across the region. And for many cities in MENA, Dubai is a shining example of what it takes to become a global hub for entrepreneurship.
Today, Dubai is home to over 40% of the scaleups in the MENA, with 306 scaleups calling the Metropolis home. Dubai still accounts for over 90% of all scaleups in the country, which is home to 338 scaleups in total; the majority of the remaining 33 scaleups in the country are headquartered in the country’s capital, Abu Dhabi. Dubai’s 306 scaleups have raised over $11.7 billion in funding over the course of 2010 through till 2022, which represents an impressive 60% of the total cumulative fundraising total in MENA. 2022 saw the most number of international investors investing in Dubai-based startups, increasing exponentially from the year before.
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In fact, there are little to no signs of Dubai’s leadership position waning, although other cities in the region are also producing strong startups backed by significant capital. Cairo plays second-best host with 135 scaleups calling Egypt home, and Riyadh rounds out the top three cities with 93 scale-ups situated in the Saudi capital. Investors we spoke to, in Dubai and across the region, all seem to welcome the strengthening of startup ecosystems in this part of the world, saying it can only benefit all startups, founders, and investors in the end, as startups in the MENA rely on healthy markets across the region to gain the market share and customer base that they need. The more stable and supportive these economies are of tech startups and their innovative business models, the more opportunity for growth for startups and startup investors alike.
2022 had a number of important highlights for Dubai and the region as a whole. In 2022, scaleups across the MENA raised over $6.5 billion; that’s one-third of the region’s lifetime total. Six mega-rounds valued at over $300 million were completed in 2022 (out of a lifetime total of 12), indicating the level of maturation of many of the startups we are seeing today. Mega rounds contributed to over 35% of all scale-up funding in 2022. 2022 also marked the second year in a row that Dubai-based startups collectively raised over $1 billion. In fact, in 2022, Dubai-based startups doubled-down on their prior year results, fundraising over $2 billion. Dubai-based startups thus lead the charge in terms of total capital fundraising within an ecosystem, total lifetime capital raised by individual scaleups, most successful exits, largest fundraising rounds, as well as being home to the most number of unicorns in the region.
Just as impressively, Saudi Arabian startups raised over $1 billion in capital in 2022, and they have reached this level of growth in record time. On January 5, 2022, Saudi-based food-delivery aggregator, Jahez, set a precedence by listing on Saudi Arabia’s secondary market, Nomu; Jahez’s public listing with a market capitalization of $2.4 billion showed investors that exits through initial public offerings (IPOs) were feasible in the Kingdom. Investors in Dubai are rallying behind Saudi’s growing startup ecosystem, and many have also voiced their support for Dubai to follow Riyadh’s lead, and put in place a plausible path for startups to raise capital via IPO on the Dubai stock exchange.
The jury is still out on special purpose acquisition companies (SPACs), though recent boom-and-bust SPAC-fueled IPOs on foreign exchanges have not proved very effective for MENA scaleups. That said, Dubai-based startups are best positioned in the region for the next wave of IPO growth stories, as only startups in Dubai can lay claim to having raised Series E and Series F pre-IPO funding rounds. Investors also tell us that they expect to see some market corrections in 2023, perhaps a sort of “funding winter” taking-hold, as we have already begun to witness in the rest of the world. Mergers and acquisitions and market-consolidation is expected over the next 3-5 years, and that will be the name of the game for the largest and most profitable entities to cement their positions.
To get the lay of the investor landscape across Dubai and the wider MENA, and for insights provided by the investors backing the startups and scaleups that are changing the face of entrepreneurship in the region, check out our report, Dubai’s Venture Capital Ecosystem, by clicking here.
This article was originally published on Lucidity Insights, a partner of Entrepreneur Middle East in developing special reports on the Middle East and Africa’s tech and entrepreneurial ecosystems.
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