More than 8000 people attended, 400 startups showcased their ideas and investors with some $1 billion in their pockets were in Dubai for the ninth edition of the STEP Conference 2020. The event brought together startup stakeholders from across the Middle East and further afield and as ever, several key trends emerged.
The event kicked off with a panel discussion curated by Wamda, discussing the state of pre-seed startups in the Middle East and North Africa (Mena) and the struggles facing entrepreneurs in the earliest stages of their launch. Many of the sessions at STEP addressed the gaps in the ecosystem from access to finance to finding the right talent.
“The biggest issue for startups is talent. Talent exists in the region, but when the biggest companies like Facebook, Google and Amazon come to places like Egypt and offer them three times what they would earn working for a startup here [in the Middle East], you need to convince them to join you and that is hard,” said Issa Aghabi, head of venture capital investments and funds for Mena at the International Finance Corporation.
While the number of funds have grown across the region, finding the smart money is still a challenge.
“Innovators are not necessarily looking for the dollar figure, they are looking for culture, accessibility to top management and opportunity to scale. And if organisations still operate with a traditional mindset, they are losing a lot of talent,” said Namir Hourani of GMIS. “Startup ecosystems do not grow unless the investment ecosystem is growing, more funds are developed and VCs are coming together. We have a long way to go [in MENA], but we are heading there.”
One venture capital (VC) firm looking to offer this kind of smart money is Nuwa Capital, which announced its launch at STEP. With offices in both Riyadh and Dubai, the fund will target emerging markets across Mena, East Africa, Pakistan and Turkey.
“The ambition of the team at Nuwa Capital is to rewrite the book on how we think about venture capital in emerging markets by supporting companies through an extensive network of accomplished founders and subject matter experts that will drive the scalability of these businesses,” said Khaled Talhouni, managing partner at Nuwa Capital.”
The fund will target final commitments of up to $100 million and will focus on direct-to-consumer, fintech, mobility and logistics and enterprise startups – and it is these types of startups that had a strong presence at STEP this year.
While e-commerce and service-based startups continue to dominate, there was a marked shift toward more sophisticated business models, with a strong presence of healthcare and education technology startups as well as artificial intelligence (AI) and logistics-based startups in the region. Many of them were at the seed stage and from Egypt, Oman and Pakistan.
“The quality of startups improved dramatically, and I do not think we have anything less than Europe countries and US,” said Medea Nocentini of AW Rostamani/C3. Pamela Attebery of HSBC echoed the same, saying “the maturity of the market is increasing, we see more mature startups coming to the region but it needs work.”
Among those on show were: Syed Abrar, Founder of Azaad Health, built a health data exchange and patient identification platform powered by blockchain to allow patients and healthcare providers to access patient information and identify them using a biometric scan anywhere in the world. Set to operate in Niagra Falls, Canada in September 2020, Abrar hopes he can bring his model to the region through a collaboration with Dubai Authority and Department of Health in the UAE.
Theresa Werney, Founder of bid-365.com, a B2B reversed auction procurement portal that is part of Wamda X cohort 2, said that one of the big issues here for small to medium sized enterprises (SME) is to be able to finance their purchases. “We thought we had to come to the market with a completely finished beautiful product, but actually Wamda X told us you need to test the market and see if anybody really wants your product.” It was getting together with ALEC and Johnson & Johnson that helped Werney and her partners validate their business idea and make their entry to the market.
Similarly, Mohammed Jafaar, Co-founder of Yanzo, member of Wamda X cohort 2, said “it is all about the connections and the networking. We are seeing a lot of interest at Step, we are talking to both investors and users, and we had more than 20 leads within a few hours. Our biggest challenge is growth and marketing.
A panel discussion looked at the transformation of corporate innovation from bureaucratic to lean, stating that despite the number of corporate investments in startups in US, Asia and Europe has nearly tripled from 980 in 2013 to nearly 3000 in 2018 and the value has risen from 19 billion dollars to 180 billion dollars, around three quarters of corporate innovation initiatives failed to deliver required results. “Failure is part of the journey, but it is important to look at what capabilities do corporates need to have before thinking about innovation. Sometimes it is as simple as procurement and the feasibility to work with startups. This is the real issue,” said Nader Museitif of Hub71, “there is enough VC money and funds out there to filter out and work with startups in early stages. What corporates need to work on is the mechanism of working with startups and access to market.”
Investors and startups from China continue to amp up their presence in the Middle East. One panel discussion shed light on the Chinese ecosystem and how it has managed to create billion dollar companies such as Baidu, Sina Weibo, Didi and Tujia. The country is prioritising innovation as a core national strategy and continues to open up its markets to attract investment and talent. The country is also looking to export its technologies abroad and the Middle East is increasingly becoming a target market for them.
A workshop was also held for those interested in entering the Chinese market, looking at the digital ecosystem in the country and outlining effective ways to penetrate the market and reach the right audiences.