UAE startup community gears up to deal with post-pandemic situation
SOURCE: Khaleej Times
The UAE is known to battle out challenges and so has it been proved this time as the startup community has come together to find solutions to face the impact of the global outbreak of COVID-19 with strong support from the government.
Over the past decade, the entrepreneurship culture has blossomed and now all the key pillars of a sustainable investment environment are available. Starting from incubators with an incredibly ambitious mandate such as Ibtikari Innovation Incubator, Dubai Future Accelerators (under Dubai Future Foundation), and Area 2071 to established early and late-stage Venture Capitalists.
One of the most exciting recent developments is the thriving success of the UAE based accelerators such as Fintech Hive, Intelaq, Dtec in Dubai, Hub71, and Flat6Labs in Abu Dhabi and Sheraa in Sharjah which have been extremely supportive of the UAE startups.
The country is also fortunate to now host some very successful international accelerators such as Techstars, Startup Bootcamp, and Plug N Play who are as excited about UAE as their homegrown counterparts are.
Walid Hanna, founder and CEO, Middle East Venture Partners, said the UAE startup ecosystem has come a long way since MEVP was founded in 2010 and has so far invested in over 50 companies.
"The UAE has succeeded in attracting many foreign start-ups into reincorporating their headquarters in the UAE. With the UAE starting to reopen all vital sectors of the economy (retail, F&B, travel, and others), we believe that a recovery will no doubt take place. Entrepreneurs that were tested during the COVID-19 crisis and that demonstrated resilience will emerge even stronger in this new phase," he said.
MAGNiTT's data shows that the sectors that have received the most amount of venture funding in Mena in 2020 have been real estate, food & beverage, and e-commerce, while the industries that have seen the highest number of deals so far have been fintech, e-commerce, and delivery and transport.
"Undoubtedly, startups in all industries and at all stages across MENA will be re-evaluating their business models and revisiting their product-market fit. Some industries have seen a surge in consumer demand, while others have seen drops in demand as a function of COVID-19," said Philip Bahoshy, MAGNiTT founder and CEO.
While the full effects of COVID-19 on MENA's venture funding landscape are not yet clear (the fundraising process in MENA takes, on average, around six months to complete), what is clear is that a fresh approach is key to align the interests of your customers' current needs with their future needs by creating short-term solutions that can evolve into longer-term revenue streams. Creativity is required to simultaneously create and capitalise on these opportunities.
It may be recalled that the number of investments in MENA-based startups was up 31% in 2019, with 564 investments and $704 million in total funding, up 13% compared to 2018, excluding previous mega-deals in Souq and Careem. In 2019, Egypt, for the first time ever, accounted for the largest number of deals in Mena with a jump of 25%, while the UAE accounted for the lion's share of total funding and a surge of 60%.
"Investment is likely to follow surges in demand flow into demand-driven sectors such as healthcare, delivery, entertainment, and online education. As entrepreneurs in the region, we need to consider one thing: Resilience is about always looking at how we can solve problems with the resources that are available to us," Bahoshy said.
Echoing a similar view, Walid Daniel Dib, co-founder of Addenda, said the UAE government has deployed several governmental accelerator and incubator programmes that target startups in the region.
"Of these, Addenda qualified for FinTech Hive and The Mohammed Bin Rashed Fund. Most recently, we became part of Hub71, which has fully subsidised our colleagues' accommodation, health insurance, and workspace costs," he said.
So how do startups battle the COVID-19 phase? "We've always recommended startups to be prudent with cash and runway management and this advice was even more pertinent during the pandemic. By now each company should have gone through a scenario planning exercise with the goal of extending runway while varying the revenue and expenditure assumptions. While a startup should plan for the worst-case scenario, it should also be well-positioned to benefit from an environment of recovery," added Hanna.
Dib, cautions with advice that cutting costs and generating more revenue will be key to survival. "The only way to survive this pandemic is to have sufficient liquid capital in your startup's bank," he said.
An encouraging 33 startup deals took place in May 2020, which was an increase of 93% compared to April. This was largely driven by the Misk500 MENA Accelerator, which graduated its third batch of startups. Discover more details in our May 2020 Dashboard Report.