Wamda and Arabnet, the region’s leading event, insights, and innovation program organizer focused on tech business and innovation, have joined efforts to conduct research for a report on the impact of COVID-19 on the startup ecosystem across the Middle East and North Africa (MENA).
As the COVID-19 outbreak continues to impact the way we live, work, and operate, very few startups in the region have managed to escape the repercussions of this pandemic. Some sectors have witnessed a surge in demand, while others are struggling.
The report features findings based on data collected from 247 startup founders from across the MENA region and includes research supplemented by Arabnet and Wamda. The report aims to identify the extent of the impact of COVID-19 on the region’s entrepreneurship sector and the measures that can be taken to alleviate the financial stress on startups.
Startups based in the UAE represent the largest contingent of the survey, with close to a quarter (24.7%) of respondents based in the Emirates, followed by Lebanon, Saudi Arabia, and Egypt. Software as a Service (SaaS), e-commerce, and financial technology (fintech) are the most represented sectors. Foodtech, e-grocery, education technology (edtech), health technology (healthtech), and on-demand services are also well represented – a reflection of a diversified ecosystem.
“Without startups, basic services like grocery and pharmaceutical delivery would not have been possible during the Coronavirus lockdown. Entrepreneurship has proven to be a vital pillar for the region’s economy and innovation output. This report highlights not only the impact of the pandemic on the startups but ways to support them too,” said Triska Hamid, Editorial Director at Wamda.
Overall, the pandemic has had a negative impact on 71% of startups in the region.
Key highlights from the report:
- Close to 50% of startups that responded to the survey reported that they have a cash runway of less than 6 months.
- Out of the e-commerce startups surveyed, 54.2% have a runway of less than 6 months, a third of logistics startups have between 1 and 2 months of runway left.
- In healthtech, 43.8% of startups surveyed have less than 2 months’ of cash runway, with the sector’s startups reporting the funding environment has improved for them.
- Only 12% of startups surveyed have a runway of more than 12 months.
- The report indicates that half of the region's startups have witnessed an impact to their latest funding round.
The report findings indicate that the region’s startups, across various sectors, have either pivoted or scaled back their operations in order to sustain the impact of the pandemic. From supply chain disruption to travel restrictions and payment collection hurdles, multiple areas of business have been impacted by the outbreak and the restrictions put in place to combat its spread. Vulnerable sectors like travel, events, and mobility have been hit the hardest with 21.9% of them having to suspend operations, while startups in e-grocery, edtech, and fintech, saw an increase in demand.
“With the increasing importance of startups to the future economy of Mena, it’s critical for government leaders, ecosystem stakeholders, and investors to support startups through these difficult times. To that end, we’ve developed robust research to help shed light on where the most support is needed and how policymakers can support the sustainability of their startup communities.” Omar Christidis, CEO & Founder, Arabnet.
The report was launched as part of a curated session on May 18, 2020, to discuss the findings. The online event, with two consecutive panels, featured regional startup founders, as well as key ecosystem stakeholders, who provided valuable insight into the challenges and opportunities that are now facing startups in the region and discussed initiatives and efforts aimed at supporting the technology ecosystem based on the report data analysis.
The ongoing crisis has placed the Healthcare sector under a microscope unlike ever before. Learn all about the industry’s funding and investment trends in our 2019 MENA Healthcare Venture Investment Report.