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7 insights from North Africa’s rising startup ecosystem
From our Innovation and Investment in North Africa Report
The North African startup ecosystem has been on the rise over the last few years. Briter Intelligence data shows that the number of deals in the region more than doubled from 2019 to 2021 and the total amount being invested more than quadrupled. Since 2013, North Africa has accounted for 10% of all investments into startups on the continent. Over this past decade, startups headquartered in North Africa received at least $1.45 billion in funding across 400+ deals from more than 160 investors from the United States, Egypt, Saudi Arabia, United Arab Emirates, France, Sweden, among others.
Yet from discussions with stakeholders in the region, we learned that, despite this growth, investors, startups and ecosystem support organisations (ESOs) don’t feel these ecosystems get the visibility and coverage compared to other regions and markets in Africa. Egypt is the exception. Its startups have captured more than three-quarters of the total investment into the region with several mega deals making headlines including MNT-Halan, Fawry, and Swvl. But outside of Egypt less is known about the region despite notable deals for startups across countries over the last few years. For example, Yassir in Algeria raised $30M in a Series A round, Presto Eat in Libya raised $4M, Alsoug and Bloom in Sudan raised $5M and $6.5M respectively, Chari in Morocco raised $5.4M and Instadeep in Tunisia raised $100M in a Series B round.
To assist investors, startups and ESOs in making sense of the region, we decided to take on a report that would look at the ecosystems from a regional perspective, under a single umbrella, that is, the North African Innovation Ecosystem. It draws on Briter Intelligence data as well as contributions from more than 20 local ecosystem stakeholders.
It shows that the country ecosystems within the North Africa region cluster around three different stages of maturity. The first, Oum al Donya (“Earth’s Mother”), only includes Egypt. It is the most mature ecosystem in the region and it is commonly featured in the Big Four along with Kenya, Nigeria, and South Africa. The challenge for most investors is to find fair valuations. The challenge for most startups is competition for market share. The second, Khawa Khawa (“The Brothers”) includes Algeria, Morocco and Tunisia. These countries have a common history and language, as well as a common approach to developing their ecosystems. Across these countries, the government has played a strong role in shaping a favourable regulatory environment and leveraging public funds to catalyse support for startups and ecosystem support organisations. Algeria slightly lags Morocco and Tunisia in terms of its ecosystem maturity, but all three provide great environments for startups and investors looking to test and prove their concepts before scaling across the region. Last, but not least, is Al Sameedoon (“The Resilient”), which includes Sudan and Libya. The political challenges in these countries have meant that these ecosystems have emerged without government support. Limited competition, strong demand, good talent and lack of alternative financing make them attractive markets for startups and investors. Those attune enough to invest have found fair valuations and healthy margins.
Below we highlight 7 insights from the report that reflect the drivers of these different stages and the similarities and differences across them:
Fintech, logistics, mobility solutions and e-commerce solutions are the region’s top sectors. Briter Intelligence counts more than 1000 digital, green, and technology-driven startups operating in the North Africa region offering more than 300 products across more than 50 sectors. The top sector attracting entrepreneurs is e-commerce, which represents nearly a quarter of all startups, followed by fintech and health. In terms of funding, fintech, logistics, mobility solutions and e-commerce are the top sectors.
Mobile apps are on the rise. North Africa boasts the highest percentage of adults with mobile phone and internet access in Africa. Mobile apps, in particular, have shown a lot of growth and traction among users as compared to traditional websites in e-commerce, fintech, and edtech in Morocco, Sudan and Tunisia.
Governments in North Africa are pioneering new ways to support startups. Tunisia was the first country in Africa to introduce the “Startup Act”, a legal framework encouraging startup creation and development. In Algeria, a ministry fully dedicated to startups was launched in 2020 and has been deploying initiatives targeting both startups and support organisations. The Algerian Startup Fund has invested around $3.6M in startups and the government recently announced a public accelerator, A-Venture. The Egyptian government has been active through the ITIDA and TIEC and has been working on improving regulations to attract more foreign investors. The Moroccan Government deployed Innov Invest Fund through Tamwilcom, a public fund targeting startups, and launched the public incubator, Founders 212, to provide access to support and funding for entrepreneurs.
The diaspora is playing an active role in the startup ecosystem. The North African diaspora are organising themselves in an effort to support startups in the region. The Maghreb Diaspora Business Angels Network (MDBAN) was formed by the diaspora and has already invested in 30 startups from the region so far. In Tunisia, a diaspora community formed the Bridging Angels Network and is now actively investing in Tunisian startups, with a plan to expand their activities to the rest of the region. In Sudan, the diaspora is supporting the Sudanese startup ecosystem through the Sudan NextGen initiative.
Many startups and investors are operating across the region. Startup founders in North Africa are expanding to new markets within the region by launching operations directly or by acquiring active startups in the market of interest. Examples include Moroccan Dabadoc expanding to Algeria, Tunisian GOMYCODE expanding to Morocco and Egypt, the acquisition of Moroccan Waystocap by Egyptian MaxAB, and the acquisition of Tunisian Q-Commerce app Lamma by Egyptian Appetito. Similarly, local Angel networks are broadening their focus and are now interested in investing in startups from the region. Several startups are also expanding outside of the region.
Social selling shows the potential for startups in Libya. In Libya, more than 90% of the population are active social media users with more than 6 million Facebook users. Many of these users participate in Social Selling where individuals buy and sell goods and services through social media platforms. Presto Eat, a logistics startup, has been an early mover to tap into this market, showing the potential for other startups in the region.
The region has its own Paypal mafia (the Careem Mafia). The Careem Mafia takes its name from Silicon Valley’s PayPal Mafia where, following its acquisition by eBay, former employees and founders became some of the most influential entrepreneurs and investors in the United States. The historical acquisition of Careem by Uber in 2019 created a similar phenomenon in Egypt where former employees and founders went on to start 30+ companies, including the previously mentioned SWVL, MNT-Halan and MaxAB, as well as Cartona and Eduay, which have been publicly listed or achieved Unicorn status for their valuation.
The above is only a sample of the insights in the report. It is clear that the startup ecosystem in the region is growing. However, there are still several areas that need further attention. Regional collaborations are at their early stage and there are big differences between countries. Capitalising on the different countries' learnings while adapting to local contexts would be an opportunity to drive the region's growth.
If you are interested in learning more about Innovation and Investment in North Africa, check out our full report accessible here.
Footnotes:
Techcrunch (2021), “Yassir’s Series A Fundraising Round”
Techcabal (2021), “Alsoug raises $5M in first foreign funding in Sudanese tech”
Techcrunch (2022), “Sudanese FinTech Bloom nabs $6.5M”
InstaDeep (2022), “InstaDeep raises $100M to scale decision-making AI products”
OECD Development Centre (2021), “Africa’s development dynamics 2021: Digital transformation for quality jobs”
Al-Wanan (2022), The Algerian Startup Fund invested 510 million DA in startups
Wamda (2020), Glimpse on Careem Mafia