The 500 Global Startup Series brings insights from new tech regions and puts a spotlight on talented entrepreneurs in every corner of the world. We’re kicking off a 7 part series and beginning with a comprehensive look into the tech landscape of the Middle East & North Africa region (MENA). Over the next few months, we’ll also explore different areas such as Israel, India, Southeast Asia, Latin America, China and more. We’ll also discuss the successes and challenges that global investors and founders face in 2015 and beyond.
With a region ripe with potential, 500 hopes to fuel this entrepreneurial movement by bringing smart capital to MENA entrepreneurs. 500 is discovering great opportunities in mobile tech, e-commerce, video, content, hardware, SaaS, healthcare, solar energy, education, social networks, gaming and much more.
Today we see numerous startups finding success: Souq.com (Dubai), MarkaVIP (Istanbul), U-Turn (Saudi) and OTS (Saudi/Jordan/Egypt) to name a few. The Middle East is showing huge potential and we’re find more and more founders across the region building digital solutions for local problems. Significant acquisitions of startups by international and regional companies include: Corona Labs, Thompson Reuters, and N2V. We’re particularly happy to see women at the helm of building tech startups in the region and we were excited to recently invest in our first female-led startup in the Middle East.
“What is most exciting about the ecosystem in the Middle East are the STARTUPS themselves. With all challenges in the region, they must be brave and deal with the gaps in the investment scene as well as political and economic hurdles. Entrepreneurs stand tall despite the lack of resources.” – Riham Mahafzah, CEO & Co-founder of SilkRoad Images.
CHALLENGES & OPPORTUNITY
“I believe that the Middle East is the land of opportunity. So many challenges in all areas and sectors begging for solutions and hence the opportunity. The online/tech market is also not as saturated as in developed markets.” – Ameer Sherif, CEO @Wuzzuf @BasharSoft
Some observers would argue that with significant geopolitical instability in the Middle East, the risk and uncertainty is too high for investment. As with all regions of the world, there are many complexities and histories to understand before entering into a new market. For one, bankruptcy is a criminal offence in several MENA countries which makes it difficult to develop a risk-taking entrepreneurial culture. It also happens to be illegal for American VCs to invest into Iranian companies. The list goes on. However, one could argue that technology and entrepreneurship can be extremely transformative for the region in the coming years. Even in times of political uncertainty, 500 sees a huge opportunity in the Middle East. With the right density of tech talent, creativity, risk capital and belief that it can be done, anything is possible.
500 Founding Partner Dave McClure argues there is a lack of startup experience on the investor side, at least for most MENA tech investors. There is a lot of capital in the region, however its mostly being managed by finance and real estate investors, not tech entrepreneurs who are angel investors or seed fund managers, as in Silicon Valley. Still, there is a large sum of money to deploy in the region and 500 believes that multiple small funds would help dramatically. 500 would like to coinvest with more seed funds of size $10M-$100M active in the region, such as MENA Ventures, Sawari Capital – Flat 6 Labs, WAMDA, Oasis 500, Silicon Badia, to name just a few. Unfortunately, aside from those investors, almost no one is investing at the $250K – $2M range in the MENA region.
There is also an adversity towards ‘risk’ in the Arabic speaking market. Investors want safe bets. At 500 we know that big successes come through experiencing and learning from failures, then continuing to take risk and persevering, and we believe that a cultural shift in this direction can happen over time. If an entrepreneur can learn to fail, pick up the pieces and start another company, others will follow. With this shift, there will be a larger acceptance around failure and new role models will emerge. Obstacles can be overcome.
There is still a great deal of work to be done and a long silk road ahead. 500 is excited to see what MENA entrepreneurs will build in 2015 and we hope to invest, guide and connect them with a strong network of global mentors, advisors, investors and fellow startups.
“500 Startups is bullish on opportunities to invest in the MENA / Arab-speaking market, and the accelerating adoption of internet, smartphone, and payments activity in the region — as a result, we plan to increase activity in 2015 & beyond.” – Dave McClure, Globetrotter & Founding Partner @500
Originally posted: 500 Global Startup Series: Enter the Middle East