Reflect Festival 2023 brought together tech entrepreneurs, startup founders, government officials, investors, and CXOs to discuss the thriving startup ecosystem in the Middle East and North Africa (MENA) region. This illuminating panel featured Ahmed AbdelHamid, Mohammed Al Rasbi, Founder and CEO of R&D Ventures and Labs, Zachariah George, Managing Partner at Launch Africa Ventures, and Aya Zaghnin, Early Stage Investor at Breega. 

Their insights delve into the challenges and opportunities for rising stars in the MENA region.

Ahmed AbdelHamid is a key Angel Investor skilled in constructing and overseeing VC and PE funds, involved in various family office fund structuring initiatives, portfolio management and startup advisory, and a serial entrepreneur. He emphasized the critical importance of access to capital for startups in the MENA region and highlighted two key dimensions: stage and growth. 

In the early stages, startups often struggle to secure funding, particularly at the Series A level. The region lacks sufficient know-how in managing capital when supporting these budding enterprises. However, as the startup ecosystem matures, different types of funds, such as climate funds and tech funds, are emerging. As they are not general funds, they will have more experience and maturity in managing capital in the various stages of ventures, from pre-seed to post-IPO.

One of the significant challenges faced by deep tech startups is that sector-agnostic funds may not fully grasp their business models. Deep tech ventures require specialized understanding. Additionally, late-stage funding remains scarce in the region. AbdelHamid advised against relying on the balance sheet for VC funding and stressed the importance of hiring fund managers with expertise in the target sector.

A noteworthy observation made by AbdelHamid was the shift in focus for startups in MENA. With many startups reaching maturity around 2017, the time is ripe for cultivating a culture that prioritizes exits and horizontal integration. Understanding local cultures and business practices is essential for success in the region.

Mohammed Al Rasbi, the CEO of R&D Ventures and Labs, shared how any startup ecosystem can learn from the experiences startups face in Oman. He highlighted the challenges in accessing capital beyond the initial stage, particularly if they lack traction. Oman's small market size, though bigger than that of Cyprus, often forces entrepreneurs to seek funding from foreign markets. 

This is a similar case in Cyprus, though instead of being based in Cyprus and seeking investments from abroad, Cypriot founders set up shop abroad first, and then make a gradual return to the island.

Al Rasbi also cited the cautionary tale of Swvl, underlining the importance of horizontal integration for establishing mature exit markets. For startup founders looking to connect with the MENA region from places like Cyprus, Al Rasbi recommended leveraging accelerators to connect with banks and major stakeholders, rather than reinventing the wheel.

Zachariah George, Managing Partner at Launch Africa Ventures, shifted the focus to the burgeoning markets in Africa. He highlighted Egypt and Morocco as particularly exciting markets. Egypt's strong connection to the Middle East, especially markets like Dubai, the UAE, and Saudi Arabia, provides unique opportunities.

George stressed the need for a balanced ecosystem with angel groups, growth-stage VCs, and more to support startups. Liquidity and exits, he argued, are critical components of a maturing ecosystem. He emphasized that CVCs, when done correctly, can significantly contribute to Series A and Series B rounds, but they should not run on corporate balance sheets.

Zachariah shed light on the robust corporate M&A market in Africa, with 150 deals in the last four years. He noted that Africa needs to witness more horizontal M&A, where larger companies acquire smaller ones, signaling a mature market. The exit market in Africa is ripe, presenting opportunities for growth and investment.

He encouraged startups in Cyprus with innovative technology to collaborate with Middle Eastern telcos to demonstrate how they can add value to consumers. This approach can transform a B2C model into a B2C2B model, opening up new avenues for expansion.

Aya Zaghnin, an Early Stage Investor at Breega, provided insights into investing in African startups. She noted that in Africa, entrepreneurs are more receptive to funding without demanding competitive term sheets, unlike in Europe. The value of VC funds is still being understood in Africa, as they differ from traditional assets like real estate.

In Morocco, there's an ongoing effort to educate corporations about the importance of technological education to propel industries and sectors forward. Zaghnin also touched upon the Swvl IPO debacle, underscoring the volatility of the startup landscape.

The panel concluded with a call to encourage partnerships, particularly in the pre-Series A stage. With the Middle East and Africa poised for growth and collaboration, and Cyprus strategically positioned at the crossroads of these regions, there are enormous opportunities for startups to thrive and succeed.

The panelists highlighted the challenges and potential of the MENA startup ecosystem. Access to capital, understanding local cultures, and a focus on exits and partnerships emerged as key factors for success in this dynamic and evolving landscape.