RIYADH, Saudi Arabia — Startups that survive the first five years of pre-establishment are highly to achieve success and continue their businesses, according to experts.
There are many factors that make startups successful, yet there is not one specific recipe. “It is a mix of internal and external factors,” says Arwa Shafi, Accelerator Lead at the Entrepreneurship Center – TAQADAM.
Yet, through experience, Shafi noticed that startups with experienced professionals on the founding team have a higher success rate. Also, founders who start a company in their area of expertise have better chances compared to founders who start in an area foreign to them.
What are investors looking for?
On top of that, founders who are receptive to feedback and mentorship, who stay up to date with the relevant news, and who are flexible to pivoting and adaptive are most likely to succeed, Shafi cited.
Investors are paying greater attention than ever before to the founders’ backgrounds, personalities, and achievements.
When considering external factors, shifts in regulations and demands from businesses and consumers can cause shifts in which sector is seen as most promising and thus receives the most investment.
Consumer preferences and government mandates have both increased the need for novel approaches in several industries, including healthcare and finance technology.
MENA Startups’ performance in OctoberÂ
Startups in the MENA region raised US$ 646 million in 69 deals in the month of October, and total investment this year so far has reached US$ 3 bn in 551 deals, according to a report published by Wamda.
As for the value of cumulative deals, it witnessed an increase of 273 percent compared to the value of deals in September, which amounted to US$ 173 million, and a growth of 331 percent compared to last year, as investments amounted to US$ 150 million in October 2021.
The UAE came out on top, having secured most of the financing, amounting to US$ 460 million in 24 deals. It should be noted that Cleantech Yellow Door Energy topped the rest of the companies in terms of financing after obtaining a huge investment of US$400 million in one of the largest funding rounds in the entrepreneurial environment in the region.
As for Egypt, it came in second place after obtaining US$ 113 million in 18 deals. Saudi Arabia came in third place after startups secured US$ 70 million in 12 deals, and e-commerce support platform Zid secured the largest share of funding, with US$ 50 million in a Series B funding round.
The rise in funding witnessed in October was mostly attributed to a significant increase in late-stage funding, and approximately 84 percent of the capital inflow was credited to late-stage startups, including Series B and growth-stage companies.
As for startups in the seed and pre-seed stages, their activity witnessed a significant decrease and represented 7 percent of the total funding. In the same vein, debt financing has become the most popular option for startups looking to obtain funding at a higher valuation, and this was evident in Karmsolar and Trella, the first with US$ 2.4 million and the second with US$ 6 million.
In terms of sectors, companies operating in the clean technology sector received most of the financing, thanks to the Yellow Door Energy round. It should be noted that financial technology companies dominate the financing scene in terms of the number of deals, having succeeded in attracting 16 deals out of a total of 69 deals with a value of $70 million, making this sector the second most funded sector in October. As for the startups operating in the field of digital and virtual banks, the sectors of financial technology are the most funded.
The food technology sector received huge amounts of funding, and the share of this sector in the total financing amounted to 7 percent, followed by the e-commerce sector at 8 percent, then Web3 at 3.5 percent. Software-as-a-Service (SaaS) startups specializing in B2B SaaS transactions received US$ 528 million in 36 deals, while B2C startups specializing in business-to-consumer transactions received US$ 115 million in 30 deals.
Last month witnessed an almost complete absence of funding for startups headed by women after they attracted 0.06% of the capital inflow. As for startups headed by a team of men, they obtained 99.47 percent of the funding value, and companies headed by a mixed team of men and women got 0.47 percent.
How do Accelerators assist?
In the MENA region, accelerators play a major role in supporting the entrepreneurship ecosystem and in diversifying and developing local economies.
TAQADAM Accelerators, which is the child of a partnership between two entities, KAUST & SABB, mandates to support economic development in the kingdom and create jobs in Saudi through innovation and entrepreneurship.
Accelerator Lead at the Entrepreneurship Center, Arwa Shafi, added: “Our startups today have created 1,000 jobs, graduated 152 startups and awarded over US$ 20 Million non-dilutive funding”.
About the accelerator’s role and the programs, they present to MENA startups, Shafi explained that such programs place “a safety net under cirque performance or adding a sandbox under kids’ playgrounds.”
Accelerators are there to help a startup and its founder weather any storm that might come their way. This is accomplished through a wide variety of means, including but not limited to mentorship, coaching, training, subsidized services, offers, incentives, discounts, access to a network of fellow founders, access to specialists in a variety of sectors, and so on, according to Shafi.