MENA likely to see over 300 unicorns and soonicorns by 2030: report

Compared to ecosystems elsewhere, the startup space in the Middle East and North Africa (MENA) region is still at a nascent stage. The region’s IPO market still has a long way to go too, with the MENA region clocking in just over 50 IPOs. For a quick comparison, India has had over 130 IPOs over five years.  

Still, the region seems poised for explosive growth. The digital economy for MENA is expected to cross just over $500 billion by 2030, which will be accompanied by a growth of more than 300 unicorns and soonicorns, a report by RedSeer Strategy Consultants found. This will also build a strong pipeline for IPOs in the short term, it said. 

Much of this is driven by the rise of emerging sectors like healthtech, edtech, and fintech within the region’s digital economy, according to Sandeep Ganediwalla, Managing Partner at RedSeer.  

Regulation and government initiatives across the region will unlock investments and drive growth, with future growth arriving from hinterlands. This is besides growing mergers and acquisitions activity in the region. 

“The IPO market has been steadily growing in recent years, as more companies seek to raise capital from public markets, and investors' enthusiasm and confidence in the region’s economic potential bolsters. The regulations governing the IPO market in the MENA region vary by country, as each country has its own legal and regulatory framework for securities offerings,” says Ganediwala. 

1113 people loved this story

---

Why Tazapay is using a part of its $16.9M funding to capture the Middle East market

Acquisitons and IPO routes

Philip Bahoshy,  CEO and Founder of MAGNiTT, a research firm, believes more exits and acquisitions are set to happen this year.

“Along with a subdued IPO market globally and more urgent cash conservation imperatives… some startups will be left with few choices in 2023 aside from seeking acquisitions or consolidations as an alternative to fundraising,” he says. 

This will give firms—from international startups to well-capitalised companies—the chance to acquire promising startups from different regions to achieve scale, he adds. 

When it comes to considering the initial public offering (IPO) route in the region, the market is dominated by Saudi Arabia and the United Arab Emirates (UAE), which account for a significant portion of the total IPO activity in the MENA region. The region also has a robust digital landscape where some of its biggest conglomerates like  Apparel Group, Landmark Group, Al Tayer Group of Companies, Mashreq, and the Saudi Telecom Company (STC) would be ready for an IPO over the next seven years. 

“Over 30 conglomerates in the MENA region have digital assets that will be ripe for IPO by 2030,” says Akshay Jayaprakasan, Associate Partner, Redseer Middle East.  

Much of how soon a company can reach the IPO stage would be determined by a number of factors, says Ganediwala, like prevailing market conditions, the regulatory environment, and specific characteristics of the company seeking to go public. 

On a more general note, current market conditions in the MENA region have been relatively favourable for IPOs recently. This is due to a growing number of institutional investors, as well as increased interest from international investors looking for opportunities in emerging markets.

“However, despite these positive developments, there are still challenges that companies may face when seeking an IPO in the MENA region. These can include factors such as political instability, economic volatility, and currency fluctuations, which can make it difficult to accurately assess the value and risks of a company's shares,” Ganediwala explains. 

While the region’s IPO market is smaller in comparison to other markets it continues to grow and garner interest from investors and companies. Some of the most prominent tech IPOs the region witnessed include Jahez of Saudi Arabia in 2022 and Egypt’s Fawry in 2019. 

Factors driving growth 

What is of note for MENA is its thriving young population. The digital economy’s share as a fraction of private consumption in MENA stood at 5% in the pre-pandemic era as early adopters in its growth stage were mostly the tech-savvy, Gen Y, and affluent consumers. 

This period also witnessed a steep rise in online grocery, food delivery, and other quick commerce platforms. Governments in the MENA region have also introduced regulations on digital payments to drive further adoption. 

The digital economy is on track to constitute about 23% of private consumption in the region, growing 4X faster than offline consumer spending. 

“With a median age of 26, MENA is home to a digitally ready population with strong enabling logistics infrastructure, making the region a fertile ground for digital solutions,” Ganediwala says. 

A deliberate and goal-based approach is necessary for companies to be IPO-ready with a focus on factors like finding the right market leadership, having a clearly visible total addressable market (TAM), customer love, and a clear path to profitability. 

The report also stresses on the need to build a good rapport with investors and bolster corporate governance for companies working their way to an IPO.

Designer Credit: Chetan Singh