Most MENA Startups Have Less Than Six Months Of Runway Left, According To Report By Wamda And Arabnet
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The global COVID-19 pandemic has had an adverse impact on 71% of startups in the MENA region, with 22% having had to suspend their operations, while 21% have witnessed a high decrease in demand resulting in significant losses.
The findings are revealed within a research on the impact of the COVID-19 pandemic on the MENA entrepreneurship sector by Wamda, an enabler for the MENA startup ecosystem, and Arabnet, an event, insights, and innovation program organizer in the region focused on tech, business, and innovation.
Impact of the COVID-19 pandemic on MENA startups. Source: Wamda and Arabnet Report
Close to a quarter of respondents (24.7%) are based in the UAE, followed by Lebanon, Saudi Arabia and Egypt. Software as a Service (SaaS), e-commerce, and financial technology (fintech) were the most represented sectors in the research. E-grocery or foodtech, education technology (edtech), health technology (healthtech), and on-demand services also made up a significant percentage of the sectors represented in the research– which is a reflection of a diversified ecosystem.
Out of 247 startup founders from the MENA region who were included in the research, only those in e-grocery, edtech, and some fintech startups have seen an increase in demand. 67.46% of UAE-based startups reported an overall negative impact. Concerningly, 16.4% reported that they have suspended operations, 23% have witnessed significant losses, and 28% have faced moderate losses.
Financial support required to help MENA startups survive the pandemic impacts. Source: Wamda and Arabnet Report
Almost half of the startups surveyed showed that they will remain solvent for less than six months. Out of the e-commerce startups, 54.2% have a cash runway of less than six months. One-third of logistics startups have between one and two months of runway left. In healthtech, 43.8% of startups have less than two months of solvency; however, the funding environment has improved for them. Only 12% of startups have a runway of more than 12 months. Half of the region's startups have also witnessed an impact to their latest funding round owing to the current economic uncertainty and drop in oil price which has resulted in a sense of caution among the investment community.
Supply chain disruption, travel restrictions, and payment collection hurdles are among the plethora of business areas that have been impacted by the outbreak. Two thirds of the region’s startups are currently working remotely, with salary cuts and reduced working hours. For over half of the startups in the MENA region, survival in the coming months depends on financial help in the form of investment, loans or bill waivers.
“With the increasing importance of startups to the future economy of MENA, it’s critical for government leaders, ecosystem stakeholders, and investors to support startups through these difficult times. To that end, we’ve developed robust research to help shed light on where the most support is needed and how policymakers can support the sustainability of their startup communities," said Omar Christidis, founder and CEO, Arabnet.