Startups in MENA have scaled back their operations to sustain operations: COVID-19 Impact Survey

As the COVID-19 outbreak continues to impact the way we live, work, and operate, very few startups in the region have managed to escape the repercussions of this pandemic. Some sectors have witnessed a surge in demand, while others seem to be struggling.

Wamda, the region’s leading ecosystem enabler, and Arabnet, the region’s leading event, insights, and innovation program organizer centered on tech business and innovation, have joined efforts to lead research for a report on the impact of COVID-19 on the startup ecosystem across the Middle East and North Africa (MENA).

The report emphasizes findings based on data collected from 247 startup founders and includes research supplemented by Arabnet and Wamda. This report, developed by Wamda and Arabnet strives to know the extent of the impact of COVID-19 on the region’s entrepreneurship sector and the steps that can be taken to ease the financial stress on startups.

Startups based in the UAE represent the largest contingent of the survey, with close to a quarter (24.7%) of respondents based in the Emirates, followed by Lebanon, Saudi Arabia and Egypt. Software as a Service (SaaS), e-commerce, and financial technology (fintech) are the most represented sectors. E-grocery or food tech, education technology (ed-tech), health technology (healthtech), and on-demand services are also well represented – a reflection of a diversified ecosystem.

Overall, the pandemic has had a negative impact on 71% of startups in the region. Close to 50% of startups that responded to the survey reported that they have a cash runway of fewer than 6 months. Out of the e-commerce startups, 54.2% have a runway of fewer than 6 months, a third of logistics startups have between 1 and 2 months of runway left. In healthtech, 43.8% of startups have less than 2 months’ of runways, although 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.

“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.”

The region’s startups have either pivoted or scaled back their operations in order to sustain operations. From supply chain disruption to travel restrictions and payment collection hurdles, multiple areas of business have been impacted by the outbreak and the new regulations put in place to combat its spread. Vulnerable sectors like travel, events, and mobility have been hit the hardest with 21.9% of them have had to suspend operations, while startups in e-grocery, edtech, and some fintech, saw an increase in demand.

“Without startups, basic services like grocery and pharmaceutical delivery would not have been possible during the Coronavirus lockdown. Entrepreneurship has proven to be a vital pillar for the region’s economy and innovation output. This report highlights not only the impact of the pandemic on the startups but ways to support them too.”

The report was launched as part of a curated session on May 18, 2020, to discuss the findings. The online event, with two consecutive panels, featured regional startup founders, as well key ecosystem stakeholders, who provided valuable insight into the challenges and opportunities that are now facing startups in the region and discussed initiatives and efforts based on the data aimed at supporting the technology ecosystem.