DUBAI: Bahrain and the UAE city of Sharjah offer the best ecosystems in the Middle East for startups in the areas of financial technology (fintech), education technology (edtech), and digital media, according to policy advisory and research organization Startup Genome.
The two locations ranked in the top five fastest-growing activation phase startup ecosystems globally, meaning that founders can “build on local economic strengths and develop focused programs to accelerate ecosystem growth and develop pockets of success leading to sizable exits.”
The Global Startup Ecosystem Report — which tracked more than 1.27 million companies from over 250 ecosystems — recognizes the support for startups offered by these two ecosystems in the wake of the coronavirus disease (COVID-19) pandemic.
Both Bahrain and Sharjah launched stimulus programs for small- and medium-sized enterprises (SMEs), either by way of equity-free grants or exemptions on a number of fees.
Thanks to its standards on crowdfunding and open banking, Bahrain leads the Middle East and North Africa (MENA) region as a fintech ecosystem. The regulatory sandbox operated by the Central Bank of Bahrain (CBB) allows players to test new concepts before they go public — perhaps an indicator of why the island nation is host to 90 active and diverse startups.
Ebrahim Janahi, chief executive officer of labor fund Tamkeen, said: “Bahrain has established itself as an innovative fintech hub, home to regulations designed to enable and encourage entrepreneurship.”
A recent success is Fasset, a CBB sandbox company that offers global investors digital tokens for fractional investment in sustainable infrastructure. Currently in beta-stage trials, its Fasset Exchange (FEX) aims to handle tokens — essentially digital coins — that are backed by virtual currencies such as bitcoin and ethereum, as well as real world assets such as gold.
“To date, accessing digital assets — whether cryptocurrencies or real asset-backed tokens — in the MENASA (MENA and South Asia) region has been an onerous process,” said Fasset CEO Mohammed Raafi Hossain.
“FEX brings to the GCC (Gulf Cooperation Council) the accessibility, variety, and ease of use which increasingly characterizes digital asset markets elsewhere in the world. It is our belief that every investor should have a healthy, risk-assessed allocation in digital assets,” he added.
Co-founder of The Tempest, Mashal Waqar (L) and co-founder and CEO of Lumofy Ahmed Faraj (R). (Supplied)
The move follows the launch of Rain, the Gulf’s first cryptocurrency exchange. The startups are capitalizing on a global virtual currency market forecast to reach $1.48 billion by 2025, growing at an annual rate of 6 percent over the next five years.
One of the most visibly affected sectors of recent times has been media, where traditional business models have been hard hit.
Against this backdrop, several startups have established themselves to serve niche audiences, such as The Tempest, defined as a “next-generation women’s media company.” Founded in 2016, the startup was admitted to an accelerator program run by Sheraa, a Sharjah-based incubator.
“The best part about the program was the mentoring aspect and the opportunities you get as a startup once you’re a part of Sheraa’s ecosystem,” said co-founder of The Tempest, Mashal Waqar.
“They created such a supportive and encouraging environment that allowed us to work through the business and revenue side of things, and fine tune our sales process.”
Startup Genome has identified Sharjah as a center for digital media startups, with two dedicated free zones. Sheraa, meanwhile, has run programs dedicated to book and digital content ventures. Overall, the digital content market is expected to expand by 18.7 percent in 2020, growing by $519.83 billion over the five years to 2024, market research company Technavio has forecast.
Whether catering to school students or adult learners seeking to upskill, education technology companies have seen an increased demand for their services since the COVID-19 outbreak.
Worldwide, edtech startups have attracted $4.8 billion in 2020, or more venture capital investment in the first nine months of the year than in 2019, according to data from market intelligence firm CB Insights. The sector is on track to set a new record this year.
Overall, the edtech and smart classroom market will more than double over the next five years, growing 16 percent per year from an estimated $85.8 billion in 2020 to $181.3 billion in 2025.
Bahrain-based Lumofy is among the regional players making it to the head of the startup class in recent months. The provider of e-learning-focused solutions has helped accelerate digital transformation for corporates and institutions in the country since the COVID-19 outbreak, beginning with a free two-month subscription to its gateway products.
Co-founder and CEO Ahmed Faraj, said: “The COVID-19 situation has allowed us to witness a major change in the way we view technology’s relationship with education.
“The shift to the digital world has been accelerated, and we as innovators have the adaptability to allow corporates, institutions, and governmental entities to pivot quickly with our suite of tools.”
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This report is being published by Arab News as a partner of the Middle East Exchange, which was launched by the Mohammed bin Rashid Al Maktoum Global Initiatives to reflect the vision of the UAE prime minister and ruler of Dubai to explore the possibility of changing the status of the Arab region.
