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Fueling MENA’s Future Through Entrepreneur Support Organizations

Intersect Innovation Hub (IIH) based in Palestine, supported by the Bank of Palestine, stands as a prime example of the transformative power of Entrepreneur Support Organizations (ESOs). Led by Rateb H. Rabi and Huda Tahboub, IIH connects entrepreneurs throughout Ramallah, Birzeit, Nablus, and Hebron. It focuses on developing digital solutions with cross-border growth potential. Operating in a complex environment, IIH leverages the region’s tech talent to foster innovation and economic development, illustrating the vital role ESOs play in MENA’s startup ecosystem.

The Role of ESOs in MENA

The Middle East and North Africa (MENA) region is experiencing a “golden age” for startups. This growth is driven by:

  • Supportive regulatory environments
  • Advanced technological infrastructure
  • Economic diversification

Despite a surge in total investment from USD 863M in 2018 to USD 3.2B in 2022, a USD 123B financing gap remains. Local startups struggle without investor capital, and investors hesitate to fund startups lacking significant traction.

Two Middle Eastern professional women smiling

Image Courtesy of Athar Accelerator

Entrepreneurship and Innovation in MENA

Over 55% of MENA’s population is under 30, representing significant untapped entrepreneurial potential. However, the region faces challenges such as:

  • Climate issues, especially water shortages
  • Economic instability
  • Political turbulence
  • Concentration of resources in major urban centers, leaving rural communities with limited access to essential services

Despite these challenges, the region is filled with opportunities:

  • Successful acquisitions and regional scale-ups attract ambitious startup founders
  • A growing number of MENA-based investors support impact-focused entrepreneurs
  • Evolving political climate with more founder-friendly policies and visas
  • Positive cultural perceptions of entrepreneurship

Three Middle Eastern male workers focusing on work

Image Courtesy of Intersect Innovation Hub

Family offices and early-stage funds are increasingly interested in tech-enabled ventures with high growth potential. The expansion of local ecosystem actors and the presence of international accelerators like 500 Startups and Y Combinator contribute to this dynamic environment. Rising education levels and high youth unemployment present a critical opportunity for startups. Enhanced digital penetration and literacy further position digital innovation as a key driver of economic development in the region.

The Middle East and North Africa (MENA) region is experiencing a “golden age” for startups.

However, significant challenges remain. Entrepreneurs need more technical assistance than the typical 2/20 model can provide. Although more talent is attracted to startups, diversity of founder profiles remains challenging, with women and marginalized communities often overlooked. The ecosystem is in its early stages, with limited collaboration between regional actors. High costs of capital and lower risk tolerance in the current economic climate are significant barriers to capital access for high-impact entrepreneurs.

Catalytic capital and local ESOs

ESOs such as incubators, accelerators, and consulting firms bridge this gap by:

  • Increasing social and financial capital access for early-stage startups, especially those outside the main investor hubs
  • Providing tailored guidance, resources, and networks to help startups become investment-ready

However, substantial capital and service barriers hinder their growth, particularly for enterprises aligned with the Sustainable Development Goals (SDGs) and those led by underserved communities. These startups often have longer timelines to demonstrate traction and higher risk profiles but offer profound social and environmental impacts. Investing in ESOs is crucial for de-risking startups and boosting investor confidence. Despite their importance, only a small fraction of funding reaches small and medium enterprises, with just over 13% going towards ESOs. Advanced organizational development initiatives, data-sharing platforms, and impact measurement systems are urgently needed to maximize and sustain their impact. A forward-thinking approach, such as catalytic capital, is essential for funding ESOs and early-stage impact-creating startups. This flexible funding, including debt, equity, or guarantees, accepts lower returns in exchange for social and environmental benefits. Local ESOs, with their deep regional knowledge, are well-positioned to improve access to this capital, bridging financing gaps, and promoting inclusive entrepreneurship.

Intersect Innovation Hub working space

Image Courtesy of Intersect Innovation Hub

Scaling ESO impact through the Ecosystem Builders Program

After supporting 120 ESOs from 90 countries, Village Capital ran an “accelerator-for-accelerator” for ESOs in MENA called the Ecosystem Builders Program in 2023. Informed by the “Unlocking the Pipeline MENA” report, the program supported 12 locally-led accelerators from Egypt, Jordan, Lebanon, Morocco, Palestine, and Tunisia.

These accelerators aimed to create a pipeline of investable opportunities for early-stage investors. The selected ESOs demonstrated potential for:

  • Catalytic impact
  • Market additionality
  • Innovative approaches
  • Success with tech-enabled and high-growth ventures

The program helped ESOs build resilient ecosystems through hands-on training, best practices, and peer connections, driving positive economic and social change. Their lasting impact is only beginning.

Case Studies: IIH and Athar Accelerator Intersect Innovation Hub (IIH) IIH helps startups access private sector investment within Palestine and the region’s investor hubs of Saudi Arabia and UAE through their annual International Conference on Entrepreneurship in Palestine. Their recent RISE initiative seeks to support Palestinian startups and tech teams to recover and sustain tech ventures affected by the ongoing war.

Co-working space at Athar Accelerator

Image Courtesy of Athar Accelerator

Athar Accelerator

Athar Accelerator in Egypt offers another compelling example. Based in Upper Egypt, Athar supports tech-enabled and green startups in an area with a population of over 40 million. It creates jobs and demonstrates inclusive development. Since its founding in 2016 under the leadership of Shoaib El Qady, Athar has:

  • Empowered over 300 startup founders
  • Trained 1,200 digital talents
  • Engaged 10,000 community members
  • Created more than 900 jobs

Six months after the Village Capital program’s conclusion, we are optimistic about the outcomes we’re witnessing:

  • Stronger relationships with financiers
  • Improved access to investment readiness tools
  • A robust collaborative community of practice

However, much work lies ahead to amplify the efforts of ESOs, specifically to close early-stage capital gaps and scale effective entrepreneurial support.

Happy professionals at Intersect Innovation Hub

Image Courtesy of Intersect Innovation Hub

Investing in MENA’s ESOs: Investing in MENA’s Future

ESOs bring immense value to startups and the broader ecosystem. Their impact extends beyond supporting individual ventures and communities; it contributes to regional and national economic growth. But they cannot do it alone.

Local organizations are often seen as service providers for development initiatives and are funded as such – yet they are much more. They are ecosystem builders. Investing in ESOs is crucial for the sustainable growth of MENA’s entrepreneurial ecosystem.

Actionable Steps to Support ESOs:

  1. Provide Catalytic Capital: Investors should consider flexible funding options that accept lower returns for higher social and environmental impact. This can bridge early-stage financing gaps and promote inclusive entrepreneurship.
  2. Donor Practices to Sustain Impact: Donors and development agencies should invest in advanced organizational development initiatives for ESOs. This includes funding for impact measurement systems, data-sharing platforms, and tailored funding to enhance the effectiveness of ESOs.
  3. Foster Collaboration and Networking: Encourage the development of strong community and network structures. ESOs should create community hubs, engage in policy advocacy, and foster alumni networks to improve access to social capital and strategic market opportunities.
  4. Enhance Access to Market Intelligence: Provide startups with comprehensive market intelligence and data to enable informed business decisions. This includes supporting research initiatives and developing platforms for data sharing.
  5. Invest in Talent Development: Allocate resources for developing local talent within ESOs. This investment can have a multiplier effect, as trained individuals often move on to influential positions within funds, development agencies, and government sectors.

By taking these steps, investors and stakeholders can collectively unleash the potential of ESOs, driving significant economic and social impact across the MENA region.

Entrepreneurial cohort at Athar Accelerator

Image Courtesy of Athar Accelerator

The path forward

The ESOs of the MENA Ecosystem Builders program identified several key priorities to support their organizational growth and scale their impact. These include targeted talent and team development, improved impact measurement, and revenue diversification. These are just a few opportunities at our fingertips. Through catalytic capital, investors can collectively unleash the power to make them a reality.

We encourage you to download the report for additional insights into MENA’s early-stage venture ecosystem. Together, we can continue to catalyze change and shape a brighter future for the MENA region.

As the Regional Lead for the Middle East and North Africa (MENA), Alicia Sornson develops strategies and programs that find, train, and support entrepreneurs solving problems in the region. Prior to joining Village Capital, Alicia worked with Ashoka in Istanbul, Turkey, where she resided for many years, and other non-profit ... Read more

This article was produced in collaboration with the Magazine's Content Partners.

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