In 2018, startup funding in MENA increased by 31% from 2017, with a record number of 366 startup deals across the region. This amounted to a total of $893 million in investments, according to MAGNiTT, MENA’s leading data platform tracking the region’s startup ecosystem

But with the region’s growing startup ecosystem comes a sad reality: nine out of 10 startups will fail. Although this may be a bleak truth, it is one that entrepreneurs need to be aware of before launching their business.

So, how can entrepreneurs build successful startups?

Having the right team

Having the right team is one of the most important characteristics of successful startups, and one that entrepreneurs usually give little thought to.

“When starting out, entrepreneurs make a lot of decisions that will shape their company,” explains Ayman Ismail, Director of AUC Venture Lab, Cairo’s American university-based startup accelerator and incubator. “[For example], the team they want to have and the culture they want to build. However, they are not usually conscious of these decisions or of the impact it will have on their business.”

He advises entrepreneurs to not only select people with the right mix of skills and expertise, but to also have a compatible and coherent team.

“This is the most important factor for a startup.”

Dina El Shenoufy, Chief Investment Officer at Flat6Labs, a regional startup accelerator in Cairo, agrees: “We don’t invest in companies, we invest in people.

“Sometimes, the startup idea could be mediocre, but we invest in the team, because we believe that they have the ability to turn it around.”

Being customer-driven

It’s no secret that any new business needs to create products or services that customers actually want. Sometimes, however, entrepreneurs are too attached to their idea that they fail to adapt to market demands.

“Entrepreneurs need to have empathy with customers’ mindset to be able to deliver what they really want,” says Ismail. “They need to test their assumptions, not just ask customers if they like it. They need to ask them if they like this product, at this price, in this format, in this channel.”

Shenoufy takes this a step further and encourages startups to create prototypes and minimal viable products (MVPs).

“This will help entrepreneurs get a sense of the market and learn more about what customers want.”

Attracting investments  

Securing investments is crucial to the success of most startups. But not all startups need angel investors or venture capital in the early stages.

“Personal funding is the number one source of funding for businesses everywhere, in MENA and across the globe,” says Ismail. “Investors from venture capital, banks or the like become more important when wanting to drive hyper growth. If a company wants to grow at an organic rate that supports the company’s resources, then personal funding is the most common model.”

However, if a startup needs to secure investments, it needs to show that there is a market for their product or service.

“They need to show traction,” explains Shenoufy. “They need to show they are actually growing. Many entrepreneurs confuse numbers with revenue generation, but what it really boils down to is showing a growing market.”

Innovation also plays an important role in securing investments. The more innovative the business idea, the less competitive the market space.

“That’s why innovation is interesting, it gets you into new spaces, which is important for investors.” says Ismail.

Demonstrating an edge or a secret sauce as Shenoufy puts it, is another trait that investors look for.

“Do they have a growing opportunity with a competitive edge? Is the technology hard to replicate or do they have exclusive rights with major venders? These are some of the things that make startups stand out.”

Despite MENA’s late boom in the startup world, the region’s ecosystem has been growing rapidly in the last five years. Entrepreneurs are now more mature and experienced, investors are savvier and there are new streams of funding coming in everyday, be it angel investments or venture capital.

There are also more support services than ever before for entrepreneurs from co-working spaces to incubator and accelerator programs. But the region still has a long way to go before becoming the next Silicon Valley.

“Our market is fragmented. We need to look at the region in a collective way to help entrepreneurs scale up,” says Ismail. “Nonetheless, we have a strongly evolving ecosystem and we are growing solidly.”