Five Future Scenarios for the VC Ecosystem in MENA

So, what is possibly next for the dynamic ecosystem in MENA? Having spent the week deep in conversations and panels, it is clear that there is a strong, optimistic momentum. Most people I’ve met have been clear on the future potential for growth and expansion.

Taking lessons from other rapidly developing VC ecosystems, we have seen that developments can take different paths. Driven by market swings, interest rates, investor moods, geopolitical instability, talent flows, government priorities and black swan events, the next 7 years in the region could take different paths. We have identified five possible future paths for the region.

#1 “Disappointing” ($1BN- 1,5BN deployed annually by 2033)

“It was a great ride, but didn’t last”, “It was bleep“ or “the euphoria of 2021-2025 was replaced by a slower, more careful approach”. In this scenario, the market would stabilize around a $1BN – $1,5BN in annual capital deployed, and a lot of the momentum of the last few years would fizzle out. Accelerators would shut down. Government-backed fund-of-funds would leave the market and many overseas fund would pull out. We have seen such a scenario play out in other ecosystems in recent years, with Norway being one such example. Given what I’ve witnessed over the past week, I consider this a highly unlikely scenario, possibly only caused by massive corrections in the global VC market. It is, I hope, a scenario will not emerge.

#2 “Unrealized Potential” ($3BN deployed annually by 2033)

“What happened, the region had such a potential?”, “It has really slowed down” or “well, not much new is happening”. In this second scenario, the market would stabilize around $3BN capital deployed, and continue to hover around the same level of activity as today. Few, if any, new funds would come in, and few growth funds would ever get into the market. Local investors and fund-of-funds would continue to support the ecosystem, but there would be a clear feeling of ‘we could have been so much more’. In this scenario, the lack of return and liquidity coupled with a declining interest from limited partners, would leave the ecosystem more or less ‘as is’, with the pioneering General Partners and ecosystem builders continuing to push forward, but the ecosystem unable or unwilling to join in.

Overall, most would agree that there was so much potential, but it did not quite pan out.

Again, I would consider this scenario as highly unlikely, due to the combined efforts and government leadership I’ve witnessed this week.

#3 “Growth, Maturing” ($4BN deployed annually by 2033)

“MENA continues to evolve”, “MENA’s ecosystem is maturing” or “Slow and steady entrepreneurial growth”. Maybe a lack of ambition in local founders, maybe limited entrepreneurial talent or a limited interest in growth-stage financing; but in this scenario, the region would continue to do well, grow and expand. Yet, the growth would be slowing and the incredible 7,5X growth seen over the past 7 years, would be replaced by a slower, more maturing phase.

New funds would be raised, new managers would enter the market and new LPs would be investing into venture, but everywhere, there would be an unsettling feeling that the market was reaching a natural plateau.

$4BN would be deployed in the market annually, a nice step up from the $3BN back in 2025, but at the same time, significantly below what the early pioneers would have hoped for.

This scenario is plausible, maybe even likely, but given the momentum I’ve seen, I struggle to believe this to be a probable outcome. Should the global venture capital market face a new, major downturn, maybe, but not likely.

#4 “Overshooting Expectations” ($10BN deployed annually by 2033)

“MENA is truly outperforming”, “Continue to leapfrog” or “LPs need to be invested into MENA”. In this scenario, the successful growth from 2017 to 2025 would continue, albeit at a slower pace. Massive amounts of new capital would be injected into the market, maybe even distorting valuations. The current $950M series B gap would vanish, and later stages, series C and D, would become high-growth stages in the region.

Exit markets would blossom, creating multiple paths to liquidity for founders, early employees and LPs alike. In turn, creating a massive wave of liquidity across the region. Funds raised in 2021-2024 would see record-high liquidity options and delivering overperforming DPI’s back to their LPs. This would in turn make it far easier for the GPs to raise new funds, from the same LPs, ranging from pre-seed to late growth. Firms like BECO Capital could suddenly raise seed-funds and late growth funds in the same vintage, maybe closing new funds with $2BN – $4BN in 2030-2031. Early movers like MEVP would be announcing Fund VIII, and a massive number of emerging GPs would come to market with innovative fund structures, new strategies and new networks. In this scenario, the region would begin to see a wave of wealth being created by young entrepreneurs and their earliest employees, through extensive use of ESOP structures.

While somewhat optimistic, I consider this a plausible scenario. We might not see the full $10BN target hit by 2033, but with a combination of luck, leadership and wide ecosystem collaboration, this scenario is not unlikely.  Such a scenario would place the MENA region closer to the UK ($12BN – $18BN) and on par with Singapore ($6BN – $10BN).

#5 “Wild Ride” ($21BN deployed annually by 2033)

“MENA is booming”, “MENA is becoming a global leader in venture capital” and “record growth in new successful listings”. In our outlier scenario, the region continues with another round of 7X growth, easily sprinting past the United Kingdom, to become the 3rd region globally behind US and China. In this scenario, the region would be firing on every cylinder, from pumping out ambitious, high-growth founders from  a record number of accelerator programs to launching new first-time funds to seeing the more established players raising multiple growth funds. Limited partners from around the world would be looking to get into the best funds, and regional exchanges would be ramping up their pre-IPO programs to attract the best companies to list with them.

Organizations like MEVCA would become centers of attention, helping industry and government collaborate on developing the wider entrepreneurial ecosystem. Talent shortage for the industry would become a real issue, leading to numerous venture capital education and training programs. A record number of emerging funds would be launched, many with talent who had a couple of years in a larger fund, only to break out and launch their own firms at a young age. The region would shift from early-stage focus and center more attention on the total “lab to listing journey”, developing a number of late-stage initiatives, most with great success. For entrepreneurs and LPs alike, a record amount of liquidity would come out of the region, with an expected $52BN of liquidity coming back into the ecosystem.

While this scenario has a lower probability, we can not completely disregard it. This scenario would place the region on par with New York, and truly cement is position as a capital of capital. Could this happen? Yes. Would it require a combination of strategic leadership, luck and coherent ecosystem development? Absolutely.

What’s your scenario?

In mapping out these five scenarios, we present five different futures for the  VC ecosystem in the region. All are plausible. Some are not at all attractive. One is exceptionally ambitions. Yet, I find the people and policies to point toward the higher outcomes.

In a few years, we will see where the global market and the regional ecosystem are moving. Hopefully, for my friends and ecosystem builders in the region, the next 7 years will be equally exciting and rewarding as the past 7 years have been.

What do you think? What is your plausible and probable scenarios? I’d welcome your comments and views in the comments.

Expert view

“MENA VC in the next 10 years:

1. We will see several blue-chip Silicon Valley fund managers set up in the region to pursue emerging markets VC strategies from a base in either UAE or KSA,

2. Half of today’s regional VC firms will no longer be around;

3. Globally scalable VC-backed businesses will have either been founded here or will have moved here attracted by a number of ‘pull’ factors that will give them an edge over their competitors in more regulated or higher-friction markets

4. North American academic institutions will have established more campuses with well-funded STEM R&D capabilities and we will see IP rich businesses starting to emerge from this region with more regional money in deep tech”

– Abdullah Mutawi, Venture Capital Lawyer, Partner, Head of Corporate, Taylor Wessing.

Closing remarks

Writing this, I am preparing to fly out of Abu Dhabi and back to Europe (next week, Nairobi, Kenya). The week in MENA has given much food for thought. I’ve had the pleasure of spending hours and hours in deep conversation with leaders, innovators, fund managers ecosystem builders and capital allocators. I come away impressed. There is an air of ambition, optimism and future growth. I am looking forward to following the region’s development the coming years and cheering on fund managers, chief exit officers and entrepreneurial leaders across the ecosystem.

Learn more

Want to learn more about our ongoing research on venture capital ecosystems? Sign up for our upcoming report, Scaling Venture Capital Ecosystems or get in touch.

Enjoyed this article, got views, even opposing views or factual corrections? We welcome your thoughts and input in the comment field or by e-mail.