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Middle East & Africa Accelerator Report 2016

#MiddleEastAfricaAcceleratorReport

Introduction

Over the last few years, accelerators and the programs they operate have become key players within startup ecosystems, helping thousands of founders build and grow innovative businesses in today's "new economy." Accelerators have become far more than simple business-service providers or investment vehicles, instead emerging as invaluable operators within public and private spheres. They bring together entrepreneurs, investors, public entities, and corporations with the common goal of helping innovative businesses quickly take root. Policymakers and other actors in the startup community should understand the essential role of accelerators within the startup ecosystem, as proper incentivization of accelerators has the potential to effectively facilitate the cultivation and cross-pollination of startups.

The Middle East & Africa Accelerator Report 2016 provides an exclusive inside look at accelerator programs in the region. This report is a follow-up on the 2015 Accelerator Report and aims to explain how the accelerator industry is evolving in the region, how accelerators support their activities, and how they impact local and regional tech startup ecosystems.

Please note that many organizations supporting entrepreneurship, such as incubators and venture builders, have not been included in the scope of this report, even if they share some common traits with accelerators.


Accelerator — an evolving definition:

The acceleration industry is evolving rapidly, and it is becoming increasingly difficult to precisely define what an accelerator is. As new models emerge, the term "accelerator" describes an increasingly diverse set of programs and organizations, and, often, the lines that distinguish accelerators from similar institutions, like incubators and early-stage funds, become blurred. For the purposes of this report, accelerators can be defined according to Miller and Bound (2011), and share these common traits:

1) An application process that is open to all, yet highly competitive.
2) Possible provision of pre-seed investment (grant or equity).
3) A focus on small teams instead of individual founders.
4) Time-limited support comprising programmed events and intensive mentoring.
5) Cohorts or ‘classes’ of startups rather than individual companies.

Total investment in the region

US$7,689,738

in 1,172 startups

by 51 accelerator programs

608
  • Israel

    Israel

  • US$3,078,987 invested in 608 startups from 28 accelerators

  • Most cash invested:
    Barclays Tel Aviv 2016 Spring
    Most startups accelerated:
    StarTAU

208
  • Turkey

    Turkey

  • US$317,000 invested in 208 startups from 5 accelerators

  • Most cash invested:
    Türk Telekom Pilot
    Most startups accelerated:
    Etohum

120
  • Lebanon

    Lebanon

  • US$360,000 invested in 120 startups from 3 accelerators

  • Most cash invested:
    Speed@BDD
    Most startups accelerated:
    BootCamp by AltCity

89
  • UAE

    UAE

  • US$932,000 invested in 89 startups from 3 accelerators

  • Most cash invested:
    Flat6Labs
    Most startups accelerated:
    in5

35
  • Egypt

    Egypt

  • US$258,750 invested in 35 startups from 3 accelerators

  • Most cash invested:
    Flat6Labs
    Most startups accelerated:
    AUC Venture Lab

26
  • Morocco

    Morocco

  • US$0 invested in 26 startups from 2 accelerators

  • Most cash invested:
    -
    Most startups accelerated:
    NUMA Casablanca

20
  • Jordan

    Jordan

  • US$725,000 invested in 20 startups from 1 accelerators

  • Most cash invested:
    Oasis500
    Most startups accelerated:
    Oasis500

20
  • Iran

    Iran

  • US$160,000 invested in 20 startups from 1 accelerator

  • Most cash invested:
    Avatech
    Most startups accelerated:
    Avatech

19
  • Palestine

    Palestine

  • US$0 invested in 19 startups from 1 accelerator

  • Most cash invested:
    -
    Most startups accelerated:
    Gaza Sky Geeks

10
  • South Africa

    South Africa

  • US$1,200,000 invested in 10 startups from 1 accelerator

  • Most cash invested:
    Barclays Cape Town 2016 Spring
    Most startups accelerated:
    Barclays Cape Town 2016 Spring

8
  • Saudi Arabia

    Saudi Arabia

  • US$630,000 invested in 8 startups from 1 accelerator

  • Most cash invested:
    Flat6Labs
    Most startups accelerated:
    Flat6Labs

5
  • Nigeria

    Nigeria

  • US$0 invested in 5 startups from 1 accelerator

  • Most cash invested:
    -
    Most startups accelerated:
    Information Technology Developers Entrepreneurship Accelerator

4
  • Ghana

    Ghana

  • US$28,000 invested in 4 startups from 1 accelerator

  • Most cash invested:
    Innohub Accelerator
    Most startups accelerated:
    Innohub Accelerator

Latinamerica
  • Top 10 countries by investment

    • Israel

      Israel

      US$3,078,987

    • South Africa

      South Africa

      US$1,200,000

    • UAE

      UAE

      US$932,000

    • Jordan

      Jordan

      US$725,000

    • Saudi Arabia

      Saudi Arabia

      US$630,000

    • Lebanon

      Lebanon

      US$360,000

    • Turkey

      Turkey

      US$317,000

    • Egypt

      Egypt

      US$258,750

    • Iran

      Iran

      US$160,000

    • Ghana

      Ghana

      US$28,000

  • Top 10 countries by startups accelerated

    • Israel

      Israel

      608

    • Turkey

      Turkey

      208

    • Lebanon

      Lebanon

      120

    • UAE

      UAE

      89

    • Egypt

      Egypt

      35

    • Morocco

      Morocco

      26

    • Jordan

      Jordan

      20

    • Iran

      Iran

      20

    • Palestine

      Palestine

      19

    • South Africa

      South Africa

      10

14 Exits reported by 5 accelerators in 2016

65% more than 2015

TOP 10 SEED ACCELERATORS

By capital invested

  • Techstars

    US$2,400,000

    Israel & South Africa | Private fund

  • Flat6Labs

    US$1,250,000

    Middle east | Private fund

  • The Junction

    US$1,000,000

    Israel | Private fund

  • Oasis500

    US$725,000

    Jordan | Private fund

  • TURN8

    US$442,000

    UAE | Mix fund

  • Speed@BDD

    US$360,000

    Lebanon | Private fund

  • MassChallenge Israel

    US$263,433

    Israel | Private fund

  • Capsula.Studio

    US$250,000

    Israel | Mix fund

  • Navigator

    US$200,000

    Israel | Private fund

  • Avatech

    US$160,000

    Iran | Private fund

Top seed accelerators ranked by cash amount invested into startups (excludes provided services, mentorship, coworking space, or follow-up investment).

This ranking is not a measure of the success or quality of these programs.

TYPE OF ORGANIZATION


Are you a for-profit organization?


  • For-profit
  • Not-for-profit

54.7% of accelerators in the region claim to be for-profit ventures, slightly above what was reported in the 2015 edition (51%). Typically, for-profit accelerators are funded with private capital from investors aiming to generate long-term profit. This is primarily accomplished by the appreciation of their equity in startups, but also by providing business-support services and by offering “acceleration-as-a-service” to large corporations.

Not-for-profit accelerators support industries that provide a specific public benefit, such as Healthtech and Edtech. Others aim to boost entrepreneurship in their communities. They may also focus on providing new opportunities for minority groups or look to boost economic activity in a given region. These programs and the organizations operating them may be either privately or publicly funded. Generally, these programs do not take equity and instead offer free support.

Examples of not-for-profit accelerators include 8200, A3I Accelerator, AUC Venture Lab, and incuba.city.


SOURCES OF ACCELERATOR FUNDING


How are you funded?


  • Private funding only
  • Mix of both (Public/Private)
  • Public funding only

    64.2% of accelerators in Africa and the Middle East are completely funded by private capital. Investors include high net worth individuals, angel groups, private investors (i.e. venture capital investment funds), and/or corporations. They seek to profit through positive startup exits (acquisitions, IPOs, etc.) and by having early access to high-potential tech companies.

    22.6% of accelerator programs operating in the region have received a mix of public and private funding, showing some level of cooperation between public and private organizations.

    The frequency of this funding structure varies depending on how advanced a country’s startup ecosystem is. In Israel, for example, 59.3% of surveyed accelerators declared to be entirely funded with private capital.

THE ACCELERATOR BUSINESS MODEL



What was your main source of revenue in 2016?


  • No revenue

    35.0%

  • Corporate sponsorship

    25.0%

  • Corporate partnerships (operating acceleration program w/corporation)

    18.0%

  • Charge for office space

    10.0%

  • Events

    6.0%

  • Other

    4.0%

  • Charge for mentorship

    2.0%

  • Exit of startups

    0.0%





How will you generate revenue in the medium & long terms?


  • Corporate partnerships (operating acceleration program w/corporation)

    41.0%

  • Corporate sponsorship

    39.0%

  • Exit of startups

    20.0%

  • Other

    16.0%

  • Events

    14.0%

  • Charge for mentorship

    10.0%

  • Charge for office space

    6.0%



In the 2015 Report, 38.3% of accelerators indicated that they intended to follow the traditional "cash-for-equity" model, first established in 2005 by Y Combinator, which involves investing a small amount of seed money in a startup — around $25,000 on average — in exchange for equity (usually between 5% and 10%). Increasingly, this model is becoming rare as accelerators reconsider their general outlook. Most likely, the small number of exits — 14 reported in 2016 — has proven insufficient in funding their operations. Not a single accelerator operating in the region reported exits as a main source of revenue in 2016. 41.5% of accelerators take equity in startups and 23% predict that they will generate revenue from exits in the future.

Accelerators have historically relied on, and continue to explore, alternative models of revenue generation. Every accelerator surveyed in the region plans to increase revenue in the medium- to long-term by incorporating such models, including, but not limited to, charging for mentorship, subletting office space, hosting events, and working with corporations.

As we predicted last year, the relationships between accelerators and corporations have grown stronger and more numerous. 47.2% of accelerators are at least partially funded by a corporation, and 60.4% aim to generate future revenue from services sold to corporations.

Corporate revenue generated by accelerators came from two main sources in 2016: 21% was a result of corporate partnerships, generally in the form of a white-labeled or jointly-run acceleration program created by the accelerator on behalf of the corporation. 25% came from corporate sponsorship packages sold by accelerators.

MIDDLE EASTERN & AFRICAN ACCELERATOR EQUITY AND INVESTMENT MODEL



Do you invest cash?


  • Cash investment
  • No investment

Accelerators that do not invest cash generally focus on providing services and resources such as workshops, mentorship, coworking space, and connections.



Do you take equity from participating companies?


  • Yes
  • No


What range?


  • Equity free

    58.5%

  • Between 1% and 3%

    2.0%

  • Between 4% and 6%

    10.0%

  • Between 7% and 10%

    12.0%

  • Over 10%

    12.0%

  • Undisclosed

    4%

TOP 20 ACTIVE ACCELERATORS

By number of startups accelerated in 2016

    • Country

    • Accelerator

    • Startups accelerated in 2016

    • Turkey
    • Etohum

    • 165

    • Israel
    • StarTAU

    • 120

    • Lebanon
    • Bootcamp by AltCity

    • 83

    • UAE
    • in5

    • 70

    • Israel
    • PresenTense Israel

    • 70

    • Israel
    • MassChallenge Israel

    • 48

    • Israel
    • BizTEC

    • 30

    • Israel
    • TheHive by Gvahim

    • 30

    • Israel
    • RishonStartUp

    • 30

    • Lebanon
    • UK Lebanon Tech Hub International Accelerator

    • 25

    • Israel
    • Microsoft Accelerator Tel Aviv

    • 25

    • Egypt
    • AUC Venture Lab

    • 24

    • Israel
    • Momentum IDC

    • 24

    • Middle east
    • Flat6Labs

    • 21

    • Jordan
    • Oasis500

    • 20

    • Iran
    • Avatech

    • 20

    • Turkey
    • incuba.city

    • 20

    • Israel
    • Gold Ventures Incubator

    • 20

    • Israel
    • StartupEast Ventures

    • 20

    • Israel & South Africa
    • Techstars

    • 20

This ranking is not a measure of the success or quality of these programs.

HOT MARKETS

in the region for the 2016

% of accelerators that reported an interest in investing in these markets in the next 12 months

  • Internet of things

    72.55%

  • Fintech

    70.59%

  • Big data analytics

    64.71%

  • Mobile apps

    62.75%

  • E-commerce

    60.78%

  • Saas

    60.78%

  • Health

    56.86%

  • Education

    50.98%

  • Cloud services

    49.02%

  • Cleantech

    37.25%

  • Agritech

    35.29%

  • Drones

    35.29%

  • Wearables

    35.29%

  • Social media analytics

    33.33%

  • Biotech

    29.41%

  • Adtech

    29.41%

  • Real estate

    25.49%

  • Others

    15.69%

THE LOCAL INSIGHT

How do you see the accelerator model changing /evolving in Middle East and Africa in the next couple of years?

  • Tair Kowalsky - General Manager at SigmaLabs
  • Tair Kowalsky

    SigmaLabs (Israel)

    Since barriers are decreasing and many new entrepreneurs are trying to build their new ventures, we will see more accelerators opening to serve that need.
    A year ago when I was asked what will happen in 2017 in Israel, my answer was that many accelerators will turn to verticals and corporations will join the game, and that—in fact— is what happened.
    Today we see more activity and growing interest in Eastern Europe, Southeast Asia, and Africa. In some of these locations, this is only the beginning; they are now creating an ecosystem and entrepreneurial culture, which means that accelerators and entrepreneurship programs are much needed. In Israel, where it is already a crowded space, I believe we will see more and more vertical and corporate accelerators.

  • Mor Barak -  General Manager @ The Junction by F2 Capital
  • Mor Barak

    GThe Junction by F2 Capital (Israel)

    I think that accelerators will evolve into much more vertical-oriented, network-based models.
    Entrepreneurs today are very sophisticated and understand that extracting very tailor-made value and connections could benefit them greatly and help them get to market faster and more efficiently.

  • Mor Barak -
  • Sami Abou Saab, CEO at Speed@BDD
  • Sami Abou Saab

    Speed@BDD (Lebanon)

    The accelerator model has been evolving globally over the past 15 years. We see major players like Y Combinator and Techstars adapting different models based on market needs and long-term sustainability. Some of them have attached a VC fund to the accelerator while others focused on specific verticals and corporate-sponsored programs. Even though the MENA entrepreneurial ecosystem is still relatively nascent, it is no different. It will eventually follow suit in the evolution of the accelerators business model. The first signs of this evolution can be seen through the more vertically-focused accelerators rising in Lebanon, the UAE, and the rest of the region. This vertical focus provides both startups and accelerators with much more added value in the long run. Since the expertise and mentorship are more specialized, startups are benefiting from deeper knowledge and insights in their industry of choice. At the same time, we have noticed the rise of seed-stage funds attached to accelerators which is providing the startups with a source of follow-up funding at a critical stage of their growth. Still, this evolution will take time to reach full maturity and MENA accelerators will adapt and change based on local market needs.

THE REPORT

  • 166

    Institutions contacted

    17% more than 2015

  • 74

    Replies

    40% more than 2015

  • 50

    Accelerators

    9% more than 2015

  • 13

    Countries

    5 more than 2015

Accelerator programs by country

  • Israel

    28

  • Turkey

    5

  • UAE

    3

  • Lebanon

    3

  • Egypt

    3

  • Morocco

    2

  • South Africa

    1

  • Jordan

    1

  • Saudi Arabia

    1

  • Iran

    1

  • Ghana

    1

  • Nigeria

    1

  • Palestine

    1

Report by

  • Gust
Thanks to the contributions of:  Sebastien BrunetMiklos GrofDiego Izquierdo.