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Highlights of Venture Summit of Emerging Markets - Opportunities in Middle East and Africa

On July 7th and 8th, Future Hub co-hosted the Venture Summit for Emerging Markets, in partnership with the Passage, Dubai Future Foundation, Golden Gate Ventures and Polymatch Venrtures.

In the Middle East and Africa session, the Future Hub team, together with Eddie Ndichu, Co-Founder of WapiPay, Roberto Croci, Managing Director of Microsoft for Startups MEA, Richard Xu, US Head of Grand View Capital, and Bella Tu, Senior Director at Gobi Partners, moderated discussions on Fintech, digital content, e-commerce and venture investing in Africa.

We really appreciate the insightful conversations and would like to share some of the highlights on July 8th.

'In 2019 alone, $2 billion capital were injected into African startups, doubling the size of 2018. ' Vincent Li, Co-Founder and CEO of Future Hub, citing this figure in his keynote speech, demonstrated strong confidence in the massive opportunities for digital innovations in African markets that have young and huge population.

65% of people across Africa are below 35 years old. By 2050, more than 2 billion people will live, work and stay in the continent, which is expected generate many more opportunities for business and investment.

In addition, contrary the stereotype of being underdeveloped, the penetration rate of mobile internet and digital payment is quite considerable. In some markets, 3G and 4G connections can reach 62% of people. More than 46% of global mobile money users come from Africa, generating 70% of total transactions. In Kenya, owing to the great success of M-Pesa, 90% of people now have easy access to digital wallets and mobile payment. As a result, Fintech innovations such as digital lending, saving or micro-investing, are rapidly growing and expanding.

E-commerce is another sector that has been overlooked by many. In 2016, the total transaction volume on digital marketplaces reached $16 billion, and it is expected to grow to $46 billion by 2024.

Aside from Fintech and e-commerce, digital content, music and entertainment startups are starting to catch up with other continents. BoomPlay is one of the leading ventures focused on music streaming that caters to local needs and preference in African markets.

Last but not least, mobile internet advancement has brought innovations to clean energy, agriculture, healthcare, among many other sectors. Please refer to the following link for more insights shared by Vincent Li: Bullish on tech-enabled digital infrastructure in Africa.

Folllowing Vincent's discussion, Xinyue Xu, COO of OneMENA, shared her experience in Middle East and Africa.

OneMena has been active in the MENA region for three years. Xinyue noticed that, mobile applications have gained very impressive tractions in Middle East and North African markets. This is particularly true in North Africa, where the average mobile phone ownership is 1.2. In total, the mobile user traffic from MENA region has a 10% share in global markets, and mainly comes from mobile gaming, social media and music streaming.

Some challenges for startups across MENA still remain. Low awareness of tech innovations, lack of tech talents and impact of COVID-19 are quite prevalent. However, Xinyue is optimistic about the huge potential in MENA, especially for ventures from abroad. 'There has yet to be a unicorn startup in MENA, which is quite different from the United States and China. We think that, the mobile app market is likely to be dominated by startups from China and the United States in the next five to ten years.'

Please refer to the following link for more insights shared by Xinyue Xu.

Salmaan Jaffery, Chief Business Development Officer at Dubai International Financial Centre Authority, then gave his keynote speech on future vision of tech innovations in MENA using the case of Dubai as an example.

'Starting from Dubai Airport, you can reach 65 major cities across the globe. ' This puts Dubai in a strategic position to connect the Middle East and African continent. Good infrastructure, competitive living and working conditions, as well as great education opportunities have made Dubai on top of the list of cities that atttract the best talent.

Zooming out and looking at the broader Middle East region, Salmaan pointed out that young population and fast urbanization would contitnue to be enablers for consumer finance, digital healthcare and e-commerce. Dubai, will be the central hub for these innovations. In particular, Dubai stands out in the Fintech space with more than 400 fintech startups located in this city.

Moreover, Dubai has developed a strong connection with China, which is expected to benefit both when it comes to collaborations in tech innovation. More than 200,000 Chinese live in UAE, with 80% and 85% of them living in Dubai. Most banks from China have established branches in UAE. Additionally, 60% of China's overseas trade activities are intermediated through Dubai. All these have proved a strong case for China-Dubai collaboration. To access Salmaan's keynote speech, please refer to this link.

The panel discussions were splited into four sessions.

The first one addressed the challenges and opportunities for Fintech startups in Middle East and Africa.

Thierry Lacroix, Managing Director of Africa One Point Group, noted that COVID-19 has made people realize that digitization is a fundamental service needed by all people, and it means opportunities for investors and mobile operators. With 54 countries in Africa, each having its own dynamics, founders and investors have to take such diversity into account, and then think about regulation, trade and scalability.

'Traditional banking in Africa cannot serve and satisfy end-users, and it gives us an opportunity and incentive for moving into digital banking' Chijioke Dozie, Co-Founder of Carbon pointed out. As smartphones get more used than pre-COVID, Carbon now is offering smartphone solutions layered on Andriod and iOS. He also shared the view that even though many startups are now doing things small and well, the future generation of startups in Africa is going to be multi-national, or even multi-continental.

Following on Chijioke's point, Hadi Guo, CEO of Applink, shared his experience starting his Fintech venture in Kenya as a foreigner. 'Access to latest regulations is the constant challenge for us.' Many startups chose to cut down costs and focus more on operation as COVID-19 hit, and my advice is to focus more on the resources available to be mobilized, and to keep a solid cash flow until next round of fundraising.

Eric Wang, Co-Founder and COO of MENA Mobile talked about the challenge of mobile payment across Middle East markets. Despite the large number of banks in the region access to formal banking services is still low. For Chinese startups, Arabic language and culture added another layer of complexity to operating Fintech business in MENA.

For more discussions on this topic, please click this link.

The second panel discussion focused on the digital content and entertainment sector.

BoomPlay, as the largest music streaming platform in Africa, also faced challenges in meeting all the compliance regulations, as shared by Phil Choi, Director of Content and Strategy at BoomPlay.

Sara Al Madani, Co-Founder and CEO of HalaHi, a venture connecting celebrities and followers with its headquarter in Dubai, believes that in order to really make people relate to the digital content, diverisity and inclusitiviy are highly necessary. Only by including these two elements, content platforms can have genuine loyalty.

Both Cordel Robin-Coker, Co-Founder and CEO of Carry1st and Rishabh Lawania, CEO of Weemedia noticed a similar pattern. There has been relatively less investments in digital creative content, and the major reason behind that is the perception of difficulty in monetization. Only if the content platform provides quality products and easy payment solutions, monetization can become a reality. Rishabh also claimed that business model has been evolving in this industry and it is worthwhile thinking about how to best serve the next billion user market.

For more discussions on this topic, please click this link.

The third panel focused on e-commerce opportunities in Middle East and Africa.

Kasha is an e-commerce marketplace for women selfcare products started in Rwanda back in 2016 (now expanding into Kenya). 75% of the users are low-income women. Joanna Bichsel, Founder and CEO of Kasha, shared that its growth has been faster than expected, and the Rwandan government is very supportive in developing the e-commerce industry. She noticed that people are price-sensitive and would be willing to try out non-branded products.

'Delivery is a big challenge for us - most people do not have physical address' , pointed out by Tao Yang, Founder and CEO of Kilimall. Logistics, payment, all these have to be taken into account in order to make the e-commerce work in Africa. Trust is a constant block factor, and building the brand awareness is important. Kilimall started six years ago in Kenya, and has expanded to Uganda and Nigeria. Nelio Leone, Founder and CEO of Urban Monks shared same view on the logistics challenges, and claimed that last-mile delivery will be critical for user experience.

Similar to Tao, Ke Wang, Co-Founder and CEO of Kikuu, shared that brands spend extra expenses on digital marketing, which will then be reflected in price, and will not be ideal for most consumers. Non-brand items are more likely to get popular in Africa.

Daniel Maison, Founder and CEO of Sky Garden, pointed out that e-commerce startups in Kenya are more active thanks to the development of mobile money and friendly governments, while in West African countries, regulations are more complex.

For more discussions on this topic, please click this link.

The fourth panel brings together investors across the continent to discuss the strategic opportunities for investing in Africa.

Adewale Yusuf, Co-Founder of Techpoint, observed that over the past 10 years, more and more investors have been attracted by massive opportunities in Africa. He's optimistic that more startups will come up in logistics, agri-tech and many other sectors. Khaled Ben Jilani, Senior Partner at AfricInvest, believes that more new and interesting ventures will emerge in Fintech and digital content sectors

Davide Capitanio, Leader of Accenture Ventures Middle East, shared his advice for venture capitalists, which is that players should not be doing this alone and should maximize the synergies among big corporates and small startups.

Philip Bahoshy, Founder and CEO of MAGNiTT, noted that recently more investors from Southeast Asia and China has begin to show strong interests in Middle East and Africa, but such enthusiam is impacted by COVID-19. However, it is yet to make a conclusion on how venture capital industry is changed by this pandemic.

For more discussions on this topic, please click this link.

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