Opportunities for US companies in the MENA region

The Middle East and North Africa have a growing population investing in fintech and renewable energy

On Monday, Stake, a Dubai-based digital platform for real estate investment, announced a $14 million funding round led by MEVP (Middle East Venture Partners), along with Aramco's Wa'ed Ventures, one of Saudi Arabia's largest VC's, Mubadala investment Company (Abu Dhabi's Sovereign Investor), Al Jomaih Holding (one of Saudi Arabia's largest family conglomerates), and Republic, a US-based private investing platform. Launched in 2021, the company, which currently has over 500,000 users, and was recognized as a Rising Star by the Deloitte Technology Fast 50 list across the Middle East, now has its eyes set on expanding to Saudi Arabia.

This kind of investment is a great example of the opportunity that currently exists in the Middle East and North Africa (MENA) region, which is growing quickly. And a great example of why the MENA region is increasingly relevant to US-based investors, startups and large conglomerates.

MENA already has around 493 million people and it's estimated to reach 581 million by 2030 and then 724 million by 2050; that would be more than triple the population in 1950, and would make MENA's population larger than Europe's by 2050. Not only that, but region has a large young population, with those 30 and under making up over half of the total population, though that obviously varies by country.

The region is also a hub for both small businesses and startups, with an estimated 19 to 23 million micro, small, and medium enterprises (MSMEs), and over 5,000 funded startups, including more than 15 unicorns, who raised $6.8 billion in venture capital investment in 2022. 

With that kind of young and growing population, and that amount of money already flowing through the region, MENA represents a big opportunity for U.S. companies that want to expand their global footprint and tap into a growing market. 

This article will explore the potential for US companies in the MENA region, the involvement of US-based venture capitalists (VCs), and the most promising sectors.

Presence of US companies in the MENA Region

Of course, a number of US companies have already recognized the strategic importance of the MENA region, with hundreds of American firms operated across various MENA countries. In fact, more than 1,500 US firms have a presence in the United Araba Emirates (UAE) along, including Bechtel, Uber, Microsoft, Cold Stone Creamery, ExxonMobil, General Electric, and Coca-Cola.

Starbucks, for example, has over 1,900 stores in 11 Middle Eastern and North African markets employing more than 19,000 employees, while McDonald's has 1,880 stores in the Middle East, including 189 in Egypt, 203 in UAE, and 412 in Saudi Arabia.

Chipotle, meanwhile, announced its own Middle East expansion in April, opening a store in Kuwait City, following a partnership with franchise retail operator Alshaya Group in 2023 to open restaurants in the Middle East. Alshaya Group plans to open the company's first Dubai location later this year, with a total of four new restaurants anticipated in 2024. 

A number of tech companies have also set up operations in the Middle East, including Facebook, which has a headquarters in Dubai, and Airbnb, which has over 5,000 properties in the region. 

US-Based venture capital investment

The venture capital landscape in the MENA region has seen significant growth, and this has led to increased attention from US-based VCs, with numerous US-based venture capital firms having started investing in the MENA region, including Sequoia Capital, Andreessen Horowitz, and 500 Startups.

Endeavor Capital, for example, through its fourth Endeavor Catalyst fund, a $292 million fund it started investing out of two years ago, has already made over 20 investments in the MENA region. That includes six in Egypt, including Breadfast, Nawy, and Taager. In all, the firm made 55 MENA investments in 2023, up from 47 in 2022, and 34 in 2021. 

In March, it was reported that Saudi Arabian's Public Investment Fund was in talks with Andreessen Horowitz to create a $40 billion AI fund.

Promising sectors in the MENA region

Of course, when the first thing people think of when it comes to the Middle East is oil and gas; the Middle East was responsible for 31.3% of global oil production and 18% of gas production in 2020, along with 48% of proved oil reserves and 40% of proved gas reserves. Gulf states’ fuel exports ranged from about 70% to 90% of total exports in the region, and the average oil rent percentage accounted for 20% of their gross domestic product (GDP). So, this obviously remains a critical part of the economy in the region.

However, there are plenty of other up and coming spaces in MENA, including renewable energy, with the UAE and Saudi Arabia, in particular, making investments in solar and wind energy projects. The UAE Wind Program, for example, is expected to power more than 23,000  homes a year and solar energy provided 4.5% of national electricity generation in the UAE in 2022, compared to 0.3% in 2014. 

One of the big spaces in the MENA region is fintech, with countries like the UAE, Saudi Arabia, and Egypt are emerging as fintech hubs: the MENA fintech market was estimated to be worth $1.51 billion in 2024, and is expected to reach $2.40 billion by 2029.

Fintech revenues are expected to increase from $1.5 billion in 2022 to $3.5–$4.5 billion by 2025 in the Middle East, North Africa, and Pakistan region as fintech in the banking sector grows from less than 1 percent to 2–2.5 percent. Some Middle Eastern countries could even achieve rates equal to those of other emerging market economies, such as Brazil’s 5–7 percent and Nigeria’s 12–15 percent.

In 2021, MENA startups received more than $2.5 billion in funding, and in while fintech funding fell to $1.4 billion in 2023, there were still twice as many fintech deals as the next most popular sector, e-commerce, which is projected to reach $50 billion by 2025. 

Another big section is healthcare and biotechnology, with the healthcare sector in the MENA region is undergoing rapid transformation, as governments have been prioritizing healthcare infrastructure and services. From 2016 to 2022, healthtech startups in the region received over $200 million in venture capital funding, and the combined value of healthtech companies in 2022 was over $1.5 billion, a 22x increase in valuation since 2016. Notably, 80% of the funding came from domestic investors.

Conclusion

For US investors and companies, the MENA region offers way for companies to grow, tapping into a young population that's making strides in a number of promising sectors, including technology, energy, and healthcare.

Many US companies and investors have already begun making investments in the region and by leveraging their expertise and strategic investments, US companies can play a significant role in the MENA region's ongoing development and prosperity.

(Image source: wikimedia.org)