Kuwait’s startup scene has largely developed under the world’s radar, yet the tiny ecosystem has produced some of the Middle East’s biggest exits to date.
In November, Kuwaiti public-transport application My Route was sold to Oman-based smart-transportation company eMushrif for an undisclosed amount. Such cross-border acquisitions are generally rare in the Middle East’s nascent startup ecosystem. Except, that is, in Kuwait, which is trying to position itself as the perfect test market for companies that wish to try out digital products before scaling across the region.
“Kuwait is one of the most interesting markets in the Middle East and North Africa region, as it influences purchases all across the GCC [Gulf Cooperation Council],” says Hasan Haider, MENA managing partner at 500 Startups, a Silicon Valley global fund, which has invested in eight Kuwaiti startups in the last two years. “Despite being a small market, Kuwait has amongst the highest adoption rates of new technology and highest revenue per user for tech companies.”
With only 4.2 million inhabitants, Kuwait’s startup ecosystem obviously can’t compare with Middle Eastern giants such as Saudi Arabia or Egypt. Last year, Kuwait attracted 6% of MENA fintech deals and 4% of the total funding, according to Dubai-based research network Magnitt.
However, in 2018, the Central Bank of Kuwait (CBK) and local banks launched the country’s first sandbox program, allowing innovators to test their products before going live with real market conditions. The program comprises four stages for participants to complete within one year. The testing grounds are open to existing financial institutions willing to try out new products, as well as to fintechs.
% of MENA fintech deals
% of MENA fintech investments
|Note: Data taken from January through October 2019. N/A ― Not applicable. Source: Magnitt.|
And the Central Bank is gearing up on cybersecurity and spearheading change in the regulatory environment. The CBK’s most recent flagship project is the Kuwait National Payment System, being rolled out in phases from 2019 into 2020. This large initiative encompasses digital-payment solutions, government electronic banking, an “E-KYC framework” to facilitate online opening of bank accounts, national cryptocurrency and other functions. Kuwait is also looking at implementing open banking in the near future.
Last January, the government announced a $200 million fund to support tech companies. High internet penetration, affordable mobile data bundles and relatively easy access to stakeholders, including regulating authorities, are also advantages the country is trying to put forward.
Kuwait’s fintech boom started in 2015 with the acquisition of Talabat by German Rocket Internet for $170 million. Today, Talabat is the region’s largest food delivery application, valued at $1 billion and operating in seven countries. In 2017, Carriage, another food-ordering platform, sold for about $100 million to Germany’s Delivery Hero only 15 months after its launch. “Kuwait’s startup ecosystem has increasingly catered to the food and beverage industry, with Talabat being the prime example,” says Sietse van de Kerkhof, venture capital data executive at Magnitt.
Kuwait even has a dedicated food startups accelerator, Savour Ventures, which caters to all aspects of the food value chain, from agritech to meals delivery. “The opportunities we see in the Kuwaiti market today are cloud kitchens, using data to better serve customers, and supply chain management solutions,” says Rashid Sultan, managing partner at Savour Ventures, in an interview with Entrepreneur Middle East.
With an edge in the food and beverages sector, Kuwait is able to nurture homegrown concepts but also attract foreign startups like Dailymealz, a Saudi company that delivers healthy meals to corporate employees and chose Kuwait as its first overseas market in 2019.
At this stage, most Kuwaiti tech companies are inspired by successful Western businesses rather than based on disruptive, pure innovation. However, the ecosystem is evolving fast, with more new entrepreneurs coming in each year and a larger number of investments. Founded in 2015, beauty e-commerce platform Boutiqaat is today one of the most preeminent companies in the MENA region, with a $500 million valuation. n