For sectors that attract young startups, 2021 brought some surprises: Business Software activities dethroned, for the first time, E-Commerce, traditionally the most coveted by startups, but which remains the most revenue-generating sector. Experts say that human capital is the main asset of the Tunisian ecosystem, while a lack of venture capital funds prevents startups from easily accessing finance.
One of the main specificities of the Tunisian startup ecosystem is that it was founded on solid foundations. An avant-garde and well-developed regulatory framework, structured financing mechanisms and an inexhaustible reserve of talent and human capital: these are the achievements and advantages that Tunisia can offer, not only to young Tunisians and foreigners, but also to investors. This does not prevent shortcomings from quickly appearing and certain limits that today prevent the development of young shoots that aspire to grow. the 3and The annual report “Start up Tunisia” presents, in this sense, a mapping of the evolution of the ecosystem and an overview of the typical portrait of the Tunisian start-up. The report was recently presented and discussed during a workshop organized by Smart Capital and Innov’i – EU4 Innovation.
a young ecosystem
Among the numbers and data published in the report, we note that 245 seals were awarded in 2021 and that, at the end of last year, 650 start-ups had been labeled, with an acceptance rate of around 47%. The report also highlights the public investment mobilized in benefit of the Tunisia start-up program. Thus, he reveals that Tunisia has invested more than 12.8 million dinars in social security contributions for start-ups and 6 million dinars in scholarships that have been used to support 383 founders of start-ups, since the launch of Act start -ups. 15 Tunisian startups managed to obtain the status of authorized economic operator out of a total of 85 Tunisian companies. This denotes the place given by the customs administration to the young shoots. The report also shows the robot portrait of Tunisian startups. According to the compiled data, the Tunisian ecosystem is still very young: more than 53% of start-ups are less than three years old. The majority (70%) is located in Greater Tunis, which confirms the existing imbalance between the regions and above all the high concentration of the ecosystem in the capital. However, a slight improvement is noticeable compared to 2019 (when the rate was 79%). It is also clear that, with 13% of startups located in the provinces of Sousse and Monastir, the Midwest region is beginning to establish itself as an innovation hub in Tunisia.
A B2B-based business model
Regarding the sectors that most attract young startups, the year 2021 brought some surprises: Business Software activities dethroned, for the first time since the launch of the program, E-Commerce, which traditionally was the sector most coveted by start-ups. ups, but which continues to be the most revenue-generating sector. Health tech follows, a sector that continues to make inroads. The report also reveals that B2B is the main business model in the Tunisian ecosystem, even if 2% of start-ups continue to grow thanks to B2G. The strong representation of engineers is confirmed and the fairer sex remains underrepresented in the ecosystem with rates of 34% for co-founders and only 2% for all-female founders of their own start-ups.
quality jobs created
Regarding support structures, the numbers show that the profession is becoming more specialized (only 46% of structures offer generalist support), while the MVP and GO to Market phases suffer from some lack in this area. Furthermore, the report results prove that the ecosystem is a provider of quality jobs. Indeed, the Tunisian start-up created an average of 8 jobs in 2021. 21% of them dedicate more than 5 jobs to research and development. Cumulative turnover increased from 72 million dinars in 2020 to 120 million dinars in 2021, of which around 50% is made in Tunisia and over 22% in Europe. The report also highlights the difficulties of startups in raising significant funds. Fundraising reached 105 million dinars, including 45 million dinars raised by Tunisian start-ups through Tunisian funds. 40% of the amounts were granted by VC funds. The business sectors that most attract investments are software and biotechnology.
human capital is the main asset
After the presentation of the report, there was a debate during which the participants commented on the numbers and data collected. Stating that human capital and venture capital are the two main factors that create the dynamism of a given ecosystem, Max Cuvellier, Mobile for Development Director at Gsma, in short, underlined that Tunisia has significant human capital, but suffers from a certain way with the scarcity of venture capital. Quoting Karim Beguir, CEO of start-up InstaDeep, he said that young researchers and engineers are Tunisia’s main asset. This asset imposed the double challenge of, on the one hand, retaining talent and, on the other hand, attracting skills from foreign ecosystems. “There is a quality here that is not found in all ecosystems, which inevitably generates envy from other markets,” he said, referring to the European market.
Referring to the success of InstaDeep, Cuvellier highlighted that start-ups specializing in artificial intelligence in Africa managed to raise several tens of millions in 2021, which demonstrates the quality of human capital, especially in Tunisia.
Regarding venture capital, the speaker said that money is the nerve of war. The amount of investments raised in the market is, in this sense, an important indicator to be monitored which, despite its imperfections, allows comparisons with other markets. Thus, funds raised in Tunisia remain quite low, especially compared to African countries such as Nigeria, where startups managed to raise US$ 1.7 billion. For Cuvellier, the variety of sectors represented, the ability of start-ups to find local funding, as well as foreign funding, as well as the support provided by local structures are positive points.
See the other factors
With regard to other factors, the specialist indicated that the 3G and 4G coverage rate (which exceeds 90%) as well as the significant investment in infrastructures that constitute a solid base for the ecosystem, allow for the creation of opportunities. He, however, specified that the low rate of use of mobile Internet (around 58%) and the limited access to banking services among the Tunisian population (which makes it difficult to access financial services) constitute obstacles that may hinder the development of the ecosystem . “Tunisia was one of the ecosystems that inspired others in Africa,” he said. He added that opening up to Europe and the talent mobility reflected in the numbers could be a risk in terms of the ability to retain human capital, but also a potential to attract talent from other countries.
the solution can be in fundraising internationally
In turn, Alaya Bettaieb, director of Smart Capital, in short, clarified that the low number of VC funds in Tunisia should not constitute an obstacle for start-ups. He said, in this regard, that there are many fundraising opportunities internationally. “A startup that raises funds is a startup that works,” he said. He added that the funding mechanism is developing for establishing VC funds for the Seed phase. Two other Seed Funds, namely 216 Capital and Titan Seed Fund, joined the Tunisian ecosystem this year, he recalled. “By the end of the year we hope to have two Seed funds that will enrich the ecosystem and the network of start-ups, our global objective is to create 13 investment funds by 2025”, he says. He added that Smart Capital is in the process of creating programs in partnership with the Gulf countries, in order to be able to position Tunisian start-ups in these markets, and support them in raising international funds.
Mohamed Salah Frad, member of the college of start-ups, for his part, recalled that the attribution of the seal is based on two criteria, namely innovation and scalability. He added that the ecosystem is growing and its development is unabated. Evidenced by continued growth in the number of labeling applications. “That means it’s a market full of talent,” he commented. Evoking the capital efficiency indicator that is obtained by relating the amount of resources invested for the benefit of the program with accumulated revenue, Tunisia should have the highest score in the world in this area. “It is a super deep market, but unfortunately we are struggling to have the necessary resources”, he concluded.