Opinions expressed by Entrepreneur contributors are their own.
You’re reading this now from Entrepreneur Middle East, an international franchise of Entrepreneur Media.
I have lost count of how many times I have heard startups talk about their dreams of becoming a unicorn. (For those who don’t know, a unicorn is, simply put, a company valued at over $1 billion.) From fintech to e-commerce to edtech and more, startups in the MENA region seem to be aiming for unicorn status as the pinnacle of success. They marvel at stories like ride-hailing app Careem, tech-enabled public transport solutions provider Swvl, and cloud kitchen and tech-enabled restaurant services provider Kitopi.
Well, MENA entrepreneurs’ hunger to become a unicorn is no different from their counterparts in other parts of the world. After all, becoming a unicorn reflects a startup’s ambitious growth aspirations and their quest to become a globally competitive player in the startup ecosystem.
The allure of the unicorn
These entrepreneurial ambitions can be boiled down to six main drivers, and Startup Genome’s The Scaleup Report has a lot to say about them. The first is validation and prestige. Reaching the unicorn level signals that a startup has achieved significant growth and attracted significant investor interest. The second is access to capital. Becoming a unicorn helps a startup attract more investment from venture capitalists, institutional investors, and even sovereign wealth funds. These investors often look for fast-growing startups that promise a big return on their investment. The third is scale and market dominance. Unicorn startups typically operate in fast-growing sectors and have the potential to disrupt existing industries.
Achieving unicorn status often involves rapid scaling and market dominance. The fourth driver is talent attraction, as many potential employees are often attracted to companies with a track record of success and strong growth prospects. Unicorns can also offer competitive salaries, stock options, and other perks to attract and retain the best talent in their industry. The fifth driver is recognition, as these startups often receive extensive media coverage and global recognition, attracting investor attention.
And finally, unicorn status can increase a startup’s attractiveness to potential acquirers, providing more favorable terms in the event of an acquisition or initial public offering (IPO). Many startup founders and investors aim to achieve unicorn status as a stepping stone to a successful exit strategy, such as an acquisition by a larger company or going public. Startup unicorns are a rare breed; as of January 2024, there were just over 1,200 in the world.
According to a report by Saudi Arabian venture capital fund STV, the MENA region is expected to see the birth of 45 unicorns by 2030. These startups are characterized by rapid growth and disruptive innovation, capturing the hearts of investors and industry players. They defy traditional norms and leverage breakthrough technologies and business models to establish a dominant position in their respective markets. Not only do startup unicorns experience rapid growth and attract significant funding, but they also serve as a source of inspiration for aspiring entrepreneurs around the world.
However, their journey is not without challenges: they overcome stiff competition, valuation challenges, regulatory hurdles, and pressure to maintain their reputations while profitably scaling their businesses. Despite the risks, startup unicorns symbolize the limitless potential and dynamism of the startup ecosystem, shaping industries and changing the way we live and work.
Related: Prince Khaled bin Alwaleed urges entrepreneurs to leverage local strengths rather than mimicking foreign models
The Zebra Appears (And Why It Matters)
In this fast-paced ecosystem, startup “zebras” emerge as a more “authentic” alternative. Compared to unicorns, zebras represent a contrasting approach to the entrepreneurial environment. Unlike unicorns, who prioritize rapid growth and high valuations, zebras focus on sustainability, profitability, and social impact. These companies aim to build resilient businesses that prioritize long-term value creation over short-term profits. They also prioritize creating meaningful solutions that solve real-world problems and benefit society at large.
Zebras may not grab attention with their multi-billion dollar valuations, but they play a vital role in fostering a more balanced and inclusive startup ecosystem. Unlike the “heroic” and “supernatural” characteristics of unicorns, zebras are a refreshing and more realistic alternative to the hyper-growth-oriented mindset often associated with unicorns, demonstrating that entrepreneurial success cannot be measured in monetary terms alone.
In the frenzy of chasing the next unicorn, it is easy to overlook the value of zebras. With their slow and steady approach, zebras embody resilience and sustainability. The allure of rapid growth may be intoxicating, but it often comes with significant risk, as the lessons of unicorns such as WeWork and Veev prove. Moreover, the aftermath of the COVID-19 pandemic has shifted investor sentiment, placing an emphasis on safer investments and profitability. The key here is to recognize that true wealth creation comes from both growth and profitability. Companies must successfully strike a delicate balance between expansion and financial stability.
While the initial focus may be on proving product-market fit and scaling, the ultimate goal is always to maximize shareholder value. Achieving this equilibrium ensures not only the survival of the company, but also its long-term thriving. However, while Zebras appear to be less risky than Unicorns, they may face difficulties raising capital as most investors in the ecosystem are often attracted by high growth potential and flashy valuations. This could make it difficult for Zebras to raise the capital they need to scale their operations.
The MENA region has unique market dynamics and regulatory environments that can pose challenges for Zebra. Navigating complex legal frameworks, bureaucratic processes, and market fragmentation can hinder Zebra startups’ growth and expansion. Building a diverse and skilled workforce can also be difficult for Zebras, especially in highly competitive sectors.
Additionally, unlike unicorns, who often benefit from extensive support networks and resources, zebras may lack ecosystem support, including limited access to mentorship, networking opportunities, and specialized support services tailored to their unique needs. Cultural perceptions of entrepreneurship in the MENA region may prioritize traditional business models and high-growth aspirations over sustainable and socially responsible approaches.
Overcoming these perceptions and educating stakeholders on the value of zebra startups could be a major challenge.Infrastructural limitations and technology gaps in certain parts of the MENA region could hinder the growth of zebra startups, especially those that rely on advanced technology and digital infrastructure.
Despite these challenges, Zebra still has an opportunity to leverage its focus on sustainability, profitability and social impact to differentiate in the market and build a resilient business that contributes positively to society. Collaborative efforts among stakeholders such as governments, investors and support organizations can help address these challenges and create a more favorable environment for Zebra startups to thrive.
Unicorns vs Zebras: Which is better for MENA?
The difference between becoming a unicorn or a zebra depends on a number of factors, including market trends, investor preferences, and the startup’s goals. Historically, the MENA region has seen a proliferation of unicorns, especially in sectors such as e-commerce, fintech, and technology-driven industries. Unicorns often attract significant attention and funding, giving them an advantage in rapidly scaling and expanding into different markets.
However, a focus on rapid growth and huge valuations does not always align with the region’s socio-economic realities or long-term sustainability goals. In the MENA region, whether a startup aims to be a unicorn or a zebra depends entirely on the context, market trends, and the founders’ values and goals.
Each model has its pros and cons, so choosing the strategy that best suits your startup’s vision, market potential, and growth path is a key decision.
Related: 5 Steps to Building an Entrepreneurial Community in MENA
