What is a startup ecosystem? The terms you need to know

6 min read
Stefano Maruzzi

The startup scene in the Middle East is on the rise, and just like any sector or industry there are a lot of words and terms used that you may not be familiar with. Most of the terms used are relatively new and the definitions are still evolving. So, if you’re new to the startup ecosystem or you’re unsure of the meaning of a few terms, this article will cover what is a startup and other related terms that every entrepreneur needs to know.

What is a startup?

Startups by definition are where things happen quickly with very few resources; they are either innovative or emulative, they are experimental and unstructured, with the goal of developing a profitable business model that can easily scale.

The startup ecosystem in the Middle East is developing quickly, as startups are increasingly partnering with large corporations and securing investment deals from all possible sources. Although startups may face challenges and disputes, they’ve managed to tackle these hardships with profound solutions.

Almost everyone one now knows what a startup is and young entrepreneurs are ready to take their future in their own hands, and they’re rocking the ecosystem with their fresh and innovative ideas.

The glossary: Terms you need to know

Now that we’ve covered the question what is a startup, let’s explore different terms that you might’ve overheard before. As an entrepreneur, understanding these terms will give you a better understanding of the startup scene mechanism, let’s go.

Pitch Deck: A presentation designed to give a short summary of your company, your business plan and your startup vision. It needs to cover all aspects of your business in a concise and compelling way. To put together a good deck, you need to do extensive research, get lots of feedback, and consider hiring a graphic designer to polish the final version. You may also want to check the following article that gives a deeper look on pitch decks, and examples of successful decks too for inspiration.

Accelerators and Incubators: They are organizations that seek to help startups attain success. According to Hackernoon and data from the International Business Innovation Association:

There are now around 7,000 business incubators and accelerators around the world. More than 90 percent of them are nonprofit and focused on incubator programs for community economic development.

Startup accelerators tend to focus on providing startups with mentorship, advice, and resources to help them succeed. Accelerators tend to offer shared resources and events such as guest speaker talks and advising office hours. While incubators offer dedicated office and development space for startups for a period of time.

Some of the renowned accelerators and incubators in the region are:

  • Flat6Labs (Cairo, Jeddah, Beirut & Abu Dhabi)
  • Falak Startup (Egypt)
  • AUC Venture Lab (Egypt)
  • Dubai Technology Entrepreneur Centre (UAE)
  • Dubai Future Accelerator (UAE)
  • Oasis500 (Jordan)
  • Misk Growth Accelerator (KSA)
  • Badir (KSA)
  • La Factory (Morocco)
  • Brilliant Lab (Kuwait and Bahrain)

Boot-strapping: One of the most common expressions in the startup world. It’s when an entrepreneur gets his first cash to fund his startup, usually either from personal savings, family or friends. If you are using little capital and improving your business model, you are successfully boot strapping.

Crowdfunding: Resorting to websites to get people give you money to help you get your product or business launched. You’ll keep all company shares and you’ll only give away a percentage of the total funds you raise to the crowdfunding portal.

Related: Top 20 crowdfunding platforms of 2019 

Angel investors: An angel investor is a high net worth individual who contributes with his own money to the growth of the small business in exchange for debt or equity ownership. They invest in the development stages of the startup and usually start contributing when the startup has something to present, such as a prototype of the product or service.

Seed round: If you’re an entrepreneur then it’s very important to get to know this term. The seed round is the first period when the startup is looking for funding or investment. It is usually followed by a “Series A round”.

Did you manage to secure seed investment? Then it’s time for your next step…..

Series A, B and C rounds: They take place in the developmental stages of a startup for the purpose of raising capital. They are based on the maturity level of the business, the purpose for raising capital, and how it is allocated. These rounds are vital steps that are required to turn a startup with a great idea into a successful company.

Series A rounds: They are meant for the optimization of the startup’s product. Some people mix up between seed investment and series A round, but the difference between them is: the amount of money and the form of ownership or participation the investor receives. Series A financing is typically millions of dollars, while seed capital will usually be in smaller amounts. Also, series A funding will come from venture capital (VC); but what is venture capital?

Venture Capital (VC): A venture capitalist is one who is investing in the startup in the form of venture capital funds. With venture capital , the startup company issues private shares in exchange for money. So, they basically come in the later stages of development for a portion of equity or debt ownership in order to advance the growth of the startup by developing its market share and they become a partial owner of the startup.

Series B round: The second round of funding usually focuses on advancing a startup beyond the development stage by expanding the company’s market reach. At this stage, the company has accomplished certain milestones in developing and is past the initial startup stage.

Series C rounds: Round three of investment; at this stage, several investors contribute funds to tackle competitors; several acquisitions take place. By this time, the business has matured and owners have convinced venture capitalists or other investors that they have a functional and stable business. Investors will be encouraged about the startup’s success rate on the long term.

Exit: It’s the point at which the startup is sold; either as a whole or some assets only. The most famous exits/ acquisitions in the region are:

Unicorn: This is basically every entrepreneur’s dream for their startup to become a unicorn. A unicorn is a startup company that is valued at over $1 billion.

The Middle East’s only unicorn, is is one I’ve used before - the popular transport app Careem.

If you’d like to explore more about the startup scene in the Middle East, get to know what is a startup and how can you successfully start one; make sure you stop by our blog and check the related articles.