Country Profile: Tunisia

Published 4 October 2021
Image of post

Tunisia, Africa’s northernmost nation, has a nascent technology landscape, which could be due to factors such as the high mobile penetration rate and the state’s desire to focus on development in technology. Broadly, the Tunisian economy is diverse, ranging from tourism, agriculture, mining, and the export of petroleum products. Policies such as the Start-up Act of 2018 boosts the local tech start-up landscape. This legal framework was the first of its kind in Africa and supports local start-ups with funding and tax relief to promote entrepreneurship and progress.

Reforms like the aforementioned Start-up Act, have led to growth in the number of tech hubs and investors in the country. Whilst the market is not large (when compared to Nigeria or Ethiopia perhaps, with populations of more than 100 million), the unanimously approved Start-up Act of 2018 incentivizes development. The act aims to “unleash and realize the full potential of entrepreneurship in Tunisia.”

The act is not exclusive to purely tech businesses but supports those using new technologies. Since 2018, we have seen funding for innovation in Tunisian start-ups like Enova Robotics, a robotics start-up developing robots for security, healthcare and other applications, to Dabchy, a peer-to-peer online fashion marketplace.

Since the passing of the Start-up Act, Tunisia has had to contend with Covid-19 that led to health and economic challenges and political unrest.

According to the Worldbank, the pandemic also caused declines in tourism and manufacturing sectors, which are economic pillars of the country. As a result, the GDP contracted by 8.8%.

As regards the tech start-up landscape going forward, 2021 has seen the highest funding amount secured by a Tunisian start-up: Expensya, an online expense management software start-up, raised $20 million USD in a venture funding round. The round was led by MAIF Avenir and Silicon Badia and backed by ISAI and Seventure Partners.

Here we look at other start-ups that have raised funds over the past 2 years:

Figure 1: VC-backed Tunisian start-ups since 2020

Interestingly, Flat6 Labs Tunisia invested in 8 of the 21 start-ups during the 5th cycle of their seed programme in May 2020. These were OnboardAuto-plusJunior Robotics Lab, Seek and Wantotrip. Onboard went on to raise an additional $175,000 in November from Kepple Africa Ventures and individual investors.

What is happening in North Africa?

Tunisia is bordered by Libya to the West and Algeria to the East. Other countries in the North African region are Morocco and Egypt.  Egypt is a major hub for technology start-ups, and 80% of all investments since 2015 in the region have gone to Egyptian start-ups.

Figure 2: Proportion of funding rounds by country in the North African region since 2015

Tunisia is the next biggest tech hub, securing 10% of all funding in North Africa. Currently, we have no data on Libya in our database, but if you would like to contribute and let us know what is happening there, give us a shout here.

Figure 3: Total investment in Africa’s technology start-ups from before 2015 to August 2021

Over this time, we see consistent growth in the number of deals secured by African tech start-ups. The value of the deals has also grown, save for a dip in 2020, which may be as a result of the Covid-19 outbreak.

Figure 4: Total investment across North Africa’s technology to date (August 2021)

The North African region has followed a similar trend in terms of the number of deals and value of deals secured by North African tech start-ups. We see steady growth, save for 2016, and 2020. Currently, 2021 is on-trend to break the region’s record for the value of transactions invested in North-African tech start-ups.

Figure 5: Total investment In Tunisian start-ups to date (August 2021)

Tunisia’s technology start-up landscape is nascent, we see that not a lot of investment (according to our data) was going to Tunisian tech-enabled or tech-based start-ups. Venture capital funding activities begin to pick up in 2017 and is on a positive trajectory. The consistent growth from 2018 may be related to the enacting of the Start-Up Act; the increased presence of VC’s and tech hubs in the country suggests we will see this pattern continue.

It is notable that in 2021 thus far, $20 million USD was raised from just 4 deals; we begin to see the start-ups moving past the MVP stage and securing later-stage funding.

Figure 6: Proportion(share) of funding per round going to Tunisian start-ups from 2015 to date

On average, funding tends to favour early-stage investments with an average of 75% of investments in Tunisia going to early-stage technology companies. The value of most investment into the country’s tech start-ups is under $100,000 USD, although we are starting to see larger ticket sizes as the companies develop, such as the $11 million Series A funding round closed by NextProtein or the $20 million USD secured by Expensya in a Series B funding rounds.

This aligns with what we can see below in the North African region. Most deals are early-stage (seed or pre-seed) as the region’s tech start-up landscape continues to develop.

Figure 7: Proportion of funding per round going to North African start-ups from 2015 to date
Figure 8: Quarterly investment into Tunisian technology companies from 2018 to date

We can see that there has not been a lot of investment activity in Tunisia with an average of just 3 deals per quarter when compared to Egyptian technology companies that have averaged 21 deals per quarter over the last 4 quarters (from Q3 2020 to Q2 2021). The highest number of deals in Q2 was down to the previously mentioned programme by Flat6 Labs Tunisia, investing in 8 Tunisian tech start-ups simultaneously.

Figure 9: Quarterly investments into North African technology companies from 2018 to 2021

The region has stayed fairly consistent in the number of deals being secured by North African tech companies, while the value has fluctuated as the companies raise bigger rounds to fund later-stage growth.

How are different sectors performing in Tunisia?

Figure 10: Proportion of funding rounds secured by Tunisian technology companies by sector in 2020

Bucking the continental trend, FinTech start-ups in Tunisia have only secured 6% of the deals in the country. Most rounds have gone to the education sector with 23%, offering great new ways to learn modern skills like GoMyCode, an online learning platform for school-age students and professionals to learn the fundamentals of software engineering or Junior Robotics Lab, an EdTech company that creates and provides educational resources to help school-age students get into robotics.

What’s next for Tunisia?

The start-up scene in the Northernmost African country is rather nascent but poised to grow. At the time of writing (August 2021), the country is facing some political unrest linked to the global health crisis and corruption, but we hope to see this overcome and continue to report exciting activity in the technology landscape.

It is certainly primed for it with increased participation from local, regional and international investors as well as the setting up by accelerators, incubators, and co-working spaces to enable Tunisian start-ups to thrive.

Is there something we missed? Do let us know here.