Updated legislation to fuel start-up development in Tunisia

While the MENA start-up scene remains small, Tunisia is emerging as one of the region’s key centres for entrepreneurship, as underscored by the rapid growth in recent years in the number of incubators and accelerators operating in the country. Developing the domestic start-up scene, and entrepreneurship more generally, has the potential to help bring down unemployment, which stands at around 15%. With this in mind, the authorities introduced new legislation in April 2017 to stimulate the segment, known as the Start-up Act, which the Ministry of ICT drafted following consultations with around 100 players in the segment. Speaking in October 2016, Houssem Aoudi, co-founder and CEO of Cogite, a co-working space in Tunis that works with accelerators such as Boost and the Founder Institute, said the legislation, delayed somewhat by the transition between governments in August 2016, would have a significant positive impact on the segment. “We are not happy with all elements of the legislation, but it is a good package overall,” he told OBG.

Infrastructure

The start-up scene is largely concentrated in major cities such as Tunis, Sousse and Sfax. Aoudi said that while Cogite worked with some projects in other coastal areas and the interior of the country, infrastructure and a lack of fibre-optic internet connections represented a barrier to development outside of major cities. “Very few areas have the ingredients necessary for a start-up to succeed,” he said. Another change he believed would help to stimulate development in the sector was improved intellectual property (IP) protection. “There is some IP protection now, but it is neither sufficient nor implemented adequately, giving rise to a situation in which it is easy to copy other people’s ideas and models,” he told OBG.

Incubators & Accelerators

Recent arrivals in the field include Flat6Labs, an incubator and investment fund focused on the MENA region that is also active in Abu Dhabi, Cairo and Jeddah, and began operating in the country together with local start-up hub Le15 in June 2016. US accelerator the Founders Institute launched its first programme in the country in 2015, which also saw Boost, an accelerator created by local entrepreneurs, launch its second programme. “A true start-up scene has started to emerge since 2013 and has been growing exponentially since then,” Aoudi told OBG.

Notable recent success stories emerging from the local start-up scene include telecoms firm RoamSmart, which was founded in 2012 and now helps 29 telecoms operators across 25 countries manage their roaming services, and E-Taxi, an Uber-style cab-hailing app. More recent start-ups still at an earlier stage of development but demonstrating promise include Expensya, a cloudbased expense management tool aimed at small and medium-sized enterprises that became operational in 2014, and YallaRead, an electronic book-sharing service which launched its website in May 2016.

Access To Finance

One challenge for new firms that is hardly unique to Tunisia is obtaining financing. Aoudi told OBG that there is a particular shortage of actors willing to provide financing at levels between TD30,000 (€12,900) and TD100,000 (€42,900). “There are some venture capital investors looking at the country, but their thresholds are too high for most projects, and there is little in the way of an angel investment community,” he said, adding that the under-developed nature of the local stock exchange and the alternative market for small growth-oriented firms in particular represented another constraint on financing for start-ups, by limiting exit opportunities, thus deterring investment.

“The market is not deep enough and there haven’t been many successful exits from investments via the stock exchange to date,” he told OBG. New sources of finance are nonetheless emerging, with some of the new accelerators and incubators opening in the country offering funding opportunities. For example, Flat6Labs plans to make investments of up to TD600,000 (€257,000) in more than 75 start-ups over the next five years, in return for equity stakes of up to 15%.