Exploring the Rising Tunisian Start-up Ecosystem

In 2019, the Global Entrepreneurship and Development Institute (GEDI) published the Global Entrepreneurship Index (GEI), measuring the quality of start-up ecosystems on a country level. Tunisia ranked second in Africa based on 14 values measuring the health of the ecosystem (including entrepreneurial attitudes, abilities and aspirations). The Tunisian Parliament passed the Tunisian Startup Act in April 2018 which brought life into the ecosystem, but what has been its impact to date?

The Start-Up Act: Creating momentum for a new generation of entrepreneurs

Crystallising the legal framework for start-ups was a grassroots movement led by multiple players, including entrepreneurs, tech hubs and other start-up support organisations. There are three aspects to the Start-Up Act: first, a legal framework that simplifies the start-up launching process. Second, the creation of a €200m Fund of Funds allocated to specific verticals. The third aspect is a strategy to consolidate the ecosystem and hubs in Tunisia.

There are several benefits for different players in the start-up ecosystem. Entrepreneurs can benefit from an allowance given to the co-founder and shareholder to cover living expenses for one year, state support for start-up patent registration procedures and fees at national and international levels, and leave one year to dedicate themself to the launch and development of their start-up. Benefits for start-ups include a portal to apply for start-up classification, the right to open a special foreign currency account, and exemption from corporate taxes. Lastly, investors benefit from tax-deductible start-up investment, and capital gains tax exemption of profits from the sale of securities relating to participation in start-ups.

Smart capital: Helping to navigate the Start-up Act

The advantages of the Start-Up Act are implemented by Smart Capital, an organisation that interfaces with different government ministries. Smart Capital is built on four pillars:

  1. Start-up Act: A legal framework dedicated to start-ups that launch or settle in Tunisia;
  2. Start-up Invest: An investment framework dedicated to start-ups built around a Fund of Funds to attract venture capital;
  3. Start-up Empower: A support framework for an inclusive start-up ecosystem; and
  4. Start-up State: A framework to support innovation in the public sector.

As of August 2020, 327 start-ups have received the start-up label, which entitles them to the aforementioned benefits.

Source: Entrepreneurs of Tunisia

Frontier technologies: Advancing deep tech capabilities

Tunisian start-ups are exploring artificial intelligence and cybersecurity, as well as solutions in robotics. There has been an increase in fintech, education, logistics and health tech solutions due to the COVID-19 lockdown. As Tunisia continues to explore deep tech, it could make the country a destination for frontier tech founders.

Some leading deep tech start-ups include:

  • Enova Robotics: A robotics start-up specializing in mobile robot development and robotics R&D projects;
  • Epilert: A bracelet using 5 biosensors and AI for epileptic individuals that alert a relative or friend when they have a seizure;
  • FabSkill: An online platform harnessing artificial intelligence for recruitment;
  • InstaDeep: An AI-powered decision-making system for enterprises;
  • RoamSmart: A cloud-based software allowing mobile operators to manage their roaming services; and
  • Wattnow: An IoT-based service allowing companies to monitor and improve their energy consumption across their sites.

Tech hubs and investors: A growing support system

Accelerator schemes continue to play an important part in the growing culture of entrepreneurship in Tunisia. Briter Bridges lists 29 tech hubs in Tunisia, and while most hubs are centred around the capital, some are emerging in Tunisia’s smaller cities. An online platform created by Entrepreneurs of Tunisia, is a useful tool for mapping the entrepreneurial players in the ecosystem, including investors, support organisations and other enablers. 

According to Smart Capital, 43 per cent of Tunisian start-ups get support from tech hubs. They maintain that this number needs to increase, along with an increase in financial support and technical assistance. Additionally, start-up support organisations need to know the key actors to create added value for the whole ecosystem.

A supportive tech ecosystem and welcoming regulatory environment are crucial to attract investment. The Start-up Act demonstrates to the international community that Tunisia is intent on innovation, and providing the right legal framework which is inviting to local and foreign investors. In July 2020, Smart Capital announced new financial support for Tunisian start-ups – this includes: a fund of $84 million to finance innovation projects, up to $1 million to support labelled start-ups impacted by COVID-19, support funding of $7 million to finance research and innovation, and a state innovation laboratory with funding of $3.5 million.

Examples of specific start-up investment in the last two years include:

September 2018$1.6 millionEnova Robotics, robotics start-upCapsa Capital
December 2018$4.5 millionExpensya, online expense management softwareISAI and Seventure Partners
February 2019$650,000Med.Tn, doctor booking platformCarte Groupe
September 2019$300,000Dabchy, peer-to-peer fashion marketplace500 Startups, Flat6Labs, Vision Ventures and Daal
July 2020$1 millionIntigo, ride-hailing and logistics platformCapsa Capital
October 2020$850,000GoMyCode, edTech start-upWamda, Meninx Holding, Anava Seed Fund, Jasminum Capital and some angel investors

Source: MENAbytes

Start-ups and corporates: Potential for deepening partnerships

As corporates are on the hunt for innovation, the interest in Tunisian start-up investment has been growing. Corporates are realising the need to transform and become more digital, which has resulted in willingness to host start-ups by creating dedicated spaces and looking at how corporates can provide support. However, there is still a great deal of awareness to be created, and the onus is on ecosystem players to educate corporates about start-up opportunities.

As support organisations such as TunisianStartups, EFE Tunisia and GIZ Tunisia help change corporate perception of innovation as merely a CSR activity, start-ups can be considered as viable investments and key partners. This can be done by demonstrating the various ways of collaborating with start-ups and highlighting examples of potential partnerships.

Mobile operators are well-positioned to be game-changers as they have infrastructure that start-ups can leverage to deliver services. They have been instrumental in many African countries in terms of payment solutions, and they have a large reach in terms of accessing consumers (read our report Building Synergies on mobile operators start-ups partnerships).

A prime example of an active ecosystem player is Orange, a mobile operator that is active in Tunisia and across the continent. They run Orange Fab Tunisia, a tech accelerator that offers selected start-ups the chance to develop their business models through funding and management support. Despite the challenging context in 2020, they announced 3 winners in their Orange Africa and Middle East entrepreneur award. Orange’s goal aligns with players in the ecosystem such as Smart Capital and Entrepreneurs of Tunisia: to foster commercial partnerships and help start-ups develop their businesses by accelerating their growth and visibility. Bolstered by the Start-up Act, a vibrant and thriving Tunisian start-up ecosystem is surely on the horizon.

We would like to thank the following people for their participation in key discussions: Amel Saidane (BetaCube), Anis Kallel (Kaoun), Tarek Chelaifa (Flat6Labs), Houssem Touil (LINK4INN) and Salma Baghdadi (Smart Capital).

The Ecosystem Accelerator programme is supported by the UK Foreign, Commonwealth and Development Office (FCDO), the Australian Government, the GSMA and its members.