Building MENA's cities of the future

Back in the mid-2000s, reports claimed Dubai housed a quarter of the world’s 125,000 cranes.

In reality, it was no more than 2%, but the sentiment was clear — the pace of construction in the emirate was remarkable.

Over the next decade, the UAE's rapid development, set against the backdrop of the 2008 global financial crisis and the Arab Spring, transformed both its landscape and society.

This morning, as I look out my window in Abu Dhabi, I see cranes stretched into the sky, assembling the next piece of a concrete jungle jigsaw that less than 20 years ago, was just a vast desert.

But, the UAE’s construction boom is no longer unique in the region.

🇸🇦 Saudi Arabia’s bold and ambitious giga-projects like The Line in NEOM, Trojena, and Jeddah Tower have captured global attention as part of the Kingdom’s Vision 2030 plan to diversify beyond oil.

Other nations are following suit:

🇪🇬 Egypt’s New Administrative Capital is taking shape east of Cairo, and a $35 billion deal with the UAE aims to develop the Ras al-Hekma peninsula along the Mediterranean.

🇶🇦 Qatar spent over $220 billion on infrastructure for the 2022 World Cup.

🇮🇶 Iraq has launched the $17 billion Development Road project to link it to Türkiye, transforming the region into a logistics hub.

🇴🇲 Oman’s Sultan Haitham City offers a more modest but equally important vision of a livable, sustainable city, breaking from the “Dubai archetype.”

As the region's resource-dependent economies accelerate diversification, construction is central to these efforts.

👷‍♂️ State of play

In this context, 2024 has emerged as a breakout year for the MENA region’s contech ecosystem.

In the first half alone, $38.6 million was raised across four deals, compared to just $3.3 million raised across eight deals in all of 2023.

That’s a 1069.7% increase year-on-year.

1️⃣ Why the slow adoption of innovation?

Despite MENA boasting one of the world’s largest construction industries, R&D investment has lagged, especially in the Gulf.

The region is not alone in this; globally, construction remains one of the least digitised sectors, with productivity gains averaging just 1% annually over the past two decades.

Key barriers include resistance to change and fragmented processes.

The complexity of construction projects, involving multiple stakeholders, suppliers, and manufacturers, makes it difficult to apply lessons learned from one project to the next.

The temporary nature of project teams also limits knowledge transfer, slowing the adoption of new technologies.

Selling into the industry is equally challenging, with suppliers and subcontractors often using different technologies, leading to slow growth for startups.

According to McKinsey, the construction tech industry has fewer scale-ups and unicorns than sectors like logistics and manufacturing.

Many companies find it hard to grow beyond $10 million in annual revenue due to this decentralisation.

2️⃣ Is this a global trend?

Globally, the contech sector has attracted significant venture capital, surpassing $30 billion in cumulative funding since 2014.

More than 17 companies have achieved unicorn status (we won’t talk about Katerra), and as of 2023, contech accounted for 0.60% of the total VC market.

However, the construction industry accounts for around 14% of global GDP, so although contech’s segment within total VC spending is growing, it is still very marginal compared to the industry’s size.

And 2023 wasn’t all rosy either – the sector saw a sharp 44% drop in funding, from $5.4 billion in 2022 to $3 billion.

This decline was driven by macroeconomic factors like rising interest rates, geopolitical tensions, and inflation.

While investors have become more cautious, particularly about large, infrastructure-heavy investments, the number of deals did increase, rising from 228 in 2022 to 236 in 2023.

This suggests continued interest in emerging technologies, particularly in cleantech and digitalisation, which address global challenges like sustainability and labor shortages.

• Cleantech: Raised $1.06 billion for energy efficiency, carbon reduction, and waste management.

• Enhanced productivity: Raised $701 million for automation, robotics, and AI tools.

• 3D printing & prefabrication: Raised $690 million for advanced building technologies.

• Construction supply chain: Secured $584 million to improve logistics and procurement.

3️⃣ Is MENA an exception?

MENA is part of this broader trend – and then some, so far in 2024.

Funding for contech in H1 2024 accounted for 4.6% of overall capital deployed.

While challenges remain, the region is finally actively embracing digital transformation.

According to a recent survey by Turner & Townsend, 63% of construction professionals in the Middle East report that their organisations have active digital strategies.

Sustainability is a major focus, with 90% of respondents believing that digital transformation will lead to greener practices.

Nearly half of those surveyed are already using data analytics, with many seeing predictive insights as a future investment to enhance decision-making and risk assessment.

These trends bode well for regional startups, which are uniquely positioned to accelerate progress.

Last week, we looked at Tenderd — and they’re not alone in shaking up the regional construction sector.

Let’s break down how MENA’s contech startups are disrupting the construction value chain 👇

🏗️ Meet the builders

🚚 Construction Supply Chain

Across the region, several startups are addressing outdated procurement practices.

The purchase of building materials across the MENA region still majorly involves physical visits to suppliers, price haggling and lack of guarantees on quality and delivery dates.

For example, BRKZ, a Riyadh-based B2B marketplace, recently raised $8 million in a Series A round co-led by BECO Capital and 9900 Capital.

The platform digitises material procurement, facilitating over $336 million in quotes from 750 suppliers across 3,400 products.

BRKZ enables buyers to submit RFQs via its app or WhatsApp, allowing for quick customization and negotiation of bulk orders. CEO Ibrahim Manna mentioned plans to "double down on financing solutions", in the coming year.

This strategy aligns with a broader trend seen in B2B marketplaces across industries, where embedded financing solutions are becoming essential to scaling operations.

For example, newly merged MaxAB and Wasoko will be making integrating financing into their platforms to better serve retail clients a core focus going forward, to facilitate faster growth and more streamlined transactions.

In Egypt, a Hub71 graduate founded in 2017, is working towards a similar goal. With backing from Flat6Labs, the platform connects contractors with suppliers to streamline the procurement process.Elmawkaa

📈 Enhance Productivity

A Saudi-based IoT platform, WakeCap, founded by Hassan Albalawi and Ishita Kochhar in 2017, uses a hard hat attachment to track workers' hours, progress, and safety on construction sites.

It has been deployed on more than 30 mega-projects in Saudi Arabia and the U.S.

Earlier this year, WakeCap acquired Silicon Valley-based Crews by Core, a construction task management platform, and plans to establish an R&D center in the U.S.

This acquisition, highly unusual in terms of the direction of the acquirer, positions WakeCap to expand globally, with a focus on enhancing productivity and site safety.

Other startups improving productivity include Opteam, a UAE-based AI-powered construction planning platform, and Procurified, which digitises bid management by connecting buyers with vendors and automating the bidding process.

🌱 Green Construction

Oman-based Innotech is pioneering green construction through 3D printing, reducing costs, speeding up timelines, and cutting carbon emissions.

🔮 Future of construction

Last week’s focus, Tenderd, could easily fit into any of these categories.

Its AI-powered telematics platform unifies machine data to automate operations, reduce carbon emissions, and lower costs.

For more on them, check out last week’s deep-dive here.

🔮 Outlook

Deal flow is improving, with funding totals seeing a sharp rise.

Saudi’s Wakecap is expanding into the U.S. after acquiring a Silicon Valley startup, while Tenderd, the YC-backed UAE startup, has raised $30 million in Series A and is eyeing international markets. BRKZ, meanwhile, is scaling fast, aiming to capture more of the regional market.

Investor interest is unmistakably there.

Wa’ed Ventures, for example, co-led a $52 million Series B in US-based Mighty Buildings, paving the way for manufacturing operations in Saudi Arabia and the UAE.

Yet, the challenge remains: the region lacks a deep pipeline of startups ready to absorb this capital.

This is why the emergence of contech-focused accelerators is so critical.

The Flat6Labs "Makers" ConTech Accelerator, the region’s first construction-focused accelerator, offers startups up to $100,000 in funding, pilot project access, and mentorship. Initially focused on Egypt, the program hopes to expand to Saudi Arabia and MENA in the near future.

Similarly, Startup Wise Guys launched a Construction Tech Accelerator in Saudi Arabia, backed by SEEDRA Ventures and the National Technology Development Program (NTDP), providing startups with funding, mentorship, and market access.

Looking ahead, the success of these programs will depend on more than just funding.

Startups will need to navigate regulatory challenges, scale across fragmented local markets, and incorporate advanced tech like AI, robotics, and 3D printing to truly disrupt the industry.

Do we have the requisite talent to achieve that? Yes, I believe we do.

As we’ve seen in other sectors, early success stories inspire the next generation of founders.

We have a foundation, now it’s time to build.

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