Morocco's startup journey: challenges and the road ahead

A decade after hosting the Global Entrepreneurship Summit in Marrakech, Morocco’s entrepreneurial ecosystem has made strides in funding and support. Yet, the anticipated surge of high-growth startups capable of reshaping the national economy remains elusive.

In 2014, the summit marked a pivotal moment when Morocco embraced entrepreneurship as a national priority. The World Bank’s announcement of a $50 million loan to support startups laid the foundation for a fledgling venture capital industry. However, despite these investments, the country has yet to see a wave of “gazelles” (high-growth companies) or unicorns (startups valued at over $1 billion) that could significantly boost economic development.

The need for growth entrepreneurship

The scarcity of high-growth startups presents a critical challenge to Morocco’s economic ambitions. According to the Commission for the New Development Model (CSMD), the country needs an economic growth rate of at least 6% to achieve its human development goals and join the ranks of advanced economies. Scaling up the entrepreneurial ecosystem is essential to meet this target, but Morocco’s ecosystem remains in its early stages.

The "Digital Morocco 2030" strategy estimates that Morocco has around 380 startups—an insufficient number to produce transformative companies. By the end of 2023, only 46 startups had received seed funding, and 75 had secured venture capital. The total capital invested—290 million MAD (29million)inseedfundingand653millionMAD(29 million) in seed funding and 653 million MAD (29million)inseedfundingand653millionMAD(65 million) in venture capital—pales in comparison to investment levels in regions like the United States, Europe, or Asia.

The strategy’s goal of creating 10 gazelles by 2026 and one or two unicorns by 2030 is ambitious given the current state. Even achieving these targets would contribute little to significantly accelerating GDP growth.

Barriers to entrepreneurial growth

Despite substantial efforts to build an ecosystem, including the establishment of dozens of incubators and accelerators and the development of a national venture capital industry fueled by the Innov Invest fund, Morocco’s entrepreneurial pipeline remains weak. The issue is not a lack of available capital but a lack of high-quality projects.

Recent developments, such as the Mohammed VI Fund for startup investments and the emergence of corporate venturing funds by large Moroccan companies, have increased financial resources. Yet, investor competition for a small pool of promising startups highlights the ecosystem’s primary challenge: a limited supply of entrepreneurs.

This shortfall stems from an overemphasis on downstream initiatives, such as financing and accelerator programs, while neglecting upstream factors critical to fostering entrepreneurship.

Addressing upstream challenges: innovation and education

Strengthening Morocco’s national innovation system is crucial to addressing the root cause of the problem. The country's investment in research and development (R&D) has stagnated at 0.7% of GDP—far below the OECD average of 2.4%. Much of this funding is absorbed by university salaries, with minimal impact on research output. For instance, in 2022, only 8% of patent applications registered with the Moroccan Office of Industrial and Commercial Property (OMPIC) originated domestically, and Moroccan contributions to international scientific journals remain limited.

Additionally, Morocco’s education system, which accounts for 20% of the state budget, has failed to cultivate an entrepreneurial mindset. Calls to prioritize creativity, autonomy, initiative, and teamwork in schools have yet to yield tangible results.

A path forward

Reforming the education system and fostering innovation are long-term solutions with no quick fixes. However, the key lies in redirecting public and private efforts to the upstream stages of the entrepreneurial process. Morocco must prioritize building a robust foundation that nurtures innovation, research, and entrepreneurial talent.

By addressing these structural challenges, Morocco can lay the groundwork for a thriving entrepreneurial ecosystem capable of driving economic growth. As the next decade unfolds, placing innovation and education at the heart of the national agenda will be essential to unlocking the country’s full potential.