A country with one of the smallest economies in North Africa has produced two of the continent’s largest tech exits. InstaDeep’s roughly USD 680 mn sale to BioNTech in 2023 and Expensya’s USD 120 mn-plus acquisition by Sweden’s Medius the same year rank among the biggest startup outcomes Africa has seen — and they came from a market most investors would size up and walk past. But capital keeps flowing in, with investors arguing that the size of the country’s economy has been far from a hindrance.

The formula in Tunisia: An unusually deep, multilingual STEM talent pool; a policy environment that has been relatively friendly to startups, including the 2018 Startup Act and the state-backed Anava fund of funds ; and a build-local, scale-global playbook that the best companies have used to push into into regional and international markets earlier than in many other African markets.

The same conditions carry a built-in tension: The constraints that make Tunisia hard to operate in, including FX controls and profit repatriation rules, also explain why nearly every breakout startup ends up incorporating in Europe. This is the story of how a market that investors describe as “small but listening” turned its limitations into an export engine.

The proof is in the size of the exits — even the marquee exits ran deeper than the acquisitions that made the headlines. Before Medius bought it, Expensya — the AI-driven expense-management platform — had pulled in a USD 20 mn round from Silicon Badia and French fund MAIF Avenir at the height of the pandemic.

The talent engine

Every investor we spoke to traces the results back to the same factor: People. “I always say if a Tunisian entrepreneur can make it in Tunisia, they can make it anywhere,” says Flat6Labs Tunisia’s director of global partnerships, Faten Aissi, crediting the country’s educational system for the quality of its founders.

“The tech talent is [extremely] advanced, not just for the region, but the globe,” says Hossam Shafick, partner at Silicon Badia, noting that Tunisia ranks first in the world for STEM graduates per capita: “For every 100k population, there are a thousand graduating from STEM education.” Roughly 60% of domestic tech talent works for international companies, mostly French — a pipeline that tends to feed founders back into the ecosystem or keep them plugged into global markets.

A fluency with languages helps: “The average Tunisian speaks three languages fluently: Arabic, French, and English. So this openness and the educational system made this happen,” says Aissi. A competitive, multilingual talent pool already experienced with European clients and standards “remains its biggest strength” for would-be acquirers, Lisa Kronreif, commercial counsellor at Advantage Austria Algiers, tells us. (Kronreif’s office also covers Tunisia.)

Government some things right, for a change

If talent is the raw material, the country’s Startup Act is what investors say converted it into companies. In effect since April 2018, the law offers benefits to entrepreneurs, investors, and startups alike, including a monthly “startup stipend” of TND 1k-5k (USD 345-1,730) that gives founders up to a year to build.

“The framework created within the Startup Act has encouraged people to take more risks, because the Startup Act itself is a safety net for entrepreneurs,” says Aissi. “Maybe 40-50% of the people we invested in had access to [the stipend]. Especially if you have the Startup Act label, you have automatic access. So it has been something extraordinary.”

The cornerstone of the framework is the Anava fund of funds. Managed by Smart Capital, Anava targets a EUR 100 mn size and houses dozens of sub-funds that provide working capital to startups. “Anava is the biggest catalyst,” says Shafick, noting it backs local, regional, and global funds without limiting itself to a single investment stage.

Flat6Labs is one such backer. The firm entered Tunisia in 2016, two years before the Act took effect, and deployed a USD 10 mn seed fund in 2018 across 75 startups. A second USD 10 mn fund launched this year, Aissi says.

The playbook: build local, scale global

The companies that work best follow a recognizable pattern — prove the product and business model at home, then move out. Bako Motors, a Flat6Labs portfolio company building electric vehicles, is a textbook case. Founder and CEO Boubaker Siala launched in 2021 and secured about USD 130k from a Flat6Labs child fund — a sizable local round at the time, enough to pay his engineering team and win European certification.

“We started in Tunisia for about three years. We validated the product, the production line, and the market. And then we moved to Saudi and Europe,” Siala tells EnterpriseAM. Bako is now headquartered in Luxembourg with plants in Tunisia and Saudi Arabia. Production is split evenly between domestic and international markets today — Siala wants to see export sales account for 70% of turnover.

Dabchy followed the same arc in a different sector. Founder Ameni Mansouri turned Tunisia’s informal second-hand fashion market into a trust-based, peer-to-peer marketplace, adding a proprietary escrow payment system and door-to-door logistics. The platform has captured more than 1.3 mn highly engaged users — over 10% of the population — and scaled into Egypt after a seven-figure pre-series A round led by Janngo Capital, Africa’s largest gender-equal tech VC, with angel backing from InstaDeep co-founder Karim Beguir.

The exits and scale-ups feed each other,Silicon Badia’s Shafick says. “Since day one, we’ve been trying to build global companies from local kitchens or tech hubs — Tunisia accentuates this thesis we’ve built over the past 15 years,” he says. He argues the sector grew stronger after Expensya and InstaDeep, which together boosted both local confidence and capital inflows. It’s a cycle of recycled capital: when big exits happen, VCs reinvest in similar projects, and founders spin up new startups to attract them.

Why the winners incorporate abroad

The same market that produces these companies makes them hard to scale from inside, and the friction points European businesses cite are consistent. The most fundamental, according to Kronreif, are FX controls under central bank regulations and the closely linked rules on profit repatriation. “Companies often point to strict rules that limit the flexibility of cross-border transactions, including restrictions on advance payments to international suppliers,” she says. Other bottlenecks include customs and logistics, particularly at the Port of Radès, and administrative quirks such as tender documents issued only in French.

Financing is similarly tight. Investment is overwhelmingly VC-driven — of the 75 startups Flat6Labs backed, only two dealt with banks or private equity, Aissi says, with donors and government incentives helping the rest survive. Kronreif points to a structural cause: “As the state absorbs a significant share of available credit, commercial banks have fewer resources to extend to the private sector. This creates a classic crowding-out effect.”

The cumulative result is visible in where these companies live on paper. Expensya’s legal home is Paris, InstaDeep’s is London, and Bako Motors’ is Luxembourg — all chosen to make it easier to raise international capital and run multi-country operations. As Kronreif puts it, “International investors recognize the innovation potential of the Tunisian ecosystem,” but the FX regime remains the constraint that touches everything else, from liquidity to day-to-day operations.

The constraints and the advantages are two sides of the same coin: “The best thing about Tunisia is the worst thing about Tunisia, which is the small size of its economy,” says Shafick. “It should be looked at in terms of quality, not quantity.” It’s a small market in which the government, corporations, talent, and central bank all hear each other — and that, he argues, is what lets a startup movement compound over time on its two core assets: Talent and a strategic position between Europe, the Middle East, and the rest of Africa.