After the Covid-19 pandemic caused lockdowns around the world in March 2020, hiring froze and so effectively did the livelihood of Egyptian jobs site Shaghalni.
But the blue and grey-collar recruitment company, founded in 2016, came back stronger than ever in 2021. It now faces another crisis due to the economic fallout of the Russia-Ukraine war.
With funding limited to $400,000 from just two investors — billionaire businessman Naguib Sawiris and Egyptian venture capital company 138 Pyramids — the start-up is focusing on profitability and sustainability for the bumpy road ahead.
“We just need to be wiser with our spending,” says Shaghalni founder and chief executive Omar Khalifa. "But at the same time, I don’t think anything is going to be worse than Covid."
Today Shaghalni, which means "hire me" in Arabic, has a database of more than 1.7 million jobseekers and more than 10,000 registered companies.
The site charges employers a subscription fee to advertise their jobs on the platform and runs job fairs a few times a year.
It recruits for blue-collar jobs such as technicians, production workers and maintenance engineers.
Grey-collar workers include waiters, call centre agents, company drivers, sales representatives, shop keepers and cashiers, Mr Khalifa says.
The pandemic upended labour markets globally through curfew measures, travel bans and supply chain disruptions and caused a decrease in demand for certain goods and services as well as a decline in production.
In Egypt, the unemployment rate rose to 9.6 per cent in the second quarter of 2020, from 7.7 per cent in the first quarter, as the economic effects of the coronavirus took hold.
About 2.3 million Egyptians left the labour force between April and June 2020, meaning they lost the ability or willingness to search for a job, a December 2021 report from Shaghalni competitor BasharSoft said.
Although Egypt’s unemployment rate has dropped to 7.2 per cent in the first quarter of this year, high youth unemployment and a wide gender gap persist in the Arab world’s most populous country.
Unemployment among youths aged 15 to 24 years averaged nearly 30 per cent between 2015 and 2020, the International Labour Organisation said.
Russia’s invasion of Ukraine in February has hit Egypt’s economy on several fronts.
It has disrupted vital supplies such as wheat, pushed inflation to a three-year high, caused the loss of billions of dollars in foreign investment and prompted the government to devalue the local currency by 14 per cent against the US dollar.
Mr Khalifa, 38, has seen his fair share of Egypt’s economic woes.
He had always dreamed of starting his own business and, after graduating from the American University in Cairo, launched a magazine publishing company called Omedia in 2009.
“The company was growing fine until the revolution in 2011 and then everything was a disaster,” Mr Khalifa says.
After the protests of January 2011 led to Egyptian president Hosni Mubarak’s removal from power, the country suffered from socio economic and political instability for years.
Meanwhile, Omedia lost its entire publishing portfolio and Mr Khalifa went into debt for three years from 2011 until 2014.
To get back on track, he expanded Omedia’s services from securing local franchises of international magazines to selling digital and outdoor advertising.
Mr Khalifa also vowed that once he paid off his debts, he would start Shaghalni, an idea he had in university to link workers with the types of jobs that are rarely advertised in easily found places.
He pitched to several venture capital firms for funding but was repeatedly rejected.
Mr Khalifa then decided to create the beta version of the website and advertised on Facebook for $5 a day, securing 500 jobseekers and 50 companies by late 2015.
His big break came from a meeting with Mr Sawiris, the executive chairman of Orascom Investment Holding, who built his estimated $3.4 billion fortune in the telecoms sector.
Mr Khalifa managed to get a generic email for Mr Sawiris from Twitter, a platform in which the billionaire is active, and sent a note pitching his idea.
“I’m a big believer in the saying 'luck happens when preparation meets opportunity’, so you’re never going to be lucky if you’re not prepared and you’re never going to be lucky if you don’t take any chances,” Mr Khalifa says.
He sent the email, selling the idea of Shaghalni, and received a reply notifying him that Mr Sawiris would like to meet him.
“There was no time to break the ice or anything. He’s a very straightforward, shrewd businessman. I literally had five minutes,” Mr Khalifa says.
Mr Sawiris believed in the social impact of the business, investing a total of $250,000 in 2016 and 2018 through his private equity firm, Gemini Holding.
“He loves job creation, he’s very patriotic and I think he has a big heart,” Mr Khalifa says.
But Shaghalni hit another snag in November 2016 when Egypt devalued the pound by 48 per cent to secure a $12bn loan from the International Monetary Fund, and began a three-year economic reform programme.
Shaghalni’s revenue fell by 21 per cent in 2017 before growing 156 per cent in 2018 and 112 per cent in 2019. In 2020, it plunged by 50 per cent. Finally, last year, it grew by 242 per cent.
During the pandemic, Mr Khalifa “did not want to lay off anyone”, so he offered them half-salaries and arrangements to work from home.
“I have 18 employees — 17 stayed, one left. I think that’s a good percentage,” he says.
In August 2020, Shaghalni closed a much-needed pre-series A funding round, raising $150,000 from 138 Pyramids.
The fund chose to invest in Shaghalni because of the social impact of the company, but also because of Mr Khalifa’s persistence and enthusiasm, says Neveen El Tahri, chairwoman at 138 Pyramids.
“Covid was a very good judge for the entrepreneurs themselves,” Ms El Tahri says. “How do you pivot during that period? Do you just give up and throw in the towel?
"Omar was unbelievable in terms of his will and his passion.”
After being turned down by more than 40 venture capital funds over the years, looking for “very scalable, very aggressive” companies that “can return 10 times, 20 times, at any cost”, Mr Khalifa has changed tactics.
Instead of concentrating on market share and increasing the number of employers on its list, Shaghalni has doubled the subscription fees and is focusing on large companies, such as Pepsi and Spinneys.
A yearly subscription now ranges between $2,500 and $7,000 a year. Smaller companies, which used to pay a low subscription fee of $30, have been moved to a pay-per-hire basis.
Shaghalni takes one month’s fee or 10 per cent of the annualised salary.
“Since we’ve done this, we’ve been in a much better place. And I’ve stopped pitching to VCs,” Mr Khalifa says.
For the past nine months, Shaghalni has been cash-flow positive.
Last year, the company resumed its bi-yearly job fairs at the American University in Cairo after the pandemic, including one specifically for women. It held one in February and is planning two more this year.
Mr Khalifa believes the online-offline model is what makes Shaghalni stand out.
There is still stark competition from BasharSoft, which owns employment platforms Wuzzuf for white-collar jobseekers and the Arabic site Forasna for blue-collar jobs.
BasharSoft says it has helped more than 50,000 companies successfully hire more than 750,000 people.
Although it also suffered through the pandemic, the start-up has raised a total of nearly $8m over two funding rounds in 2015 and 2018.
That still pales in comparison to the high amounts raised by start-ups in Egypt’s FinTech sector recently, such as $50m by Paymob and $120m by MNT-Halan.
“Being an entrepreneur and seeing every day fellow start-ups raising millions of dollars, you feel like you’re losing a race, when in fact that’s not true,” Mr Khalifa says.
“Everyone has a different journey, everyone has a different story, everyone works in a different sector, so when I compare myself to others in the same sector, I think we’re in a very good position.”
Q&A with Omar Khalifa, chief executive and founder of Shaghalni
Where do you see the company five years from now?
A sustainable, profitable business that keeps creating job opportunities every day.
What’s your biggest lesson from launching Shaghalni?
Running a start-up is not a sprint but a marathon. I have had terrible days and great ones, the key is to stay focused and not get distracted.
It is important to take advice from investors, but also not drift away from what the business needs. Focus on making the company profitable and bringing real value.
What skills have you learnt from setting up your business?
Being flexible, aggressive, fast, ambitious, results-oriented and innovative.
If you had to start over, what would you change?
I'd have definitely been more aggressive and raised earlier to fuel our growth.
What other successful start-up do you wish you had started?
Twitter.
COMPANY PROFILE
Company: Shaghalni
Based: Cairo, Egypt
Launch year: 2016
Founder: Omar Khalifa
Number of employees: 17
Sector: Recruitment
Amount raised: $400,000
Investors: Naguib Sawiris, 138 Pyramids
