Sylndr, an Egyptian online used car retailer, has raised $12.6 million in its first funding round as it seeks to disrupt the car-buying experience in Egypt once it fully launches later this year or early next year.
The pre-seed funding, which is typically used by a start-up to commence operations, was led by Saudi-based early stage venture capital company Raed Ventures.
Egypt’s Algebra Ventures, Berlin's Global Founders Capital, Dubai's Nuwa Capital and San Francisco's 1984 Ventures also participated in the round, along with regional and global angel investors.
“We have been able to get a very distinct group of investors” that gives credibility to the team and the market potential, Sylndr chief executive and co-founder Omar El Defrawy told The National.
“They are really solid names that can help us grow and scale and achieve our milestones. It is clear that it is a business that is going to impact millions of Egyptians and it is a model that has already been tested in markets globally.”
There are more than five million licensed private cars on Egypt’s roads, according to the country’s statistics agency.
Used cars are popular in Egypt as new cars are very expensive and out of reach for the majority of the population. About 250,000 new cars are sold in Egypt yearly, compared with 750,000 used cars, Mr El Defrawy said.
The market is estimated at $14 billion, with more than 2,000 used cars sold daily, said Arnav Danthi, a senior associate at Nuwa Capital, which invests in early stage tech start-ups across the GCC, Egypt and Pakistan.
However, the demand side is accompanied by “poor customer experience” and lack of transparency and trust, while the supply side is “extremely fragmented with over 18,000 car dealers in Egypt and no dealer group capturing over 1 per cent market share”, Mr Danthi said.
Such issues create a “clear gap in the middle for a tech-enabled marketplace” such as Sylndr to enable consumers to “transact reliably and without information asymmetry”, he said.
Other than dealers, classifieds sites selling used cars in Egypt include Hatla2ee, Contact Cars and OLX.
The Sylndr platform will be unique in that customers will be able to buy, sell, trade in, finance and refurbish used cars in a transparent manner.
“We aim to become the most trusted used cars retailer in the region. Our customers will be able to sell their cars directly in as little as 24 hours, with free collection and fast payment,” Mr El Defrawy said.
Only 3 per cent to 5 per cent of Egypt’s used car market is financed, offering the opportunity to cross-sell financial services and insurance, he said.
Sylndr has a first-mover advantage and the potential to follow in the footsteps of globally transferable business models such as US-based Carvana, the UK’s Cazoo, India’s Cars24, Germany’s Auto24 and Mexico’s Kavak.
“The market is massive, ripe for disruption and we are excited to be part of Sylndr’s journey as they transform and set an entirely new standard for the used car market,” said Omar Almajdouie, managing partner of Raed Ventures, whose portfolio includes Nasdaq-listed Swvl, Egyptian lorry and logistics platform Trella and UAE buy now, pay later platform Tabby.
Before starting Sylndr, Mr El Dafrawy worked as an investment banker at EFG Hermes and then became chief financial officer at food delivery app elmenus.
Co-founder Amr Mazen has had experience at a variety of start-ups and e-commerce platforms, including British online car retailer Cazoo, German meal-kit company HelloFresh and souq.com.
The founders plan to double the size of their team of more than 40 people by the end of this year.
While the Sylndr website is already live as a business-to-business channel, selling to wholesalers and dealers in the market, the consumer platform will be fully set up for consumers either in the fourth quarter or earl 2023.
The pre-seed capital will be used to build Sylndr’s operational capabilities, technology infrastructure and brand awareness.
The amount is high for an early funding round for Egyptian start-ups, beating the $11m raised by 20-minute delivery start-up Rabbit in November.
Egyptian start-ups raised a record-breaking $491m last year, an increase of 167 per cent from 2020, according to data platform Magnitt.
Egypt also accounted for 15 per cent of transactions and 11 per cent of capital invested in the Middle East and Africa in 2021.
International expansion for Sylndr may also be in the cards, depending on the global economic situation in the coming months, Mr El Defrawy said.
“We know that we don’t want to be an Egypt-only player,” he said. “Expanding outside Egypt is definitely something we want to achieve in the medium term, so ideally we want to do that by our coming round, hopefully in mid-2023.”