For the inaugural Wamda X fellowship programme in Dubai, 600 applicants were whittled down to 27 hopeful start-ups to present their business ideas, go through interviews and answer case study questions over a couple of days before eight finalists were selected.
About 15 per cent of the applicants were from Egypt, including Amal Aboulhassan, who flew in from Alexandria for the in-person pitch round.
With a master's degree in computer graphics from Alexandria University and a doctorate in computer science from Saudi Arabia’s King Abdullah University of Science and Technology, she uses her expertise to develop software that creates complex scientific illustrations with a fast turnaround time. She founded her company Material Solved in 2016.
Ms Aboulhassan did not succeed in making it into the four-month Wamda X programme, which would have awarded her a $16,000 grant (Dh58,770), office space next door to Wamda Capital’s headquarters in the Dubai Design District and a $100,000 buy-in option at the end. But Ms Aboulhassan says she is not disheartened.
“They were interested in the idea, they liked it, but they said that the market was not within their experience. It’s very technical,” Ms Aboulhassan says. “Finding funding for this type of program is challenging.”
Venture capital activity in the Mena region hit record levels last year with 366 investments amounting to $893 million in funding – up nearly a third than in 2017, according to start-up community platform Magnitt's 2018 Mena Venture Investment Report. While the UAE was the most active for investors with 30 per cent of all deals, Egypt was the fastest growing, receiving 22 per cent of the deals – an increase of 7 per cent from 2017.
As Egyptian start-ups mature into the next phase of the business cycle, looking to expand and scale up, they require bigger and later-stage investments. While challenges abound, players in Egypt's start-up scene are seeing positive trends, including more expertise, societal acceptance and government support - and also potential for growth.
In 2018, there were 81 deals in Egypt, including Samsung’s acquisition of knowledge engine start-up Kngine, in comparison with 54 deals in 2017, according to Magnitt. The amount of funding invested in Egyptian start-ups more than doubled – from $30 million to $73m year-on-year.
Other notable deals in 2018 included digital health care start-up Vezeeta's $12m series C funding – the biggest investment round secured by an Egyptian tech company – led by Saudi Technology Ventures, the region's largest VC fund. Ride-sharing start-up Swvl raised $8m in a series A round, while online recruitment software BasharSoft raised $6m in a series B round for its job platforms Wuzzuf and Forasna.
Dubai's Wamda Capital, which has invested in Careem and Mumzworld, also recently invested in two Egyptian tech start-ups: online real estate marketplace Aqarmap and Arabic-focused social media monitoring platform Crowd Analyser.
“Over the last couple of years … we’ve seen an exponential uptick in the number of start-ups started by Egyptian entrepreneurs,” says Fares Ghandour, partner at Wamda Capital. “That’s due to the relative political and economic stability of the country, but also the underlying exponential adoption of smartphones and feature phones and mobile internet.”
With a population of 100 million and a median age of 25 years, Egypt has enormous potential. Many Egyptian start-ups started springing up post-uprising in 2011 and the support network has followed suit with CV companies such as: Algebra Ventures and Sawari Ventures; start-up accelerators Flat6Labs and the American University of Cairo's Venture Lab; and entrepreneurship events such as RiseUp Summit entering the scene.
RiseUp, established in 2013, puts on the largest innovation and entrepreneurship event in Mena annually in downtown Cairo. In December, it published the first edition of the Startup Manifesto, which outlines current challenges and ways to improve Egypt's entrepreneurship ecosystem.
The Startup Manifesto notes that in 2017, Egypt reached an annual growth rate of 5 per cent, the highest since the political and economic upheavals that followed the 2011 uprising. The private sector has a strong role to play, contributing around 60 per cent of gross domestic product and accounting for 74 per cent of employment, the report adds.
Ahmed El Alfi, who is the co-founder of VC company Sawari Ventures in Cairo and regional start-up accelerator Flat6Labs, says there are other factors at play as well.
“The two biggest trends are: the change in attitude of entrepreneurs and their families in accepting the concept of entrepreneurship as a career path or as a life choice; number two, the change in attitude of all branches of the government in the value they put on entrepreneurship and promotion of entrepreneurship as value to the economy,” Mr El Alfi says.
The Ministry of Investment and International Co-operation created Fekretak Sherketak, a nationwide initiative to support the growth of Egyptian entrepreneurs through its accelerator Falak Startups and its venture fund Egypt Ventures in September 2017.
There has been a growing interest in entrepreneurship in general. At the Greek campus, a 25,000 square-metre office park (also co-founded by Mr El Alfi) near Tahrir Square that launched in 2013, more than 130 start-ups work and collaborate.
Ayman Ismail, the Jameel Chair of Entrepreneurship at the American University of Cairo and a co-founder of the AUC Venture Lab, says when he started working at the university in 2011 there was only one undergraduate entrepreneurship course on offer.
“Now we have 500 to 600 students taking entrepreneurship courses every year … so more than half of the students are now taking entrepreneurship courses in a formal way and an additional percentage is getting engaged in entrepreneurship in different ways, whether through doing an internship in a start-up or even starting a company,” says Mr Ismail, a former McKinsey consultant.
Many of the start-ups in Egypt are driven by the need to address social and environmental problems.
“The new generation is all about having an impact and having a purpose,” says Dina El Mofty, the founder of Injaz Egypt, a non-profit organisation that is a part of the Junior Achievement worldwide network. Injaz Egypt has seed funded and supported around 75 start-up businesses, while also training and mentoring hundreds of thousands of school and university students.
Some examples of social impact-driven start-ups include: Swvl, which allows users to book affordable fixed-route bus rides as an alternative to the inconvenient public transportation system and expensive ride-hailing services; Reform Studio, which upcycles plastic bags, turning them into stylish functional products; and Greenish, which is cleaning up the Nile river and delivering workshops to waste collectors to improve their value chain.
The top challenge now – with expertise and bankable ideas in abundance in Egypt – is funding.
“The part that’s missing is there hasn’t been enough participation by the funding entities,” says Mr El Alfi, who is also the founder of Nafham, the top online video educational platform covering the Egyptian public school curriculum. “Whatever it is, it’s a drop in the bucket. We need much, much more money and funding for start-ups relative to the amount of talent we have in Egypt,” he says.
Tarek Assaad, managing partner at Algebra Ventures, a $50m VC in Cairo that invests in early-stage technology companies, agrees.
“We’re happy at the pace at which we’re investing, but there’s certainly a funding gap in the $200,000 to a million dollar range. We see a lot of companies that want to raise $500,000, $300,000 … and don’t find someone to write that check,” says Mr Assaad, citing an insufficient number of angel investors in Egypt.
As for the potential for Egyptian start-ups to expand and succeed elsewhere, Mr Assaad says “the proof of that is Fawry”. As a managing partner at Ideavelopers, Mr Assaad had invested in Fawry, the pioneering e-payments network, that was valued at more than $100m in 2015.
“There’s a big enough market in Egypt and a big enough talent pool for an Egypt-only player to be successful,” Mr Assaad says. “However, there’s also tremendous opportunity, once you create something that works in Egypt — because Egypt is a difficult market to operate in – [you can] take what you’ve done in Egypt and roll out it out in other countries.”