Start-ups in Egypt received a record $190 million in funding last year, accounting for more than one-fifth of every venture capital deal in the broader Middle East and North Africa region, according to a new report.
Total funding deployed into Egyptian start-ups jumped 30 per cent year-on-year, higher than the 13 per cent growth in venture capital investment recorded across the region, data platform Magnitt said in its 2020 Egypt Venture Investment Report.
Venture capital investments in Egypt have grown at a compound annual rate of 100 per cent over the past five years. With 114 transactions in 2020, Egyptian start-ups accounted for 22 per cent of all deals, coming in second in volume terms behind the UAE, which accounted for 26 per cent of all Mena transactions.
Egyptian deal volumes were down 14 per cent on an annual basis. The decline in activity was largely attributed to the fall in the number of accelerator programs. Accelerated deals were responsible for almost half, 48 per cent, of the total transactions in the country in 2019, dipping to just 20 per cent in 2020, according to the report.
“Egypt is home to the region’s largest start-up ecosystem. We treasure this fact and back it,” Amr Talaat, Egypt’s Minister of Communications and Information Technology said in the report, which was sponsored by the country's IT Industry Development Agency.
“Today, we see Egyptian start-ups driving culture change in the business environment; proactively and innovatively addressing societal and economic needs,” the minister said.
The digital start-up scene is evolving in Egypt and is being supported by “progressive legislation, diverse technical capacity-building programmes and novel funding mechanisms", he added.
Magnitt said the digital transformation experienced in 2020 had a positive effect on the e-commerce and healthcare sectors, with the number of e-commerce start-ups receiving funding increasing by 64 per cent year-on-year, raising a total of $18m. Ventures operating in the healthcare ecosystem registered a 1,600 per cent growth in capital deployment, amounting to $57m.
“Vezeeta’s Series D round accumulated $40m alone … [and] venture investment into transport demonstrated resilience against Covid-19’s global impact on the sector, [as] Swyvl’s $26m [fundraise] and Halan’s $15m put the industry in second place,” according to the Magnitt report.
Supporting start-ups and developing digital infrastructure in the most populous Arab nation is among the top priorities of the Egyptian government, which is ramping up its “Digital Egypt” initiative and providing legislative support to bring more technology ventures to the country.
Egypt was included among the top 20 economies globally in management consultancy Kearney's index that helps companies decide on the location of their offshore operations. The North African economy recorded a score of 5.62 per cent on the index and was ranked 15th globally in the 2021 Kearney Global Services Location Index.
The index analyses 47 metrics across four main categories: financial attractiveness, people skills and availability, business environment and digital resonance.
Both the UAE and Egypt are “financially attractive locations with competitive compensation and infrastructure costs, strong entrepreneurial cultures and public sectors willing to make strategic investments”, the Kearney report said.