The US venture capital firm 500 Global has opened an office in Cairo — its first in Africa — nearly a decade after making its initial investments in Egyptian start-ups.
“We feel very strongly that our conviction to invest in the best founders everywhere has paid off,” 500 Global’s chief operating officer and managing partner Courtney Powell told The National.
“We’re now investing from the first cheque all the way to pre-IPO [initial public offering]. So we’re expanding the stage of the funds and expanding very aggressively from a geographic perspective as well.”
As the Arab world’s most populous country with one of the fastest growing start-up ecosystems in the Middle East and Africa, Egypt has “a strong market of talent and new start-ups being born”, Ms Powell said.
Venture capital funding in Egypt-based start-ups reached $491 million last year and recorded a compounded annual growth rate of 117 per cent between 2017 and 2021, start-up data platform Magnitt said.
Despite recent macroeconomic challenges and layoffs at high-profile start-ups such as Nasdaq-listed Swvl, Egyptian start-ups have raised a total of $488 million in the first 10 months of this year, Dubai-based entrepreneurship platform Wamda reported.
500 Global, formerly 500 Startups, started out in 2010 as an early-stage venture fund and seed accelerator in Silicon Valley’s Mountain View.
Founding partner and chief executive Christine Tsai made the decision to invest outside the US from the very start, based on the idea that “talent is everywhere, opportunity is not”, Ms Powell said.
Today, the San Francisco-based firm has $2.7 billion in assets under management and has backed more than 5,000 founders representing more than 2,700 companies operating in 81 countries.
Its portfolio includes 49 unicorns — companies valued at more than $1 billion — and more than 150 companies valued at more than $100 million. More than 40 per cent of the unicorns are outside the US.
Nearly 200 team members with 500 Global are on the ground in about 30 countries, including Bahrain, Saudi Arabia and the UAE.
500 Global made its first investment in the Mena region in 2012 in a Jordanian reviews website called Jeeran. In 2017, it launched its first Mena-dedicated fund, Falcons, which closed at $33 million.
The opening of 500 Global’s Cairo office marks a new milestone in the region. Over a period of three years, 500 Global and the Egyptian IT Industry Development Agency (Itida) will deploy three programmes that will support nearly 200 start-ups and about 60 accelerator managers.
They include boot camps for seed-stage companies and accelerator managers, and a “scale-up” programme with possible investments for companies that are at the slightly more advanced “pre-series A” stage.
The goal of Itida, the executive arm of Egypt's Ministry of Communications and Information Technology, is to increase the global competitiveness of the country’s IT industry and make it a key contributor to economic growth.
“The partnership comes within the ministry’s keenness to establish co-operation with key global players to build an inclusive and robust network of experts and investors, aiming to accelerate the growth of the local start-up sector and boost the innovation-based entrepreneurship,” said Minister of Communications and Information Technology Amr Talaat.
Itida has invested about 5 billion Egyptian pounds ($204 million) in building and creating a vibrant start-up community at Creativa Innovation Hubs spread across the country. The 500 Global Egypt office will be located at the Creativa in Giza, close to Cairo University.
500 Global has appointed seasoned investment professional Amal Enan as the Cairo-based partner to lead the office and oversee deal-related activities in the country. She joins four other general partners in Mena.
Ms Enan previously served as executive director of the Egyptian-American Enterprise Fund and as chief investment officer at the American University in Cairo. She has also held positions at EFG Hermes, the International Finance Corporation and Egypt’s Ministry of Finance.
Most of her roles have been geared towards how best to serve the Egyptian market and “impact policymaking in Egypt”, Ms Enan told The National.
For example, she managed the investment strategy for the Egyptian-American Enterprise Fund “at a time when no one — literally no one — was investing in Egypt from the global investors”.
Even with the economic challenges due to the Russia-Ukraine war, 500 Global “doubling down” in Egypt is testament to the country’s start-up market potential, Ms Enan said.
“Egypt is really a gateway between the Middle East and Africa, and the potential there is showing more opportunities for exits and more opportunities for all stages of investing,” she said.
Ms Powell said the fast scale-up of Egypt’s ecosystem and strong government support for innovation are key enabling factors.
Egyptian start-ups have progressed beyond the “clones” stage and there are many examples of “really unique” concepts, Ms Powell said.
She cited MaxAB, which connects suppliers with traditional food and grocery retailers using data-driven technology.
As a strong proponent of supporting women founders, Ms Powell said she would “love to see more female general partners” in Egypt.
“There’s a mission behind 500, which is uplifting people and economies through entrepreneurship. So by writing cheques to women, we believe that more cheques will be written for women, more jobs will be created for women,” she said.
More broadly, 500 Global wants to make sure it drives a “healthy, thriving ecosystem that is sustainable”.
“When I think about unicorns, and especially in emerging markets, I always want to push the point of sustainability,” Ms Powell said.
“We don’t want to have a situation where there are artificially inflated unicorns. We want it to be a real thing that is indicative of a very strong future of the ecosystem.”