Why Egypt’s Startup Ecosystem Is Seeing A Funding Revolution
Back in 2011, a political revolution in Egypt captured the imagination and triggered a regional democratic uprising. Fast-forward seven years, and the desired freedom has not yet quite come to pass, but the country’s tech scene is making dramatic gains.
In September, digital health startup Vezeeta bagged the biggest investment round ever secured by an Egyptian tech company, at $12 million, but that only tells part of the story. The annual African Tech Startups Funding Report released by tech startup news and research platform Disrupt Africa in January found Egypt was the fourth most popular destination for tech funding in 2017, but 2018 is already a much better year.
Already 18 Egyptian startups have raised funding this year, five more than in the whole of 2017, with these companies raising a combined total of over $30 million, three times last year’s tally. Vezeeta scored big, but so too did jobs platform WUZZUF and ridesharing startup Swvl.
Aside from the perhaps inevitable return of investors as the political climate cooled post-2011, what accounts for the growth of the Egyptian startup scene? Much of the increase in funding can be attributed to the launch of Algebra Ventures, the $50 million Cairo-based venture capital firm that has invested in a host of early-stage Egyptian technology companies over the last couple of years.
“We believe that technology startups in Egypt have the potential and the drive to leverage innovation to disrupt and transform large markets and solve problems at scale. We’ve already seen technology transform our societies and we know that this is just the tip of the iceberg – we want to help build the market-leading companies of tomorrow,” said the firm’s managing partner Tarek Assaad.
Algebra Ventures sees these startups in Egypt, which is becoming a hotbed for innovation. The country has the largest population in the Middle East and North African region, and the third largest in Africa. It also has 50 million internet users. Regional and global tech players are competing in areas like transportation and e-commerce, but hundreds of local startups are also growing fast.
Ameer Sherif is CEO of BasharSoft, the company behind WUZZUF. He says a host of new VC firms and accelerators have launched in Egypt over the last couple of years, with the scene basically unrecognisable now from what it was a few years ago.
“Four years ago, we were the first startup from Egypt to get funding from 500 Startups. Today, there are more than 15 Egyptian startups who raised from the global tech accelerator. I believe regional and global investors have recently become more interested and seen the potential in Egypt thanks to the success stories and growth local startups have been seeing recently,” he said.
Even though Egypt remains slightly unstable politically, Sherif does not see the tech space’s gains being reversed.
“The world economy and global politics as a challenge have become a norm. The most successful founders find ways to build and grow their startups regardless of market challenges, and Egyptian founders are no exception,” he said.
“The past few years after the revolution in 2011 were tough, but great companies are generally built in tough times. There are still some other challenges in Egypt like in online banking and payments, but there is a plethora of fintech startups that hold the promise of things improving vastly.”
Nonetheless, Egypt as a market remains relatively small, and international expansion is critical if startups are to reach their full potential. Geographically, it is stuck between the Middle East and Africa, with startups having to decide which way to expand first.
Assaad said that decision should be taken based on the kinds of problems startups are solving. Yet sub-Saharan Africa should not be discounted as a market.
“We see a lot of startups who want to expand to the UAE and Saudi Arabia because Arabic is a common language, and sometimes that’s where they should be growing, but very often there are real and missed opportunities in African expansion,” he said.
“Especially when companies are solving large-scale problems in Egypt, there are other African countries that are structurally and demographically similar to Egypt and with many of the same challenges, so African expansion would create unique value and generate significant economic returns.”
Tom Jackson is co-founder of Disrupt Africa, a news and research company focused on the African tech startup ecosystem.