The north African nation is in the race to be the fastest growing entrepreneurial hub in the world
Suparna Goswami Bhattacharya
February 6, 2015: Back in 2013 when majority of Egyptians were busy revolting against the then president Mohammed Morsi, there was a parallel revolution going on in Egypt involving the young from the tech world, which gave birth to Cairo’s startup culture.
Today, with a bustling population of around 90 million, 50% of whom are below the age of 27 and tech savvy, Egypt is suddenly in the race to be the fastest growing entrepreneurial hub in the world. And it has a lot of factors going for it — internet penetration is around 45%, a fast growing ecommerce base (expected to grow by 36% by 2016 according to research conducted by Jumia, an Africa-based ecommerce retailer), and a young population, which is tech savvy. And, the best aspect of doing business in Cairo lies in the ravenous spirit of its entrepreneurs and the massive opportunity the country provides in terms of a huge market.
For many, the tough economic condition in Egypt has been a blessing in disguise.
“Egyptians would not have survived without their entrepreneurial spirit given the tough economic conditions and lack of employment opportunities,” says Hanan Abdel Meguid, a prominent entrepreneur and an active angel investor based in Cairo.
It all started five years ago when US President Barack Obama visited Cairo and pledged a new fund ($455 million) for the Middle East to support the growth of startup businesses. Egypt was the first recipient of the fund, which helped various organisations fund startup weekends, competitions, training and so on. However, this got accelerated by the revolution in 2011 when thousands took to the streets to protest against lack of freedom of speech, high level of corruption, rising unemployment and income gaps. The movement toppled the government and gave the youth hope in a way that never existed before.
The movement had a spillover effect, which saw the return of some Egyptian diaspora from across the globe who then set up investor groups, incubators and co-working spaces. Many venture capitalists showed renewed interest in the region and some started their own firms.
Investors are now investing big time in firms in the food sector, ecommerce and the payments sector. “With the extreme centralisation in our big cities and a lack of proper retail experiences, the need for ecommerce is very clear. This provides a great opportunity to Internet services firms. Hence, in terms of product and revenue, these firms have moved faster than the rest,” says Meguid.
As a result, Egypt, or rather Cairo, today is home to many successful startups. The year 2014 saw Shahiya.com, the largest cooking recipe site in the Middle East, being bought by Japan’s Cookpad for $13.5 million.
There are numerous other success stories as well. While some startups want to continue focusing on Egypt, there are some who want to take their product and services to other countries. Con O’Donnel, entrepreneur and investor in Egypt, says, “Those who want to focus on the global market develop a product or service and then test the same in Egypt. At the same time, there are many who are content with focusing just on Egypt.”
Besides ecommerce and food, technology in healthcare, education and energy are other sectors on which investors are betting big time. “Apart from technology, startups focusing on providing financial services to serve the unbanked and under-banked have a bright future. Also, given the engineering talent among Egyptian graduates, there are specific opportunities in semiconductor design, hardware products, analytics and security,” says Ahmed Alfi, CEO, Sawari Ventures, a venture capitalist firm. Alfi has invested millions of his own fortune in growing Egypt’s tech startup scene.
Egypt is now attracting startups from neighbouring countries as well. Many are relocating to Egypt to start their businesses. Many startups from neighbouring countries attended the RiseUp Summit in October 2014. “The summit drew investors from European capitals, Silicon Valley and from around the region. It also saw entrepreneurs from Morocco and Iraq. We are hoping for a much bigger summit this year,” remarks O’Donnel.
Yet, Egypt is still a long way from being the next Silicon Valley. The education system in the country is yet to cultivate an entrepreneurial spirit among students. The country also needs more investors who are ready to put in their money in a startup.
Though the government has announced big funding initiatives, it is not yet clear how they will run it. Their incubators and accelerators are poorly managed, and much of the funds they allocated made no impact. The government is still trying to work out the best way to grow entrepreneurship.
Though Egypt has started well on the startup front, it needs to follow up well to see the next Google or Facebook coming from the country.