Egypt may be on its way towards developing Africa’s biggest tech start-up Hub if efforts by both government and entrepreneurs are anything to reckon with. Having lagged behind in catching up with tech innovation and tech driven entrepreneurship, Egypt seem to be working assiduously to catch up and even overtake established names such as South Africa, Nigeria and Kenya.
Recent indices indicate that Egypt made appreciable showing in the tech start-up funding within the last 12 months. In a report titled African Tech Startups Funding Report 2019, 311 startups on the continent raised a grand total of US$491,623,400 in 2019, up 46.7 per cent on 2018. The report reveals a shift in activities from the traditional regions of southern, eastern and western Africa to northern African region with Egypt leading. It shows that eighty-eight Egyptian tech startups secured investment over the course of the year, more than any other African country, and accounting for 28.3 per cent of the overall total. This represented growth of 159 per cent on the 34 startups that secured investment in 2018.
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The Egyptian startups secured almost US$90 million in funding, a higher figure than South Africa and one bettered by only Kenya and Nigeria. This accounted for 17.4 per cent of Africa’s overall total funds raised, and was up 45.5 per cent on 2018. Africa’s “big three” is now a “big four”.
Leading the pack was the US$ 42 million round raised by transport startup Swvl followed by the significant raises for the likes of advertising platform Adzily and e-commerce startup MaxAB, and dozens of early-stage companies backed by accelerators like Flat6Labs, Startupbootcamp and Misk 500. Market watchers however, are in agreement that aside the huge funds raised, there are other driving forces behind Egypt’s rise as a major player in Africa’s tech startup ecosystem.
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Managing Partner at Algebra Ventures, a Cairo-based VC firm which has backed 16 companies over the last couple of years Tarek Assaad opines that the driving force behind Egypt’s rise is not farfetched. He noted that there is a link between a more positive economic indices and the growth of the country’s tech start-ups. Mr Assad added that Egypt is generally becoming a more attractive investment destination because of the improving macroeconomic picture and attractive fundamentals like large population and underserved consumer base. He pointed out that the growing deployment of fintech which the central bank is encouraging through innovative policies is aiding tech startups which have encouraged many entrepreneurs to tackle that space.
“The tech space is attracting investments to support the increasingly maturing founding teams of startups. Egyptian entrepreneurs are tackling large long-unsolved problems such as mobility, distribution and financial services with new digital solutions to build businesses that have the potential to scale significantly and become market leaders,” he said.
Equally note worthy is the success of companies such Swvl, which has expanded to Kenya, and fintech company Fawry, which became the first venture-backed Egyptian company to go public earlier this year, is giving investors more confidence that Egyptian startups can deliver on the market potential of the country. The start-up ecosystem in Egypt is quite encouraging according to Ahmed Ashoor, chairman of Adzily who believes Egypt is a “very promising market” with high growth in population and the number of SMEs, adding that “this paves the way for us to expand as fast as we can, which makes our economy an interesting one to invest in specifically now”.
Tech entrepreneurs however say that all is not rosy. While there is huge potential for investments, challenges still remain in terms of ensuring Egyptian startups have access to the necessary capital. Observers say that there remains a gap in seed funding – the US$100,000 to US$500,000 – and later stage funding, above US$10 million, thus the need for regional players to step in to fill that gap.
Kelechi Deca
Kelechi Deca has over two decades of media experience, he has traveled to over 77 countries reporting on multilateral development institutions, international business, trade, travels, culture, and diplomacy. He is also a petrol head with in-depth knowledge of automobiles and the auto industry