Egyptian startup - Afrikan Heroes

Early Stage Startups In Egypt Have A New VC In Town, Foundation Ventures

October 25, 2020

Early stage startups in Egypt can now knock on the doors of Foundation Ventures, the latest venture capital firm in the North African country. The VC has the capacity to invest from pre-seed to Series A. Already, it has made investments in four startups, namely two in fintech (NowPay ($2.1m) and Capiter); one in entertainment tech (Minly); and one in logistics currently operating in stealth mode.

“Our fund construction strategy is built around the idea of playing a supporting role to the startups and de-risking through adding value. FV has a very wide network of enterprise partners that our portfolio companies can tap into, allowing them to unlock immediate growth and access wide distribution channels. We like to remain highly engaged with the teams we back. Once invested we ensure that we dedicate enough time and resources supporting the founders, we basically become employees in the companies we invest in and try to help the team we invest in any way we can,” said Omar Barakat, one of the partners on the team.

L-R: Partners, Ziyad Hamdy, Mazen Nadim and Omar Barakat .

A Look At The New Venture Capital Firm

One remarkable thing about the new VC is that it says it is prepared to take risk, funding startups even before they go to market or gain traction.

“We believe that the best way for the ecosystem to mature and grow is through a collaborative approach, and this is why we love club deals and working closely with other local and regional investors,” it says in a statement.

The VC also says it invests across all sectors.

“The ecosystem in the region is still not at a place where any fund can be dedicated to a single sector in our view. We are sector agnostic and we map out markets and themes and try to identify high potential opportunities. And while we try to monitor these trends and shifts in consumer and market behavior we believe more in founder-led insights. Learning from entrepreneurs about their solutions to particular problems is what excites us the most,” it says.

Foundation Ventures equally likes to lead the rounds but also doesn’t mind taking part in an already structured deal. Its average investment ticket size starts from $300,000, although it has the possibility of following-on in future rounds of their portfolio companies.

Foundation Ventures is managed by Mazen Nadim, Omar Barakat, and Ziyad Hamdy, in partnership with US-based VC firm HOF Capital, and Egypt-based private equity firm BPE Partners. The fund is backed by some of the largest family offices and business leaders from Egypt and the Middle East and North Africa (Mena) region.

Being part of the FV’s network, FV will help its portfolio companies scale up quickly by enabling them to access and utilise the resources of its limited partners and enterprise partners, expand their reach and product offering, access top industry experts and potential investors.

The VC recently co-led a $2.1 million seed round in NowPay.

What Startups Is The VC Looking For And How May They Apply?

Egyptian startups from all sectors are welcome.

“We’re on the look for full-time founders who are articulate in discussing the company and their vision for it, have built strong technical teams (complemented by an operationally competent CEO), and have a solid understanding of their target market,” said Ziyad Hamdy.

“We try to look for startups that are solving a challenging high-value problem, can offer a big improvement over incumbent solutions and build long-term defensibility,” he added.

However, it seems the VC is more interested in founders with long-term focus and not those with short term exit plans.

At seed-stage, Foundation Ventures looks out for measurable traction, user engagement, and evidence of market acceptance, it says. It also says expects the startups to have identifiable target customer and monetization strategy, scalable, and capital efficient business with favorable unit economics.

Interested startups may contact them here, or through the partners Ziyad Hamdy, Mazen Nadim and Omar Barakat.

Charles Rapulu Udoh

Charles Rapulu Udoh is a Lagos-based lawyer who has advised startups across Africa on issues such as startup funding (Venture Capital, Debt financing, private equity, angel investing etc), taxation, strategies, etc. He also has special focus on the protection of business or brands’ intellectual property rights ( such as trademark, patent or design) across Africa and other foreign jurisdictions.
He is well versed on issues of ESG (sustainability), media and entertainment law, corporate finance and governance.
He is also an award-winning writer

Egypt’s Startup Argineering Raises $400,000 To Build Its Products

March 14, 2020

Tim Chae, general partner at 500 Startups

Joining the league of fund raisers even in the face of the coronavirus pandemic is Egypt’s startup Argineering which has raised $400,000, closing its seed round led by 500 Startups and Flat6Labs Cairo.

‘‘In the middle of COVID19, the true entrepreneurs and investors reveal themselves. Entrepreneurship has no politics. We expect to write over 300 checks this year at @500Startups. Be part of 18 unicorns and 90+ Centaurs. The next unicorn and centaur founders are starting today,’’ Tim Chae, general partner at 500 Startups noted in a tweet.

Here Is The Deal

Also participating in this round of investment is an Angel Investor, Islam Mahdy, who is also the chairman and CEO of Credence and a hospitality entrepreneur who excels in designing human-centered experiences.
With this investment Argineering is looking to accelerate the development of a new feature backed by Artificial Intelligence and Data Analytics.
Translating the customer interaction to data, Argineering’s co-founders David Erian and Islam Gamal are betting on this feature to be their biggest revenue stream.
In 2018, the same year it was founded in, Argineering won both RiseUp’s pitch competition and CBC’s Hona El-Assema and has been making waves in Europe ever since.

Why The Investors Invested

500 Startups, one of the lead investors has been very active investing in North African and Middle Eastern (MENA) startups. Argineering is raising this $400k barely a few weeks after Garment IO secured $450k from investors including 500 Startups; and the fact that Argineering and Garment IO had previously participated in the RiseUp 2018 Startup Pitch Competition, goes a long way to show that Argineering is merely benefiting from the Egypt’s startup community it has been around in for some time now.

500 Startups is a venture capital firm on a mission to discover and back the world’s most talented entrepreneurs, help them create successful companies at scale, and build thriving global ecosystems. In May 2017, it announced the launch of its new MENA focused fund, 500 Falcons, to double-down on MENA startups and founders. The fund is led by Hasan Haider, based in Bahrain, and Sharif El-Badawi, based in Silicon Valley, with personnel on the ground in Saudi Arabia and various other countries in the region.

‘‘Beyond providing seed capital, 500 further supports startups via its Seed Programs in San Francisco and Mexico City and the Series A Program in multiple locations globally. The Seed Program emphasizes digital marketing, customer acquisition, lean startup practices, and fundraising for pre-Seed companies. The 500 Series A Program delivers growth marketing and investment for post-seed and pre-Series A companies. 500 Startups is also aiming to contribute to the development of thriving innovation ecosystems around the world to better equip startups with tools to succeed by running educational programs, events and conferences, and partnerships with corporations and governments around the world,’’ the VC notes.

A Look At What Argineering Does

Argineering is an interactive design lab that provides shop owners and artists with devices that would enable them to create customer interaction through window displays and installations.
With their product “RG Kit,” Argineering had to think meticulously about the market they should start at. Their eyes landed on one of Europe’s busiest shopping avenues, Oxford Street in London.
Their product quite literally caught the eyes of shopping arenas like Selfridges and Ted Baker.
However, Argineering also caters for cultural venues like museums and showrooms; London Science Museum is also one of its clients portfolio.

Charles Rapulu Udoh

Charles Rapulu Udoh is a Lagos-based lawyer who has advised startups across Africa on issues such as startup funding (Venture Capital, Debt financing, private equity, angel investing etc), taxation, strategies, etc. He also has special focus on the protection of business or brands’ intellectual property rights ( such as trademark, patent or design) across Africa and other foreign jurisdictions.
He is well versed on issues of ESG (sustainability), media and entertainment law, corporate finance and governance.
He is also an award-winning writer.
He could be contacted at udohrapulu@gmail.com

Egyptian Transport Startup Swvl targets Nigeria, Africa And Asia before the end of 2019

September 16, 2019

Barring any last minute changes, Egyptian transport technology startup Swvl will expand into two cities in Pakistan in the next two weeks and begin operations in Nigeria’s commercial capital Lagos before the end of the year, its chief executive.

co-founder and CEO Mostafa Kandil — Co-founder and CEO Mostafa Kandil.

“We will enter Lagos before the end of the year, and our eyes are on Dar es Salaam and Abidjan,” co-founder and CEO Mostafa Kandil told Reuters. ‘‘The firm is also planning to launch in other South East Asian markets, he added.’’

Here Is All You Need To Know

The firm, which operates buses along fixed routes and allows customers to reserve and pay for them using an app, will also expand into Manila in the first half of next year, Kandil added.
Kandil said the company is seeking to raise more than $100 million in a financing round in the first half of next year, and is targeting a $1 billion valuation in the next five years.
Since its launch in April 2017 Swvl has secured the biggest round of funding for a tech start-up in Egypt.

“We were a company worth about $2 million two years ago and our paid-up capital is now $80 million,” he said.

Kandil said he hoped Swvl would eventually go public, but did not say on which stock exchange. He said he would in the longer term also consider a buyout offer from the likes of ride-hailing giant Uber (N:UBER).

Kandil, 25, said the company has been losing money, but expects to turn a profit in two to three years.

“This year we have entered about seven new cities and next year we are targeting another 10 to 20 new big cities,” Kandil said.

The Cairo-based firm, which is due to move its headquarters to Dubai in November, launched in Nairobi about six months ago and began operations in Lahore in July.

“We aim to reach one million trips a day in Egypt over the next five years,” said Kandil.

He and two other young Egyptian co-founders, Mahmoud Nouh and Ahmed Sabbah, own more than 30% of the company, he said.

The rest is held by 17 investment funds, including U.S.-based Autotech Ventures, Sweden’s Vostok New Ventures, Oman’s sovereign wealth fund, the UAE’s BECO Capital and China’s MSA Capital.

The Swvl app, which has fixed bus routes, uses the passenger’s location and destination to determine the shortest possible trip time based on the nearest bus stop.

Uber and regional competitor Careem began operating their own bus services in Egypt in late 2018, competing directly with Swvl.

About Swvl

Founded in 2017, Swvl connects commuters with private buses, allowing them to reserve seats on these buses and pay the fare through company’s mobile app. The buses available on Swvl operate on fixed routes (or lines).
The report by Vostok New Ventures, notes,”Swvl offers a premium on-demand bus service with third party supply. The algorithm
plans the most efficient routes and the most efficient bus stops for peak hours, and more flexibility is possible during off peak hours. Network effects arise through the snowball of the more users that are attracted to the service, the more bus owners will want to offer their supply, the more bus supply the more routes etc., the more customers etc.”
It won’t be a fair comparison but to give you some context, Careem had raised its $60 million round (Series C) at a valuation less than $200 million in November 2015, over three and half years after the company was founded.
Swvl is now in the same territory both in terms of total investment they’ve raised so far and the valuation, in almost two years.
The VC landscape in MENA is entirely different today with a lot more options when it comes to raising Series A/+ rounds so the funding is relatively easier to come by (than it was when Careem raised money) but what Swvl has achieved is still a very big feat.

Charles Rapulu Udoh

Charles Rapulu Udoh is a Lagos-based Lawyer with special focus on Business Law, Intellectual Property Rights, Entertainment and Technology Law. He is also an award-winning writer. Working for notable organizations so far has exposed him to some of industry best practices in business, finance strategies, law, dispute resolution, and data analytics both in Nigeria and across the world

Why Exit by IPO Is Healthier For Startup Ecosystems

September 6, 2019

When Egyptian financial technology (fintech) company Fawry went public on 8 August, it was a fantastic moment for the tech ecosystem, not just for Egypt, but the Arab world, and Sub-Saharan Africa as a whole.

Preferring IPO to Private Placement

The technology startup sector has, over the past few years focused too much on fundraising with an aim to exit via acquisitions to companies abroad. This has become the ultimate sign of success for startups, but while it has been the dominant way investors make money and entrepreneurs and their employees realise financial value, it leaves the regional ecosystem wanting.

When I was raising funding for Aramex back in 1996, we were trying to do a private placement which did not get much appeal in the region. People questioned whether Aramex could survive in the face of formidable competition from the giants of the industry even at a mere valuation of $30 million, so we decided to take the company public.

“Great idea, but where do we do that?” I told my partner Bill Kingson. Certainly not on any of the regional exchanges! Why? Because of all sorts of restrictions, from foreign investor restrictions, to small illiquid exchanges, to a restricted process of fund raising and book building, and interference by the regulator in company valuations rather than the market/investors.

“Oh well, let us then go to Nasdaq!”

We listed on Nasdaq in New York and stayed listed on it for five years, then we took the company private in 2002 and listed it again on the Dubai Financial Market (DFM) in 2005. Eleven years later, Aramex continues to be a public company in Dubai, 37 years after its founding.

Why IPO, And Not Acquisition?

While acquisitions can provide a boost for the ecosystem and can bring global investors to the region, initial public offerings (IPO) allow for a deepening of the ecosystem and gives more options to regional startups.

So why is it that companies that could IPO in the region do not even have it in their thinking to go public and why would a company like Jumia, which has its corporate office in Dubai lists in New York rather than on one of the Middle East regional exchanges?

Laying Foundation For Many More Startup IPO

There are several challenges currently in place and the following will need to change if we are to see more companies going public:

Foreign ownership laws: a lot of companies have registered themselves outside of the region to allow for foreign ownership, like the Cayman Islands or the British Virgin Islands. Why is that? The writing is on the wall, a lot of these investors are here, but they invest in entities that are offshore that allow for anyone to be an investor.
Track record of profitability: most of these exchanges require three years’ of profitability before they allow a company to IPO. This is not a restriction visible in most developed markets, Uber went public despite stating it may never make a profit. Investors should be given a choice of whether they invest or not, rather than have the regulator decide what will be a good investment.
Engage these scale-ups: engage the hundreds of companies that are scaling up in the region, talk to their investors, their founders and see what the regional exchanges need to do to get them to list in the region. Changing these laws and regulations will not hurt anyone, they have been tried and tested in the most developed exchanges in the world. Learn from them and make it happen here.
This will be a win-win for everyone. Someone needs to take the first step. Watch Fawry and learn from their experience.

Listing more companies creates deeper liquidity for our exchanges, which they all need. It is also the best way to democratise and to trickle down the benefits of companies like Aramex and Fawry, making liquidity available on the public market — where most of the region’s investors are based.

The bigger the exchange, the more funds there are, the greater the possibility to get investors and give their listed companies their fair value.

How Startups That Went Through The IPO Route Have Fared

Fawry managed to do very well in Egypt, it listed on the Egyptian Exchange at a share price of EGP6.46. After the first day of trading, its share price soared by 31 per cent to EGP8.48, valuing the company at $366 million. It seems regional exchanges can and will give you the valuation that you want.

IPOs give companies the ability to stay independent, keep the brand that they have worked so hard to build, generate liquidity and exits for their investors, create a liquidity option for their founders and employees while giving the general investor public a chance to participate in the success of these companies. It also encourages and widens the base for regional and even global institutional investors to invest in the region and generate healthy foreign direct investments (FDI).

This is exactly what happened with Aramex since it went public on the DFM. Employees enjoyed their stock options, founders were able to find their exits, regional investors had huge appetite for the share, and global investors waited in line to gain access to the share. The company stayed independent, continues to thrive, and retained its talented people and created a great platform to access funding from various financial institutions in the region.

Having the region’s tech and non-tech scale-ups IPO, means the stock exchanges become less dependent on traditional businesses like real estate, banks and insurance companies and can attain the diversity that reflects the new businesses of the 21st century, generating new wealth for a new generation that is currently building the businesses of the future.

Fadi Ghandour is the chairman of Wamda and founder of Aramex, one of the leading logistics and transportation companies in the Middle East and South Asia.

Charles Rapulu Udoh

Charles Rapulu Udoh is a Lagos-based Lawyer with special focus on Business Law, Intellectual Property Rights, Entertainment and Technology Law. He is also an award-winning writer. Working for notable organizations so far has exposed him to some of industry best practices in business, finance strategies, law, dispute resolution, and data analytics both in Nigeria and across the world.

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Egyptian Startup Fawry Goes On Egypt’s Largest IPO

July 22, 2019

This is a major breakthrough for digital platforms across Africa. Less than 9 months after another technologically focused finance solution startup, Sarwa Capital, opened its shares for public subscription, Fawry, the Egyptian digital payment solution has announced it is ready to open itself to the public too by going on its First Public Offering (IPO )

Here Is What The IPO Is Going To Look Like

Although the IPO would come late August 2019 or early 2020, Fawry is only ready to list 36% or more of its stake in the company on the Egyptian Stock Exchange.
The company is eyeing proceeds between EGP 2 and 2.5 bn, which would make the offering the largest Egypt has seen since Emaar Misr raised EGP 2.28 bn in 2015.
It would also value Fawry at EGP 4.5–5.5 bn. The offering will consist of a substantial international component, with the roadshow is set to cover the GCC, European, US, and South African markets.
The offering will include a private placement for institutional investors and an initial public offering (IPO) for retail investors in Egypt at the same price, said investment bank EFG Hermes, which is managing the sale.
The offer price is not yet known as the bank did not give any indication on the expected offer price.
Fawry’s managing director this month told Reuters the company had begun preparing for the IPO on the Egyptian Exchange and that the process would be carried out in 2019 or early 2020.
Financial advisor FinCorp, which Fawry hired to conduct a fair value study, is due to submit its report to the Financial Regulatory Authority within two weeks, after which the book-building process will begin, the sources hinted.
Fawry’s expansion plans include increasing its points of sale, buying new payment machines, and developing Fawry Pay. Fawry also signed an agreement with Dubai Islamic Bank last month to launch a trial run of its services in the UAE this summer.

Here Is Why This IPO is Significant For African Technology Focused Startups

Fawry is owned by local and foreign investment banks and was founded in 2009. About 8% of its shares are in the hands of management and employees.

Fawry’s network processed 600.1 million transactions last year with a total value of 34.2 billion Egyptian pounds ($2.1 billion), EFG Hermes said in its statement.

Fawry made core profit of 152 million pounds in 2018, up 41.2% on the previous year, indicating the increasing viability of FinTech business model across Africa.

The last IPO by a private company on the Egyptian Exchange was financing solutions business Sarwa Capital last October.

Indeed, this IPO shows that Fintech in Africa has increasingly become more profitable as banks. The ability to pay dividends from profits is a major factor every business owner should have in mind before deciding to embark on IPO, and with Fawry which basically runs online with little or no physical presence doing so, this is a major announcement that digitally-focused businesses have finally come to stay.

This notwithstanding, so much credit has to go to the acquisition that happened as far back as 2015. In 2015, a consortium of international financial investors acquired a majority stake in Fawry, a deal that valued the company at EGP773 million (US$100 million) and saw the company adopting an expansion strategy outside of Egypt. The investors are the Egyptian-American Enterprise Fund (EAEF), pan-African private investment firm Helios Investment Partners, and the International Finance Corporation.

* $1 = 16.5600 Egyptian pounds

Charles Rapulu Udoh

Charles Rapulu Udoh is a Lagos-based Lawyer with special focus on Business Law, Intellectual Property Rights, Entertainment and Technology Law. He is also an award-winning writer. Working for notable organizations so far has exposed him to some of industry best practices in business, finance strategies, law, dispute resolution, and data analytics both in Nigeria and across the world.