The Egyptian startup ecosytem: a youth perspective

According to MAGNiTT’s State of MENA Funding 2016 report, Egypt was ranked as one of the top five countries in the Arab world (including the UAE, Lebanon, Jordan and Saudi Arabia) when it came to the percentage of startup deals and the amount of investment in startups between the years of 2014 and 2016.

During this three year period, there was a total of 8% of deals made in Egypt with a total sum of $24 million, putting the Egyptian startup ecosystem in third place and fourth place for each of these measures respectively.

However, as the MENA region’s most populated country (with an estimated population of 95 million people) and countless underserved populations and markets, the Egyptian startup ecosystem should be growing at a faster rate.

However, this is not the case, but why is this so? In order to answer this question, I spoke with Omar Rabie, a passionate youth development advocate and startup enthusiast in Egypt.

Meet Omar Rabie

In 2012, Omar graduated from Cairo University with a Bachelor’s of Law. However, unlike most recent law graduates in Egypt, instead of choosing to pursue a career in law, he decided to take a different path. He entered the world of entrepreneurship and development, which he developed a passion for during his university years when he worked with different NGOs, student-led groups and youth organizations,

Over the past five years, Omar has gained extensive experience in the areas of social innovation and entrepreneurship in Egypt, by providing countless social enterprises, startups and non-profit organizations with moral support and legal advice. However, that’s not all that Omar has been up to since he graduated from law school.

Since 2012, Omar has also completed a master’s degree in Euro-Mediterranean Studies at Cairo University and a diploma in Social Innovation Management from the University of Peace Center for Executive Education in Costa Rica.

In addition to that, Omar has also earned a post-graduate certificate in Social Innovation Management from the Amani Institute in Nairobi, Kenya, where he also completed a legal apprenticeship at IKM Advocates and DLA Piper Africa.

Currently, Omar is in charge of establishing (and replicating) new business incubators and providing different means of support to the startup ecosystem in Egypt under the umbrella of the USAID’s Strengthening Entrepreneurship and Enterprise Development (SEED) Project.

In this interview, I ask Omar, a young Egyptian who is well on his way to building an amazing career developing the capacities of startups in the MENA region, how he feels about the startup ecosystem in his own country.

1) Can you give an overview of the Egyptian startup ecosystem and how it has developed over the past couple of years?

Traditionally, Egypt’s economic market has always been dominated by large legally registered corporations and the informal sector. Nevertheless, in the last couple of years, the Egyptian government has started to pay more attention to small and medium enterprises (SMEs), because they’re providing access to new funding and business opportunities to develop the country’s economy.

Yet, despite the growing support for entrepreneurship within the country, SMEs still struggle to survive (and thrive) in Egypt, because they’re disrupting the traditionally dichotomous nature of the country’s business ecosystem and its slow-changing legal frameworks.

However, while it might seem like there’s not much support or space in the current business ecosystem for startups to flourish, if you compare the current condition of entrepreneurship in Egypt to what it used to be before, you would see a remarkable difference.

Recently, various initiatives have been introduced  to promote entrepreneurship in Egypt including:

  • A new investment law that aims to encourage foreign direct investment.
  • A new agency that has been established under the Ministry of Trade and Industry with the express goal of supporting Egypt’s micro, small and medium enterprises (MSMEs).
  • An ongoing commitment to develop and establish Business Development Centers (BDS), and One Stop Shops (OSS) [Note: OSS are local municipality offices that allows business owners to register a business and become a legal business entity in Egypt all under one roof]

However, even though there are a growing number of initiatives that aim to support the startup ecosystem in Egypt, many of these new initiatives have yet to be fully implemented (or reach their full potential) because of a lack of legal enforcement and institutional inertia. Both obstacles that are the result of Egypt’s outdated and lethargic bureaucratic systems.

So, in sum, while the Egyptian startup ecosystem has experienced an uphill battle over the last couple of years, it has been gaining more support (and momentum) from various key stakeholders. However, there’s a lot of work that needs to be done to streamline the entrepreneurial journey, so that the Egyptian startup ecosystem can continue to grow.

 

 2) What role have youth played in the development of the startup ecosystem in Egypt?

Youth are the main engine behind the growth of the startup ecosystem in Egypt. If you look at the profile of the average person who wants to start a business in Egypt, you’ll quickly discover that most of them are under the age of 30.Why is that? Because Egyptian youth are more willing to take the entrepreneurial leap and go through all the trials and tribulations that are required to found a startup in Egypt.

Since I’ve started working with USAID, I’ve visited dozens of incubators throughout Egypt and during these visits, I’ve noticed that the majority of people at these incubators are either young university students or fresh graduates.

Many of these young people gather in incubators because they’re trying to launch a career or envision a future where they’re following their entrepreneurial passions. Instead of looking for a job in the traditional job market and getting stuck in a never-ending cycle of unfulfilling underemployment.

With that in mind, we have to put more effort into empowering young Egyptian entrepreneurs, if we really want to see the country’s startup ecosystem thrive in the future.

 3) What are the main challenges that young entrepreneurs face in Egypt?

Honestly, young entrepreneurs in Egypt face challenges in everything! Although Egypt has all of the elements to build a vibrant startup ecosystem, it doesn’t have all of the elements properly in place.

For example, although a new agency has been established to oversee the growth of the startup ecosystem in the country, you may find contradicting laws and different definitions for an SME.

Despite the various initiatives that have been introduced over the past couple of years to help the Egyptian startup ecosystem grow, there are still many issues that continue to hinder this growth including:

  • How difficult it is to establish an SME in Egypt’s current business ecosystem

The process of setting up a business in Egypt can take up to a month or two- or sometimes even longer. Although the OSS system was created to reduce the time it takes to set up a business, the system has yet to alleviate this problem.

As many of the OSS offices have overlapping laws and regulations requiring different documents and approvals, which ultimately results in a confusing registration process for Egyptian entrepreneurs who want to establish a formal business entity.

  • The lack of appropriate business licensing options and legal frameworks

Not all startups fall under the available business categories in Egypt. Consequently, more business licenses and supporting legal frameworks need to be introduced in Egypt by the relevant stakeholders.

However, this has yet to be done. Therefore, many entrepreneurs are forced to create limited liability companies, because it’s the most feasible licensing option.

  • The inability of startup founders to easily access startup capital

Although the Egyptian government has pledged billions of dollars to support the Egyptian startup ecosystem, very few entrepreneurs have actually been able to get access to this funding, because there are strict banking policies that regulate the dispersal of these funds.

  • The complex legal requirements for operating a business

Getting one license to operate a business in Egypt is hard. Now, imagine if you had to get more than one? Unfortunately, this is the case in many economic sectors including the food; import and export; and manufacturing industries.

If you want to legally operate a restaurant in Egypt you need to obtain more than 10 licenses to do so! So, imagine if you were trying to found a startup in an industry that doesn’t even exist in Egypt yet? You may or you may not be be able to do so!

  • The lack of professional business networks for Egyptian entrepreneurs

Although many professionals in Egypt’s larger corporations have access to several established business networks, there are only a small number of networking opportunities and professional business networks for Egyptian entrepreneurs.

However, these networks need to be developed in order to allow for startup founders and other key stakeholders in the ecosystem to meet, collaborate and leverage each other’s knowledge.

The RiseUP Summit is just one example of an effort to create such a space for entrepreneurs in Egypt. Since its first edition in 2015, the RiseUp Summit has become a popular annual international event, which gathers thousands of entrepreneurs and some of the most important stakeholders in the MENA region’s startup ecosystem.

  • The limited understanding of startups and what it takes to be an entrepreneur

Although more and more young Egyptians are interested in the idea of entrepreneurship, you will find that the majority of young people still don’t know much about the startup world or its key stakeholders.

Consequently, many of them don’t know where to go to access the knowledge, support and expertise that they need to establish their own business. So, they look for a secure job, instead of taking the risk of starting their own business- no matter how much they might want to do so.

4) What are the most underutilized resources available to young entrepreneurs in Egypt?

There are many organizations and networks in Egypt who are trying to support young entrepreneurs. However, there tends to be one of three problems:

i) Sometimes young entrepreneurs don’t know where to look to find the right organizations to support them, even though the number of these organizations is increasing in Egypt.

ii) There are many young people who either don’t believe that this kind of support really exists or they have never heard about certain incubators or accelerators.

iii) Even when entrepreneurs can find the right organizations to help them, these organizations often struggle to incubate and support them. Especially, if the SMEs in question are located in other regions of Egypt, since most of the organizations that can offer this kind of support are usually located in Cairo.

Here is a list for just some of the active key players in the Egyptian startup ecosystem:

  • Endeavor Egypt: a Cairo-based international organization that supports high impact entrepreneurs who are already well-established.
  • Flat6Labs: a Cairo-based regional organization that support startups with proven business models. They operate on a venture capital model, where they provide funding in exchange for equity.
  • V-Lab: an accelerator operating under the umbrella of the American University in Cairo, which takes startups through an intensive program that culminates in a demo day where the startups pitch to potential investors.
  • Nahdet ElMahrousa: a Cairo-based organization which acts as an incubator for early-stage social enterprises.
  • Enpact: a German company operating in Cairo, which provides mentorship and guidance to startups in different stages.

If you’re interested in learning more about incubators in Egypt you can check out this list.

5) What recommendations do you have for youth who want to enter the world of entrepreneurship in Egypt?

Here are my recommendations for Egyptian youth who want to enter the Egyptian startup ecosystem:

  • Do an exhaustive amount of research on your startup idea and be ready to pivot when necessary, as the Egyptian market can be quite volatile at times. Due to the high level of competition and the constant introduction of new trends.
  • A team can make or break a startup, so make sure to choose the right cofounders (or cofounding team) and be ready to work really hard. Harder than you ever expected.
  • Create a thorough business plan and make sure that you understand all of the legal procedures required to legally operate a startup in your chosen industry.
  • Once you have a clear understanding of your startup idea and all of the requirements that you need to run your business, make sure that you have access to your designated consumer market and that you have a high-risk contingency plan in place.
  • Make sure that you have enough funds to sustain you through at least one full year of your startup’s operation, as the Egyptian market is quite big and requires a lot of creative and targeted marketing- especially if you’re presenting a new idea or business model.
  • Accept the fact that dealing with long bureaucratic processes is an inevitable part of the Egyptian startup experience. Once you can accept that, you will be able to channel your energy into more productive pursuits.

More entrepreneurial reads!

3 Lessons MENA entrepreneurs can learn from Mazza café in Tajikistan

3 Ways To Promote Youth Participation In The MENA Region

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