The pounding heart of tech in the region
by Karim Hussein
Egypt has been buzzing with entrepreneurial activity in recent years with ever expanding new businesses and a rich set of supporting institutions and communities. Egypt offers some unique opportunities within the region driven by a large online consumer population, a highly competitive core technology talent pool, a large untapped opportunity in financial services for an under-banked population and rapidly expanding energy demands driving the need for clean technology.
Egypt’s entrepreneurial ecosystem enjoyed some early government support in the last 10 years through several government financed technology funds and government sponsored incubation programs. Since the 2011 revolution, these have been significantly augmented by a growing ecosystem of private startup events, accelerators, incubators, angel networks, venture capital funds and community enablers. There are now over 20 accelerators/incubators, two significant angel networks in Cairo and Alexandria, several local and regional VC funds (with over $70 million in committed capital in the last couple of years), regular startup events throughout the country and an annual regional and international startup summit bringing together emerging businesses, investors, support services and most importantly eager young talent looking for exceptional opportunities.
Until recently there has been a significant funding gap driven by the instability in the political environment and an unclear economic direction. Lately, significant local, regional and international capital has been committed in several venture funds as the ecosystem has matured and a new government economic reform program has largely stabilized the business environment. The significant currency devaluation has also made Egypt even more attractive as a dollar now goes significantly further towards hiring top talent and building out a mature startup. While difficulties remain with government bureaucracy, an outdated corporate law and weakness in infrastructure, the ecosystem is at a major growth inflection point and many new startups are working to transform some of these challenges in to lucrative opportunities.
A large market and challenging economic conditions driving new consumer business models.
Egypt enjoys a large young consumer market 90 million strong and has significant trade links with other Middle Eastern, Mediterranean and African economies. Smartphone and internet penetration has also grown significantly with over 98 million mobile subscribers and a 57% Internet penetration rate with over 20 million mobile internet subscribers and 3 million broadband subscribers. Egypt also has a diversified economy supported by mostly fragmented small and medium businesses which naturally supports industry marketplaces and platforms across a range of services.
In addition, economic challenges and the recent currency devaluation are spurring increased domestic demand for locally produced goods and technologies and are also making those goods more competitive globally. This has provided local startups with a unique opportunity to expand and capture market share locally, regionally and globally.
A long history in technology R&D has built an exceptional talent pool for core technology startups
Over the last three decades leading global technology companies established significant R&D centers in Egypt including IBM, Mentor Graphics, Microsoft, Oracle, Sakhr, and Valeo to take advantage of the highly qualified technology graduates from Egypt’s top universities. Many of those budding entrepreneurs have now established new business leveraging the world class technology and innovation culture nurtured through these global innovation centers.
Egypt now enjoys renowned expertise in several key core technologies including nano technology, MEMS, security and encryption, biomedical engineering and biotech, wireless technologies, integrated circuit design (both analog and digital), natural language processing and artificial intelligence. In the past, many of these core technology developments rarely saw the light of day outside of the research context. That is now changing as technology led organizations are maturing to more well rounded teams with increased financing options spurred by several successful exits and the development of technology licensing offices across local research institutions. In addition there is a growing number of returning Egyptian expats from academia, research centers, and technology businesses around the globe that are bridging the gap with developed market experience and innovative business models.
An under-banked and young population has spurred increased interest in financial technology to expand financial services
An under-developed retail banking sector and largely unbanked population makes Egypt ripe ground for innovative financial technology startups. The recent exit by a major financial technology business that provided a unique bill payment and presentment solution in the local market coupled with executive support from several key commercial banks have sparked a renewed interest in financial technology startups. Many new businesses have been recently launched coupling mature financial services experience with innovative technology skills to build unique business models to serve the local market with promising opportunities for regional and global scaling. The fin tech ecosystem has been further fueled by two new high profile fin tech accelerators established last year with significant support and participation from leading local banks.
Energy and Environmental challenges coupled with abundant sunshine and wind provide a rich base for Clean technologies
Egypt’s growing population and industrial base has been taxing to the existing fossil fuel based energy infrastructure while Egypt enjoys an ideal position globally with some of the highest annual sunshine durations and large, consistent wind power generation corridors. There is also a significant amount of organic waste from both consumer and agricultural waste that can be readily transformed to bio-fuels. In the past, it has been difficult to compete with clean energy technologies in Egypt due to high government energy subsidies. The government is steadily reducing these subsidies and technology advancements have greatly reduced renewable clean energy generation costs providing a rich opportunity for clean technology entrepreneurs in Egypt. There are a range of emerging startups providing clean energy solutions, clean energy services and supporting components and control solutions.
Egypt’s young, internet-savvy and technology skilled generation of entrepreneurs is poised to bring innovative new products and services to the region and to the world. The ecosystem has been maturing steadily and is on the right trajectory to support these new businesses and the talent pool in Egypt is unparalleled in the region. These factors coupled with exceptional trade access to Africa, the Middle East and the Mediterranean makes Egypt the likely birthplace of a herd of regional unicorns.
About Author, Karim Hussein
Karim is an active investor and mentor to a number of technology businesses in Egypt and the US. He’s a technology veteran with deep experience in product and innovation management and rapid business growth and scaling. Karim is co founder of DKimia Diagnostic Solutions which develops fast, affordable, and accurate medical diagnostics using nano-technology. Before moving to Egypt Karim was SVP of Engineering and Products at WebMD in New York and founder and CTO of Riskclick, a insurance technology provider. Karim graduated with a PhD in information systems from MIT and began his career as a consultant at Booz Allen and Hamilton.