Egypt financial authority introduces new rules easing startup financing

Ahram Online , Wednesday 23 Aug 2023

The Egyptian Financial Regulatory Authority (FRA) has introduced new regulations for the financial evaluation of startups to help them secure financing through different means, according to a statement on Wednesday.

Depiction of financing of startups. stock image.
Depiction of financing of startups. stock image.


The new rules cover stages spanning from pre-profitability phases to post-investor exit strategies.

One of the new mechanisms that has been introduced is the utilization of the venture capital valuation method. It is a calculated approach to estimating a startup's theoretical worth based on parameters such as projected exit value – the anticipated valuation of the enterprise in the foreseeable future.

The FRA also introduced requirements for the valuation of startups, including assessing their weaknesses and strengths and how much they adhere to principles of governance, in addition to their credit trustworthiness.

Other requirements were also added like the assessment of startups' tangible and intangible assets, and their ability to achieve profitability in the future.

"The new rules cater to startups' need for securing financing through different means to expand, enter new markets, and add new products, activities, and solutions," said Mohamed Farid, chairman of the FRA.

Egypt has recently taken serious measures to improve its business and investment climate. In July, Egypt's Prime Minister Mostafa Madbouly gave directions for the establishment of a permanent cabinet unit assigned to proposing policies, laws and regulations that ensure the growth and prosperity of local startups.

The country has taken major steps to encourage investments and entrepreneurship and it has paid off. In December, the country came first in the Middle East and North Africa (MENA) region in terms of startup funding, with a total of $45.7 million.

The country is seeking to increase the share of the private sector in the economy to 65 percent, up from the current 30 percent, based on its State Ownership Policy Document.

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