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Tuesday, 13 April 2021

Coronavirus: an opportunity for Egypt’s startups to grow

Doaa A.Moneim , Saturday 25 Apr 2020
A member of the medical staff at the infectious diseases unit of the Imbaba hospital in the capital
A member of the medical staff at the infectious diseases unit of the Imbaba hospital in the capital Cairo, is pictured on April 19,2020, during the novel coronavirus pandemic crisis. (AFP)
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Despite the destructive repercussions of the coronavirus on Egypt’s economies and businesses, there’s a room for growth amid the pandemic crisis for startups and entrepreneurs.

The batch of protective measures the government has adopted to maintain the public’s safety range from social distancing to a partial curfew and teleworking. The move urged business owners to resort to the world wide web and technology services and solutions to conduct their businesses.

The success of the new reality is supported by a recent regional economic outlook report issued by the International Monetary Fund (IMF) following the latter’s spring meetings with the World Bank.

The report stated that Egypt’s economy is expected to grow by two percent in 2020, and 2.8 percent in 2021, which makes Egypt the least affected by coronavirus in the MENA region and the subsequent recession in 2020 that will cause further damage to other emerging and developing economies.

In January, Start Egypt Forum -- an Egyptian incubation initiative for startups funded by the UK’s Department for International Development (DFID), supported by the International Finance Corporation (IFC), and powered by Flat6Labs -- said entrepreneurs in Egypt face a host of challenges, such as poor funding and an absence of channels between entrepreneurs and investors, be they domestic or foreign.

Yet, as the forum discussed, Egypt has significant potential as the doorway to Africa, a continent that has a number of problems that can be solved with new startups that address serious cases, particularly because startups offer a suitable and innovative solutions that tackle problems communities face.

The COVID-19 crisis is a double-edged sword. The pandemic poses significant challenges to Egypt’s startups, entrepreneurship and innovation, yet crises are always a golden opportunity for new startups and innovative ideas to be born to provide solutions for new problems.

A recent report issued by Oxford Business Group said funds in Egypt are looking to push the startup ecosystem to ensure innovative firms are supported as the global economy faces a significant downturn.

The report showed technology and digital firms are becoming increasingly instrumental in ensuring essential goods and services remain available in the country, like many countries across the world, because of social distancing and decreasing workforce actions.

“Egypt’s digital startups were in a good position to respond to the pandemic,” said the Oxford report.

UAE-based data platform MAGNiTT said in its report about MENA venture capital investment that 2019 saw a record 564 start-up investments take place across the region, amounting to $704 million in total funding, which is an increase of 31 percent in the number of deals and 12 percent in total funding compared to 2018.

With these record deals and funds, 2019 marked a strong end to a great decade, as 2009 saw $15 million in funding in only five venture deals, which means that total funding has had a compound annual growth rate of 47 percent, while deals rose by 60 percent over the last 10 years, according the report.

As the report showed, the regional start-up ecosystem saw a shift in 2019, as Egypt ranked first by number of deals for the first time ever at 25 percent, while it ranked second following the UAE in 2018.

MENA witnessed another record in 2019 with 27 start-ups, according the report.

“The MENA region continued to mature and grow,” the report highlighted.

Moreover, Egypt managed to keep its place at the top of MENA countries in deals, accounting for 37 percent of all deals in the region, according to MAGNiTT’s new report for the first quarter of 2020.

In its report for 2018, MAGNiTT shed light on the growing interest from international investors to invest in MENA’s startups, as more than 155 institutions invested in MENA-based start-ups in 2018, 30 percent of which were from outside the region and 47 percent had not previously invested in MENA. 

Public-sector institutions too are eyeing startups amid the COVID-19 outbreak.

On 15 April, Egypt’s governmental startups accelerator Falak announced an allocation up to EGP 1 million to support start-ups during the crisis, calling upon startups outside its regular circles that need funding, coaching and access to markets in these trying times to apply to Falak.

With a focus on HealthTech, FinTech, CleanTech, EdTech, e-commerce, 3D printing, logistics and remote work solutions, Falak’s new facility aims to provide incentives to the opted start-ups to set new ideas providing new solutions to tackle the COVID-19 impacts without a need for the innovator to provide infrastructure or other hard facilities.

On 14 April Egyptian fin-tech firm Fawry, launched a $25 million fin-tech fund to boost Egypt’s fin-tech startup ecosystem.

Fawry stated that the fund was planned before the pandemic yet its focus has been altered to respond to the health crisis.

Speaking to Ahram Online, cofounder and CEO of RiseUp, a startup accelerator with a community comprising 250,000 individuals, Abdel-Hamid Sharara said that startups is an innovation sector in Egypt that can tap the opportunities arising from the current crisis, especially because startups are founded on technology and can introduce services and products remotely.

Sharara said that while the coronavirus crisis resulted in a boom in the number of startups, it has killed others either because of social distancing and the partial curfew measures or due to the fact that their products are no longer suitable for the market.

Meanwhile, startups that provide services such as tourism, retails, energy, fitness and sports, transport, events, publicity and advertising, and few financial services solutions were destroyed by the pandemic, Sharara said. Nonetheless, startups providing healthcare, e-commerce, online education, online gaming, and entertainment have grown by 40-50 percent after the outbreak, he added.

He stated that startup owners have applied different strategies to cope with the challenges imposed due to COVID-19, including reducing costs to save cash, management rationalisation, and introducing new products the market needs.

Sharara said he is optimistic about the future of startups in Egypt, adding that RiseUp has launched 20 episodes about how startups can work through the crisis. The episodes have garnered more than 700,000 views.

He added that recent data by Kauffman Fellows, a global venture capital fund, shows that venture capital headed towards startups globally has declined by 40 percent, compared to 2019, because of the COVID-19 outbreak. The crisis will impose new challenges that need new innovations and solutions built on technology, which is expected to leave ample room for new startups to emerge, attracting in the process more venture capitals towards funding.

For the coming RiseUp summit, scheduled to be held in November, Sharara said there is a strong tendency to hold the summit virtually amid the COVID-19 crisis, adding that the final decision in this regard will be taken in July.

On the other hand, managing partner at the start-up accelerator Flat6Labs Marie Therese Fam said that the current crisis generated new challenges that startups can tap.

Speaking to Ahram Online, Fam explained that these challenges include purchasing power decline, rearranging the purchasing priorities, social distancing and teleworking.

Pointing out the boom Egypt’s startups have witnessed since the COVID-19 outbreak in February, FAM said that startups working in healthcare and e-learning have grown by 120-130 percent, logistics by 60 percent, recycling business by 40 percent, and e-finance and e-payments by 80 percent.

Over the short and medium terms, FAM said the future of startups is yet unclear due to the uncertainty shrouding the COVID-19 pandemic. However, she asserted the sustainability of funds for startups and innovations by public-sector institutions and local and international private venture capital funds.

 

 

 

 

 

 

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