Record breaking by MENA startups in 2019. Source: www.enterprise.press
Although the MENA region is subject to constant turmoil, caused mainly by political and economic issues (influenced by the oil resources), there are other domains that thrive under the harsh conditions, especially since now, the region is severely affected by the COVID-19 pandemic. One of these domains is the tech environment and more precisely, startup development.
As such, last year, Egypt was the most active venture capital market in MENA with 25% of all transactions in the region, according to startup platform Magnitt’s 2019 MENA Venture Investment Report. The UAE was pushed to the number two spot with 23% of all agreements, followed by Saudi Arabia with 12%, Lebanon with 8%, and Jordan with 6%. The UAE remains the largest recipient of venture funding by value (60% of the total), while Egypt followed with 14%. Summarising, Egypt had the largest number of transactions, the UAE led in total value, while Saudi Arabia was the fastest-growing by number and value of transactions announced.
The Arab world’s most populous country (Egypt) is also considered one of the fastest-growing entrepreneurial hubs in the MENA region, along with the UAE and Morocco. That’s why both investors and entrepreneurs are keen on tech startups and businesses in Egypt, where the market is craving solutions in the fields of fintech, e-commerce, and health technology. “There’s a very good appetite from investors, with more of them competing for good deals within the market than ever before,” said Ahmed Alfi, chairman of Sawari Ventures, an international venture capital firm that invests in MENA.
Alfi is also co-founder of Flat6Labs, a regional startup incubator that first launched in Egypt back in 2011. He’s also the founder of The GrEEK Campus, a technology and innovation park in the heart of Cairo that offers working spaces for both startups and established multinational tech and media companies. Also, Alfi says he’s witnessed an increasing number of seasoned workers and managers leaving their corporate jobs in Egypt to join new companies or to start their own.
From a financial point of view, the conditions for startups are reasonably easy to follow with costs of about $1,500 to register and establish a company in Cairo and as such, they encourage young entrepreneurs, especially those looking to launch new and unique e-commerce platforms.
What helps with digital innovation is also Egypt’s internet penetration rate that stands at 54% in 2020 and is growing rapidly. The country currently has about 92 million active mobile connections.
This past week, from August 13th to August 15th, Egypt hosted the annual tech summit Rise Up. However, due to COVID-19 restrictions, the event took place online, highlighting the challenges and opportunities of adapting to the new normal, amid the coronavirus pandemic and giving visitors a glimpse into the Egyptian entrepreneurship ecosystem. Therefore, RiseUp from Home (RFH) lasted for three days and included 2,000 attendees spanning 30 nationalities, 269 startups, 22 workshops, 47 investors, and 105 speakers. The virtual event explored topics relating to building entrepreneurial resilience through 100+ keynote speeches, panel discussions, workshops, and other virtual features.
Co-founder and CEO of RiseUp Abdelhameed SHARARA said the virtual edition of the summit was a testament to the innovation that emerges out of challenging circumstances, adding that COVID-19 has tested all businesses. “In our virtual Startup Expo, exhibitors customized their own virtual booths and interacted directly with potential clients and investors, while Startup Office Hours allowed participants to book consultancy sessions with industry experts, and Networking Circles gave people the opportunity to meet and interact, sharing ideas and resources on how to overcome current business challenges,” Sharara added. Also, “RFH represented a channel that bridged the gap between new stakeholders and the entrepreneurship ecosystem, bringing innovation to traditional markets and offering new investment opportunities to startups”, SHARARA underlined.
The Egyptian communications-platform-as-a-service (CPaaS) provider, and RiseUp’s official communications partner, announced that it will provide WhatsApp Business globally, where companies will connect and engage with two billion customers worldwide, raising the level of their communications and scaling their businesses.
CEQUENS also launched its CEQUENS Chat platform, where businesses can reach and engage with their customers on their preferred messaging app, including SMS, Facebook Messenger, WhatsApp Business, Apple Chat, and Google Chat.
In MENA, 110 million school-aged children stayed at home this term because of school closures, according to UNICEF. The shutting down of schools and universities resulted in an unprecedented surge in demand for education technology (edutech). Prior to COVID-19, edutech in the Middle East only received $1.26 million in funding after a record of $20 million was invested in the sector in 2019, according to Magnitt.
While the shift to online learning was rapid and unplanned, it highlighted the gap between those from privileged and disadvantaged backgrounds – not everyone has internet or technology access to participate in digital classes. Recognizing this challenge, governments across the region launched initiatives to support remote learning and working to deal with the pandemic. In Egypt, free e-education platforms were provided to students, and in the UAE, a campaign was started to help low-income families unable to afford a laptop, computer or tablet to continue online learning.
Moreover, at the RFH summit, in terms of edutech, Hatem SALLAM, partner/chief growth officer at almentor.net and Hamdi TABAA, co-founder and CEO of Abwaab, discussed the development of edutech in the MENA region and how it has supported the academic system during the pandemic, in collaboration with the Ministry of Education in Egypt and sponsored by the National Bank of Egypt. SALLAM highlighted how technology changed the education landscape in Egypt, providing access and convenience for users of different demographics to updated educational content online, which opened a new market that is continuously growing and drawing investment during these unprecedented times.
The edutech aligns with other technology innovations in Egypt to counter the economic pressure from other factors, such as coronavirus preventive measures, the sudden stop in tourism, and record-high debt levels.
Lamsa World, an Arabic childhood education platform based in the UAE, is also witnessing an unprecedented shift towards online learning. Since the closure of schools in the UAE, the platform has experienced at least a 300% increase in downloads and content consumption, according to founder and CEO Badr Ward. “The pandemic has accelerated what’s been in the making for years,” explains Ward. “COVID tested the importance of what we’ve been working on and proved that we can look at education differently. We need to examine how to deliver education in a more effective and creative way. It’s not a matter of e-learning; it’s a long-awaited innovation towards education.”
As lockdown has forced more business online across the region, it has increased the need for online payment options. In Egypt, less than 15 percent of the population has a bank account and are limited in accessing online payment solutions. Sherif KAMEL, Dean of the school of business at the American University in Cairo (AUC), stressed the need to continuously nurture a thriving financial technology (fintech) ecosystem in the MENA, highlighting the important role that fintech enablers can play in promoting and ultimately achieving financial inclusion.
The rise of e-commerce platforms in Egypt has not gone unnoticed by companies, investors and entrepreneurs, particularly during the pandemic, with some companies witnessing three to five times higher online sales of fashion, food, hygiene products, gifts, and other consumer products. One reason that could justify all this is that more than half of Egypt’s population of about 98 million is under 30 and highly tech-savvy.
In June, Chefaa (online platform, which serves as a marketplace for Egyptian customers, allows those with chronic conditions to order medication online and connects them to pharmacies that can deliver it) raised seven figures in its first significant round of venture capital financing working with 500 Startups. “We believe raising money amid the global COVID-19 crisis is an achievement that carries a responsibility for us to serve and achieve more,” Chefaa co-founder Rasha Rady told Al-Monitor.
Although Egypt has a rapidly growing e-commerce market, it still hasn’t reached its full potential. With mobile users increasing by the day, the Egyptian government decided in 2017 to partner up with the UN Conference of Trade and Development to increase the contribution of e-commerce to the county’s GDP to 2.32% and double the number of online retailers — currently about 14,725 — by the end of this year.
Another element displaying the confidence for innovation in technology in Egypt is the fact that Uber launched its new product “Connect” in this country, for the first time in MENA, on August 16th. Through this service, senders can ask couriers to deliver groceries, pick up laundry, or other small items and packages on their behalf via Uber Connect. “By launching Uber Connect, we are taking a step forward to accelerate our efforts to keep our community safe, which has been our goal since the start of COVID-19. Our role as a technology company won’t stop here; we will continue to evolve to effectively and sustainably define the new normal during this unprecedented time,” general manager of Uber in Egypt Ahmed KHALIL said.
During the Rise Up event, Ibrahim MANAA, managing director of global markets at Dubai-based Careem said that the company decided to double down on fulfilling deliveries and e-payment services through its recently-launched super app to make up the ground lost in the ride-hailing space, which saw an 80 percent decline in revenues during the lockdown. “We were working on launching the super app prior to COVID-19. What happened was that COVID-19 actually accelerated the process of developing and launching it.”
On the other hand, there are sectors that have experienced a rise in demand. For Taker, a Saudi Arabia-based software as a service (SaaS) startup that provides an online ordering management platform for restaurants, the pandemic has presented an unprecedented opportunity for food delivery aggregators to obtain a pivotal position in the F&B sector in Saudi Arabia. “During the lockdown period in Saudi Arabia, we were approached by restaurants looking for professional ordering channels like ours. We saw almost a 500 percent increase in the number of orders placed through our platform overnight, which was not really expected. Now after the curfew was lifted, the number of orders placed online still is much higher than it was before the pandemic,” said Abdullah El SAADI, CEO of Taker.
While the pandemic has been devastating for the world, it presents an opportunity to innovate and disrupt all sectors.
“At the time of crisis, disruption brings advancement in the same manner that challenge is being produced,” said Sherif KAMEL. “For the next generation, innovative entrepreneurs are focused on tech-enabled and tech-driven startups that can provide future-proof solutions to help sectors such as transportation, fintechs, healthcare, logistics, education, retailing, agriculture, manufacturing during challenging times. The sky is their limit.”
This article was edited using data from the following websites: www.al-monitor.com, www.techinafrica.com, www.english.ahram.org.eg, www.wamda.com, and www.sme10x.com.
