How Egypt established itself as an African tech hub to be reckoned with in 2019

0

Looking at the African tech startup ecosystem over the last few years, you would be forgiven for thinking it was a question of South Africa, Nigeria, Kenya, and then the rest. Well, not anymore.

According to Disrupt Africa’s recently-released African Tech Startups Funding Report 2019, 311 startups on the continent raised a grand total of US$491,623,400 in 2019, up 46.7 per cent on 2018.

And whereas in many previous years the data would have shown the vast majority of that funding went to companies in just three markets, namely South Africa, Nigeria and Kenya, 2019 was a little different.

Eighty-eight Egyptian tech startups secured investment over the course of the year, more than any other African country, and accounting for 28.3 per cent of the overall total. This represented growth of 159 per cent on the 34 startups that secured investment in 2018.

These startups secured almost US$90 million in funding, a higher figure than South Africa and one bettered by only Kenya and Nigeria. This accounted for 17.4 per cent of Africa’s overall total funds raised, and was up 45.5 per cent on 2018. Africa’s “big three” is now a “big four”.

The US$42 million round raised by transport startup Swvl grabbed most of the headlines, but there were also significant raises for the likes of advertising platform Adzily and e-commerce startup MaxAB, and dozens of early-stage companies backed by accelerators like Flat6Labs, Startupbootcamp and Misk 500. 

But what is behind Egypt’s rise to its current status as a major player in Africa’s tech startup ecosystem?

Tarek Assaad is managing partner of Algebra Ventures, a Cairo-based VC firm which has backed 16 companies over the last couple of years. He says Egypt is generally becoming a more attractive investment destination because of the improving macroeconomic picture and attractive fundamentals like large population and underserved consumer base.

“The tech space is attracting investments to support the increasingly maturing founding teams of startups. Egyptian entrepreneurs are tackling large long-unsolved problems such as mobility, distribution and financial services with new digital solutions to build businesses that have the potential to scale significantly and become market leaders,” he said. 

“In fintech, the central bank is taking unprecedented steps to work with tech startups which has encouraged many entrepreneurs to tackle that space.” 

All of this has prompted Algebra Ventures to double the pace of its investments to keep up with the size of the opportunity. Assaad said investors are supporting businesses that have the potential to serve a large consumer base and grab market share quickly. 

“We are seeing these companies growing at faster rates than ever before in our market,” he said.

Additionally, the success of companies such Swvl, which has expanded to Kenya, and fintech company Fawry, which became the first venture-backed Egyptian company to go public earlier this year, is giving investors more confidence that Egyptian startups can deliver on the market potential of the country.

What is the view from the startup side? Ahmed Ashoor, chairman of Adzily, believes Egypt is a “very promising market” with high growth in population and the number of SMEs. 

“This paves the way for us to expand as fast as we can, which makes our economy an interesting one to invest in specifically now,” he said.

“We have a huge edge in the country in terms of the tech calibre, which makes this scene attractive. With the high number of tech scale-ups starting to grow from Egypt, this makes the market very attractive.”

Some challenges remain, however. Assaad says there is still a way to go in terms of ensuring Egyptian startups have access to the necessary capital.

“Although funding has come a long way in the past few years, there are still significant gaps. We see a gap in seed funding – the US$100,000 to US$500,000 – and later stage funding, above US$10 million, and we see regional players stepping in to fill that gap,” he said.

Ashoor agrees there are still issues to be overcome.

“Challenges remain when it comes to the governing laws, onboarding the right calibre talent at the right stage, and access to local funds that can boost the whole ecosystem further,” he said.

For now, though, growth has been impressive, and if Egypt can keep this up then we have a very powerful tech hub on our hands in North Africa.

For more information, or to order the report, please visit disrupt-africa.com/funding-report, or email Gabriella on gabriella@disrupt-africa.com, or Tom on tom@disrupt-africa.com.

This year’s edition of the report includes:

  • Detailed information on funding activity in six African countries;
  • Figures on the number of deals per location, and average deal sizes;
  • Data on growth in funds and deals over the past five years;
  • Highlights of key deals across continent;
  • Sector-specific breakdowns across 13 sectors;
  • Tracking of acquisitions in 2019.

The basic report is available at a cost of US$300.

Buy it now!

Disrupt Africa is also making available the full list of 311 funded tech startups from across Africa, detailing location, sector, when funding was secured and, where we are able to disclose, the investors and approximate amount raised. Any funding amounts disclosed confidentially do not appear in the list.

Buy it now!


Share this Story

About Author

Passionate about the vibrant tech startups scene in Africa, Tom can usually be found sniffing out the continent's most exciting new companies and entrepreneurs, funding rounds and any other developments within the growing ecosystem.

Comments are closed.