Understanding Startup Landscape: Cairo
The startup market in Cairo has been quietly growing over the last decade. There have been small examples of economic innovation over the years, but within the last few years the startup scene has exploded. The political revolution of 2011 threw open the doors to freedom in Egypt, giving entrepreneurs opportunities they never thought possible.
As we discover what advantages Cairo has over other startup cities, we’ll explore 1) the location, 2) the tax incentives, 3) legal incentives, 4) investors, 5) local resources, 6) specialization of the area, and 7) startups to watch.
The capitol city of Egypt, Cairo is the largest city in the Middle East. Situated along the Nile River delta, the city is the center of the political and cultural life of Egypt.
One of the world’s oldest cities, Cairo has been in existence since early in the fourth century. A long tradition of influence has helped to shape the city’s landscape; influences from the Greeks, the Babylonians and the Romans can all be seen. Nestled among the iconic Egyptian symbols of the pyramids and Sphinx, Cairo is bringing its own influence to the surrounding cities and the world.
Cairo acts as a hub for the Middle East. With a centralized location, the city has become important in every aspect of the Egyptian life. Medical resources are prevalent in the city, with the highest levels of care available in advanced hospitals. Educational systems are headquartered in Cairo, offering the highest number of schools and higher learning institutes in the country. Ramses Square, located in the heart of Cairo is the center of the entire Egyptian transportation network, connecting an extensive roadway, subway and train system. With an international airport, Cairo has connections to the rest of the world that allow entrepreneurs to easily navigate to wherever they need to go.
Advantages of choosing the city
The entrepreneur who selects Cairo as their headquarters is positioning themselves in one of the most exciting marketplaces in the world. The recent revolution has created a climate for businesses to thrive and grow in a way that few locations can compete with. Unlike many cities that are entering the entrepreneur race, Cairo has the advantage of being a relatively modern city. There is already an existing internet infrastructure, the climate for business is good and the city has a base of skilled technicians who have been waiting for the opportunity to showcase their talents. The needed ingredients are all in place – the city is simply waiting for the entrepreneurs to show up.
Another advantage the entrepreneur in Cairo has is the support of existing entrepreneurs already established in the city. The explosion of knowledge and information within Cairo has revolutionized the city in many different areas. For the entrepreneur, however, it has given them the ability to move quickly with the swell of public interest. With the presence of entrepreneurs in the city already, the recent revolution made it possible for others to join the startup community easily. Collaboration and support are essential to a young entrepreneur, and the existing community allows for even more rapid growth and development.
Due to the recent revolutions in Egypt, the government system in Cairo is in a state of upheaval. Within this upheaval is the regulation of startups, and the correlating tax systems in place. Prior to the revolution, the tax policies of Egypt were established at a flat twenty percent of income. Post-revolution Cairo finds itself in the process of re-inventing not only the city, but the policies and systems that are in existence. One area that must be addressed is the lack of tax incentives for entrepreneurs. The Cairo economy is slowly beginning to recover after the turmoil of the last decade, and entrepreneurs are a large part of that recovery.
In order to continue to encourage entrepreneurship, the government must create tax incentive programs that not only benefit startups, but provide additional motivation to individuals. Taking their cue from other successful startup hubs, Cairo could institute a tax incentive plan that allows for tax breaks in specific industries, for innovative problem solving, for specific hiring regulations – the possibilities are endless.
Providing tax incentives can be an asset in non-financial areas as well. A major hurdle that entrepreneurs have in Cairo is the risk-averse attitudes many people seem to have. Most of the people in Cairo encourage young people to find established, stable careers and avoid the risky, unknown world of entrepreneurship. Coupled with this lack of risk-taking is the shame (and legal ramifications) of failure. Filing for bankruptcy has long term consequences that can include a jail sentence, causing many would-be entrepreneurs to choose safe industries to work in. It can also cause many to avoid the risk altogether by forgoing the opportunity to be an innovator. This fear of failure is detrimental to the innovative and entrepreneurial identity that Cairo wishes to have for itself. To overcome this stigma, there must be a concerted effort by the government to offer support, encouragement and incentives for those who wade into the innovator waters.
Further, the streamlining of the processes involved in establishing a company in Cairo would greatly improve the city’s startup hub potential. The current process can take up to two weeks, and involves a series of applications and addendums that must be filled out and filed. In recent years the process has begun to move online, allowing applicants to do many of the paperwork forms all within the span of a day. This improves the ‘workability’ of the city and allows more entrepreneurs to move from idea to reality in a shorter amount of time.
One of the largest issues that entrepreneurs in Cairo face is the required conscription into the Egyptian military. All young men between the ages of 18 – 30 are required to serve in the military for up to three years. For a young entrepreneur coming out of college, this can be a major setback. A young, energetic entrepreneur who has to walk away from their dreams of starting a business to join the military may never find their way back to becoming an innovator.
In one instance, the founder of Recylobekia is a young 23 year old who decided to take action and save his company. Because he has never signed up to serve in the military, he lives in anxiety; wondering when the government is going to demand his service. Before being forced into service, Mostafa Hemdan is considering hiring a chief operations officer to handle the day to day operation of his company. This would allow Hemdan to simply sign up for his military service, instead of waiting to be conscripted. In any future revitalization of the city, it must revamp the conscription policy.
Another area of concern for startups within the city is the legality of entrepreneurship. While it is not illegal to start a company, it is not encouraged in many ways. The lack of supporting laws that protect both the company and the entrepreneur is problematic for both entrepreneurs and investors. Entrepreneurs want to know that their work will not be in vain – that they will not lose their intellectual property to the competition. Investors want assurances that the money they invest is secure from outside forces. In addition, there needs to be a policy of entrepreneurial support. Offering advice and support to navigate the myriad of legalese forms that must be filled out is an excellent way of encouraging entrepreneurs, and should be the focus of reforms in Cairo.
Few things rattle investors like political unrest. In Cairo, recent uprisings have virtually dried up the potential funding sources of most entrepreneurs. With political uncertainty, investors – particularly foreign ones – have trouble feeling enough confidence in the marketplace to invest. For an up and coming startup city, the lack of funding combined with a shaky economy can only spell disaster.
In Cairo, however, it has simply inspired a new generation of entrepreneurs. The lack of angel investors and startup capital has deterred many who considered the odds insurmountable. Others, though, saw the hurdles as challenges and simply used them to springboard into entrepreneurship.
There are very few accelerators and incubators in Cairo. However, the last two years have seen an explosive growth in the number of resources that exist in the city. Within the last year, Cairo has held its first entrepreneurial summit, launched an angel investor group and opened its first startup accelerator program. The potential for investors is huge – it is simply time to establish a means for them to quickly and easily engage with entrepreneurs.
Working with accelerators, investors can begin to find entrepreneurs that are of interest to their group and establish a relationship with them. The investor can begin to showcase the prospectus to other, like minded investors and encourage them to invest as well.
After startups receive their angel funding, there is a clear gap between the startup funding and the expansion funding. The limited amount of funding is problematic to entrepreneurs within Cairo who are looking for capital to start or expand their business. As the city stabilizes and innovators continue to demonstrate their entrepreneurial spirit, investors will once again return to Cairo. The snowball effect of adding funders to the city is an effective demonstration of the process. Other funders will be drawn to the city as they see the success that early investors have. As the startups succeed, other companies will be drawn to the city as well, creating a self-propelling cycle of investing and innovating.
Facing Down the Challenges to Entrepreneurship in Egypt: Shereen Allam of Awtad
A well educated workforce is one of the greatest resources that Cairo has to offer. A high unemployment rate has created an environment where young, educated citizens are without jobs and prospects. These young people are turning to innovation and design to create jobs that solve problems, as well as create opportunities for work.
Flat6Labs is another important resource the city of Cairo has. A startup accelerator, it takes a company from a vague idea and helps turn it into a viable corporation. Partnered with a law firm, they ensure that all the paperwork and other essential filings are completed correctly, and then help to establish all the necessary tools for success. The accelerator offers assistance to a selected number of companies each term, and provides workspace, funding and support. For the emerging startup city, it is one of the most valuable resources to possess.
GrEEK is another innovative resource that Cairo can claim. Located directly in the center of the turmoil downtown, the former college campus turned innovation headquarters is working to revitalize the city from the inside out. Developed to allow entrepreneurs to have a place to collaborate and innovate, the GrEEK model is seeing early success with the companies it has assisted. By offering entrepreneurs a tech-campus co-working space, it offers hope in an area that recently saw nothing but riots.
The startup market in Cairo is not new, but has recently seen an explosion in growth and support. The entrepreneurs who are turning to innovation in the last few years have generally migrated to the tech startup fields or the rapidly growing fields of science and healthcare. As the leading internet market in Africa, Cairo leads Egypt in the number of connected web users, bandwidth and web services.
With new interest in solar energy, innovative technologies are being developed to harness the power of the sun – something Cairo has plenty of – to provide electricity to residents.
Mobile technology applications are also an area of specialization that has developed in the last year. The recent riots and uprisings in the city led developers to create a program alerting users to traffic delays, backups and other location based services. As more users begin to take advantage of the program, more features will likely be added.
Educational needs will also be a large push in the specialization of Cairo’s entrepreneurship. With high unemployment rates, startups will begin to innovate new methods of improving the Cairo lifestyle. Training centers, instructing farmers on the latest and newest agricultural methods are important for the future agricultural development of Cairo. Innovative methods and techniques will be essential to maintain the farming structure of the area.
STARTUPS TO WATCH
Solarist: Hoping to eliminate a lack of drinkable water, Solarist has developed a portable, solar powered water desalination machine. This affordable option can be used out in the farming areas around Cairo, as well as offer potential long term solutions for water within the city.
Recyclobekia: Addressing the growing amount of technology waste that is produced, Recyclobekia collects electronic waste and exports them. By exporting the waste to a green recycler, the materials are repurposed and reused; helping to keep the materials out of landfills and providing the consumer with usable items.
Instabug: Tech startup Instabug is an innovative bug-reporting tool for mobile users. Specifically designed for mobile application developers, Instabug allows the user to simply ‘shake’ their cell phone to report bugs with development. Passing up opportunities for jobs at large tech firms, the developers of Instabug gambled on becoming entrepreneurs and won.
Taqalid: With a new perspective on death and the dying, Taqalid offers the new generation of Cairo residents the convenience of digital. Obituaries, funeral announcements, service information and other parts included in the process of death are now all available online. Bridging the age gap, this ‘new feature’ allows the younger generation to grieve and find strength through the digital interface.
The growing startup community in Cairo is increasing exponentially in size. With an existing infrastructure and readily available workforce, the potential for explosive growth is huge. As more investors realize the opportunities that Cairo offers, there will likely be a stampede of money moving into the area, wanting to capitalize on the innovation.
Companies and investment funds are currently sitting on a lot of money. But before they start …