Egypt startups attract wave of foreign VCs

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Egyptian entrepreneurs are finally beginning to attract foreign investors, with jobs site Wuzzuf the latest to close a major Series A funding round.

Sweden’s Vostok New Ventures and UK-based Piton Capital have invested $1.7 million in the parent company BasharSoft. Wuzzuf (CEO Ameer Sherif below) was one of four companies the Swedes used as a launchpad into the Middle East, and it was both VCs' first investment in Egypt.

This is the first of almost half a dozen Egyptian Series A deals led by offshore investors that are due to close in the next few months.

Yaoota cofounders Sherif ElRakabawy and Mohamed Ewis. (Image via Rachel Williamson)

Price comparison site Yaoota isn't far behind and is speaking to offshore investors. Instabug is allegedly also expecting to close a Series A by the end of this year.

Sherif ElRakabawy and Mohamed Ewis, cofounders of online price comparison site Yaoota (‘crazy tomatoes’ in English, a piece of popular Egyptian market slang) are in the final stages of talks with a UAE-based VC. Yaoota only launched in June last year.

Eventtus CEO Mai Medhat confirmed they were in talks but wouldn't disclose the origins of the VCs she's speaking with; Wamda understands it’s not a local investor.

Kngine, a question-and-answer search engine developer, raised $1 million in September last year from a consortium that included the US’s Samsung Open Innovation Center as well as Vodafone Ventures Egypt and local VC Sawari Ventures.

Now based in Palo Alto after two years commuting between Cairo and the US, Kngine CEO Haytham Fadeel told Wamda the startup was planning for a second round with the same and new investors around the $3 million mark. He expects it to close at the end of the year.

Wael Amin, a partner at Sawari Ventures, said the VC landscape and the ecosystem as a whole was taking shape.

"A number of players have emerged in angel, seed funding, VC, accelerators, incubators, mentor networks and now we are seeing momentum in Round A and beyond, and decent exit success stories - just this month Fawry and Silicon Vision [were respectively invested in and acquired]."

Both in July, the Fawry deal saw the sale of an almost 25 percent stake to BSI Netherlands BV, and tech company Silicon Vision was effectively acquired by US-based Synopsys.

Other movements include Jobzella in December 2014 selling a 51 percent stake to Saudi Arabian company Alkhaleej for Training and Education. CEO Nader Al-Batrawi (right) told Wamda the deal had allowed them to grow in Egypt and Saudi Arabia, and to open a new headquarters in Dubai in 2016.

Fulfilling forecasts

Egypt investors were last year forecasting that  fundraising for local startups were about to take off.

At the time angel group Cairo Angels had just closed its largest funding deal ever – leading a $330,000 bridge round for Lebanese startup Zoomaal that was announced in March. Sawari Ventures was about to launch its first VC fund. And Ideavelopers had just raised $16 million in follow-on funding for three of its companies.

Cairo Angels founder Hossam Allam has been surprised at how shy many regional and international VCs have been around investing in Egypt up to this point, given that many “claim to be bullish” on African and Middle Eastern startups.

“What we’re seeing is that startups in this region seeking to raise foreign, follow-on funding need to demonstrate substantially more traction than their peers in Europe and the US,” he said.

“Over the next few years I expect to see Series A and buyout rounds in the relatively large ticket size, $20 million-plus, for substantially matured companies, while it will be those rare, early movers, who can stomach emerging market eccentricities, that cream off the best deals in the $1 to 5 million class.”

It appears those rare, early movers are beginning to move on Egypt. However, it remains to be seen whether foreign investors are truly interested in the Egypt ecosystem, or whether they are merely cherry-picking the best.

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