Last week, Japan-based venture capital firm Samurai Incubate closed its second $18.6 million Africa fund and for the first time, the fund will be deployed in Egypt. The news follows the announcement of two new funds in Egypt from Algebra Ventures and Sawari Ventures and while Samurai’s foray is a small one, it nonetheless highlights global interest in the country’s startups.
Founded in 2008 by Kentaro Sakakibara, Samurai Incubate has invested in 140 companies in Japan. In July 2018, it began investing in Africa by establishing subsidiary, Leapfrog Ventures (now Samurai Incubate Africa), which has so far invested in 26 startups across Africa.
We spoke with Rena Yoneyama, managing partner at Samurai Incubate and Risa Takeda, senior associate, about why they have decided to start investing in Egypt.
You have been investing in Africa since 2018, why did you include Egypt in your portfolio now?
Rena: I think Egypt is one of the best startup ecosystems on the entire continent. We have been interested in investing in Egypt for the past few years, as we noticed that the Egyptian startup ecosystem is growing, and we saw more new companies are being established and more capital is pouring into those startups. From an economic perspective and ecosystem perspective, Egypt is quite different from other startup ecosystems existing in Sub-Saharan Africa for one interesting fact, the middle-class population in Egypt is high, who represent potential consumers of variant sectors. That is why the B2C type of businesses are largely growing in the country, unlike the Sub-Saharan Africa, where the B2C model is very difficult to scale.
Which is the most attractive sector in Egypt?
Risa: As we started studying the market for the past few months, we found out that e-commerce and retail industries are booming in Egypt. We have also seen the government’s efforts in the tourism sector and the financial inclusion of SMEs. The healthcare sector is also on top of our interests in Egypt, as well as proptech.
How much have you invested in Egypt so far?
Risa: So far, we have only funded one startup working in the field of food and beverage, with an investment estimate of $100,000. We are working with angel investors in Egypt to introduce the startups to us to make the investment at their earlier stages.
Is the pipeline in Egypt strong?
Risa: I think so. Of course, we have our criteria to determine if we will go further with this investment or not. But we've seen so many good talent that are making a great effort to develop their startups. The government in Egypt is trying its best to support the emerging startups, through building more universities, having more engineers. And from what I see, it understands the importance of innovation and moving towards supporting that ecosystem.
Does your foray into the Middle East signify greater Japanese interest in the region?
Risa: Absolutely. When Japanese enterprises set their sights on the African market, the Middle East is always their gateway. As you can see, most Japanese enterprises found their bureaus in one of the Middle East countries to look after the African market in the beginning. So, the Middle East is always an important region for Japanese enterprises.
From an investment perspective, we believe that the relationship between Japan and the Middle East is quite tight; for example, Rakuten invested in Careem, also, Softbank Vision Fund secured funding from Saudi Arabia.
There are not many cases in regards to seed investments, however, the attention will rise as the startup ecosystem is rapidly growing.
Almost all Japanese VCs investing in Sub-Saharan Africa started to have an interest in Mena, and of course, Egypt holds a very important position.
What is Samurai Incubate’s next stop?
Rena: We are planning to expand to more countries in Mena. We do not have a specific country in mind, but when we spot a possibility of investment and startups who are approaching us looking for a chance, we consider supporting them.