The startup braving the odds in Upper Egypt
Opportunities for young graduates are limited in Upper Egypt, that is in the southern governorates of the country, which account for some 40 per cent of the country’s population and where 80 per cent of its poverty is concentrated according to the World Bank. It has therefore become increasingly common for young people from Upper Egypt to head to Cairo or other industrial cities in Egypt right after they graduate in search of better job opportunities.
Despite comprising two-thirds of the country’s land mass, Upper Egypt has long remained behind in terms of socio-economic development, with local communities suffering from adverse limited access to opportunities and resources.
The impact of this has largely reverberated down to the startup sector as well, with entrepreneurs being hard-pressed to grapple with a unique set of challenges being repeatedly thrown their way.
Among the entrepreneurs working to make a difference is Rafeek Mohamed, the founder of the Sal7lyy app, which connects users in Upper Egypt to technicians and repairmen. Mohamed, who originally comes from Asyut, the largest city in Upper Egypt, has faced difficulties bringing his venture to light.
In the first stages of the roll out of the app, Mohamed struggled to gain the necessary user traction and therefore was not able to achieve scalability, as a result, he nearly shut down the app.
Similar to many others, Mohamed was faced with two major challenges: the lack of general knowledge about startups due to the unavailability of educational resources in this area as well as limited access to capital.
"I truly had no idea what a startup really means, and how it runs. I was just after building a platform that brings all technicians under one umbrella,” he says. “So I along with my co-founder initially created a Facebook group to do so, before it evolved into a simple app that aimed at easing access to technicians, but customer behaviour was not oriented towards online services at that time because using the phone to [call to] order services remains the dominant behaviour. After a short while, we ran out of money and were on the brink of shutting the entire company down."
In an attempt to salvage his business, Mohamed joined Athar Accelerator, whose goal is to give an impetus to already running startups in Upper Egypt with real potential for commercial success. It helps them gain access to mentorship, technology know-how and other resources that are more widespread in urban cities, particularly Greater Cairo.
At Athar, Mohamed managed to turn things around for his startup.
“This was a turning point for us. I had the opportunity to nurture my startup knowledge, get to know how to read financial statements, learn about consumer behaviour, and most importantly, learn when and how to pivot to meet evolving consumer needs and maintain the agility of the business,” he explains.
For Mohamed, joining Athar provided a lifeline for his startup, a privilege that most of the founders from Upper Egypt do not necessarily have due to the shortage of similar initiatives in this area. Athar is among a handful of entities that attempt to plug a very wide gap faced by these entrepreneurs in terms of the availability of ecosystem enablers and innovation labs.
During its participation in the accelerator programme, Sal7lyy secured its very first round of capital. But as the company continues to grow, the need for larger funding tickets becomes more pressing.
After graduating from Athar, Sal7lyy was incubated by the Technology and Innovation Entrepreneurship Centre (TIEC). Later on, the startup was already registering adequate growth, reached its break-even point and was ready for venture capital financing. But the effort to find venture capitalists in Upper Egypt has been faltering. Eventually, the founder managed to get funding from an angel investor, whom he met during a networking event in Alexandria, Egypt’s second largest city.
“We suffered a lot in this aspect and we were very disappointed. There is an abundance of traditional investors but little to no venture capitalists willing to back tech startups. So the list of the challenges also counts lack of proper investor awareness,” he adds.
With the investment landscape becoming more competitive, investors might be hesitant to back a startup from Upper Egypt owing to the small size of their total addressable market (TAM), especially when compared to Cairo.
To counteract this issue, the startup tends to place a greater emphasis on serving the corporate sector in order to ensure sustainable bottom-line growth and avoid fast cash burn.
In 2022, it claims to have processed 25,000 orders from its corporate clients in Upper Egypt’s cities of Sohag, Asyut, and Wadi Gedid.
To focus on the business-to-business (B2B) segment is a common pivot approach adopted by the majority of startups and small-scale companies in Egypt that are already reeling under the fallout of the country’s economic crisis and rising inflationary pressures. Mohamed says that the impact of the economic crisis on his business has been a mixed bag.
“As the prices of everything have gone up, including home appliances and gadgets. So instead of buying new items at inflated prices, people have the propensity to fix whatever appliance they have already. So on the one hand, the crisis benefited us from the customer side. But, on the other hand, it affected the technicians that we work with because the prices of the tools they use have also significantly increased," he expalins.
To help its technicians surmount this challenge, the startup recently collaborated with ElGameya, a fintech offering rotating savings and credit association (ROSCA) services, to enable them to buy the tools and gadgets they need in installments.
As the economic situation continues to worsen, investors will be increasingly more discerning and want to back founders that bring them profitability, and for many, this will not include startups from Upper Egypt. The pattern will persist as long as access to quality education, resources and information remains challenging for this region’s founders.