How to Invest in Egypt: Tamkeen Takes a Holistic View

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There are quite a few people in the Egyptian investment community who talk without delivering results; not so Tamkeen Capital co-founder and Managing Partner Tarek Fahim. 

Tarek and co-founder Ihab El-Fouly prefer to let their work to do the talking; both are successful serial entrepreneurs and fond of inventing new business models. Not ones to shy away from a challenge, they set up Tamkeen shortly after the revolution and funded it initially with their own seed money, in order to disrupt the Egyptian venture capital community itself.

Before I explain how Tamkeen are different, I’ll list the companies Tamkeen have in their portfolio:  Social Fruits (the company behind Wasalny, Kherna, & Talent Cell), NAS Trends, Nabda Care, Zoboon, Mash, Nezal, Wireless Stars, Jidari, & Mobicon.  All are “technology-enabled” without necessarily being technology focused. There are 4 more in the pipeline and also the in-house Raneen, sort of a virtual incubator which is still in beta.  I’ll profile all these separately in due course.

The number of companies in Tamkeen’s portfolio is not huge, and this is the first pointer as to why Tamkeen are different from most investors. 

“We’re not interested in helping create startups, we’re here to aid the creation of successful businesses, “ says Ihab El-Fouly. “We want all of the companies we support to succeed, not just 10% of them.”  This isn’t a simple quality over quantity approach, although that’s part of it. 

An Investment Model Tailored to Egypt 

Tarek clarified, “the foreign Venture Capital (VC) models that are in fashion in the West now don’t work well in Egypt because the local investment ecosystem isn’t developed enough.” 

In other words, why invest seed money in 50 startups when you know that the ecosystem isn’t able or ready to sustain their growth during their following early stages of development.  This has been proven by the number of promising startups who gained seed capital from other Egyptian incubators and accelerators only to suffer once they leave because they haven’t been able to get further investment.  

Worse still, many times startups have secured second round or series-A investment, only for the VC in question to be so inept that the startup has to wait up to a year for funds.  As the initial seed money invested was small to start with, many of these startups struggle to survive, if they survive at all.

Tamkeen aims to own 25% to 45% of the companies its invest in, a chunk that is relatively high, but their seed investment amounts range between US $50,000 to $250,000, an amount significantly higher than most local seed-stage investors, which mostly invest through accelerators. 

Tamkeen also does series-A investments of up to US $1,000,000, providing bridging loans to aid their startups during early stages when they’re in dire need of working capital.  In short, Tamkeen are providing all the funding tools a startup needs, until it can stop calling itself a startup and simply call itself a business.

Taking a Longterm Approach 

In my long chat with Tarek at their offices, he mentioned the film Benjamin Button.  He likened startups to Benjamin, as they start life tiny and with big dreams but full of old people’s problems, growing younger as they age to gain the vitality to go with their ambition.

He also mentioned the film Something Ventured, which documents the beginnings of the VC community in the U.S.  In early days, VCs were involved in the day-to-day operations of their portfolio businesses, and would often stay invested for up to a decade, or even more sometimes, until they sought an exit, very often with astronomical returns. 

This is the long-term approach that Tamkeen is taking.  Tarek doesn’t like to describe Tamkeen as a VC firm or an accelerator, rather a “venture ally or enabler.”

Another variance in their model is that Tarek actively scouts for new talent through a vast network.  The quality talent they spot, plus any that are introduced to them in other ways, get a chance to intern.  The ones that impress become portfolio possibilities.  Not only that, the startups that are incubated aren’t given a set number of months to leave; they can stay rent free for up to a year, or until they have 20+ employees. 

Tamkeen recently moved to a new office building with an open plan layout, creating a co-working style environment that was buzzing, energetic, and felt like a community.  It was also relaxed, with graffiti on some of the walls and various games in the canteen area.

I left the space feeling good. Not only was there an investment firm that looked to the future, but it also took the practicalities of present-day Egypt into account.  Tamkeen is a startup with its head in the clouds, but its feet are firmly on the ground.  The Egyptian investment community would do well to use Tamkeen’s holistic model as a blueprint on how to operate.

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