PM — How the LimeWire era came to be

Happy hump day, wonderful people. It’s a bit of a news dump day here in Omm El Donia, while global eyes are fixed firmly on China and Taiwan as US House Speaker Nancy Pelosi is due to land in Taipei later today.

THE BIG STORIES TODAY

#1- Caps on cement production are staying in place for another year — though the industry is set to see some supply hikes: The Egyptian Competition Authority has agreed to cement companies’ calls to extend caps on production brought in last summer for another year, Ahmed Shereen Korayem, head of the cement division in the building materials chamber of the Federation of Egyptian Industries, told Enterprise.

#2- NUCA could make the local market’s biggest-ever securitized bond issuance: The Financial Regulatory Authority (FRA) is reviewing a request by the New Urban Communities Authority (NUCA) to issue EGP 20 bn in securitized bonds, the authority said in a statement (pdf). If approved, the issuance would be the largest in the history of the local market, and would bring total securitized bond issuances since the start of the year to EGP 30 bn, the FRA said.

THE BIG STORY ABROAD

The global business press in its entirety is fixated this afternoon on US House Speaker Nancy Pelosi’s trip to Taiwan. The Financial Times and Reuters are leading with China’s military activity near the Taiwan Strait, while the Wall Street Journal takes note of the market downturn ahead of Pelosi landing in Taipei this evening. The potential political, diplomatic, and military ramifications of the trip are the key points of interest for CNBC and Bloomberg.

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** CATCH UP QUICK on the top stories from today’s EnterpriseAM:

• Maait shoots down talk of a USD 15 bn IMF loan: “That figure is completely inaccurate,” Finance Minister Mohamed Maait said when asked if Egypt is requesting a USD 15 bn loan from the international lender.
• Emirati real estate giant Aldar Properties still sees potential to invest another USD 1.5 bn in Egypt, Saudi Arabia and the UAE over the next 6-12 months despite a higher interest rate environment, CEO Talal Al Dhiyebi said.
• Homzmart just closed one of Egypt’s largest funding rounds this year: Furniture and home goods marketplace Homzmart has closed a USD 23 mn pre-series B round.

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FOR TOMORROW-

Our friends at Chimera should find out tomorrow how much of Beltone Financial they have acquired via a mandatory tender offer. Shareholders have until Wednesday, 3 August, to subscribe to Chimera Investment’s MTO for the financial services firm. The Abu Dhabi-based outfit has already locked in a 56% stake in Beltone after Orascom Financial last week agreed to sell its shares. Chimera is offering to pay EGP 1.485 per share for up to 90% of Beltone, valuing it at around EGP 690 mn.

PMI figures are out tomorrow: We’ll get an idea of how the private sector fared in July when S&P Global releases its latest purchasing managers’ index (PMI) tomorrow. The index fell to its lowest level in two years in June as surging inflation hit demand and output.

National Dialogue board will talk about the economy: The board of trustees overseeing preparations for the National Dialogue will meet tomorrow to discuss the economic agenda.

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We’re on the lookout for a number of key macro figures this week and next:

• Foreign reserves figures for July will likely be released at the end of this week or the beginning of the next;
• Inflation data for July will land on Wednesday, 10 August.

The Central Bank of Egypt will meet to discuss interest rates on Thursday, 18 August.

☀️ TOMORROW’S WEATHER- The internet is going to be more or less the same tomorrow as it is today: Our favorite weather app tells us to expect a daytime high of 37°C and a nighttime low of 24°C.

Young people are increasingly experiencing a “quarter-life crisis” filled with anxiety, depression, anguish and disorientation. Much like reaching your 40s and experiencing a midlife crisis, quarterlife can bring its own set of challenges like forging your own sense of self and separating from your parents or caregivers, therapist Satya Doyle Byock tells the New York Times.

Deviating from the script: Previous generations followed a pattern of sorts with young people graduating from college, marrying, and raising a family. In today’s world, young people tend to experience “extended adolescence” due to rising costs, crushing debt, a climate crisis, and a prolonged multiyear pandemic, which have come together to make them unable to plan long term. To navigate a “quarter-life crisis,” psychologists are setting long term goals like healthy eating and exercise, balancing between day-to-day tasks and creative passions, and not being afraid of the big changes like changing career paths or moving to a new city.

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First Metaverse Seoul, now metaNesia — the metaverse is reeling in governments, too: Indonesia has created its own metaverse under a bid to vie with Facebook and Google, State-Owned Enterprises Minister Erick Thohir said, according to Bloomberg. PT Telkom, the country’s state-run telecommunications company, launched “metaNesia,” a virtual platform that is meant to help push operating micro, small and medium enterprises (MSMEs) amid a rapidly-altering online landscape. While the details are scant, Thohir said metaNesia will be home to small businesses showcasing products on a level of other leading foreign businesses. It will also include a Metaverse Mall and a Metaverse concert, he said, with plans to host an NFT marketplace and others later this year.

Not what we’re talking about? Check our explainers on NFTs and the metaverse (here and here).

Income is king in volatile markets: Equities may have been doing a little better in recent days — but that doesn’t mean investors are returning to riskier asset classes amid a rally prompted by the US Federal Reserve’s latest bumper rate hike, Bloomberg reports. Last week’s 75-bps hike prompted the biggest two-day rally ever for US stocks as traders bet that the US central bank may have reached peak tightening. But the S&P 500 is still down 13% YTD, recessionary fears on high inflation have not dissipated, and risk-off sentiment remains — meaning some of the biggest inflows are going to high-earning, dependable assets like dividend-focused exchange traded funds (ETFs), treasuries, and high-grade corporate bonds, the newswire reports.

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The relentless world of morning television — with all its dramatic realities: Apple TV+ drama The Morning Show takes viewers behind the scenes of the world of morning television (where the work day starts at 3:30am). The series, which premiered in 2019, starts the first season with the abrupt firing of popular morning show co-host Mitch Kessler (played by Steve Carrell) following allegations of sexual misconduct against him go public amid the #MeToo movement. His co-host of 15 years, Alex (Jennifer Aniston), and the show’s network scramble to address the scandal, and to replace the disgraced anchor with someone who can give ratings a much needed boost. Eventually, the network settles on an inexperienced field reporter, Bradley (Reese Witherspoon). The show’s second season tackles issues of homophobia with Bradley struggling with her identity, how covid-19 upturned entire industries, and cancel culture as Kessler spends his meaningless days in a mansion in Italy. The show has been renewed for a third season, but no release date has been announced yet.

⚽The Egyptian Premier League- Al Mokawloon face off against Future at 6:30pm tonight.

???? EAT THIS TONIGHT-

Il Divino Pizzeria has your next pizza party covered: Il Divino specializes in homemade wood-fired oven pizzas, with crispy crusts. Their menu includes appetizers, salads, sandwiches, a variety of mains, and even dessert, but pizza remains the star of the show. It is refreshing to eat a slice of pizza that isn’t smothered in an excessive amount of cheese, so you are able to fully appreciate the crust, the tomato sauce, and the toppings equally. The crust is thin and airy and the sauce to cheese ratio is balanced so slices are not too rich. We recommend the funghi pizza and the vegetable pizza that’s topped with mozzarella cheese, mushrooms, red and green pepper, onions, olives and tomatoes. Il Divino has branches on both the east and west ends of Cairo, as well as Zamalek, Uptown Cairo, Maadi, and Heliopolis, and two Sahel branches in Telal and La Vista Bay.

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Classic Live Night by LetsGoBig at Room Art Space New Cairo will feature 14 artists performing pop hits but with a classical twist, a piano accompaniment.

The Return is an exhibition featuring more than 20 Egyptian contemporary artists runs through August 15th at the Arts’ Hub Gallery in Zamalek.

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The story of the Limewire era: The invention of the mp3 format for audio files by German audio engineers paved the way for an era in which pretty much all the music ever recorded became available to download online without charge. It’s a story you think you know — and probably lived through most of it, but the intertwining storylines that led to the world of online music downloads and streaming are far more complex. How Music Got Free: A Story of Obsession and Invention by journalist Stephen Witt chronicles the chain of events, starting with the invention of the mp3 and all the crime and manipulation that followed.

The EGX30 rose 0.2% at today’s close on turnover of EGP 343,84 mn (57.7% below the 90-day average). Foreign investors were net sellers. The index is down 21% YTD.

In the green: QNB Alahli (+10.1%), Ibnsina Pharma (+7.1%) and Qalaa Holdings (+5.6%).

In the red: CIB (-2.1%), Cleopatra Hospitals (-1.9%) and Telecom Egypt (-1.3%).

OUR FOUNDER OF THE WEEK- Mahmoud Talaat, CEO, and co-founder of Cartona (LinkedIn).

My name is Mahmoud Talaat and I am the CEO and co-founder of Cartona. Cartona is actually my third entrepreneurial endeavor. My first job was at Lamar in 2012, back when it was still a startup and the products had not yet been launched. As CCO, my job was to ensure that the new products were fully distributed in the market. I handled the operations for many warehouses and created an indirect distribution network.

I founded Speakol back in 2017 while I was still working at Lamar, and it is a fully bootstrapped startup that is profitable. Speakol is a native advertising platform that connects publishers with advertisers. We currently operate in Egypt, Saudi Arabia, and the UAE, and are a leading native advertising platform, generating around 2 bn paid views each month.

We founded Cartona to tackle a problem that I personally encountered during my time at Lamar. Part of my role was ensuring that the products made it to as many supermarkets, small grocery stores, and kiosks across the country as possible. The process is very straightforward with large supermarkets such as Carrefour or Metro: You pay the listing and marketing fees, and rent out shelf space. The issue is that these large supermarkets only make up around a quarter of the market; the majority is made up of around 400k small mom-and-pop stores.

Without any tech, the only way companies can reach these small retailers is by having vans physically pass by each store with products. The entire process depends on these stores’ liquidity availability and demand on a given day. I encountered instances where a retailer would want the products, but would be strapped for cash and unable to pay, rendering the visit unsuccessful. The entire process is just inefficient.

Cartona helps facilitate this process through its marketplace that directly connects retailers to FMCG producers and wholesalers. We do not own warehouses or cars; we are an asset-light marketplace. Suppliers list their products, prices, and details regarding delivery on the platform. Retailers can then compare prices (products can often have several prices in Egypt) from their end and place an order. Pre-ordering allows for a more streamlined and efficient process that cuts down on producers’ and wholesalers’ costs, which in turn allows them to offer retailers better prices.

Retailers were a lot easier to get on board with the new technology initially because the value proposition for them is extremely clear. They get to compare prices, when before they did not have that price visibility. Wholesalers and big multinationals were a bit more difficult to convince since we charge a commission on each order (though we don’t charge an initial fee for them to list their products). As we signed on more suppliers and reached an equilibrium between the number of retailers and suppliers, we were able to achieve the flywheel effect.

The most important KPIs that I look at are retention and positive margins. They are both extremely important because they tie back to your value proposition. Repeat customers indicate customer satisfaction with the service we are providing. From day one, positive margins were something that I'm really conservative about. I believe that if you’re really solving a problem, there is value in that, and your customers will be willing to pay money for your service. Positive margins indicate that you're bringing something to the table.

I gave up working at my family business, the Talaat Moustafa Group, which owns and operates a multitude of businesses. I always saw myself working in the family business and I did that for a while after university, but around a year in it was very apparent to me that I wanted to build something from the ground up. So, although it was a big sacrifice and a difficult step, it was one I was excited to take. My family initially struggled to accept my decision but supported me when they saw how passionate I was about building Cartona.

To date, Cartona has raised around USD 17 mn: We recently raised USD 12 mn in our series A round, led by VC firm Silicon Badia. Finance in Motion, Global Ventures, KfW’s Sanad Fund, Arab Bank Accelerator, Sunny Side Ventures, Global Ventures, and Kepple Ventures have all invested. I could have convinced my family to invest in Cartona, but I chose the VC and institutional investor route because of the value they bring. They help us think big and set benchmarks, as well as advise and mentor us, which is great added value.

Our short-term goal, with our latest funding and focus on FMCGs, is to be profitable by 2024. In the long run, we want companies to stop viewing Cartona as a third party but rather as an extension to their sales force or distribution arm. We would achieve this by fully integrating with companies and wholesalers in their ERP. They would not even have to look at our dashboards:Everything would be integrated into their systems, though that would require a big investment in technology. With this integration, we would be able to tackle other markets: I believe this solution would work in many markets in Africa, Southeast Asia, and even South America.

In my spare time, I enjoy playing football. I actually attended Northeastern University in Boston on a football scholarship. The issue with building a startup is that you struggle to take time off to relax. You’re constantly thinking about the business. These days, if I’m not working, I’m spending time with my family and my kids. I also enjoy reading and usually read a book every month. I’m currently reading The Magic of Thinking Big, which is all about positive thinking.