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Wednesday, 7 April 2021

Algebra Ventures doubles down on Egypt with USD 90 mn fund

Algebra launches USD 90 mn tech fund: Algebra Ventures has launched a second tech fund that will invest USD 90 mn into companies based in Egypt and the Middle East and Africa region, the VC outfit announced in a press release (pdf) yesterday. The company is “doubling down” on its home market and will focus its investments primarily on Egypt-based tech firms that are “transforming industries,” it said.

First close coming next quarter? Algebra is targeting a first close in 3Q2021, but doesn’t have a set timeline for when it will begin drawing on the fund, Managing Partner Karim Hussein told us.

Algebra is tight-lipped on potential limited partners. The company’s first USD 54 mn fund received backing from a who’s who of international LPs including Egyptian American Enterprise Fund (EAEF), the European Bank for Reconstruction and Development, the International Finance Corporation, Cisco and family offices.

Egypt + “bottom of the pyramid” businesses in focus: The fund will focus on investing in primarily Egyptian fintech, agritech, logistics and healthcare startups, but will also look at startups in the wider Middle East and Africa region. It plans to increasingly turn its focus to businesses that cater to lower and middle-income segments by bringing “excellent services at a low cost,” and is also looking at businesses that can evolve and have the potential for cross-border expansion to similar markets, particularly emerging markets. “We already have within our portfolio of businesses that are active in Sudan, Ethiopia, Tanzania, Kenya, and other countries, so we’ll continue looking at similar stories,” Hussein told us.

The ticket size for investments will range from anywhere between USD 500k to USD 3 mn, depending on the stage of the startup, Hussein says.

And this could increase in the future: “With the high pace of growth we’re seeing with many of our startups, I’m expecting the ticket size to increase a bit over the coming years,” he said.

The story so far: Algebra has supported some 21 startups over the past four years through its inaugural USD 54 mn fund, with the VC firm’s six most established companies now valued at more than USD 350 mn.

It’s never been a better time to be a tech startup: Egyptian tech startups have been having their day in the sun this past year, with much of the USD 100 mn raised by startups during covid-19 going to fintech and e-commerce ventures. The tech transformation in the Egyptian economy and the government’s financial inclusion drive (including digitalizing the tax filing system and other major government services) coupled with initiatives from the Central Bank of Egypt such as financing commercial banks’ purchase and distribution of PoS machines all bode well for tech-enabled businesses, Hussein told Enterprise. “We see encouraging signs from the digitization of the economy that there will be stronger infrastructure for startups to rely on going forward.”

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