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Sunday, 2 January 2022

Egypt’s startup scene in 2021 (Part I): Startups just keep breaking those investment records

Egypt’s startup scene in 2021 (Part I): Startups just keep breaking those investment records. Egypt has heard of some big funding rounds this year, as ticket sizes are growing and the total number of fundraising rounds across the startup scene is increasing. Acquisitions have also been more frequently mentioned in 2021 than any year before.

We take a look at what our internal trackers tell us about those investment rounds in terms of size, types of investors, and sectors. What we can say up front is that fintech and e-commerce are tying for the top position in terms of number of transactions, and international investors are more interested in Egypt than ever before.

DISCLAIMER- These numbers are — at best — approximations, with 17 startups only disclosing that they had raised a “6- or 7-figure round” and 19 others preferring to not name an exact amount.

Our internal trackers count 76 investments in Egyptian startups in 2021, a 55% increase from 49 in 2020. September, November and December clearly were prime time for startup investments. Eleven closed investment rounds were announced in the last month of 3Q2021 and 4Q2021 each, and 12 in November. The most discreet months of the year were April and August, with only three investments each — but there wasn’t a single month all year devoid of investment announcements.

Egypt’s startups raised well over USD 373 mn this year compared to over USD 100 mn last year, according to our data. One of them said it had raised more than USD 1 mn, which is also not precise, as well as another that announced a “multi-mn USD investment.”

Government-backed VC Egypt Ventures invested some EGP 92 mn in startups and accelerator programs in 2021, the International Cooperation Ministry said in a statement. The investments include EGP 75 invested directly in businesses, and another EGP 17 mn that were earmarked for accelerator programs by Falak Startups and EFG-EV Fintech.

And accelerators have been quite active, too. Besides the above-mentioned investment rounds, EFG-EV made two unannounced investments, with the outfit investing a total of USD 1 mn in five transactions in 2021, CEO of EFG-EV Mahmoud El-Zohairy told us. Flat6Labs poured USD 3.14 mn into 29 local transactions through its accelerator program and other rounds, according to regional investment associate at Flat6Labs Cherif Hamdi, of which four were announced and included in our tracker. Falak Startups joined six more investment rounds worth over USD 413k in 2021, besides the two included in our tracker, CEO of Falak Startups Ahmed Hazem told us.

There are other indicators that set the bar for that number a notch higher. ITIDA CEO Amr Mahfouz estimated the number to be USD 400 mn in October, while database Africa: The Big Deal puts a USD 588 mn label on Egypt, as of 1 December.

Setting aside MNT-Halan, the average transaction raised was almost 3x this year compared to 2020. Of those who disclosed a precise figure, the average raised this year per transaction was USD 6.09 mn, up from USD 2.38 mn in 2020.

The five largest tickets in 2021? Most of them were series A rounds: MNT-Halan raised USD 120 mn, followed by Trella’s USD 42 mn series A round. Maxab announced a USD 40 mn round, while Capiter and Breadfast saw USD 33 mn and USD 26 mn, respectively, go into their bank accounts.

Some 60% of investments had international involvement, compared to 53% last year. In previous years, “international” involvement mostly referred to regional investors, but this year we’ve seen investors from Japan, the UK, Switzerland, pan-Africa, Canada, Japan, and even Ireland join local funding rounds. We even had Silicon Valley’s Sequoia Capital enter the region for the first time through its investment in fintech outfit Telda.

Fintech and e-commerce are almost tied again for the top sectors of 2021, which was also the case in 2020. Fintech saw 13 transactions, while e-commerce (between B2B and B2C) saw 11 investment rounds.

What’s new and interesting about this year is where the biggest pickups in investment rounds happened: Edtech, had 8 investments (up three from last year), and healthtech and grocery delivery had five investments apiece. Taking on supply chain solutions has also proven to become more popular, with six rounds in the logistics sector. Proptech, which was barely seen in the past years, nailed 3 investment rounds.

Pre-seed and seed rounds were all the rage this year: We saw 28 pre-seed rounds and 23 seed rounds raised in 2021, accounting for the bulk of this year’s rounds. Twenty-three companies did not specify for which rounds they were raising, seven raised a pre-series A, six announced series A rounds, and nine companies ranged between bridge rounds and other types of funding.

Pre-seed rounds specifically kept breaking records in the first half of the year. Dayra started off with a USD 3 mn round in March, after which Flextock raised USD 3.25 mn in May, followed by Telda’s announcement of a USD 5 mn pre-seed round. But the largest we heard of to-date was Rabbit’s USD 11 mn round in November.

What do startups want to do with all those USDs? Mainly geographical expansion. Thirty-three startups want to either enter new locations within Egypt, or venture beyond our borders, most popularly into MENA and the GCC. Hiring and product development were also among the most sought ambitions of startups that raised investments in 2021.

Five acquisitions from the local startup world graced our news coverage last year. Eventtus was acquired by US event management platform Bevy, South African home services firm SweepSouth bought Filkhedma, CIRA acquired 51% of education startup Innovvette, Tareeqi was scooped up by Oman-based e-Mushrif, and Jordanian B2B healthtech platform Aumet acquired Egyptian startup Platform One.

And startup-to-startup acquisitions have also seen a (small but noteworthy) spike. B2B commerce platform MaxAB acquired Moroccan startup WaystoCap last summer, Egyptian edtech startup Tyro bought local edtech outfit Nafham, and Egypt-based customized celeb video platform Minly scooped up Emirati celebrity shout-out platform Oulo.

More seasoned entrepreneurs and founders are starting new businesses: “Entrepreneurship is attracting people with more experience, which we will see even more of in 2022” managing partner at Algebra Ventures Tarek Assaad tells us.

Next week, we’ll dive into how investment vehicles in Egypt developed over the past year, before we tell you what (we think) is in store for 2022.

Your top stories on future trends for the week:

  • MENA SPACs this month: Swvl and Anghami are expected to complete their SPAC mergers and list on the Nasdaq in the second half of January.
  • Startup buys startup: Jordanian B2B healthcare marketplace Aumet has acquired 100% of Egypt-based digital pharmacy supplier Platform One.
  • A record year for Africa tech investment: African tech startups raised a record USD 5 bn of investment in 2021, with most of the funding concentrated in Nigeria, South Africa, Kenya and Egypt, according to a report from Briter Bridges Intelligence cited by Bloomberg.

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