Egypt startups: innovation through revolution

Features Marin Perez 01:16, Jul 16 2013

We take a look at how the startup and mobile culture is emerging in Egypt

Update: The events in Egypt are still explosive but the transition of power appears to be peaceful, as of the time of publication. This just shows some of the difficulties of trying to grow a company in this type of environment.

In Silicon Valley, the word “revolution” is thrown around quite often and we’re not just talking about theLG phone. In Cairo, that word carriers a much heavier weight and a recent trip to Egypt reveals a blossoming hotbed of startups that are trying to push through the tumult.

Egypt isn’t exactly the most lucrative market at the moment, as roughly half of the more than 80 million people live at or under the poverty line. There’s chronically high unemployment among the youth and political turmoil is a part of the daily experience in Cairo. During a recent trip to Cairo, I discovered that  the Internet and mobile penetration rate are rapidly rising and multiple entrepreneurs are hoping to ride those waves to help build products that help everyday life.

For example, Bey2ollack is trying to make sense out of the crazy Cairo traffic that’s worse than anything Los Angeles, Houston and Atlanta have to offer. If you want molokhia, grilled chicken with thomeya, Tex-Mex, beer or nearly any other type of food or drink delivered to your house, Otlob provides a one-stop portal to get your grub on. The list of successful Internet and mobile companies in Egypt isn’t that large but there’s a growing crop of entrepreneurs trying to blaze their own path.

Flat6Labs is trying to stoke that entrepreneurial fire with its incubator/accelerator in Cairo. Like  YCombinator or others, it invests in young companies for a stake, provides workspace, mentorship and networking, and then has a demo day in front of potential investors, media and business bigwigs. Tucked away in a charming flat a stone’s throw away from the Nile, Flat6Labs is trying to spot and mold the next big tech companies in the region.

"We strongly believe in natural selection," Flat6Labs CEO Ramez Mohamed said. "By providing the right environment for them and not interfering, we strongly believe that the best companies will flourish."

The venture firm Sawari Ventures provides much of the capital and a partnership with American University in Cairo gives Flat6Labs participants the business training they need to build a real company. Flat6Labs only invests in technology companies but Mohamed said it is open to various types: hardware, software, those targeting global markets or those with a narrower focus. More than anything, Mohamed said Flat6Labs wants to get the best teams it can find.

"If you have a bad team and a great idea, you’re still going to wind up with a lousy company," he said.

My visit to the startup accelerator was relatively low key, as the next round of companies weren't due to kick off until February but it was filled with the same zeal I’ve seen in other tech hubs: young, smart people working against the odds to try and create something new and innovative. Flat6Labs has already graduated 24 companies and nine had already received a second round of funding.

We can expect that number to grow rapidly over the next few years unless something dramatic happens. Unfortunately, drama is an everyday part of life in Cairo now.

Revolution

You can't talk about Egypt without discussing the political atmosphere, the revolution and the unrest that spills into the streets. The day I arrived in Cairo was marked with hundreds of protesters in Tahrir Square, Molotov cocktails being thrown at the presidential palace and a video of a stripped man being beaten by police that quickly went viral. Many conversations, especially among the young, will eventually drift to President Morsi, the military and the future of the country.

While Mohamed said that Flat6Labs is a place where they try to not talk about politics or religion, it’s inevitable that it seeps in and can have a major role in how the companies operate.

Mohamed believes that being worried about the safety and security of your family and friends will inevitably impact the "mental bandwidth" of the workers. This instability can also be a major impediment to foreign investments and it can have a direct, tangible impact on some of the businesses themselves.

Hussein Alsaqaf, for one, ditched his pharmaceuticals job to launch the social travel startup GoEjaza during Flat6Lab’s fall 2012 period. His company is trying to make it easier for Arabic travelers to plan their trips. Cairo has historically been one of the most popular destinations in the region but tourism has dried up since the revolution.

Alsaqaf actually finds Cairo more stable than his home country, Yemen, and despite some of the tumultuous images that are coming out, it’s very possible to keep your head down, build a company and focus on making the best products you can. Despite the violent clashes that have gone on in Tahrir Square, Port Said and in other cities, it’s actually possible to just go about your business.

Alsaqaf also said that Cairo is probably the best place to find talent in the region, which makes hiring easier than in some other nearby cities. Egypt is well known for producing engineering talent but most will admit that the talent pool for things like user experience and user interface is lacking.

The turmoil is far from being resolved and the potential for full-scale chaos is still a real possibility. I'm not just talking about shutting down the country’s Internet and cell phone service like in 2011, as the situation may boil over to the point where it can’t be ignored. Nationwide riots are definitely possible.

Needless to say, this could also hurt foreign investment and interest in investing, derail a company’s momentum and present real safety concerns. Like most citizens, entrepreneurs in Egypt want a peaceful and stable environment where they can grow their companies. Most accept that there will be some turbulent times ahead but some have even drawn a direct connection between the revolution and the startup life.

Moataz Soliman, CEO of AStarApps, reminds me of hundreds of people I’ve seen around Silicon Valley: not too far out of school, has a deep passion for something that many would consider geeky and wouldn't seem satisfied in a traditional job. Unemployment is very high, but Soliman sees a renewed interest in university graduates starting their own businesses as opposed to hoping to secure one of the precious few jobs from large companies.

For Soliman, long-term success may mean leaving his home country. AStarApps provides a comprehensive way for app developers to test and deploy their apps and Soliman said it has already signed up nearly every app maker in the country. He will be moving to Silicon Valley this year to court more developers, seek more financing and to embrace the startup culture.

Most of the development team for AStarApps will remain in Egypt but Soliman said that he can envision a not-too-distant future where his story becomes commonplace.

All eyes on mobile

Not surprisingly, many startups in Egypt see mobile as a huge opportunity in the country and around the globe.  Egypt already has a mobile penetration rate of more than 100 percent - which means that there are more phones than people. Most are feature phones (Nokia devices, from my anecdotal experience) but there is a growing market for iPhones, Android phones and even BlackBerry handsets.

Again, the political situation could weigh heavily in on what companies can do to utilize mobile technology to build sustainable businesses. For example, Egypt only lifted its ban on GPS in 2009, so developers and consumers aren’t as familiar with location-based services and apps as those in the United States. Just think about how many of your favorite apps use location and you realize that many Egyptian tech companies have been competing with essentially one hand behind their backs.

Mohamed believes that the market could really be galvanized if the government gives the go-ahead for mobile payments. We’ve seen systems like M-Pesa flourish in Kenya and Tanzania. Mohamed said that this type of system could do really well in Egypt because the rate of credit card/debit ownership is less than 10 percent. Unleashing this type of service could be a boon for customers and businesses alike, and Mohamed thinks that it may be a reality as soon as the end of the year.

Along with mobile payments, there’s a large market for mobile, Arabic-first content and services. Egypt is well positioned to capitalize on this and target a region that hasn’t been that well served by much of the tech community. The revolution has shown that social networking sites like Twitter and Facebook are popular, but there’s also a groundswell of support for messaging services like WhatsApp. Opportunities remain for more mobile-centric messaging apps.

Almost all of the entrepreneurs I met were realistic about what’s going on in Egypt: The country is going through many challenges, may face some dark times, and technology companies alone will not be a panacea for what ails it. Still, there’s a lot of optimism emanating from behind the keyboards and touch screens of many entrepreneurs in Cairo.

"The future will be much brighter than the current situation and entrepreneurs will contribute," Mohamed said. "Whether it's creating jobs, opportunities, or new channels … there is just so much positive energy here."

Update: A few months later, and I'm still very much impressed with the innovation and yes, courage I found in Cairo. I've written about entrepreneurship in other places where the ravages of war and instability are not too far in the past (Berlin and Seoul, which you can argue is still facing a daily threat of war) but nothing compared to what I saw in Cairo. Don't get me wrong, it's still quite modern and you can go about your day but the constant grind of the revolution and the political instability have to be a constant source of pressure. If you're running a startup, it's already a ton of pressure, so my hat's off to the folks out there.

I also wanted to give a shout out to Neatly, another Cairo-based startup that I didn't get to speak with during my brief period there. The app is doing some very interesting things and it has quickly become one of my favorite ways to consume Twitter.

Marin on Mobile: Each week, Marin tackles a subject that intrigues him in the mobile world. You can follow him on Twitter @marinperez.

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