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Tech Startups in the Middle East: Basic Problems, Sophisticated Solutions

From space tech to smart city solutions, the Middle East offers unparalleled opportunities for entrepreneurs. As the Rise Up Summit gathered the movers and shakers of the startup world last December, we asked global corporate giants and investors about their vision of the tech scene in Egypt.

“There are places facing problems that the Western world has stopped thinking about for the past 300 years. But solving a basic problem may require a very advanced technological solution. We have examples such as cloud computing used to produce electricity, or to facilitate micro loans for farmers in Kenya. So it doesn’t mean that because it is a basic problem, it needs a basic solution. That’s why you want your best people in the emerging markets, because these are the people who can think differently,” says Ali Faramawy, President at Microsoft MEA. His words resonate with a reality that is particularly palpable for Middle Eastern tech startups, the product of entrepreneurs who stand up to challenges and refuse to be copycats of Silicon Valley. 

Take the case of Iqraaly and Bey2ollak, two Egyptian startups that have tapped into Cairo’s oral tradition and un-manageable traffic jams, respectively, to offer culturally-relevant services that could echo onto other latitudes. Iqraaly, a mobile app that offers audio material including books, newsfeeds, and podcasts, has raised three rounds of Angel investment since its inception in 2011, while Bey2ollak, which allows users to tell each other how much traffic there is in a given area, launched virally in 2010 and has amassed one million users. This year, the application partnered with the unbeatable car sharing platform Uber to incorporate their service into the app and announced their expansion to Saudi Arabia.

Uber’s own regional competitor, Careem, is already present in 20 cities across the region, from Morocco to the UAE, and has recently raised $60 million in a financing round with the Abraaj Group as lead investor. In an increasingly competitive market, Uber further announced a $250 million investment in the Middle East.

“Cairo is an amazing city. It is the fastest growing market in Western Europe and the Middle East because of the environment; people are interested in tech and new services,” said Uber’s Regional General Manager Jambu Palaniappan, who flew over to Cairo to attend the RiseUp Summit last December. Over 4,000 would-be entrepreneurs flocked to Downtown Cairo’s Greek Campus to network and absorb inspiration, giving testimony to the implausibly young tech-minded generation that is driving the region’s growth in mobile and web-based industries.

“This is like South by Southwest; there are more startups than I’ve ever seen,” said Mike Butcher, condensing the vibrant atmosphere that reigned during the two marathonic days when world giants like Google, Facebook, Microsoft, and Uber came to Cairo. “Seeing that level of energy in Egypt is a reflection, not only of what is going on in the Middle East, but across the world. We are seeing all these entrepreneurs in all corners of the globe literally rising up and claiming their destiny as founders of great tech companies,” Techstars’ manager Greg Rogers explained, as he illustrated the work of Dopay, a Fintech startup that partnered with Barclays through Techstars’ acceleration programs and offers payroll services to bank the unbanked in Egypt.  

The city of successive revolutions and sleepless nights, Cairo is not only the fastest growing market for companies such as Uber but also one of the most rapidly growing markets for Facebook, which announced at the summit hitting a milestone 26 million monthly users in Egypt and 114 million in the MENA region. With an internet penetration of 48%, primarily mobile-based, and two thirds of the population under the age of 30, Egypt stands out as one of the leading Middle Eastern countries harnessing the power, the talent, and the energy of young aspiring entrepreneurs that take their ideas to the digital space.

“The Middle East and North Africa are the fastest growing markets for us, which reflects the hunger and needs of users across the Middle East,” said Facebook’s Head of Public Policy MENA Ashraf Zeitoon, who also made his mark at the summit. In Egypt, Facebook users amount to 68% of Egypt’s total Internet population, a population that not only leverages on the power of the social network to connect, but also uses it in surprisingly different ways; to grow their businesses, sell in overseas markets and connect with potential partners or employees. “From a social media standpoint, there is tremendous opportunity here,” Zeitoon added. 

 The founders of online obituaries platform El Wafeyat, on stage at the RiseUp Summit.

But aside from consuming, Egyptian startups are gearing up to create locally grown social networks, such as Slickr, the rising fashion network that hogged the podium at the summit's 'Get in the Ring' pitching competition, and Engezni, a recently launched application aimed at creating communities of foodies online. Among the startup success stories, e-commerce beast Souq.com - also present at the summit - sustains a prominent position, and it has just announced raising global venture capital at over $1 billion. 

On stage at the Greek Campus were also El Wafeyat’s co-founders Youssef el Samma and Nesma El-Far, owners of a startup innovating in an industry worth millions of dollars, but severely outdated: online obituaries. “We visualise great opportunity in the region as a whole, because there are huge amounts of money spent in this industry and no convenient solutions,” Elsamma told CairoScene, as he discussed the implications of launching a tech startup in Egypt.

But technology, in a region where entrepreneurship is often a synonym of hope, is also being used as the vehicle for transformational social initiatives, enacting solutions to what were once the demands of the revolution. The zeal for change is particularly palpable in companies leveraging the power of digital tech to solve developmental conundrums, such as educational platform Nafham and and employment-related startup Wuzzuf, an Egyptian startup that made history this year as it raised the nation’s largest funding round from European VCs: $1.7 million, competing with regional powerhouses Dubizzle and Bayt.com.

Last November, a study published by Forbes listed Cairo as one of the top 10 cities around the world to launch a startup.  And, just before the summit took off, US-based accelerator 500 Startups announced a $30 million MENA-based fund entitled 500 Falcons, aiming to invest in between 100 to 200 companies.  

“This is a young market for venture, which is exciting. There are a lot of talented young people and the challenges are different to those addressed in the USA,” said Marlon Nichols, general partner at US-based VC Cross Culture Ventures. “The question is whether it is scalable on a global level. In an ideal scenario, an entrepreneur would identify a local challenge, figure out a way to solve it locally, but that challenge would be relevant to other parts of the world, and he would scale it,” he concluded.

Nader Sabry, an Egyptian-American himself who disrupted an industry untapped for 1400 years when he invented the world’s first physiological prayer mat, expressed his optimism in Egypt’s rising entrepreneurs entering the challenging, often seemingly scary, industry of space tech. “We have a lot of talented people in this region who have contributed in the past through history to space technology; which is what led to today. Reigniting that passion in young people, that’s what I hope to do today, because space can be summed up in one word: hope,” he said.

Photography and videography by @Mo4Network's #Mo4Productions

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