When Yacine Rahmoun was considering in 2008 whether to relocate from Silicon Valley to Algeria, the north African country’s start-up ecosystem was virtually non-existent.“There were no business plan competitions, no boot camps within universities, no business angels, no incubators or mentorship programmes,” recalls the Algerian-American entrepreneur and tech investor.
Along with a few other start-up enthusiasts, Mr Rahmoun has endeavoured to change this. Moving back to his home country in 2011, in the years that followed he co-founded the Algerian Startup Initiative, the country’s first private incubator programme, and local investor network Casbah Business Angels.
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These early initiatives helped set in motion Algeria’s now-emerging tech scene, which has been bolstered by recent government start-up legislation and support.
Yassir, a ride-hailing and delivery platform founded in 2017 by Algerians Noureddine Tayebi and El Mahdi Yettou, has drawn further attention to the country’s tech potential. The on-demand services provider is currently operating in 25 cities across Algeria, Canada, France, Tunisia and Morocco.
In November 2022, Yassir raised $150m from investors — including Silicon Valley-based Bond and accelerator Y Combinator — in one of the largest rounds raised in Africa last year, according to data provider Magnitt.
“This funding round had a ripple effect in the ecosystem, inspiring other entrepreneurs to pursue their ventures and providing a benchmark for future investment,” says Sid Ali Zerrouki, the managing director of Algeria Venture, a public accelerator that supports start-ups across the country.
[Ride-hailing firm Yassir's] funding round had a ripple effect in the ecosystem, inspiring other entrepreneurs to pursue their ventures.
While Algeria’s start-up scene remains nascent, entrepreneurs tell fDi that recent reforms to open the country’s historically closed economy and support start-ups are setting the stage for growth. Given Algeria’s reliance on oil and gas, which accounted for 93% of product exports between 2016 and 2021, it is hoped that tech entrepreneurship could diversify the economy and create jobs for the population, of whom 70% are under 30 years old.
But there are teething problems to overcome in Africa’s largest country by land mass. Cumbersome bureaucracy, brain drain and poor access to international financing must all be addressed if Algeria’s emerging start-up scene is to achieve its full potential.
Changing mindset
Despite this, in December 2022, a start-up conference in the capital, Algiers, hosted representatives of 30 countries from across Africa. The two-day event epitomised Algeria’s change in approach towards start-ups since president Abdelmadjid Tebboune assumed office at the end of 2019.
Amel Touhami, managing director of Algeria’s chapter of the Founder’s Institute, the US-based pre-seed accelerator, says “strong political will” has helped the country take a “big step” towards formalising its start-up scene and encouraging more innovation.
Along with setting up a dedicated ministry for the knowledge economy, start-ups and micro-enterprises, the government established the Algerian Startup Fund in October 2020. Last year, it committed to invest up to $411m in local start-ups across Algeria’s 58 administrative provinces, though it has not outlined a specific timeframe for these investments.
Mr Zerrouki says the government has pledged a total of around $500m to early stage start-ups. The accelerator has also signed several international agreements to set up additional funds, including with Italy’s national innovation fund CDP and US-based impact investor SEAF.
While the increased government funding and guarantees are welcome, entrepreneurs say more angel investors and later-stage venture funding are needed if the country is to produce more internationally successful tech start-ups. Magnitt figures show that despite growth of 405% in venture funding between 2021 and 2022, Algeria still lags many other emerging markets, including Egypt.
Imed Allal, co-founder and chief operating officer of Namla, an edge computing platform with offices in both France and Algeria, notes more could also be done to promote collaboration between the biggest Algerian companies and tech start-ups.
“The market in Algeria is still untapped in several sectors, which means there is a real opportunity for start-ups,” he says. Namla is currently working with Sonantrach, Algeria’s national oil and gas company, to explore the deployment of edge computing technologies at one of its factories.
Ironing out bureaucracy
Algeria’s ministry of start-ups and entrepreneurs are currently discussing ways to make the regulatory process easier for start-ups, such as the ability to set up a company online. Information about requirements and updates to business registration in Algeria are still often only available in person, according to the US state department.
“If we can digitise the entire process for entrepreneurs, it will be much more time- and cost-efficient, especially for founders from outside Algeria,” says Abdellah Aouf, an Algerian serial entrepreneur based in the US, who helps connect Algerian tech talent with work opportunities abroad.
Recent steps have been also taken to improve the broader investment climate, including the elimination of the ‘51/49’ rule in 2020, which previously capped foreign ownership of all companies in Algeria at 49%. The rule now only applies to strategic sectors, including energy, mining and transportation infrastructure, and companies intending to import goods to resell in the country, according to the US state department.
“Now we are in the phase of opening up to the world. In terms of regulations, the government is adapting through start-up methodology, trying to build, learn and improve in the process,” says Mr Aouf.
Start-up label
Since formalising its approach in 2020, the Algerian government has identified more than 5000 tech entrepreneurs in the country, with around 1200 of them being labelled start-ups. Prominent start-ups include ride-hailing app Temtem, recruitment platform Emploitic and Zawwali, an e-commerce site that sells tech and fashion brands.
While the majority of start-up activity is concentrated in Algiers, Mr Zerrouki says innovative companies are being founded countrywide, including in cities such as Oran, Constantine and Ghardaia. To be classified as a start-up, companies must be less than eight years old, have fewer than 250 employees, generate less than $5m in revenue and have an “innovative idea or project”, says Mr Zerrouki.
But a requirement for start-ups to be labelled and be incorporated in order to access public funding can be stifling for very early-stage ventures. “Many of these start-ups are not ready to incorporate,” says Ms Touhami at the Founder’s Institute. She notes that this can be a “bureaucratic hurdle” for start-ups that are still working on their ideas, and are yet to develop their minimum viable product.
Brain drain
Like other emerging markets, Algeria also faces an uphill battle to retain its best talent and start-ups. Mr Aouf, who connects Algerian’s with overseas opportunities, says the median salary for a web developer in Algeria is about $24,000 per year — roughly 75% less than the going rate in the US.
Given the benefits for international start-ups hiring Algerian talent, the country faces the same challenges of talent retention as other emerging markets, in a global market where hiring can be remote.
Mr Rahmoun has seen Algeria’s start-ups and talent grow; now, as he says: “We need to figure out ways to create a better economical environment so that [start-ups] can remain in the country.”
This article first appeared in the April/May 2023 print edition of fDi Intelligence.