Although Fawry, Egypt’s top e-payment platform and leading fintech, became Africa’s latest ‘unicorn’ this year via a listing on an African bourse, it will not be the last to emerge from the country’s burgeoning tech scene, according to the International Finance Corporation (IFC).
“Egypt will produce further unicorns one day, absolutely,” says Walid Labadi, the IFC’s country manager for Egypt, Libya and Yemen. “We fundamentally believe in the power of the entrepreneurial spirit and its ability to address fundamental market needs, which will eventually create significant economic value and can become a driver for creating future entrepreneurs.
“Entrepreneurs are resilient, forward-looking and agile and we can see now how many more young Egyptians want to become entrepreneurs and create their own companies. They will create the future unicorns of the country.”
Leading the way
Founded in 2008 by Ashraf Sabry and Mohamed Okasha, the company listed on the country’s main bourse, the Egyptian Exchange, in August 2019 and was valued at $275m. However, at the start of October this year, its valuation surpassed more than $1bn.
It is the third African start-up to reach unicorn status and the first one to do so after going public on an African stock exchange. Jumia, a pan-African e-commerce company based in Lagos, was the first unicorn out of Africa after listing on the New York Stock Exchange in April 2019. In November 2019, Interswitch, the Nigerian digital payments firm, also became a unicorn after Visa acquired a minority stake.
Fawry offers an online payment gateway for business owners to transact with customers via cash, credit cards and e-wallets. It has helped to transform the Egyptian economy by reducing the reliance on cash, lowering costs and offering a more convenient way to pay. Its good fortune is partly due to the Covid-19 pandemic that prompted many people to place a high demand on its e-payment solutions. Its revenue for the first nine months of 2020 surged to E£892m ($57m), a 45% jump on the same period last year.
“Fawry developed a unique business model that was specific to the Egyptian market and to Egyptian pain points,” says Mr Labadi. “Egypt’s economy was traditionally dominated by cash; they found a way to tackle this challenge effectively and efficiently.
“The company’s success can be attributed to a very talented management team, a strong vision and understanding of the market, and a very disciplined execution. That is a rare combination. We invested in Fawry in 2012, after the revolution in the country. This was a time when very few investors were coming to Egypt, but we believed in the country and its potential and wanted to showcase the opportunities there. We also believed Cairo had the potential to develop into a great digital hub. Today, there are other companies in Indonesia and Africa looking to replicate the Fawry model, which is a testament to its success.”
The IFC, part of the World Bank, is a growth-stage investor and has invested $6m in Fawry since 2013. It partially exited the company at the time of the initial public offering, but still holds around 4% of the equity.
In 2015, Egypt had a nascent tech ecosystem, mainly owing to a lack of serious investors prepared to take early-stage investment risks. This ecosystem has now started to flourish.
The country remained the most active venture capital market in the Middle East and North Africa (Mena) during the first half of this year, accounting for 25% of the 251 transactions in the region, according to the Mena Venture Investment Report by Magnitt, a start-up data platform. In the first half of 2020, $659m was invested in Mena-based start-ups, a 35% jump on the same period last year (by value, Egypt attracted 19% of the total).
Magnitt says that the country is attractive to foreign venture capital groups because it has a large addressable market for entrepreneurs, with Egyptian students and professionals increasingly turning toward entrepreneurship to capture the opportunity of the quickly developing market. Egypt’s economy (at $303bn, according to the World Bank) is the third biggest in Africa and also makes the country’s tech ecosystem attractive to foreign investors.
The IFC believes it helped to kickstart this ecosystem by expanding access to early-stage capital. It has committed $2.5m in equity financing to Flat6Labs, a Cairo-based early-stage incubator, since July 2017. It has also invested $10m in Cairo-based venture capital Algebra Venture. One of the Fawry co-founders, Mohamed Okasha, has now launched his own $25m fintech fund, called Disruptech.
“Tech start-up accelerators now exist all over Egypt,” says Tamer Azer, principal at Sawari Ventures, the Cairo-based venture capital firm with plans to invest $70m in tech companies in Egypt, Tunisia and Morocco. “There is now a core cluster of tech start-ups in Cairo — many [of which are] located in the Greek Campus and Maadi neighbourhoods.”
He says a start-up to watch is MoneyFellows, a Cairo-based fintech that has digitalised the concept of a rotating savings and credit association, and that raised $4m in a Series A round in June. Covid-19 has fuelled the demand for digital services across all business sectors and firms are responding to it by boosting their digital presence, innovating and thinking about new solutions.
The AUC Venture Lab, part of the American University in Cairo — one of Egypt’s top universities — is a highly successful start-up incubator. Since 2013, it has incubated around 210 start-ups and provided them with seed capital of around only $2000 each. These firms have proceeded to raise more than $100m from other investors.
“We have graduated around 40 fintech start-ups,” says Ayman Ismail, founding director of AUC Venture Lab. “These firms specialise in all areas of fintech, including digital payments and insurtech. In September this year, the financial authorities drafted a new law regulating the use of fintech in non-banking financial activities. Once it is enacted, it will be an incredible boost to the sector.”
Swvl Egypt, a bus vehicle for hire company based in Cairo, is another company to watch, say local experts. Dubbed ‘Uber for buses’, users are able to book fixed-rate affordable rides on existing mini-bus routes through an app. The firm says it offers affordable, quality, convenient and reliable bus rides.
Founded in Cairo in April 2017 by Mostafa Kandil, the company has expanded fast. It moved its headquarters from Cairo to Dubai in November 2019. It plans to debut its service in Indonesia, the Philippines and Bangladesh within one year. It already operates in Pakistan's major cities, including Islamabad, Karachi and Lahore. Last year, it raised $42m from investors in Sweden, Dubai and China to fund its expansion in Africa.
In January this year, Uber also completed the purchase of Careem, the Dubai-based vehicle for hire company with a big presence in the Egyptian market, for $3.1bn.
Fawry has unique selling propositions that have turned it into one of Egypt’s most successful companies in little over a decade. Today, the country has a highly dynamic tech ecosystem which is at the heart of innovation in Mena and is likely to produce further unicorns in the near future.
This article first appeared in the December/January print edition of fDi Intelligence. View a digital edition of the magazine here.