With over 63% of Egypt’s population under 30 years old in 2023 and growing 1.57% annually, the country is a startup hotbed. “The government recognizes the importance of … entrepreneurship … given Egypt’s youthful population,” said Prime Minister Mostafa Madbouly at a November press event.
He plans to boost investments “from $500 million to $5 billion.” However, he offered no timeline for achieving that tenfold increase.
To realize such a goal, the government has to be more effective at overcoming factors that cause startups to fail. “While the Egyptian market has grown into a healthier environment for startups by the quarter, there is still a high level of risk; only 10% of startups are successful,” noted research from RSM Egypt, a think tank.
Growing landscape
According to Entlaq, an Egypt-based specialized think tank, 2,118 startups were operating in the country as of July, with combined investments reaching $8 billion. They created 50,000 jobs — an average of 24 each.
Sectors where startups made the most money in the first half of 2024 were health tech (two deals generated over $10 million), education technology (four deals worth a combined $4.82 million), fintech and artificial intelligence (each closed one $4 million deal) and logistics and mobility (three deals worth a combined $5.1 million).
Rania Al-Mashat, minister of international cooperation and economic planning, told the media in October that “42% of venture capital in Egypt comes from international financing institutions (IFI),”.
Some of the money goes directly to startups. The rest funds a “significant number of Egyptian [startup] accelerators, particularly those focused on climate and innovation, … supporting women-led startups, [and] green transformation,” Al-Mashat explained.
Egypt-based startups also enjoy incentives, “including facilitated procedures, providing [electronic] incorporation and [lower] fees and taxes,” Hossam Heiba, CEO of the General Authority for Investment and Free Zones, told the media in October.
Working with the government is the Egyptian National Competitiveness Council (ENCC), a nonprofit founded in 2005. It says it focuses on “encouraging the establishment of incubators and accelerators, as well as measures to promote the adoption of new technologies and business models that help increase productivity and competitiveness.”
Risky, nevertheless
Startup growth comes despite Egypt’s high-risk entrepreneurship landscape. According to an RSM Egypt report on why startups fail, most problems originate internally.
“Entrepreneurs, especially the younger generation, tend to skip over market research and go straight to executing their brilliant ideas,” said RSM Egypt’s report. “This is due to … a lack of affordable, reliable sources of data … in Egypt and a lack of patience and structure in these entrepreneurs’ approach to building their business.”
Timing is another risk as “23% of startup failures occur, at least partially, due to launching their businesses at the wrong time,” RSM Egypt said. In 2025, choosing when to operate is increasingly vital amid ongoing regional geopolitical disruptions. “Entrepreneurs need to be more sensitive to the situation and mindset of their market,” the report said.
Other factors causing startups to fail include inherited weaknesses in their products, services, or the market, the result of insufficient research, testing and quality control. “This is especially true in a market as volatile as the Egyptian market, where purchasing power is relatively low,” RSM Egypt said.
Ensuring that products are “important to Egyptians’ day-to-day life” and priced correctly also are common pitfalls, noted RSM Egypt. Incorrect pricing causes “18% of startups [to] fail due to miscalculating, overestimating and underestimating their business costs and prices.”
RSM Egypt also highlighted the founders’ management skill sets. “Having a good idea is one thing … Having the knowledge, experience and business acumen required to succeed in today’s hectic business world is a completely different ball game,” said RSM Egypt’s report.
“Entrepreneurs can get wrapped up in their own egos as they view their startup as the be-all and end-all of the business world,” RSM Egypt added. “Confidence can go a long way [but] it should be accompanied with a healthy dose of humility and modesty.”
Many local entrepreneurs also lack “tolerance for failure and knowledge of how to fail safely, quickly and in a way that enables them to rapidly adjust their approach,” RSM Egypt said.
Meanwhile, many startups don’t have solid HR or legal departments to tackle “legal problems and challenges during a startup’s first few years,” RSM Egypt said, adding that most startup failures happen in the second to fifth years.
External risks include lack of investment by angel investors and insufficient skills to “work out the deal,” RSM Egypt said. The country already has abundant initial and late-growth-stage funding for startups, but “there is still a lack of investment funding in the awkward middle stage of a startup’s growth,” the report noted.
Missing half
Having just 12% of startups led by women in Egypt in 2022, according to the latest data from the World Economic Forum (WEF), is a missed opportunity for the country to grow its entrepreneurship landscape. According to the World Economic Forum’s 2023 Gender Gap Report, Egypt ranked 134 out of 146 countries.
Worse still, women-led startups received just 2% of startup financing from external sources. “Gender bias [that women can’t start a business] and a scarcity of female investors are … hampering venture capital investment in female-owned businesses,” said the WEF.
The lack of female-led local startups ultimately hinders a country’s entrepreneurship scene. “Investors are increasingly incorporating assessments of companies’ gender diversity and equity,” a research note from S&P Global said. “Women [are] the most underutilized source of growth.”
New era?
To overcome those challenges, the government in May launched a “dedicated unit for entrepreneurship and emerging companies” reporting directly to the Cabinet, headed by GAFI’s CEO.
It “acts as a unifying platform for various entities involved in entrepreneurship in Egypt,” said Madbouly. “It facilitates interactions between young individuals, entrepreneurs and emerging companies. Responsibilities include development of appropriate policies, laws and regulations to support the growth of emerging companies.”
Also in May, the government launched a platform that “consolidates [startup relevant] services and procedures from various government agencies,” the state’s State Information Service (SIS) reported.
In September, Madbouly announced the creation of a minister-level committee tasked with “fostering entrepreneurship and bolstering Egypt’s entrepreneurial landscape,” the SIS reported.
Leading it is the minister of international cooperation and economic planning. Its members are the ministers of ICT, higher education and scientific research, finance, supply and internal trade, and investment and foreign trade. Non-minister members include the CEO of the Micro and SME Development Agency and representatives from the Central Bank and Financial Regulatory Authority.
During the first Entrepreneurship Ministerial Committee meeting in October, A-Mashat promised to start “a new phase of government support to create a stimulating business environment and enhance the competitiveness of the Egyptian economy.”
The committee’s agenda includes reducing startup funding gaps via incentives for foreign investors targeting Egypt-based startups. Those incentives include tax exemptions and legislative and regulatory reforms that align with international standards, Al-Mashat said. The committee also will balance “access of Egyptian startups to regional and international markets [while] preserving local skills.”
Attendees also discussed raising civil servants’ awareness of their role in supporting startups and entrepreneurs, the Ministry of International Cooperation and Economic Planning said in its meeting recap.
Ultimately, the government wants “innovation [to become] a fundamental aspect of [Egypt’s] economic growth,” Al-Mashat said.
The ENCC stressed that transition is compulsory. “As the world becomes increasingly connected and competitive, the ability of countries to foster a dynamic and innovative entrepreneurial ecosystem will be crucial to their success.”
This article first appeared in February’s print edition of Business Monthly.
