When Egyptian entrepreneur Doaa Aref was diagnosed with thyroid cancer three years ago, she said her thyroidectomy was the easy part. Not only did she have trouble finding the medicines she needed, but she would often get the wrong prescriptions delivered to her home when ordering from local pharmacies over the phone.
Later on, a recovered Aref found out that she wasn’t the only patient to have faced the issue. That’s how the former digital marketing manager and her business partner Dr. Rasha Rady came up with the idea for Chefaa, a Cairo-based medicine delivery platform launched in 2017.
In June, Chefaa raised seven figures in its first significant round of venture capital financing working with 500 Startups. The company had previously raised a six-figure fund of seed capital through 500 Startups, Cairo-headquartered Flat6Labs and a few angel investors last August.
The online platform, which serves as a marketplace for Egyptian customers, allows those with chronic conditions to order medication online and connects them to pharmacies that can deliver it.
While Egypt’s economy currently faces pressure from several factors, such as coronavirus preventative measures, a sudden stop in tourism and record-high debt levels, one bright spot in the economy is a tech boom that has continued even throughout the global pandemic. Chefaa is one of several tech companies benefitting from that growth.
“We believe raising money amid the global COVID-19 crisis is an achievement that carries a responsibility for us to serve and achieve more,” Chefaa co-founder Rasha Rady told Al-Monitor.
An appetite for innovation
The rise of e-commerce platforms in Egypt has not gone unnoticed by companies, investors and entrepreneurs, particularly during the pandemic, with some companies witnessing three to five times higher online sales of fashion, food, hygiene products, gifts and other consumer products.
More than half of Egypt’s population of about 98 million is under 30 and highly tech savvy.
The Arab world’s most populous country is also considered one of the fastest growing entrepreneurial hubs in the Middle East and North Africa, along with the United Arab Emirates and Morocco. That’s why both investors and entrepreneurs are keen on tech startups and businesses in Egypt, where the market is craving solutions in the fields of fintech, e-commerce and health technology.
“There’s a very good appetite from investors, with more of them competing for good deals within the market than ever before,” said Ahmed Alfi, chairman of Sawari Ventures, an international venture capital firm that invests in MENA.
Alfi is also co-founder of Flat6Labs, a regional startup incubator that first launched in Egypt back in 2011. He’s also the founder of The GrEEK Campus, a technology and innovation park in the heart of Cairo that offers working spaces for both startups and established multinational tech and media companies.
Now more than ever, Alfi says he’s witnessed an increasing number of seasoned workers and managers leaving their corporate jobs in Egypt to join new companies or to start their own.
That it costs about $1,500 to register and establish a company in Cairo is encouraging for young entrepreneurs, especially those looking to launch new and unique e-commerce platforms.
Ramy Khorshed, co-founder of the online real estate platform Sakneen, is one of those young entrepreneurs who knew he had reached the end of his learning curve at his corporate job. Khorshed and his co-founder Hussein El Kheshen launched Sakneen last year to reinvent the real estate experience in Egypt. The platform aims to help property developers and sellers connect directly online with potential buyers.
The real estate sector was plagued by “disorganized public information” and a lack of financial transparency, according to Khorshed.
While the need for advanced digital solutions for real estate e-commerce was always there, Khorshed tells Al-Monitor that the coronavirus pandemic has supercharged the adoption of digital tools.
“We had an explosive response to our waitlist with hundreds of homebuyer and seller requests coming in on the first day as well as dozens of enterprises reaching out for demonstrations,” Khorshed added. “The proposition for digitizing physical processes was always strong but the past few months have bumped it up to a critical priority.”
Y Combinator is one of the world’s leading early stage backers. It’s invested in 18 companies now valued at over $1 billion. Since 2005, it has invested in over 2,000 companies including Dropbox, Reddit and Airbnb. Sakneen recently participated in Y Combinator’s incubator program, raising $150,000 in June.
E-commerce drives growth
Egypt’s internet penetration rate stood at 54% in 2020 and is growing rapidly. The country currently has about 92 million active mobile connections.
Although Egypt has a rapidly growing e-commerce market, it still hasn’t reached its full potential. With mobile users increasing by the day, the Egyptian government decided in 2017 to partner up with the UN Conference of Trade and Development to increase the contribution of e-commerce to the county’s GDP to 2.32% and double the number of online retailers — currently about 14,725 — by the end of this year.
While tech companies like Chefaa and Sakneen are a testament to the growing appetite for more innovative e-commerce solutions in Egypt, they still face a tricky balance when it comes to driving growth amid the uncertainty of a global pandemic.
“I think Sakneen along with a number of other software companies are well positioned for the post-Covid economy,” said Khorsehd.
“The key will be to hit profitability and strong unit economics early since investor appetite for risk is likely to change, with a preference emerging for profitability over ballooning growth at all costs. Like many things, this is cyclical and a consequence of the times,” he added.