A15, a company specialised in investing in startups, is about to complete the final stages of investing in two startups, one of which works in healthy food, and the other sells clothes online.
A15 Investment and Venture Development Director Tamer Azer told Daily News Egypt that the ecosystem of the entrepreneurship field has not yet tapped into the mainstream consumer market. He also said that the company has invested about $800,000 out of the company’s $3m investment portfolio.
What does the entrepreneurial ecosystem in the Egyptian market lack?
Entrepreneurships and startups need to inform consumers in Egypt about companies’ services and products. This is the most important factor to boost the entrepreneurial ecosystem so as to speed up growth rates and create a market.
Are there attempts to cooperate with the government to promote the services startups provide?
The majority of innovative companies’ service provision is based on the BTOC system, while government services provision is based on the BTOB system. Startups need to reach individual consumers. They are the segment who use Shezlong services for example or buy food from Mumm; they are the decision makers when it comes to spending money.
The government, represented by the Information Technology Industry Development Agency (ITIDA), plans to establish a fund for investment in startups. What do you think about that move?
We, as a private sector company, are specialised in the field of venture capital and know how to choose promising startups to invest in. So, if the government wants to invest in that field, it is better to cooperate with the private sector as those companies are more experienced in that field.
The sector needs more investments because many startups and entrepreneurs need those investments to push their growth forward.
Do you have a promotional plan for entrepreneurship among university students?
The promotion of entrepreneurship culture among university students is essential and it is important to feed that sector with creative youth permanently; however, it is too early [on the timeline] to promote for A15, as the company invests in companies, not ideas.
We invest in companies that have already achieved significant sales or provided services to many customers.
How could the flotation of the Egyptian pound affect the entrepreneurship sector?
Entrepreneurs use imported tools and products, including equipment, devices, and software as well as paying advertising fees on Facebook. The flotation of the pound has increased the prices of most of this equipment. It also affected the Egyptian consumer’s purchasing power. Those who used to buy the products or services from emerging companies changed their purchasing orientation.
In general, our economy depends on 90 million people and the flotation of the pound would have a negative effect, represented in the decline of purchasing power. But it would regain its strength within three months; these negative effects are temporary.
There are three stages to financing startups. Which stage requires the most investors and investment funds in the Egyptian market?
Before we decided to enter the investment market, we had studied the market carefully and found that there are some problems in three phases out of the seven phases of growing companies. The first problematic phase is the exponential growth phase which follows the transition of an idea into a real project, then the growth phase, and the penultimate phase, in which the company needs funding to increase its expansion regionally or globally.
Egyptian companies have recently attracted investments from foreign investors, does that mean that we lack investments in our local market?
The Egyptian market provides positive signals. Companies which recently received investments from foreign companies are mainly based on local funds and investors. This confirms that the Egyptian market is promising in this part; however, it also shows that the required sources are not available in the Egyptian market to drive those companies’ growth through providing them with funds and new investment.
What is the current size of the size A15 investment portfolio?
The size of the company’s investment portfolio is $3m, of which $800,000 has been invested in 16 companies so far. We seek to inject new investments in promising companies, and we plan to be able to exit from these companies after injecting those investments to obtain the return on investment and reinvest it in other startups.
The total revenues of the 16 companies are roughly $100m, and the average per company ranges between EGP 500,000 and EGP 3m.
Are there companies A15 plans to invest in currently?
We are studying possibly investing in a number of companies; two of them are in the final stages of discussions. One of them is operating in the healthy food sector, and the other is in e-commerce in clothing and fashion.
Through our investments, we try to integrate between products and services, in order to encourage growth and the opening of new markets.
What are the most important criteria of chosen companies?
Many of the procedures followed in selecting companies include meeting their teams to observe their way of thinking, their background, and their vision to the future and interdependency. In addition to studying their project’s idea to find out if it resolves a fundamental problem in society and if the staff will be able to implement it.