Complexity of procedures, scarcity of investors challenge startups

Daily News Egypt
4 Min Read
Co-founder of Ta2heel, Ahmed Mahfouz by Nagy Youssef

Founder and CEO of Ta2heel Tarek El-Fakharany said he had to resort to businessmen and investors to finance his company when he first started, noting that he received nothing but encouragement from them.

“I realised that attracting investment only comes after working hard, rather than negotiations,” he added. “We are still in the beginning.”

El-Fakharany said the gap between studies and market requirements is a challenge for entrepreneurs. He called on investors and incubators to conduct workshops for university students to teach them how to start businesses based on innovation and creativity.

Lack of funding is another challenge for emerging companies, El-Fakharany said, noting that investors tend to finance companies that have already been making profits, and have already turned into growing companies, rather than being startups.

“This does not solve the problem with emerging companies seeking financing,” he said.

He explained that emerging companies do not have connections with investors, and lack the necessary skills to market their ventures and obtain the necessary financing, according to El-Fakharany.

Al-Fakharany’s partner in Ta2heel, Ahmed Mahfouz, expressed his agreement. “A large group of investors avoid the risk of investing in emerging companies,” he said. “They prefer to keep their money in banks.”

Mahfouz called for events that bring entrepreneurs and investors together so that they can meet and open channels of communications.

Shezlong CEO Ahmed Abuol Haz said the absence of legislation to regulate start-ups hinders the establishment of many companies due to government bureaucracy.

He explained that Egypt does not have an entrepreneur-friendly environment, calling on authorities to develop mechanisms to improve the sector’s performance, especially the legal and routine aspects.

On his part, Jobzella CEO Nader El-Batrawy said attracting investors is the foremost challenge facing Egyptian start-ups, in addition to the reluctance of governmental agencies and Egyptian companies to utilise the innovative ideas provided by local companies, where they prefer to do business with foreign companies.

El-Batrawy added that the sector requires the support of government agencies more than their money.

He noted that start-ups do not get the state’s necessary support, noting that Egyptians have many innovative ideas that can compete in the global market. “We can become the Silicon Valley of the Middle East—if we receive the support of the government and the private sector,” he added.

Further, legislation and regulations hinder start-ups, El-Batrawy said, noting that the government has raised the rate of advertising taxes from 15% to 20%, without considering the companies’ financial situation and whether or not they are making profits. He added that he had to shutdown the company on paper in Egypt and reopen it in Dubai to avoid these additional costs and exploit the tax exemptions and investors relation offered in the UAE.

El-Batrawy further criticised Egypt’s strategy for taxes, saying the state does not collect money from social networking websites even though they make billions through advertisements.

Further, CEO and co-founder of DrBridge Amir Barsoum said companies that solve social problems are the most successful among start-ups, calling for further support from the state.

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