Opinion| Egyptian startups: The situation has changed

Malek Sultan
4 Min Read

The world economic situation has changed drastically since December 2021, as the US Fed has increased its rates and Nasdaq stocks have been going down, with VCs likely going to be more cautious. Moreover, if you own an Egyptian startup that relies on imported materials, the new importation rules make it more difficult to fulfill your plans.

There are market tips that I am sure you know by heart now; cut your company’s costs, and work harder on your unit economics to have a clear path to profitability, work on your product market fit for maximum effectiveness, get to know your customers better, save cash if you made a round before, etc…

But there are also other tips that I hope to say:

– To deal with such tough times and more aggressive VCs, you need a very strong CFO, not your traditional Egyptian accounting manager. It is no longer acceptable to have a CFO who cannot answer detailed questions about unit economics, growth driver for each product/service, monthly or even weekly cash burn, and forecasted cash flow with various scenarios focused on growth drivers, profitability, and market conditions. If your current CFO cannot do all of the aforementioned tasks and even more, it means you need a new CFO.

– You should have strong connections if you want to go for a financing round. It is all about leadership in tough times. Existing investors and staff especially those with ESOP, they need to believe that you are capable of sailing their ship to safe harbor. It will not be easy but your startup is your life dream. If you do not believe in your life dream, nobody will.

– You must consider local sourcing. Importation is not as easy as it used to be. It is time to build strategic relationships with local producers. Finding quality producers will not be easy, and you need to invest lots of time and effort in building strategic relationships with those local producers.

– It is time to consider merger or acquisition (M&A). Many Egyptian founders shy away from M&A, but this needs to change. You have to be realistic. Acquisition or merger with a stronger entity may rescue your business, but it also needs lots of planning, reasonable valuation, share swap, tax implication, shareholders agreement, management rights. I believe there will be many such opportunities with other entities from the Gulf, Nigeria, Kenya, and maybe other countries as well.

– Your mental health and emotional discipline is very critical. Be frank with your spouse about the challenges you are facing. Reach out for help from other business founders, especially those who share similar VCs. It is time to stick together, but do not allow wishful thinking to blind your eyes on tough realities. You have to be able to see the reality as it is and also shield your emotion from disruption.

Malek Sultan: Co-Founder of Disruptech VC

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