By: Moslem Ali
Cairo - Mubasher: Today’s guest in the Startup Lounge has played an integral role in developing the entrepreneurial scene in Egypt and the MENA region. He is one of the startup ecosystem leaders and investors who brought real contributions that helped numerous success stories.
Ahmed El-Alfi is the Chairman of Sawari Ventures, a Cairo-based venture capital firm investing in technology companies. He is also the co-founder of Flat6Labs, the largest accelerator in the MENA region; the founder of The GrEEK Campus, a technology and innovation park; and the founder of Nafham, one of the region’s top online education platforms.
El-Alfi believes the pace of change in the world is accelerating, especially in the area that he cares about the most, which is technological and scientific advancement. He was chosen by Fast Company magazine as one of the Most Creative People in the Business Community, among inspiring leaders who are shaping the future of business.
Mubasher spoke with El-Alfi about his outstanding journey in the field, as well as his vision and ideas for the future.
Could you tell our readers about your personal journey into the startup ecosystem?
I moved to the US when I started high school. I was fascinated by reading science fiction novels about the future of humanity and Star Trek. I was always thinking about the futuristic aspects of technology.
I was also interested in finance, worked on Wall Street for ten years, and started investing in tech companies in 1986. Then, I moved to directly invest in startups and early-stage companies, which I have been doing full-time since 1990.
When my kids went to college, I decided to come back to Egypt in 2006, where I worked in private equity for some time. Then started Sawari Ventures with Hany El-Sonbaty, and started Flat6Labs. A few years later, Wael Amin joined us. And I also started the GrEEK Campus.
Our work continues to expand to find different things that we can do to build the ecosystem in Egypt and in the region.
What did you envision when you started these successful initiatives within the startup ecosystem?
It would be presumptuous to say that what I envisioned is exactly what we have now, but it was. I envisioned Flat6Labs being a dynamic entity launching a couple of hundred companies a year, and I thought that the GrEEK Campus would be a transformative place in terms of how people think, act, and collaborate, which is the most important thing. Once you put people together in the right environment, they start collaborating, exchanging ideas, and sharing their experiences.
How does the work of these initiatives overlap and intersect?
Flat6Labs provides training and funding for early-stage startups, many of which were just ideas when they joined. Sawari Ventures is funding startups that breakout and need growth capital, whether they come from Flat6Labs or the marketplace, while the GrEEK Campus is a place for companies to come, congregate, and work together.
There are a few Flat6Labs startups at the GrEEK Campus and very few Flat6Labs companies that Sawari has invested in. So, they kind of have a very small overlapping space, but each one is working independently.
What is driving the growing activity of Flat6Labs in countries like KSA and the UAE?
We have Flat6Labs programmes in Cairo, Egypt; Jeddah, Saudi Arabia; Abu Dhabi, the UAE; Beirut, Lebanon, and in Tunisia and Bahrain. We also just launched in Amman in Jordan.
Each programme has its focus and each country has its own unique identity. We are very happy and proud to be in Saudi Arabia and the UAE, where we hope to contribute a lot to the ecosystem. There is a lot of local talent there, and a lot of talent that wants to be there.
In our earlier Flat6Labs programme in Abu Dhabi, the applications came from 70 countries, with very talented entrepreneurs from different parts of the world who are relocating to start their companies.
Sawari recently closed an EGP 1 billion fund to invest in tech-driven startups. How do you plan to direct this investment?
Sawari Ventures will invest around 80-90% of the fund in Egypt, as it is the dominant market in the MENA region. We will also invest in Tunisia and Morocco.
We believe there is a disproportionate talent to capital ratio in these three markets, with the amount of funding available for startups and talented young people much less than many other places. This is what is driving our investment strategy.
So you are pointing to sort of a finance gap, what else does the startup ecosystem in Egypt need right now?
We can never stop improving the regulatory framework. It has improved tremendously and it continues to do so on a regular basis. The reforms should not stop, as it is an ongoing process.
I think the Financial Regulatory Authority (FRA) has done a great job. The Central Bank of Egypt (CBE) with its bold initiatives, as well as the Ministry of Investment. We need to continue on this track, as we all have the same desired outcome, which is the growth of the economy and prosperity for Egypt.
A question that might come to the mind of many aspiring entrepreneurs is what would be the perfect journey for a startup?
I do not think there is such a thing as a perfect journey. There is always challenges, or bumps and hiccups. If you do not make mistakes, you are not bold enough.
There is a difference between an entrepreneur who changes the world and somebody who builds a company, and there is nothing wrong with that.
A startup that desires to be a high-growth company should take lots of risks and be bold enough and willing to take a chance. We are talking about some startups that grow 20-30% a month.
If you are not taking risks, you are not making mistakes, and you are being too conservative and not pushing the growth envelope far enough.
That is why I suggest startups not take loans from banks. Because if you take a bank loan, you are not supposed to make mistakes or take risks before repaying the loans.
It is important to say that taking risks does not mean being careless or jumping off a cliff. Taking a risk should be calculated, like when putting money in entering a new market or starting a new line, there is a risk there if you do not succeed. Those are the kind of business risks that I am talking about.
Could you tell us an example from the startups that you have closely encountered?
One of our portfolio companies is Swvl, which I think could be a unicorn soon, and the risk was actually imposed on them, as they had to survive COVID, a situation where everybody went home. They managed to do an amazing job last year, sailing their ship through the toughest storm in the world, and currently growing again at high speed.
They were bold to open in Kenya. They also launched their service in Pakistan, a very competitive market where the average fair is much cheaper than other places.
Speaking of this, what is your take on startups going regional or global from the beginning?
Different companies have different opportunities. Some have the opportunity to go global, while others can only serve in a certain country or city. Each one is penetrating a different market, and it depends on the market opportunity they are tackling.
Some entrepreneurs are being criticised for supposedly establishing their startup with the ultimate goal of selling it later or being acquired by a major market player. What is your take on that?
I advise those who criticise to instead enter the market, pull up their sleeves, and go through the experience. Until you have lived in their place, managed their employees, investments, and cash flows, and dealt with all the issues and challenges entrepreneurs endure, do not criticise them. Analyse and don’t criticise. It is better to learn from them.
I have lots of respect for everybody who went out on the field and participated, created job opportunities, made returns for their investors, offered a service that people are willing to pay for, and achieved success.