In the month of August, in a significant move to foster economic growth and support the burgeoning startup ecosystem, the Egyptian Financial Regulatory Authority (FRA) has unveiled a fresh set of regulations designed to streamline the process of securing funding for startups. These groundbreaking rules encompass various stages of a startup’s journey, from its pre-profitability phases to post-investor exit strategies.
One of the key innovations introduced by the FRA is the utilization of the venture capital valuation method. This method employs a meticulous approach to estimating a startup’s potential value, taking into account essential parameters such as projected exit value – the anticipated valuation of the enterprise in the foreseeable future.
Moreover, the FRA has introduced comprehensive requirements for assessing startups. These requirements include an evaluation of a startup’s strengths and weaknesses, its adherence to principles of governance, and an assessment of its creditworthiness. Additionally, the regulations mandate an examination of both tangible and intangible assets and the startup’s ability to achieve profitability in the future.
Mohamed Farid, Chairman of the FRA, emphasized the significance of these new rules in meeting the financing needs of startups. He noted, “The new rules cater to startups’ need for securing financing through different means to expand, enter new markets, and add new products, activities, and solutions.”
This development is part of a broader effort by Egypt to enhance its business and investment environment. Prime Minister Mostafa Madbouly has directed the establishment of a permanent cabinet unit tasked with proposing policies, laws, and regulations aimed at fostering the growth and prosperity of local startups.
Egypt’s commitment to nurturing innovation and entrepreneurship has yielded impressive results. In December, Egypt led the Middle East and North Africa (MENA) region in terms of startup funding, with a total of $45.7 million. The country aims to bolster the private sector’s share of the economy from the current 30 percent to 65 percent, based on its State Ownership Policy Document.
Minister of Communications and Information Technology, Amr Talaat, highlighted Egypt’s remarkable progress in attracting investments and supporting startups during the Techne Summit in Alexandria. In his remarks to Wamda, he pointed out that the country is in the third position in the MENA region, following the UAE and Saudi Arabia, with Egyptian startups raising a substantial $434.7 million in just the first ten months of this year, despite economic challenges.
In response to queries about Egypt’s potential to compete with regional giants like the UAE and Saudi Arabia in attracting international investors and tech entrepreneurs, Minister Talaat expressed confidence. He stated that Egypt is “well positioned” to become the tech hub of the region, thanks to its abundant talent pool. Egypt boasts 600,000 university graduates annually, including 300,000 STEM (Science, Technology, Engineering, and Mathematics) graduates and over 50,000 ICT (Information and Communications Technology) graduates, providing a significant resource for the tech sector.
Minister Talaat also highlighted Egypt’s substantial infrastructure investments, totaling over EGP100 billion ($3.24 billion) in recent years, aimed at bolstering the country’s network and providing widespread access to the internet and technology. He underlined Egypt’s focus on training and capacity-building to ensure a continuous flow of talent.
The involvement of Alexandria, Egypt’s second-largest governorate with a population of 5.6 million, in the country’s investment landscape was a topic of discussion. The developments in Alexandria play a crucial role in Egypt’s broader efforts to become a regional technology and innovation leader.
With these forward-looking regulations and a concerted push to support startups, Egypt is positioning itself as a promising destination for entrepreneurs and investors, signaling a new era of growth and innovation in the country’s economic landscape.