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Starting up in Egypt: Challenges and Advice from AUCVLab Graduates


AUC Venture Lab startups featured in the article: ShopX, La Reina, AlMakinah, AlKottab, Jfuel, Darna and Payme

By Nour Ibrahim 

While entrepreneurship became one of the vital arms that contribute to the Egyptian economy many startups still face challenges when it comes to launching their startup or sustaining it. We reached out to some AUC Venture Lab (AUCVlab) startups, asking them about the biggest challenges they have faced and the things they wish they knew before they started out. Here are some of their answers.

 

 Finding the Team:

 

While many entrepreneurs start out on their own, having the right team of individuals who share the same vision never hurts.

“The first and main challenge [we faced] was finding the right team, to be able to find the calibers that both have the passion and belief in what we’re doing and have the entrepreneurial mindset and are willing to give in their full time for this, we were lucky but it took some time until we were able to find the right team members,” explained Eman El-Koshairy, co-founder of AlMakinah which offers an intense programming boot camp producing production-tier software developers.

This is especially challenging when one is venturing into a field that he / she is new to.

“The issue is the pool that you select from is always your friends and family and in many cases you will not find what you need in them that is if you really know what you need in the beginning,” said Islam Almohandes, founder of Alkottab,  a creative lab for games, interactive experiences, simulations and virtual worlds. They integrate game technology with designs to develop user experiences that engage, educate and entertain their customers

 

 Understanding the market and the customer:

 

The Egyptian market does have special characteristics that startups need to study before launching.

 

“Don't assume what your customer wants or what the market needs. Just because you want it to be so, doesn't mean it is. Support your claims with actual data,” advised JFuel’s CEO Abdelrahman Othman. JFuel produces biodiesel from jatropha seeds by planting the jatropha on marginal lands and using recycled wastewater for irrigation purposes.

Payme’s Hessain Almenawy also recommended going through different validation processes. His startup provides smart payment solutions that enable users and merchants to complete distant or on-delivery card payments.

“I would have loved to hear not to get clingy about the startup idea and to make very fast trial and errors until you settle on the last version of a product the customer really likes,” he said.

Othman added that many startups start with ideas that are not necessarily new or have never been executed before.

“It shouldn't get you discouraged though, there's always something you can do better, something you can improve,” he said.

Financing:

Many entrepreneurs struggle to finance their startups at different phases, some very early on and some after they start facing expenses that they hadn’t accounted for.

“Unless your parents are willing to support you financially, I found it hard, as a girl, to get funds at a very early stage,” said Ghada El Tanawy, founder of La Reina Exchange, an online rental service for high-end, designer wedding gowns, evening dresses and accessories, featuring famous designers.

“Most of us start from their pocket money and we rely on the success of the first product, but as you know the first product does not succeed in most of the cases...This make the startups face an early bankruptcy...most of ideas end in this point,” said Almohandes.

In addition to relying on investors, some, like ShopX’s Founder Hussain Momtaz, found the solution in founding a parallel business that was guaranteed to generate profits.

“I had to build a software house as a sustainable business to fund my product ideas without getting involved in a fundraising headache in an early stage,” said Momtaz whose startup provides a social platform with an integrated CRM system for stores and products.

Coping with a changing economy:

With the turbulence the Egyptian economy has been facing over the past years, entrepreneurs face the challenge of not only controlling their startup’s economics but also coping with the country’s fluctuating economy.

Things like currency devaluation, tax increases and the rise of living expenses affect a startup deeply.

“The sudden increase in living costs caused a dramatic increase in salaries which we struggle to keep up with,” added Momtaz.

Khaled Wagdy, the founder of 7esba which organizes expenses and due payments for residential buildings, advised: “Be prepared to constantly change the budget and cost estimation!”

Understanding the legalities:

Many startups start out in the informal sector due to lack of funds, lack of a coherent business plan and the absence of a clear vision for the product/service to be offered. However, once the founders decide on their path, they start to face another challenge, namely, becoming legal.

“I did not know anything related to legal issues. … how should I register my company? Which registration type should I use? How to make a contract with my partners?. ... I think the government needs to make an organized portal to help entrepreneurs in finding all what they need to start regarding the legal issues,” said Almohandes.

Keeping up with governmental policies and regulations is another challenge that entrepreneurs face.

“Registering the company itself, this was very difficult, it took us a lot of time to understand exactly what we need to do of the logistics, finding a good lawyer. Setting up the bank account was also hard. It wasn't easy to find information to set up our company legally,” said El-Koshairy.

Banking:

Many startups expressed their disappointment in regards to the banking system and the limited services they have to offer to startups.

“I think many of us start with small budgets that do not allow us to have a bank account for our startups. Till now, I have issues in transferring money from clients abroad. Banks should do something that allows us to open accounts easily,” said Almohandes.

Mentorship:

Although finding the perfect mentorship fit in the ecosystem is not easy, forming relationships with different individuals helps entrepreneurs build a network of calibers who can offer advice and support in the different fields based on their connections and expertise.

“Having a mentor who believes in you as a person and in the idea will shorten a lot of roads,” said El Tanawy.

At the end, our graduates advised all entrepreneurs to read and expand on their business knowledge.

Reports on entrepreneurship in Egypt and the region like the Gust Report and the GEM report suggest improvements as entrepreneurship has become more socially acceptable as a career choice, there have been government initiatives to support entrepreneurs and financial inclusion is receiving more and more national interest.

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AUC launched AUC Venture Lab (V-Lab) in 2013 which is the first university-based incubator in Egypt. It incubates early-stage and growth-stage startups that are chosen through a selection process that judges the novelty of the idea, the team’s track record and cohesion, scalability and potential for commercialization, as well as the team’s tenacity and commitment to success. Once selected, the startups benefit from training sessions, mentors, student internships and their presence at the AUC School of Business. They also play an active role in the AUC community and Egypt, sharing their entrepreneurial experience with students, faculty members, mentors and investors, as well as a global alumni network.