You Say You Had a Revolution: What Does It Take to Build a Start-Up in Egypt?

What does it take to build disruptive businesses in the midst of a revolution? As it turns out, it requires a culturally uncommon aversion to risk.

Amr Ramadan, Ziad Aly and Haytham El-Fadeel all hail from Cairo and Alexandria, Egypt — places recently in the international spotlight for news of political disruption.

In that time, though, these three have built high-tech businesses bucking the Egyptian trope of an antiquity-based economy.

Ramadan started Vimov, which developed Weather HD, the top selling weather app for Apple’s iPad. Aly is CEO of ALZWAD, a mobile content platform for feature phones in the Middle East, and El-Fadeel has built Kngine, a Wolfram Alpha-like infosearch service.

The trio recently did a quick tech tour of the U.S. entrepreneurial hotspots — Manhattan and Silicon Valley — on a trip led by Ahmed El Alfi.

Alfi is CEO of Sawari Ventures, an early-stage venture capital firm invested in the Middle East and North Africa region (MENA is the shorthand for the area).

So, I sat down with the group during the Silicon Valley leg of their tour to pick their brains on the realities of building businesses amidst so much political disruption.

U.S. pundits have been banging away, asserting that the revolution was really fomented by an overabundance of young, educated and unemployed Egyptians.

I asked the trio if those same circumstances might make for a good start-up culture.

Aly agreed that there had been a change since the revolution and he now sees a necessary boldness among founders that wasn’t there before.

“I saw an idea last week that’s a platform around where people can go out — similar to Yelp. The founder came up with the idea and a prototype,” he said. “Before [the revolution] you would never have seen this.”

Even though conditions were right for digital disruption, Ramadan explained that cultural attitudes about risk of failure remain even after the government has turned over.

Because while a failed start-up or two in Silicon Valley can be a mark of experience for an entrepreneur, he observed that in Egypt prior failures just mean you have a history of failing.

But he did acknowledge that things are very much in flux.

“Before [the revolution], the way to get ahead was find a government job and stay off the radar; now that doesn’t seem to be as much the case,” he added. “I think more young people are willing to look at a start-up and say ‘Why not?'”

Alfi, the venture capitalist who arranged the trip and who is invested in companies in the MENA region, said that enough money isn’t really an issue — smart money is.

“It’s the Middle East, there’s plenty of money around,” he said. “What we lack are enough experienced people to help guide these companies.”

The lack of “smart” investment is complicated by what Ramadan described as Egypt’s cash economy. Because there isn’t a large community of investors taking risks on tech start-ups, Egyptian companies have to turn a profit from day one.

“The idea of losing money for a couple of years … is not something common in Egypt,” he said. “Even the concept of credit is not really there.”

In other words, profit from day one in Egypt is the only way to pay for day two.

“So, a country with a decent crop of engineers and a fresh start seemed to me like a reasonable place to develop a start-up community, especially one that could build products for the Middle East, based around cultural norms that foreign companies might have difficulty designing for,” he added.

Aly, whose mobile content delivery platform is targeted only at Middle Eastern users, believes that the combination of pervasive 3G and 4G phone service and an uptick in social media interest post revolution are good signs for companies entering his market.

“Mobile is the primary [and, often, only] Internet device, as opposed to more mature markets,” he said. “Even the iPhone, until recently, had to be connected to iTunes.”

All three men noted that Twitter and Facebook were the social media platforms of the masses in Egypt, but Aly added a footnote to the popular (and much debated) news narrative about the Egyptian revolution and social media.

Rather than heavy social media usage facilitating a revolution, the opposite seems to be happening.

During the revolution, Twitter was the only way to get reliable information even if not everyone was on it,” he said. “Since the revolution we are seeing much more interest than before.”

The group did acknowledge the difficulties they face building operations in such a politically and socially dynamic region.

But most of their worries echoed the kinds of refrains one might hear from Silicon Valley companies: Difficulties attracting developers, trouble finding good advice and learning the lessons of surviving rapid growth seem to be at the top of everyone’s list — regardless of geography.

But the combo of education, mobile device use and social media adoption in Egypt seems like fertile enough ground for start-ups, at least to Alfi, who will launch an incubator there this year.

He thinks what the region needs most are a few good home runs for investors.

Referencing one such exit, Leslie Jump, Alfi’s colleague at Sawari Ventures, added: “We need a success story. Like the ICQ deal was for Israel, a high-profile exit would bring interest in investing in Egypt.”

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Just as the atom bomb was the weapon that was supposed to render war obsolete, the Internet seems like capitalism’s ultimate feat of self-destructive genius, an economic doomsday device rendering it impossible for anyone to ever make a profit off anything again. It’s especially hopeless for those whose work is easily digitized and accessed free of charge.

— Author Tim Kreider on not getting paid for one’s work