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Incubators for IT startups

The best thing in the early stages of this kind of investment is for a venture idea to first develop in incubators until the idea matures, finds some success and begins to feel its way towards growth.

Tahrir2 provided startups with facilities and financial support

Startups represent a stage prior to attracting large investors, one in which specialised firms like Tahrir2, Tamkeen and Flat6Labs identify promising new IT firms and provide them with funding, expertise and networks of contacts and partners. In doing so, they help these startups grow quickly, after which they can be presented to investors to receive the next stage of funding and continue developing their venture idea.

Nayera Al-Naggar, one of the founders of e-commerce site Open- Dayz, said that investment firm Tahrir2 first invested in the company after its team presented the idea to the firm, which in turn studied and evaluated its chances of success and further growth.

Tahrir2 provided the startup with facilities and financial support, at this level no more than EGP 100,000, as well as training and technical support to the team when needed. Al-Naggar said that the best thing in the early stages of this kind of investment is for a venture idea to first develop in incubators until the idea matures, finds some success and begins to feel its way towards growth. If the idea needs further funding, it can then be presented to larger investment firms and funds, like Idevelopers and Bedaya, or it can be marketed for a partial or full buyout by a company in its sector.

Al-Naggar said that OpenDayz launched in March and Tahrir2 is working on shopping it around . The activity of the site is not e-commerce in a traditional sense; rather, it could be considered a “mall” presenting products from local manufacturers, in particular individuals who lack the means to market their goods. The site also helps them export the products abroad.

According to CEO of Tahrir2 Samer Al-Sahn, technology investors in Egypt can be divided into two groups. The first consists of about 100 individuals like Husam Allam and Khaled Ismail, who sold SySDSoft to Intel. The second group is made up of between 10 and 15 firms like Tahrir2 and Tamkeen. Al-Sahn said that Tahrir2 has invested in six companies over the past year: WatWuz.it, OpenDayz, Spyros, FunWave, ShootGet, Zabatak and Blue Flare. Of those ventures, the firm has marketed two. The first, Fun- Wave, produces Facebook games and applications and was responsible for the app “Ultras”. The second is OpenDayz, which currently serves 60 customers. According to Al-Sahn, Tahrir2 takes ownership stakes of varying sizes in the companies in which it invests but does not control them.

CEO of Flat6Labs Ramez Mohamad said that he prefers that companies investing in small and micro-enterprises specialise in that sector so as to allow them to better provide their investments attention and support, in addition to improving their ability to better evaluate and select investment opportunities.

Mohamad, whose firm is part of the Sawari Ventures family, emphasised his belief that investment opportunities are better in the small and micro-enterprise sector, as these startups’ ideas have a potentially broad markets and great potential for growth. Mohamad added that no more than ten companies are currently providing incubator services to IT startups, with the most well-known being Tahrir2, Tamkeen and Flat6Labs.

Mohamad argued that the advantage of investing in startups is the opportunity to work with them from the start. These early stages can be the most important, as the company can need technical support, expertise and appropriate funding, all of which Flat6Labs provides.

Mohamad said that Flat6Labs has finished incubating 12 tech companies, with a new cohort of six companies set to graduate by September; the company should provide services to more than 25 startup companies by the end of this year. Mohamad went on to say that the influx of investment in the first round’s graduates’ companies by outside investors and two other startups’ current investment negotiations attest to the success and development of the idea.

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