Venture fund Algebra Ventures is targeting to use its investment portfolio to invest in 25 companies, while it is expected to complete the second phase of increasing the size of its investment portfolio in 2017 by raising it to $50-60m.
In his interview with Daily News Egypt, managing partner of Algebra Ventures Tarek Assaad said that the fund is currently reviewing about 100 companies to select 20-25 companies to invest in. The fund pumps investments varying between $500,000 and $4m in each company in return for acquiring a share varying between 15% and 30%.
What is the value of the fund’s investment portfolio after the first phase of increasing the size of its investment portfolio?
The investment portfolio of the fund is now $40m. We will work on investing in the next period until we increase the size of the fund’s investment portfolio again, which will raise the value of the portfolio to $50-60m in maximum a year. We did not have to wait for the second increase in the size of the fund’s investment portfolio to start investments, given the availability of many investment chances in startups to benefit from.
What are the major points of the working plans of the Algebra Ventures fund?
I, as well as the other executive managers of the fund (Ziad Mokhtar and Khaled Ismail), are experienced in investing in startups and contributed to many success stories. We seek to combine the successful experiences in other countries and the experiences we have in order to benefit Egyptian start-ups and build a wide base of promising start-ups, which contributes to the creation of successes based on spreading technology or inventing new technology.
Also, we aim to help the start-ups convert from small to bigger entities, in order to become leading entities that rely on modern technology. There are many successful examples that used technology to become leaders, such as Uber which is basically a transportation company. However, by using the technology of mobile applications, it became a giant company and changed the concept of individual transportation. Also, there is the success story of Fawry. We seek to imitate these successful examples in dozens of start-ups.
What doyou think has been the effect of international bodies investing in the Algebra Ventures fund on the Egyptian market?
We started discussions with the bodies investing in Algebra Ventures a long time ago, even before the Egyptian pound’s flotation, and were able to attract investments from four international institutions, namely the International Finance Corporation, European Bank for Reconstruction and Development, Egyptian American Enterprise Fund, and Cisco Investments.
Investment in technology is very promising. Since 2011, the country has seen disturbances on political and economic levels. Nevertheless, there are companies that grew despite these circumstances and attracted foreign investments. Investments in the technology sector will not be significantly impacted by the pound’s flotation or other economic conditions, because users need it. Technology will still exist whether or not the economic conditions are good. Having such strong companies investing in the Egyptian market helps attract more foreign investors in general, and especially in the entrepreneurship sector.
What is the value of the investments you are targeting to pump into each company?
We are working now on reviewing over 100 companies to invest in some of them and are targeting to pump investments varying between $500,000 and $4m into each company, in return for a minority interest varying between 15% and 30%. We are targeting to invest in 20-25 companies through the fund’s investment portfolio.
We are aiming to invest in a group of entrepreneurs with experience, enthusiasm, and innovative ideas, which help create a large market for their services not only locally, but regionally and globally. We do not focus on companies providing a specific type of service or operating in a specific sector, but the idea has to be based on innovation and creativity.
Could Algebra Ventures fill the financing gap which the sector is suffering from?
The entrepreneurship sector will grow naturally. The more success stories of start-ups appear, the more the sector will grow spontaneously and attract many investors. There is already a financing gap in the sector but Algebra will contribute to fill a part of this gap. However, this mission needs more venture capital funds.
How do you see entrepreneurship and start-ups in Egypt?
Egypt has two main advantages: firstly, the skilled labour which achieved many successes in Silicon Valley and Egypt. The second feature is Egypt’s large market which has 90 million customers. These features contribute to the rapid growth of start-ups. It means that the local start-ups based on creativity can compete regionally or globally, and thereby, we will have several giant companies such as Fawry.