* Revolution prompts new interest in starting ventures
* Entrepreneurs cite both push and pull factors
* Much activity focused on IT sector
* Legal, financial obstacles are large
* Egypt could become innovation centre for region
By Andrew Torchia
CAIRO, Jan 18 Two months after mass
protests ousted Egyptian president Hosni Mubarak last February,
Ahmed Essam resigned from his job at a well-established software
company to set up a six-person venture developing applications
for smart phones.
The economic turmoil which engulfed the country after
Mubarak was overthrown played a part in his decision, says
Essam, 28. With many firms freezing investments and shedding
jobs, his salaried post no longer looked as stable.
"I felt the current situation might not continue after the
Revolution. Most of the old companies will not make it in the
new era," he said.
But the euphoria of the Revolution was also a factor. With
the end of 30 years of rule by Mubarak, during which much of
Egypt's economy was dominated by state-run companies and
businessmen linked to the Mubarak regime, Essam thinks hard work
and commercial vision have a greater chance of succeeding.
"People had lost hope -- you would walk along the street and
nothing was yours, nothing was under your control. The
Revolution created a feeling that people can change the world
for the better."
In a 1920s apartment building across the street from the
Giza Zoo outside Cairo, Essam now works 15-hour days to develop
an application which rearranges social network feeds such as
Facebook and Twitter according to their relevance to the user.
He hopes the application will be used not just in Egypt or other
Arab countries but around the world.
A year after Mubarak's ouster, economic conditions in Egypt
remain grim. The risk of a currency devaluation, and continued
uncertainty over how much power the military is willing to hand
over to a democratic government, are deterring new projects by
many large businesses, including foreign investors.
Unemployment officially stands at 11.8 percent, according to
the latest data from the second quarter of 2011, but this figure
understates the problem as it does not include people struggling
in part-time jobs outside the formal economy. Economists
estimate unemployment among young people at around 25 percent.
At the same time, the new political landscape is encouraging
a flowering of entrepreneurial activity among some Egyptians.
Around the country, thousands of young people are developing
ventures based on original business ideas or laying plans to do
so -- efforts that could, if they prove successful, eventually
help to solve Egypt's unemployment problem.
There are no comprehensive statistics for the number of new
ventures but Abdelrahman Magdy, chief executive of Egypreneur,
which helps entrepreneurs find the contacts and services they
need, promotes their ideas and provides training, says the
change in the past 12 months has been dramatic.
Before the Revolution, Egypreneur had between 2,000 and
3,000 followers on Twitter; now it has about 20,000, Magdy said.
The number of public conferences for entrepreneurs in Egypt's
big cities has increased eightfold, he estimated.
As in Essam's case, there is a push factor behind the growth
of entrepreneurship: seeking a long-term job in a government
bureaucracy or a big corporation, traditional avenues for
educated Egyptian youths, no longer seems as possible or as
attractive with the government in disarray and the economy
But many entrepreneurs say the Revolution has also been a
pull factor for young people: the protests in Cairo's Tahrir
Square showed how, through cooperation and planning, it was
possible to beat the established system.
Egypt had entrepreneurs and a growing information technology
industry well before the Revolution, noted Ramez Mohamed, chief
executive of Flat6Labs, a U.S.-style "startup accelerator" that
was established last year to provide starting capital and
support to ventures in their initial stage. But people's new
sense of political empowerment is providing a boost, he said.
"The Revolution has affected the scene," he said. "People
learned that they could set their hopes higher. They feel they
can make it on their own, that anything is possible."
Many of the new entrepreneurs are focusing on software and
information technology because those areas require relatively
little capital, and in some cases because the anti-Mubarak
protests, organised with the help of Facebook and Twitter,
raised the profile of social media in Egypt.
But Magdy said he saw entrepreneurs operating in other areas
too. One example is Mashaweer, a service which helps customers
avoid the traffic in Egypt's gridlocked cities by running
errands for them, from shopping and paying bills to arranging
replacements for lost IDs.
With an average age of 26 among its staff, Mashaweer started
in Alexandria in 2010 with three scooters and investment of
30,000 Egyptian pounds ($5,000). It launched in Cairo last month
and now boasts 130 of its distinctive orange scooters, 15 cars
and a speedboat. It aims eventually to operate airplanes.
Gilan Kamal, digital marketing manager at Mashaweer, said
poor business conditions did not deter the firm's expansion as
its cost base was lower in a sluggish economy. The political
turmoil "motivates us because we want people in our generation
to see how it is possible to increase productivity", she said.
There are big obstacles for entrepreneurs in Egypt. In the
World Bank's annual 2012 rankings for ease of doing business,
Egypt came 110th out of 183 economies: 21st for ease of starting
a business, such as registering with the government and signing
up to pay taxes, but 101st for obtaining electricity, 147th for
enforcing contracts and 154th for handling construction permits.
"The pieces for the chess game are there. The board is not
there yet," said Scott Gerber, a U.S.-based author who founded
the Young Entrepreneur Council, a global group of entrepreneurs.
He visited Egypt last year to meet businessmen and investors.
Egypt badly needs legal reforms -- "the tax laws are all
over the place" -- as well as government support for
entrepreneurs in areas such as public-private partnerships; "the
banking system needs a complete overhaul" to prepare it to lend
to smaller enterprises, Gerber said.
With Egypt's new, democratically elected parliament likely
to remain distracted for months by political manoeuvring and
macroeconomic challenges such as coping with the state's budget
deficit, the obstacles to new ventures may not be removed any
Ahmed El Alfi, chairman of Sawari Ventures, which invests
Egyptian and foreign money in local start-ups and helped to fund
Flat6Labs, acknowledges the difficulties. But he says the strong
tradition of teaching engineering and computer science skills at
universities gives Egypt huge potential.
According to the Ministry of Communications and Information
Technology, Egypt's exports in that sector grew at an average
annual rate of 37 percent between 2007 and 2010, hitting $1.1
billion in 2010. It aims for $2 billion in 2013.
El Alfi said Egypt, with a population of over 80 million, by
far the largest in the Arab world, had a chance to become the
main source of innovation in information technology for the
region. Israel's IT industry took off after a few globally
recognised successes with start-ups in the 1990s, he noted.
"Over 50 percent of the good tech services guys in the Arab
world are in Egypt," said El Alfi, who left the country in 1966
and returned from the United States in 2006 to pursue business
opportunities. "They just need a chance to do their stuff."