How is COVID-19 affecting Egypt’s startup ecosystem? Entrepreneurs talk, consultants advice

CAIRO – 22 April 2020: In this time of uncertainty, many are questioning how Egyptian startups are surviving the COVID-19 crisis, which sectors and industries are most affected, how to mitigate losses and if there are any positive windows of opportunity.

A lot of reports, published in the past couple of weeks, asserted that it is going to be harder for startups to attract consumers and show traction. Consumers may not buy as much as they used to. The growth of these startups will suffer making it even more difficult for them to raise a round of funding sooner.

Trying to get a clearer picture, we have gathered some responses from startups in different industries as well as business consultants. Although we can’t forecast the future, a collaborative urge amongst entrepreneurs is clear, with everyone eager to share their advice for survival.

Transportation: Wasel

“The curfew affected our company significantly, now the demand on intercity transportation dropped, and the number of our weekly trips decreased by nearly 50 percent in the first two weeks of the curfew, which in turn affected our revenue and our drivers' revenue,” Founder and CEO of Wasel Ahmed el-Rawy told Egypt Today.

Wasel is an intercity transportation platform that connects passengers with professional limousine drivers for a convenient, reliable, and available on demand trips.

Asked about the measures his company took to mitigate the pandemic’s effect, Rawy said the company re-developed its business model, cutting the company’s commission on trips and making it 25-percent cheaper to make it easier for travelers to use the service safely with less money. This has gradually increased tractions and revenues for the company’s drivers; revenues could also be enhanced by taking a commission on round trips only to cover the company's expenses without affecting the driver's daily revenue.

Furthermore, Wasel launched the new service, Intercity Carpooling, so that any driver with an air-conditioned car can pick-up up to three travelers on his way with a cheap price that covers his fuel cost, and only a 10-percent commission for the company, a win-win situation.

“The crisis' impact will continue until the end of September with possibilities to extend to the end of the year, but we are working continuously on developing our business model, and alternative plans. We are doing everything to make our company sustainable to pass this hard time for everybody,” he said.

Rawy advises all startup owners to have a deep look at their financials; cut extra expenses; re-develop their business model; look for other sources of revenues; and decide together to push, pause or even pivot their activity. "It is time to do whatever it takes to make your company sustainable."

Digital Marketing: LemonAI LLC

The situation isn’t much better when it comes to digital marketing startups, as Mohamed Ali, the owner of LemonAI LLC, admitted that business nowadays is very tough especially that his startup is b2b focused and most of his company’s customers are currently trying to save as much cash as possible instead of spending it on software services and digital marketing.

“As a company, we know that it’s a real hard to sell or gain new customers nowadays, but we are trying to save enough cash to cover our expenses for a period of three months,” Ali told Egypt Today.

In an attempt to limit the losses, the company launched an initiative offering free marketing services to companies, including managing social media platforms, doing designs, article writing, and managing the software. “This initiative aims to help us in building a new database so that we can have some work to show off after the end of this crisis,” Ali clarified.

Sadly, the creative entrepreneur said that if the crisis lasts more than three months, it will be very tough for his company to continue. However, Ali still holds hope to survive. He advises startups’ owners to save as much cash as possible, limit expenses, and most importantly save employees and never give up on them as they are the real assets.

Tourism & Travel: Hub Adventure

“It’s a tough moment to be in the tourism industry as tourism and entertainment are the main sectors affected by the crisis. We are totally shut down until the end of this pandemic,” Ahmed al-gameel, founder of HubAdventure told Egypt Today.

HubAdventure Travel is a travel company offering luxury corporate and leisure travel and advisory services.

Explaining the company’s situation right now, gameel said that all travel and tourism startups are on hold. “We don’t know when this will end but we know that our sector will be the last one to be back.”

“However, there is a light of hope amid the darkness, as some reports said that once the global economy has somewhat recovered, tourism-related startups will be the toast of the town,” gameel told us. He indicated that after the rate of infection has decreased significantly in China, large numbers of people flocked to popular tourist sites and major cities across the country, where several hotels in touristic areas are now fully booked in weekends.

“But still, there is another scenario that individuals in Egypt might remain afraid of going out of the country even after the crisis ended and travel go back,” he added.

Automotive Engineering: Auto Parts

“The pandemic has severely affected me and my business in many aspects; the sales are not of the same speed or quality as before. The sales have dropped by 60 percent,” Abo Bakr el-Mashtoly, founder and CEO at Auto Parts said.

Nonetheless, Mashtoly sees this period as a good opportunity to develop his company’s product and train his employees so that they can compensate losses caused by the crisis after it ends.

“One piece of advice I give to newly launched startups is to survive the crisis and take advantage of it; life has paused and you have some time to take further steps in your product’s improvement,” Mashtoly concluded.

Motorsports industry: MK

“We aren’t so much affected by the pandemic until now, as the company has adopted new procedures, including offering discounts and delivery services that mitigate the losses,” Moustafa Farouk, founder of MK industries Egypt said.

MK is an Egyptian startup that is specialized in fabricating premium quality parts for cars, motorcycle, karts, and racing parts.

Co-working Spaces

“Businesses that have high fixed costs are the most affected and co-working spaces are going through a huge crisis as most of them have a strategic location, and pay high rents, so their margin may be very low,” Abdul Rahman el-Gohary, a freelance business developer said.

Though many startup owners are not optimistic about the coming months, business consultants see many opportunities in this tough stage.

“I believe that the economy will recover after the crash because this is what happened in past crises. Startups will undoubtedly need some time to recover, but how long this takes depends on the type of business and the governmental support that startups, SMEs and the business sector will receive. In general, it will take less than one year,” Managing Partner at AJA Venture, CEO at ITEX, Hany Sewilam told Egypt Today.

“One of the advantages of COVID-19 is that most startups have started to carefully monitor their financial metrics and understand the importance of cash. In business we say, 'Cash is king.' And finally, we see entrepreneurs deal with that fact,” Sewilam added.

More so, startups changed their business attitude from counting on contracts in the pipeline, to going into survival mode by counting on managing the current accounts they already have.

Asked about measures entrepreneurs should take to face the current challenges, Sewilam said that many startups and entrepreneurs have found ways to reduce the drain of their expenses by controlling the monthly fixed and variable costs, and negotiating with vendors, distributors, business suppliers and service providers to reduce variable costs. Unfortunately, many startups have also laid-off employees to cope with the decrease in sales volume and business income.

On the effect of working from home on revenues, Sewilam clarified that most startups were not qualified for this step. “It was difficult for business owners and entrepreneurs to work from home in a way that generates profit and revenue, but with many resources and guidelines explaining how to manage your business and your team from home, I see that many of the startups start to make profit and customize a home-based revenue model, which is amazing.”

He said that entrepreneurs shouldn’t let this crisis kill their dreams, make it an opportunity to gain experience and build a good relationship with their existing customers. "Also, I want every entrepreneur to stay alert for the inflection point as with almost all things in life, this crisis will pass very soon, and if your company is alive and flexible, there will be great opportunities for you to write your business name in the new economy chapter," Sewilam stressed.

"Finally, if you are going through the most difficult time in your business cycle, don’t let the wrong decisions take over you. I know that right now most of the startups are looking for sources of cash; my advice is to find sources of cash that are non-equity. Think of ways to get government grants, explore the SBA programs that have been put in place to help small businesses, be creative with finding sources of cash to stay alive, including potentially doing some short-term deals that help the immediate crunch. After the crisis, this cash can push your business forward or hold you back," Sewilam concluded.

Walid Saed, business consultant at Callmars, also advises startups to think of completely pivoting their businesses, especially if they are in early stages.

“We don’t know when this crisis will end; we have no expectations. But I’m sure that few startups will grow, a lot will close, and many more will withstand these circumstances.”