A new generation of innovative tech businesses is being incubated right here in Cairo
Information technology has changed the way we live and restructured the world economy. The stunning rise of India’s IT sector has resulted in a wave of nations as- piring to become ‘the next India.’ In recent years, the Ministry of Communications and Information Technology (MCIT) has led the way in ensuring Egypt remains a com- petitive member of the pack of emerging IT investment destinations. The fruits of this laborious and often challenging task are now beginning to emerge.
Egypt has seen the creation of the Software Engineering Competence Center (SECC) by the MCIT in 2001, the introduction of “free” internet in 2002, the establishment of the Information Technology Industry Develop- ment Agency (ITIDA) in 2004 by Law 15 of the same year and the inauguration of the Technology Development Fund (TDF) by the Prime Minister, also in 2004.
The TDF was set up to nurture the growth of innovative Egyptian information and com- munications technology (ICT) startups by providing them with venture capital financ- ing and venture development services. Since its establishment, the TDF has sponsored — along with the MCIT, Ideavelopers, ITIDA, the American University in Cairo (AUC), Telecom Egypt (TE, bt100 number 3) and EFG Hermes Private Equity — an annual Business Plan Competition (BPC), which en- courages innovative IT ideas to be presented for the possibility of winning total cash and services prizes worth LE 2 million.
The competition consists of several stages, spread over a period of months. It begins with online submissions of executive summa- ries in March, followed by the announcement of the first round of winners based on these submissions in mid-April. These winners then submit their more developed business plans in June after attending business planning and a presentation skills workshops. Winners of the business plan — or semi-final round — are then announced at the beginning of July, taking home a monetary prize as well as access to services, facilities and the necessary training to start up their own business.
The winners of the competition receive a monthly salary for up to one year, a state-of- the-art incubation facility in the Smart Vil- lage, professional development workshops from AUC and on-site business consulting, all in addition to the opportunity to network with other IT leaders.
Ideavelopers, Egypt’s first technology in- cubator and, according to their website, the “region’s first integrated funding, venture development and incubation services firm focused on the technology business,” plays a key role in helping the BPC winners get their projects off the ground. Ahmad Gomaa, Ideavelopers chief executive officer, explains that “In 2004, [Ideavelopers, MCIT and EFG] set up the Technology Development Fund [as] an early stage venture capital fund and we had [planned] that besides our deal- sourcing [through our networks or deals that we seek ourselves] we would invite new inno- vative business plans to come forward.”
“One of the most appropriate ways to do this in the [ICT] industry is the Business Plan Competition,” Gomaa says. The competition ran for the first time in 2005 with 350 par- ticipants, which grew to 500 in 2006; Gomaa anticipates a showing of 1,000 participants this year.
Of the competition’s first winners in 2005 is Khayal Interactive Entertainment (Khayal means “imagination” in Arabic) made up of Ahmed El-Deeb, Ahmed Sabri and Mostafa Ashour.
“Our idea was originally to implement a physics engine, [which is a] software [mod- ule] that creates a 3D module which can enhance the interactivity between the player and videogames,” El-Deeb says. “It can be used in engineering or gaming software, or simulation software like the software NASA uses.” The BPC was a great way for them to get their idea out there.
Their idea is an example of exactly what the judges were looking for in terms of in- novation. According to MCIT Senior Advisor, and one of the BPC judges, Khaled Ismail, the winning proposal has to have several qualities. “We look for something that can sell globally, return a financial reward and create job op- portunities,” he says. The Khayal Interactive proposal had all of those elements.
“We believe we are one of very few software houses that has [our] capability [to create 3D modules] in the Middle East,” El-Deeb said. With this kind of value proposition, it didn’t take them too long to make a deal. “There were other competitors in the market, our main competitors were asking for $175,000 for licens- ing, while we were willing to provide the same solution for considerably less,” El-Deeb said.
Khayal didn’t just stop at simulation soft- ware — with a desire to give locals a video- game hero of their own, they created “Boha the Game” (www.boo7athegame.com). The videogame is based on the famous film char- acter Boha and how he and his friends rally together to take revenge on evil-doers.
Khayal Interactive started as an after-school project, which explains the young entrepre- neurs’ ages, which range from 24 to 27. Win- ning the competition allowed them to turn their hobby into a full time job. El-Deeb, who is now the business coordinator of the company, says the BPC was a learning process for him.
“At first you learn how to articulate your ideas, how to write them down in a present- able form and how to convey the idea’s potential,” he says. “You have to learn to con- vince investors or the judging panel that it is feasible — at first, some ideas might seem crazy so you have to convince [the judges] that it can work — then you learn how to make a full business plan, how to analyze the market and how to present your idea in 10 minutes. You are pushed to impress the judges in a limited amount of time.”
El-Deeb’s partner Mostafa Ashour feels that while the business plan competition is valuable, the real learning process took place after they won. “I learned more after the com- petition by just being a part of the market,” he explains. “Businesses take a long time to get to the final stages, plus learning how to hire and direct people — nothing is like the experi- ence itself. [Nevertheless], without winning the competition it would have been much harder to pursue our dream,” he adds.
Today, Khayal is one of the many companies located at the MCIT funded incubation unit in the Smart Village that are under Ismail’s supervision. “The idea [behind the incubation unit] is to encourage young individuals to begin their own startups or companies and take risks, rather than wait- ing for employment and coming up with some good, innovative ideas,” he rationalizes. “[The entrepreneurs] drive the project and hopefully succeed, but if not, at least they didn’t risk money, just time.”
Ismail goes on to explain that while the gov- ernment invests in these startups, it doesn’t earn anything from their success. “We don’t share in their equity, if they don’t succeed we’re still investing in something positive,” he says. Each of the units is not only supported financially, they are also given all the other tools to succeed, including office space and furniture. “We give them marketing, technical, legal and accounting advice and then they’re expected to graduate in eighteen months whether they’re a success story or not,” Ismail says. “The business plan competition is just a means of finding successful candidates in a fair and transparent way.”
While Ismail values the current incubator effort at the Smart Village, he stresses that there is still more to be done. “No matter how big the incubator in the Smart Village may be, we need to expand this idea across the country, there should be corresponding incubators to scale this idea throughout the region,” he says. bt