Thoughts on startups by investors that
fund them & entrepreneurs that run them

Sprint Like An Egyptian: A Tech Entrepreneurship Revolution in Alexandria

At the threshold of one of the most recognizable landmarks in human history — the sole survivor among the Seven Wonders of the Ancient World, dating back nearly five thousand years — my entrepreneur host was engaged in heated debate with a rotating phalanx of functionaries.  As our group sweltered in the July heat on the outskirts of Cairo, each of these purported minions of the Egyptian state — none of whom wore a uniform or badge — in turn blocked our entry, determined to exercise the modest amount of authority bestowed on him by demanding that my host surrender his digital SLR camera.  (Never mind that tourists of all nationalities, sizes and colors streamed past us carrying similarly weighty “prosumer” equipment.)

Whether in English or Arabic, all appeals to logic and authority fell on deaf ears because our host had unfortunately shown his journalist visa at the window when buying our tickets.   Tempers flared, fueled by the unrelenting midday sun.  (It probably didn’t help to be here during Ramadan, when Muslims fast from 5 a.m. to 7 p.m. every day for a month.  That includes abstaining from water, despite the 95-degree heat.)  “What’s the problem?”  We needed to be escorted by a press officer, or something.  “I’m just here to show my friends the pyramids.”  Yes, but we needed to check in with the press office, or something —yet the office was closed because this was a national holiday.  “Why?  This is personal, not a professional assignment.”  Then we needed a permit to go unescorted, or something.  “But my credentials are for a television network.  Do you see a TV crew with me?”  No, but a camera is a camera, or something.  “Show me the law that says I need a permit to bring in a still camera just like all these tourists!”  There is no law, other than the word of the manager on duty — who decrees that we could get in with the camera if we paid some ludicrous amount of money to procure a permit on the spot.  Or something.  “Yes, but….”

Those who have spent much time in the developing world are likely accustomed to dealing with this sort of frustration on a daily basis.  My client handled the whole thing with aplomb, fortified by a decade of immersion in the distinctive culture and language of Egypt and the Arab world.  On the other hand, I was exhausted, patience worn thin after a half-dozen similar encounters over the course of a four-day trip.  How spoiled we are, taking for granted a system of government with relatively stable, transparent laws and regulations, consistently applied (at least in theory), and subject to judicial oversight with appellate review.
What the heck was I doing in Egypt anyway?  Giza was just a one-day side trip on my main mission:  Visiting a tech startup tucked away in Alexandria, a bustling seaside metropolis of 5 million.  Silicon Arabia, founded by Romanian-born entrepreneur Catalin Braescu in 2009, has an ambitious vision:  To do for the consumer Internet in the Arab world what companies such as Baidu, Tencent and Yandex have done in Asia and Russia, bringing the mainstays of contemporary online living in the West — beginning with the Eshta search engine — to one of the world’s few remaining emerging markets of scale.  (Arab countries, stretching from Morocco to the Persian Gulf, have a combined population of about 350 million, with combined GDP equal to nearly 40% of China’s.)

Coming on the heels of Egypt’s election of Mohamed Morsi as president in June — the first elected leader since the “Arab Spring” revolution of 2011 — the trip afforded an exceptional opportunity to witness the challenges and opportunities inherent in building a startup in “emerging markets” that are also emerging democracies.
I mention challenges and opportunities in the same breath here because it’s axiomatic among entrepreneurs that if something were easy to do well profitably at scale, it would have been done already.  My microeconomics professor’s version was the “$100 bill theorem“: The reason most people never find a large bill on the sidewalk, even once in a lifetime, is that if one were ever there to begin with, somebody else invariably already picked it up.

One commonly used approach is to identify widely felt “pain points” in the target market; build a workable solution to address them using particularly effective or efficient means; and if the business model pencils out, work like crazy to execute, execute, execute.  Viewed through the entrepreneur’s lens, developing countries are rife with opportunity because there’s no shortage of pain points, to put it mildly, begging to be addressed.  Just getting through the day in these countries can try the patience of coddled westerners, accustomed as we are to a relatively high level of efficiency, customer orientation and reliable infrastructure.  On the downside, operating any business in this type of climate —particularly an ambitious, complex, high-growth business such as a tech startup — can involve such headaches that many of the most talented business and technical people simply leave the country, emigrating to entrepreneurial hotbeds such as Silicon Valley, or resign themselves to working in local branches of giant multinationals that are headquartered elsewhere.
From my vantage point as a business lawyer for entrepreneurs, one of the greatest frustrations for a well-intentioned company or founder comes in attempting to comply with all applicable laws and regulations without necessarily even knowing what they are. In some countries, public corruption runs so deep that a given “policy” may materialize or vanish depending on whether the official in question has been paid baksheesh.  Even in the absence of outright corruption, however, the uncertainty following a regime change, coupled with human nature, leads to seemingly arbitrary ad hoc rule making:  The iron-fisted top-down mandates of an authoritarian regime are at least consistent, but in the vacuum left by the collapse of such a regime, there can be legitimate confusion about what  the rules are, what they really mean, how they should be applied, and who has the authority to interpret or apply them.

Building a startup is one of the riskiest endeavors to begin with, so predictability is key, even in the face of known adversity.  For example, in an area known for a high crime rate, security guards can be hired and other measures taken.
In a country with an unreliable power grid, if the power goes out periodically, businesses can plan accordingly if the outages occur on a consistent, well-known schedule.  An extra dose of patience and flexibility is called for when rules or circumstances change in the middle of the game.  (In post-revolution 2012, Silicon Arabia began experiencing power failures at its Alexandria headquarters, about twice a day, adding up to more than two hours without power per day on average.)  Even locating suitable office space for a growing startup poses challenges in a country where historically most institutions have either been giant government or corporate enterprises or tiny mom-and-pop storefronts.

Nevertheless, for those with the courage, resources and determination to succeed in this kind of environment, the opportunities for tech entrepreneurship in post-revolution Egypt appear to be vast.  The risk-reward tradeoff in finance should hold true in developing and unstable regions as well.  Internet connectivity is still sparse but mobile phones are everywhere, with major players and familiar brands aggressively pursuing new markets.
There is an ample supply of labor; a relative scarcity of challenging, career-building jobs for recent graduates of technical institutes and universities; and a dramatically lower cost structure for many initiatives as a result.

Perhaps most importantly, IT and Internet business are simply a breed of their own.  With nearly all assets of value existing in the digital domain, backups can be made and data stored redundantly anywhere on Earth.  Unlike a manufacturing or other bricks-and-mortar business, if a hostile government were to take over, there is no enormously valuable equipment or land that could be expropriated.  Distributed teams can work across multiple countries in ways that make the most efficient use of human capital.  (Silicon Arabia has engineers in Russia and Ukraine as well as Egypt.)  English has become the lingua franca for doing business, while the technical jargon is as familiar (or cryptic) in Alexandria as in Mountain View:  Scrum, sprints, Git, Cassandra, Hadoop.
Even the hijab and other traditional clothing worn by some team members can be seen in IT work environments in places like London, New York or San Francisco.  Yet in an increasingly globalized, diverse, interconnected world, it would be a mistake to assume that the same players can dominate in all markets.  Step away from the ping-pong table, out into the dusty streets of Alexandria, and it’s a strikingly foreign environment compared to America or Western Europe.  In that sense, particularly with respect to consumer-facing businesses, indigenous startups and their founders have a tremendous home-field advantage.  The contrast with sterile campuses of multinational tech giants, lured by subsidies to insular developments such as “Smart Village” — hours removed from employees’ home communities, farther from the heart of Cairo than the great pyramids — could hardly be more striking.

This article is for general informational purposes only, not a substitute for professional legal advice. It does not result in the creation of an attorney-client relationship.

Written by Antone Johnson

user Antone Johnson Founding Principal,
Bottom Line Law Group

Antone is a business lawyer and executive advising technology and media companies, entrepreneurs and investors in corporate, commercial and intellectual property matters. Johnson is Founding Principal of Bottom Line Law Group, a business and IP law firm and was the former VP and head of worldwide legal affairs at eHarmony.

prev next

You might also be interested in

The UrbanTech Movement is Transforming Cities

Urbanization is a defining process of modern life.

More than half of the world’s population now lives in cities, and the number of urban citizens around the world is projected to rise to 66% by 2050.

In the US, over 80% of the population lives in urban areas with 1 in 7 Americans living in New York, Los Angeles and

Read more >

Angel Investors Spotlight: An Inside Look at Hudson Valley Startup Fund’s Investment Process & Advice for Founders

Hudson Valley Startup Fund brings together a network of the region’s successful business and community leaders to give back, supporting the launch of the next Hudson Valley visionaries. We sat down with fund managers Chad Gomes, Johnny LeHane and Paul Hakim as they shared insights into their investment process, what they look for in both group members and startups, and

Read more >

The Right Startup Advisors Are As Valuable As Money

If you are a new entrepreneur, or entering a new business area, it’s always worth your time to assemble an Advisory Board of two or three executives who have travelled that road before. You need them before you need funding, and if you select the wrong people, or use them incorrectly, no amount of money will likely save your startup.

Read more >

How do I get in touch with investors/funds with just an idea and no product?

There are many wonderful ideas, and they are not necessarily easy to come up with. So congratulations on having thought of one!

However…

“Having value” and “Being fundable” are two completely different things. What the more experienced responders here are saying is completely accurate: while a good idea is usually a necessary ingredient for the formation of a good company, it is

Read more >

Is there an incubator for aspiring Angel Investors or VCs?

No, but there are several sets of courses on angel investing that can provide a good base from which to start. The most comprehensive and best known is the Power of Angel Investing seminar series developed by the Angel Resource Institute (formerly known as the Angel Capital Education Foundation, and prior to that part of the Angel Capital Association). It

Read more >

Comments