The role startup accelerators play in Egypt’s green startup ecosystem: The role of climate-focused accelerator programmes is becoming increasingly important as growth-stage VC funding to climate tech startups is drying up in MENA and globally. Owing to the challenges green startups in Egypt face — including access to finance, sourcing technical assistance and talent, and a host of legal hurdles — climate-focused accelerators play an essential role in developing Egypt’s green economy ecosystem.

2023 wasn’t a good year for climate tech to land VC funding: While startups working in e-commerce, fintech, and logistics managed to attract investment, global VC and private-equity funding to climate tech dipped by 40% in 2023 due to economic uncertainty and a dip in investor confidence due to geopolitical tensions, according to a report by PwC. The report — which analyzed 8k climate tech startups and over 32k agreements worth more than USD 490 bn — also found more funding was occurring at the mid-stage than at the early stage for the first time ever for reasons including challenges around scaling or implementing capital intensive climate tech, as well as a challenging macroeconomic environment.

Enter accelerators: Accelerator programmes help catalyze the growth of young startups by providing access to mentorship, networking opportunities, and drumming up funds from external investors. Some programmes offer grants and others extend equity-based investments.

The award for most accelerated goes to … : Egyptian startups are the most accelerated in Africa, with almost 40% having taken part in some kind of acceleration or incubation programme, according to a 2021 report (pdf) by Disrupt Africa.

The rise of the green accelerator: Accelerators have come as a key policy recommendation to bolster climate entrepreneurship. MENA began building its first generation of accelerators some years ago, according to the US-based Center for Strategic and International Studies, reflecting that there is talent, interest and potential for the green startup ecosystem.

And there’s been moves at home: “Our efforts began three years ago in Tunisia with the Green4Youth program, after a growing awareness of environmentalism around the world,” Chief Programs Officer at Flat6Labs Yehia Houry told us. Flat6Labs’ Ebtekar Agritech Program has invested over USD 1 mn into Egyptian startups working in biotech, smart farming, internet of things (IoT), big data and AI, logistics and more.

Green means good business: “Our thesis has always been that making green investments is good business,” Changelabs founder Karim Samra told us. Samra’s Scale Up to Green accelerator helped to raise USD 2 mn of investment across its top six startups in the 2022 cohort. “The investors we put our startups in contact with are not “climate-focused” investors. VCs are realizing that there’s a huge opportunity in Egypt for agritech and waste management,” he added. “We were able to bring on nine corporate partners in the programme’s fourth cohort, as opposed to just one in the first cohort.”

And there’s more than one success story: Hydrofarms, a hydroponics company that saves 75% of water used in agriculture, is now expanding into Saudi Arabia. “We’re in the process of helping [company founder] Adel El Shentenawy raise USD 500k and introduced him to 80-90% of investors in that round,” Samra told us. Another company in the Changelabs portfolio, Tekaya, is soon expanding into Saudi Arabia and recently licensed in Japan.

Funding and support is more scarce in Upper Egypt: Athar is an accelerator based in Upper Egypt, which has graduated three cohorts of startups on its Green Accelerator, and launched an agribusiness incubator for women-led startups in Minya Governorate this year. “There are virtually no VC funds or angel investors in Upper Egypt,” said Athar founder Shoaib AlQady, whose first cohort had raised a total EGP 1.53 mn by the end of 2022. “As for accelerators, some exist, such as the TIEC accelerator programme under the Communications Ministry. Most university graduates move to Cairo to receive professional training, from which they enter Cairo-based accelerators. It is extremely difficult to reduce this gap.”

There’s still a long way to go: “Startups across all of our programmes have received close to USD 250 mn in external investments, but less than 2% of that went into green startups,” Houry said. “We have started expanding our network of investors to environmentally-minded impact funds. For example, Catalyst Fund recently invested in Bekia, one of the startups in our portfolio, and Katapult Fund is another well-known impact investor in MENA.”

In part two, we’ll explore the economic, educational and regulatory barriers facing green startups and how accelerators are addressing them.

Your top green economy stories for the week:

  • We’re going to reduce fossil fuel dependence to 55% by 2035: The Egyptian Electricity Holding Company aims to reduce our fossil fuel dependence for electricity production to 55% by 2035. (Enterprise Climate)
  • Tuk-tuk EVs? State-owned El Nasr Automotive is reportedly close to inking a partnership agreement with an unnamed Chinese investor to manufacture four-wheeled electric light vehicles as an alternative to three-wheeled tuk-tuks. (Enterprise Climate)
  • Egypt partners with IEA on green transition: Egypt’s Ministry of Petroleum and Mineral Resources signed an agreement with the International Energy Agency (IEA) to establish a joint action program. (Enterprise Climate)
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