{"id":610046,"date":"2023-11-14T00:00:00","date_gmt":"2023-11-14T00:00:00","guid":{"rendered":"https:\/\/enterpriseam.com\/egypt\/goinggreens\/how-green-accelerators-address-the-challenges-facing-startups-in-egypt\/"},"modified":"2023-11-14T00:00:00","modified_gmt":"2023-11-14T00:00:00","slug":"how-green-accelerators-address-the-challenges-facing-startups-in-egypt","status":"publish","type":"goinggreen","link":"https:\/\/enterpriseam.com\/egypt\/goinggreens\/how-green-accelerators-address-the-challenges-facing-startups-in-egypt\/","title":{"rendered":"How green accelerators address the challenges facing startups in Egypt"},"content":{"rendered":"

How green accelerators are addressing the challenges for climate startups:<\/strong> Last week, we explored how climate-focused accelerators are helping green startups<\/a> in Egypt gain access to capital and funding. In the second installment of our two-part series, we take a look at the technical, regulatory and economic barriers that startups face, and how accelerators are helping startups navigate and mitigate such challenges. <\/p>\n

There\u2019s a gap in finding the correct technical support: <\/strong>Access to tech support is a significant barrier startups face when scaling, especially in innovative fields like biotech or AI built to support green initiatives. Most state-owned commercial banks such as NBE and Banque Misr offer technical assistance to SMEs, but these are often not tailored enough to the needs of climate startups \u2014 nor are many accelerator programs, which offer general business development support, but fall short of sector-specific<\/a> climate tech support. <\/p>\n

We need more climate-focused accelerators:<\/strong> Given that climate tech is a nascent industry, focused tracks for each sector would be beneficial, project lead of ClimAccelerator Egypt<\/a> Ola El Houfy told Enterprise. \u201cIf you put biotech next to fintech, they\u2019re not quite the same, so the benefits won\u2019t be tailored. We were able to offer an advanced program based on the needs of the startups \u2013 we ran a co-creation phase prior to the programme asking green startups to tell us exactly what they needed,\u201d she added. <\/p>\n

Still, it\u2019s not always easy to source expertise:<\/strong> ClimAccelerator partnered Schneider Electric to offer startups workshops led by experts. \u201cFor one of our startups Egymag<\/a>, which produces protein from insects, we ended up having to outsource tech support from abroad,\u201d El Houfy said. Flat6Labs<\/a> Chief Programs Officer Yehia Houry \u2014 an accelerator which offers tech support on its Ebtekar<\/a> agritech program \u2014 agreed that it has been difficult to find the correct experts tailored to each startup\u2019s niche, and has resorted to running multiple cycles of the accelerator programme in order to allow enough time to source the appropriate support. <\/p>\n

Egypt\u2019s legal environment is an obstacle to startups:<\/strong> Egyptian startups face rigid regulations surrounding business administration, licensing, and compliance processes. Founders often lack the awareness of hiring, contracting, insurance and labor rights, according to a 2021 AUC report (pdf)<\/a> on startups and human capital management in Egypt. Moreover, outdated employment laws are not suited to a dynamic labor market. \u201cHiring people is tedious work \u2014 we often end up turning to consultants to help with the legal side of things,\u201d Changelabs<\/a> CEO Karim Samra told us. <\/p>\n

Many startups are, <\/strong>for regulatory and financial reasons<\/a><\/strong>, headquartered abroad:<\/strong> \u201cRunning a business in Egypt is still rather complex \u2014 being able to manage bank accounts and wire money around in a foreign currency, for example. A lot of companies instead register as an entity abroad in order to expand and raise money,\u201d Samra explained. <\/p>\n

And recent developments have not made it easier:<\/strong> Our current FX crunch and FX spending limits on credit and debit cards are a significant challenge<\/a> to early-stage startups based in Egypt. Coupled with record high inflation<\/a> and an impending devaluation, these factors stand in the way of startups looking to purchase equipment, scale up, and gain credibility from foreign investors. <\/p>\n

\u201cWe don\u2019t invest in companies today that are focused on Egypt alone,\u201d <\/strong>Samra told us.\u201cThere\u2019s no startup that\u2019ll be able to raise VC funding in the next 12-18 months without having a clear, actionable strategy around expansion and generating foreign currency, to avoid reliance on the EGP. We\u2019ve introduced our startups to partners in Africa and the Gulf.\u201d <\/p>\n

Climate tech is still struggling against fintech: <\/strong>Most accelerator programs in Egypt rely on the financial backing of commercial partners and development finance institutions such as Hivos, GIZ, and USAID. Commercially-driven accelerators have a fiduciary responsibility to investors, where they must justify investing in a climate tech startup as opposed to the attractive fintech startup, which typically generates revenues faster. The aim is to help green startups reach the same level of profitability as traditional startups in order to make them enticing enough to further investors down the line. <\/p>\n

What can be done to encourage more investment?<\/strong> \u201cWhat has worked best for us, was partnering up with [international development organization] Hivos \u2013 for every USD we invest into a startup, Hivos matches it with a grant. This makes investment more attractive to us, as it\u2019s less risky,\u201d Houry told us. Many others we spoke to agreed that financial matching from development organizations and the government is needed to develop Egypt\u2019s green startup ecosystem. <\/p>\n

How can state-led initiatives help? <\/strong>\u201cGiven that the loss and damage fund that was announced at COP27 has still not been clearly defined, I believe there needs to be more ground-level initiatives and cooperation between sectors. We\u2019ve been supporting the state-led National Initiative for Smart Green Projects<\/a> by offering our network,\u201d Houry said. <\/p>\n

And where do development finance institutions (DFIs) step in?<\/strong> \u201cThe state should provide more debt facilities to the most promising companies, identified by working closely with the private sector,\u201d Samra added. \u201cThat\u2019s what we\u2019re trying to do with Hydrofarms, whose water-saving hydroponics systems are desirable to both farmers and the economy, but which have a high upfront cost to build. Imagine if The European Bank for Reconstruction and Development and Agricultural Bank of Egypt stepped in to finance the purchase of these products.\u201d<\/p>\n

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