Agtech startups and Egypt are hot prospects for Mena funding

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• Egypt startups secured $45.7m across 11 deals in December
• Sustainable agriculture firms are promising investment prospects
• Agriculture and food industries make up 12% of Egypt’s GDP

Startups across the Middle East and North Africa region raised $125 million in funding in December last year, with Egyptian companies leading the pack, ahead of regional powerhouses the UAE and Saudi Arabia.

A joint report by Wamda and Digital Digest showed that Egyptian startups secured $45.7 million across 11 deals in December, more than the UAE and Saudi Arabia’s respective $31.8 and $31.7 million.

Agritech startups received 31 percent of December’s Middle East and North Africa (Mena) investment, followed by fintech, HR technology and food innovations.

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“The sheer size of the Egyptian economy, the presence of very large firms and not that many mid-sized firms, and the well-connected and educated population mean that there is room for disruption, process efficiencies and moving people up the financial, social, manufacturing and services value curve,” said Dr Bhaskar Dasgupta, head of strategic development for Mena at global financial services provider Apex Group.

“Technology-driven startups are therefore getting established, funded and have strong customer and revenue streams.”

Egypt’s population of roughly 110 million provides ample opportunity for startups in need of customers or workers. But having so many mouths to feed also presents a challenge for the country, which is the largest in the Arab world and struggles with both water and food insecurity.

Startups aiming to improve, expand and optimise agricultural and food industries are increasingly seen as promising prospects for investors.

Mahaseel Masr, for example, provides a digital platform from its base in Cairo for business-to-business trade in fresh produce. It struck a deal in late December for an investment of an undisclosed amount with the Emirates International Investment Company. 

Mohamed Abdel Rahman, Mahaseel Masr’s CEO, said the deal would help realise its mission to “simplify the lengthy supply chain and empower farmers’ inclusion into the digital transformation process”.

Dasgupta said that programmes such as the recent $25 million Climate Resilience Fund have recently been established to invest in “nature-positive and sustainable agriculture startups”.

He highlighted wind energy company Askova, which is building farm-based wind turbines to help local electricity production in farms, and agricultural marketplace Dajin as examples of stand-out companies in Egypt’s agritech sector.

Flat6Labs, the Cairo-based seed and early-stage venture capital firm, has also established an accelerator to help the development of agritechs.

Hassan Mansi, its head of ecosystem development, said that agriculture innovation is a “no-brainer” for the country, given that it has been “a major player in the Egyptian economy for hundreds, thousands, of years”.

Agriculture and food make up around 12 percent of Egypt’s GDP, making the integration of technology such as artificial intelligence for water management, crop sensors, smart farming and other innovations a natural fit.

Egyptian water management in particular stands to benefit from technology. Egypt faces an annual water deficit of seven billion cubic metres and the country could run out of water by 2025, says Unicef.

An estimated 80 percent of Egypt’s water is used by agriculture, the majority of which is sourced from the Nile, according to the Oxford Business Group.

As for how Egypt beat the UAE and Saudi Arabia in terms of investment raised, for Mansi it is relatively simple. “Egypt is one of the biggest countries in the region and that makes it one of the biggest markets, specifically for consumer products and agriculture,” Mansi said.

Regional investors, particularly in Saudi Arabia, have taken notice of this. Wamda and Digital Digest’s report noted that of regional countries, Saudi investors were the most active, participating in 31 Mena deals in December.

Mansi said that Saudi’s own rapidly growing and maturing entrepreneurial ecosystem has wisened Saudi investors to the need and opportunity of diversifying their portfolios and Egypt is a natural fit.

“Instead of only investing in the Saudi or GCC market, they also seek out Egypt because they know we have great talent,” he said.

“The Egyptian youth constitutes 60 percent of the population. We have more likelihood of great exits in this kind of market.”

Lucy Chow, Dubai-based general partner at the World Business Angels Investment Forum, said it was not a surprise that Egyptian startups did well in December 2022.

“The number of startups is growing due to the opening of accelerators and incubators, as well as a government focus to make it easier for local and international VCs to invest in them,” Chow said.

“Egypt’s startup ecosystem is among the most vibrant in Mena and will continue to experience year-on-year expansion. The country has a young population and is also strategically located for those wanting to do business in the region.” 

Chow pointed out the sizeable role that agriculture plays in Egypt’s economy, as well as the region’s diplomatic and environmental overtures by way of hosting Cop27 in Egypt and Cop28 in the UAE. 

“One contributing factor for ‘desert’ tech sector growth are new environmental standards that are on the rise globally. Many governments understand these trends and are acting on them. Sovereign funds have been investing in this sector for years.”