What's next for Egyptian entrepreneurs?February 2, 2011: 2:24 PM ET
One day before Egyptians took to the streets in protest, a Cairo-based venture capital firm called Sawari Ventures formally launched. It is the nation's only privately-funded VC firm, with plans to invest between $2 and $5 million in local technology and telecom startups.
Earlier today I spoke with Leslie Jump, a Sawari Ventures partner who works out of Washington, D.C. (her husband is Edward Walker, U.S. Ambassador to Egypt between 1994 and 1997). Below is an edited transcript of our conversation:
Fortune: Is it safe to say that business is on hold for Sawari Ventures?
Leslie Jump: Definitely. The country is dealing with existential questions right now, and today you have thugs on camels attacking people in the streets. So obviously all regular business has been put on hold. One of our Egyptian partners has a non-Egyptian wife, so he took her to London to keep her safe – but he plans to return soon. Our other partner is out in his neighborhood with a cricket bat, helping to protect it from looters.
It was great to see our entrepreneurs come back online today, although they're all out protesting.
How are your firm's investors reacting?
Our lead investor is Naguib Sawiris, the richest man in Egypt. He has been coming out with statements about how we need to get through this period first, and then remember that investment is key to Egypt's economic development. We completely agree, of course.
Obviously the American investors are a different story, and are a bit more cautious. We knew that a majority of our funding would come from the region, but we wanted some Americans involved to help validate the market.
You said that you hope that there is a continued interest in economic development through investment. Are you optimistic?
I believe in the pragmatism of the Egyptian people. Political folks keep asking if Egypt will turn into Turkey or turn into Iran, but I have a very hard time believing the latter is possible. The people are devout, but not fanatical, and the protests have been driven by middle and upper-middle class educated people who understand that economic reform is critical.
What types of reform?
Well, if I had the ear of the minister of finance in the prevailing government, I'd tell him that the number one issue for entrepreneurs is that the country's bankruptcy laws must be reformed. It takes two days to start up a company in Egypt and two years to wind it down. You cannot have a successful and thriving entrepreneurial ecosystem unless you can fail fast.
The second thing is access to capital.
Speaking of which, how many other venture capital firms are active in Egypt besides Sawari?
Before January 25, I used to tell people that the Arab digital economy was a lot like the U.S. digital economy in 1995. In terms of venture capital, it's more like 1975. There are just seven firms in the region: Two in Dubai, two in Egypt – one is public, and we're the private one – one in Jordan, one in the West Bank and Intel Capital.
Egypt is a market of 80 million people who speak a common language, but it is very under-served in terms of access to capital. Despite the political challenges, Egyptians are rampant consumers of consumer technologies and are digital natives because the vast majority is under the age of 30. I'm hoping that, once things begin to stabilize, we'll be part of helping to build out an entrepreneurial ecosystem that has incredible potential.