TLcom plans first Egypt start-up investments as entrepreneurs embrace tech

By David Whitehouse
Posted on Monday, 7 February 2022 12:11

TLcom's partners, left to right Maurizio Caio, Andreata Muforo, Ido Sum and Omobola Johnson. Photo supplied.

The TLcom venture-capital firm plans to make its first investments in Egypt as the country’s entrepreneurs accelerate their use of technology, founder and managing partner Maurizio Caio tells The Africa Report.

Caio expects to make a first Egyptian investment within the next one or two years. “Entrepreneurs have decided that Egypt is a good idea,” he says. “If venture capitalists decide Egypt is a good idea then nothing happens. We are glorified passengers.”

The firm looks at between 250 and 300 companies per quarter and might invest in one or two. Between 10% and 15% of the companies that are currently being considered are Egyptian, and that proportion is rising, Caio says.

Egypt’s start-up culture is beginning to catch up with Africa’s main markets in Nigeria, Kenya and South Africa. The number of funded Egyptian tech start-ups increased to 114 in 2020 from 10 in 2015, according to a report by Egypt’s IT Industry Development Agency (ITIDA) and Disrupt Africa. The e-commerce and retail-tech sector is the largest employer, accounting for 20.8% of tech start-ups, the report says. That’s close to double the number of new fintech companies.

Caio is interested in investing alongside local funds and wants to support Egyptian entrepreneurs expanding outside the country. He believes that technology can be used to improve African industries such as education, healthcare and logistics. “There are big, solid opportunities,” he says. “The relationship is always with the entrepreneur.”

The ITIDA report shows that in Egypt, those entrepreneurs are overwhelmingly men based in Cairo.

  • The headquarters for 94% of tech start-ups are in the capital, and only 12.5% are founded or co-founded by a woman.

‘Build the company’

TLcom was founded in 1999 and was an established venture-capital firm with investments in Europe and Israel before it decided to enter Africa. The firm opened its first African office in Nairobi in 2013. The continent’s large, unserved markets and the potential of technology to address them prompted the strategic decision, Caio says.

That rationale remains intact today. There remain many “broken verticals” which need to be fixed. “Technology can redesign these industries.” Current investments include Twiga Foods, where Caio has a board position, Andela, uLesson, and Kobo360.

  • Caio decides which countries to prioritise on the basis of the entrepreneurs he sees, rather than macroeconomic or policy assessments. “You can only do it if there are entrepreneurs with technology.”
  • His advice to entrepreneurs is to concentrate on getting the company right rather than worrying about finance. “Build the company. The capital is there for great companies.”

TLcom in late January announced a first close of $70m for its $150m tech fund. The fund is backed by investors including German insurer Allianz and development institutions CDC of the UK, the World Bank’s IFC, France’s Proparco and Swedfund.

  • The fund’s second closing is planned for later this year. Existing and new investors are interested, and Caio aims to raise the full amount.
  • “There is no reason to be shy and prudent. The visibility leads us to think this is quite realistic.”
  • The use of those funds, he says, “is in the hands of the entrepreneurs. Venture capitalists should not be deciding what is most attractive.”

Bottom line

Encouraging greater diversity among Egyptian tech start-up founders would give investors such as TLcom more options to choose from.

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