Does the Ecosystem need more resources or more efficient use of available resources?
The aim of the article is not to give a clear cut answer to the question. Instead, the article is a display of key information and data that may help us individually or collectively reach some relevant conclusions towards the subject matter.
Startups do not simply grow in vacuum. They require a definite set of resources that enable them to scale and develop through the usual startup lifecycle, from seed stage to the exit. This set of resources is variable. For instance, RiseUp defines 6 main resources as key elements of any successful startup: Human Capital, Funding, Exposure, Know-How, Tool-box, and Marketplace. The World Economic Forum, on the other hand, adds quality cultural support and government and regulatory policy to the list of key resources required for startups to operate and grow effectively.
The availability of these resources significantly defines the value and effectiveness of any given startup ecosystem in comparison to others in the region and even worldwide. The question is: are these key elements sufficiently available today? Assuming they are available, then how accessible are these resources to everyone in the ecosystem? When asking various ecosystem players about the most significant challenge facing startups in Egypt today, talent topped the list followed by data availability and funding, respectively. Yes, we thought funding would top that list too, it seems that it isn’t the most pressing challenge.
Availability vs. Accessibility: Both the availability and accessibility of resources are easier to measure when it comes to tangible resources. For instance, the amount of funds available for investment vs. the amount of funds actually invested in startups. Similarly, the annual number of graduates from public and private universities vs. the amount of human capital employed in startups annually. Although theses indicators are tangible and measurable, there is low or almost no data available. On the other hand, intangible resources such as media exposure or mentorship are harder to measure.
Availability Availability of a resource could be measured by mapping the ecosystem and understanding its players, whether those players are individuals or entities. Availability is also affected by the geographic region to which the entities mapped provide assistance and the number of startups to which assistance is provided. The ecosystem had witnessed various attempts to map the ecosystem, each using a slightly different approach.
An interesting mapping attempt is the one published by Dr. Nabil El Araby, Founder and Chairman of the Arab Entrepreneur House. The map focuses on the Egyptian entrepreneurial ecosystem as a whole, and overlooks the geographic distribution of those resources. A total 154 entities that operate in different fields were identified. The map divided the entities into areas of assistance/services, including Talent, Funding, Support, Growth, and Connect. The map continues to divide each area into smaller sub-sectors as shown below. Going through some development research, two methods of development can be identified. The first scenario assumes the scarce availability of resources in a given economy/ecosystem. In this case, the injection of new resources, usually funding, is required. This highly depends on the extent to which an ecosystem is attractive for such opportunities and the potential it holds. The second scenario assumes the abundant existence of all or some resources within the given ecosystem. In this case the development of the ecosystem depends on the connections and cross-sectional partnerships among different entities operating. The more connected an ecosystem is, the higher the potential for mutually reinforcing activities among ecosystem players, which leads to a widening of the scope and scale of current activities and the introduction of more collaborative efforts, i.e. more impact.
The existence of 154 supporting organizations in the ecosystem seems as a fair demand/supply ratio. Yet, the availability of a resource in large quantities still doesn’t necessarily guarantee the effectiveness of support provided by all entities.
The availability of resources does not guarantee its accessibility. Accessibility could be affected/restricted by a myriad of obstacles, including geographic disparity, over-regulation, lack of social connections, lack of impactful initiatives, etc. Accessibility could be measured by the amount of available resources that is actually received and utilized by various ecosystem players.
Funding was voted the third most pressing challenge to startups in Egypt today, which highlights the facts that the startup scene has been witnessing bigger investment opportunities. Sawari ventures announced the launch of a $55 million VC fund by the end of this year or early next year. As for startups, SWVL was recently able to obtain an $8 million dollar series. The largest series A investment ever obtained by an Egyptian Tech startup. Followed by Wuzzuf, which locked in a Series-B funding round of $6 million last May. Similarly, Vezeeta announced a Series C investment of $12M 2 months ago.
The ability of Egyptian startups to raise such funds undoubtedly increases Egypt’s competency and a regional hub for entrepreneurship.
- Human Capital:
Talent is a key element of the success and growth of startups. Startups seem to struggle to find the “right-fit” talent for their teams, which can be traced to multiple reasons. Given that most startups in Egypt are not well funded, the high cost of talent restricts the startups’ ability to create first- rate teams, thereby affecting their ability to create and sustain growth. According to the startup manifesto survey, 38% of respondents believe that “Talent” is the no. 1 problem facing startups in Egypt.
Data was ranked as the least available and accessible resource in the Egyptian startup ecosystem.
You could find more about ecosystem data challenges in the ECOSYSTEM INFORMATION & DATA section in the Startup Manifesto document
“What is it? Why is it important?
While important research has been conducted in recent years, key data is still missing. This hampers the ecosystem’s growth and performance as it is an obstacle to tailoring interventions, which directly affects startups’ growth cycles.”
Understanding the Ecosystem’s current standpoint would allow the understanding of its “deficits” and “surpluses”, thereby allowing better management of existing resources. Efficient use of resources would includes better dispersion of resources, avoiding redundant efforts through collaboration, etc. Collaboration is exactly where the Startup Manifesto fits. The Manifesto is a Collective Impact Initiative that works on optimizing existing networks and creating new networks by harnessing isolated efforts to collectively reach a more developed entrepreneurial ecosystem.According to the 2017 GEM report on Egypt, a positive improvement trend can be identified, although Egypt ranks low in most of the measures compared to GEM global averages. Egypt could view even higher performance improvements through more efficient resource management. Resource management through collaboration is definitely an approach to be visited by the ecosystem to reach the ultimate objective of a more developed ecosystem for everyone.
By: Ghada Saber
Project Associate of the Startup Manifesto
December 1, 2018.
According to the Startup Manifesto Survey, when asking 43 startup ecosystem stakeholders to evaluate the availability and accessibility of 4 Key resources (Talent- Funding-Know-how-Data), the availability of each resource always received a slightly higher score than its accessibility. The survey findings imply a modest gap between the supply and distribution of resources.