Introduction

You have probably heard a lot about entrepreneurship and stories of the usual guys making it to
outstanding success through starting their own business. The Bill Gates, Steve Jobs, Mark Zuckerberg are
known names that every entrepreneur is aspiring to catch up with.

You have probably started a journey of searching for an idea, building a team, building a product or probably
starting a company to create your own success story. You might have searched and suffered of lack of
funding and you might be considering giving up.
This document provides basic understanding to the roadmap entrepreneurs go through from idea till
building a hugely successful companies and making a lot of money in the process, focusing exclusively on
the funding component across their journey.

About the author

Abdelrahman Magdy is the CEO and Founder of Egypreneur. Since

2008, Abdelrahman had been leading the effort to establish the
network of Egyptian entrepreneurs, among his responsibilities
had been introducing entrepreneurs to investors, conducting
training workshops on investment readiness.

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Why do people invest in

companies?
The reason why people invest their money in
companies, if company A is valuated today at
100,000 EGP and you invest 10,000 EGP to own %10
of the company, in 2 years the founders work very
hard and now the company grows to be valuated at
1,000,000 EGP, your %10 shares (ownership) is now
equals. How much? 100,000 EGP
Imagine that having this 10,000 EGP today, other than
choosing to invest in this company, I have kept my
money in the bank, after these two years, how much
would the 10,000 EGP grow into? (Assume interest
rate of %10) in 2 years, that will be just 12,100 EGP.

Now compare the decision to put your

money in the bank relying on interest
rate vs. investing in a company A. If
you are really looking to grow your
money, then the option to invest in
the company is way better.
This is exactly how you should start
thinking while attracting funding to
your business from this perspective,
as the founder and owner of the
company, you are selling part of your
company in exchange for money that
will help you grow the total value
of the company and accordingly
maximize gains or what they call it
Return on Investment (ROI) for your
investors.

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The whole startup funding game is based on this basic principle. Though, startups are experimental
companies that while having the potential for exponential growth, it is is an extremely risky investment as
you cant guarantee that its going to work or that youll even get your money back.
Now, you should start thinking like an investor, the only reason why they might consider investing in your
potential company is that YOU can show them the potential, skills and flexibility you have to lead this
experiment though and make it a financial success.

Also, you should now understand that the reason why Mark Zuckerberg, Bill Gates, Steve Jobs and all
other entrepreneurs are rich, is that they owned percentage of companies they have created and invested
their time and skills growing these companies to be Valuated at very large values.
The good news is that its a simple game, the bad news is that its very hard and only 5-10 % of startups
make it alive after the first 3 years. Itll be a hard job for you to build this startup and sell other investors
on its potential for growth.
TIP: Now, you know why people invest in companies, we know you have a great idea, passion
and probably team, but something matters just more to your investors, their return on
investment, if they buy part of your company today for 100,000 EGP, how much would it be
worth in 3 years?
Exercise 1: Go to Forbes.com and check out the list of the most valuable
companies in the world http://www.forbes.com/global2000/list/
Exercise 2: Go to SharesPost.com and check out the list
of most valuable venture-backed startups in the world
http://sharespost.com/sharespost100-/list/

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Things youll need to know

Finding your Hedgehog concept (The Engine of Growth)
So, you might be asking how can I discover the
idea where I should start my business, or if I already
have a startup how can I optimize it to be ready as
an attractive high growth venture. Jim Collins in
his book From Good to Great highlights that out of
years of study he discovered that the companies
that was able to survive and thrive was that realized
their Hedgehog concept early on.
The Hedgehog concept can be thought of as the X
Factor for scaling your startup, the growth engine
that drives the whole vehicle into profitability and
scalability

an action that can be repeated endless number of times with low investment to increase the companys
ability to make money.
This exercise should help you realize this X Factor from both ends, the end of you as the founder and
what you want to make in the world and the end of the market and what they are willing to pay for, if
you find this fit and you are able to let it grow on its own, your company is ready to scale.
TIP: Your goal should be achieving Product-Market fit in a way that maximizes your
revenues and minimizes expenses.

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The Business Model

When you have realized your X Factor and want to manage the variables of your startup to maximize
Profit and minimize Expenses and accordingly build a profitable business with high growth potential, the
type that investors like to pour their money into to grow it.
Your most essential task is to work on optimizing your business model, The Business Model Canvas is
a tool that helps you arrange your thoughts in a structure way until you are able to weight the revenue
streams and cost structure of your businesses. Your job is to keep optimizing these variables until you
reach the formula with which you maximize revenue and minimize costs.

Fore more information about The Business Model Canvas please visit:
http://www.businessmodelgeneration.com/canvas/bmc

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The Startup Journey

So once you find your Hedgehog concept and start optimizing your
business model, you should be ready to pitch this attract startup to
investors within weeks right?

The bad news is, this is just the beginning of your startup journey, you
should expect to have 3-5 years during which youll be experiencing ups
and downs and during this period you are not expected to be an attractive
opportunity for usual investors.
A pivot is a shift in one aspect of your startups focus based on validated learning

Excuse me?
Youll have to survive this potential company for 3-5 years before you reach the solid grounds upon which
people would be trusting you with their money and be gladly considering you other than any other options.

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The reason why, is that it doesnt work right away, your passions and ideas are really nice, but not necessary
would build a solid company, youll have to experiment and grow through try and error until you define
and reach the stable Business Model and Hedgehog Concept for your startup.
Before the stage of profitability and scalability, youll experience 3-5 years of a harsh startup life where
youll be searching for the proper business model, its very unlikely investors will be interested in pouring
investments in your startups, you should be expected to change your business model a few times before
you reach the right model through which income is higher than expenses and you can scale that at low
cost.

Eric Ries, writes about the Pivoting game of changing the business model of a startup 7-5 times in 5-3
years until the startup is ready to be called a stable company.
Pivoting is not failure, pivoting should be intentional, you should be aware of the cycles your startup is
going through and should get ready to pivot whenever you need before you hit the bricks.
The question is as youll not be such an attractive investment during this period for the usual corporate
funding options, how can you survive until you reach this stage and thats when Startup Funding comes in
play.
HIGHLIGHT: When you are starting out, youll still need a long way to go before you become
an attract investment, thats when the startup funding ecosystem comes in play.

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Startup Funding Sources in Egypt

Because of this harsh years of starting up a company and because of the massive potential startups
have, there is a complete industry and ecosystem thats concerned about supporting and giving a lifeline
to companies thats just starting up.
If you still can remember the 10K that grew into 100Ks in 2 years? While being extremely risky the startup
funding game is about figuring out startups with this potentials and buying parts of these startups in
exchange of Cash that can help them survive during these rough years.
Startup funding usually happens at stages, below are some of the sources you might consider during
the startup stage until you have already proven your business model and can be a part of the corporate
finance world.

Services : Consulting , Freelance

Loans
Competitions
Grants
International Development Institutions
Operations : Sales , Sponsorship
Financial Partners
Incubators
Accelerators
Angel Funding
CrowdFunding
Venture Capital

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Fundraising Process
1. Your personal brand
Why should I fund you? Am I making an ass of myself if I invest with this
guy and he fails? Do you have the social proof that you can make it?
These questions might seem irrelevant and quite unfair speaking of a professional, consistent environment, but so as the startup funding landscape one
of the deciders whether youll get funded or not is your personal brand, who
knows you as a quality professional and promising entrepreneur.
the good news is that building this can be fairly easy with the commitment
and consistency, you can use your LinkedIn posts, your Tweets and Facebook
posts to showcase your knowledge and progress, you can even grab membership at quality organizations like Egypreneur to get yourself known and
reach the right exposure and network.

2. Your value proposition

What problem are you solving in the world? How are you solving it differently? Whats the size of the market for this idea and how are you going to
capture it?
Entrepreneurs often get caught out in the details of either financials or operations of their startups and overshadow the most essential questions to
have, you need to understand and commit yourself to understanding the real
problem and need in the world and the core competence and potential value
of how you are solving it.
Pack this value proposition with you everywhere you go and make sure to
consistently communicate it, if someone got to know that you are working
on solving this problem or take advantage of this market and that you know
enough about it, then saved yourself a lot of pushing into investors.

3. Do you really need external funding, now?

Alright, now, before you jump into the process of securing funds for your
startup, I want you to know that its not easy, its very exhausting and time
consuming, your idea and startup might be very fine, but its might not be the
right time for you yet to start raising funds for your startup.
Or you might be seeking funding from the wrong sources, too early seeking
Venture Capital investment and building expectations on your idea not product ... etc
Rely on sales, sponsorship, grants, if you cant then proceed to the next

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4. Your startup valuation

As you understand the number that you are look for and how much equity you are willing to give in exchange
for this funds, you can easily find out which entities might be best for you to consider for your fundraising
activities
According to InvestoPedia, these are rough estimate for startup valuation at
each stage.
Estimated Company
Value

Stage of Development

$500,000 - $250,000

Has an exciting business idea or business plan

million $1 - $500,000

Has a strong management team in

place to execute on the plan

million $2 million $1

Has a final product or technology prototype

million $5 million $2

Has strategic alliances or partners, or

signs of a customer base

million and up $5

Has clear signs of revenue growth and

obvious pathway to profitability

Source: InvestoPedia
http://www.investopedia.com/articles/financial-theory/11/valuing-startup-ventures.asp

5. Possible resources categorization

If you have really reached a dead end or can see a great opportunity, then probably its time for you to start fundraising. Your can have two approaches, Spray
and pray which might fire back and affect your image and reputation as a serious entrepreneur or you might want to take a sniper attitude.

6. Design a custom approach

Once you have realized how much you need and what range of valuation should
be acceptable to you and accordingly which entities youll be seeking funding
from.
You need to take the time to visualize and design a custom approach to initiate
communication with each of these entities. Worst channel is a cold email and
best to be introduced through a trusted source.

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7. Pick up a line

Its important to be thoughtful in your approach to initiating communication with potential investors, ideal scenario is that your personal brand and your startup has already done the tough part of the job, if not, you need
to make some decent first impression.
As you meet investors for the first time your goal probably shouldnt be an
immediate pich, rather to build rapport and personal connection before pitching
for funds. A good approach is to ask them for advice that shows something interesting about what you are doing.
Think about this as a dating process, at first, youd probably get someones attention and exchange contacts not necessarily going out immediately.

8. Pitch

Once you have built rapport with a potential investor or venture capitalist, ideally
youll be asked to visit their offices and provide a presentation about your investment opportunity.
Failure to prepare, is preparing to fail This will be very obvious

9. Follow-up / Due Diligence

In average it takes 2-3 months to complete all communications related to the

funding deal, this period from the moment you attract the attention of the investor till you close the deal is called due diligence.
During this period you and your investors will be testing everything, they will be
testing the assumptions you made regarding the finances and your ability to
run the business, you should be open and transparent to build up for a strong
relationship.

10. Term sheet (Contract Terms)

It is important to understand that an investment deal is not just about how much
to invest and percentage of equity the investor gets in return. Once you move
into more serious investments youll have to agree to a term sheet.

11. Close the deal

Congratulations, deal is now closed. Make sure you have your lawyer with you
throughout the process and be very careful with the amount you have on the
companys bank account now, itll not be enough for everything, so manage it
carefully.

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Providing loans to
micro and small businesses

http://www.sfdegypt.org/web/sfd/
direct-loan

TIEC

TIEC Acceleration
Program

http://www.tiec.gov.
eg/incubation

Ki Angel

Seed funding for early

stage startups

http://www.crunchbase.com/organization/k-i-angel

Cairo Angels

Seed funding for early

stage startups

http://www.cairoangels.com

Flat6Labs

100K EGP in seed

funding and joining the http://www.flat6labs.
acceleration program
com
for 6 months

Juice Labs

Acceleration program
with seed funding

/http://juicelabs.me

AUC Venture Lab

Accelerator program
at AUC including seed
funding for winning
teams

http://www.aucegypt.
edu/Business/eip/Pages/Venture%20Lab.
aspx

Loans

Social Fund for

Development

Incubator

http://www.mitarabcompetition.com

Angel Funding

Competition provides

Arab Startup Com$50K USD seed fundpetition

ing to winning startup

http://injaz-egypt.org

Accelerator

INJAZ Egypt

Startup Egypt Competition provides seed

funding and incubation
services to winners

Competition

Who is funding startups in Egypt?

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Investing at early
stage startups in the
Middle East

http://www.mevp.
/com

Vodafone Ventures

Venture Capital Arm

of Vodafone Egypt

http://www.vodafone.
com/content/xone/index/ventures.html

Wamda Ventures

Venture Capital Arm

of Wamda

http://wamda.com

MBC Ventures

Venture Capital Arm

of MBC Group

http://www.crunchbase.com/organization/mbc-ventures

N2V

Investing in technology startups in the

Middle East including
Egypt

/http://n2v.com

Ideavelopers

Venture Capital

http://ideavelopers.
/com

Sawari Ventures

Venture Capital

http://www.
/sawariventures.com

Seed Funding

Middle East Venture Partners

Venture Investment

http://www.oasis500.
/com

VC

Oasis500

Seed funding and

acceleration program
for entrepreneurs in
MENA

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https://angel.co/tamkeen-capital

Delta Inspire

Venture Capital

http://www.del/ta-shield.com

Union Capital

Co-invests with VCs in

high growth startups

http://unioncapitalpe.
/com

Innoventures

Innovation platform
that helps you with
fundraising

http://www.innoven/tures.me

aFundem

Platform connecting
entrepreneurs and
investors

http://www.afundem.
/com

Zoomaal

Crowd funding platform for creative

projects in MENA

https://www.zoomaal.
/com

Yomken

Crowd funding for

Crafts and Innovative
projects in MENA

/http://yomken.com

Eureeca

Equity-based Crowd
funding in MENA

/http://eureeca.com

Shekra

Crowd funding Platform in MENA

http://www.shekra.
/com

Private
Equity

Venture Capital

Service

Tamkeen Capital

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Facts & Figures

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Case Studies
WUZZUF
Started in 2009 as a project of BasharSoft, BasharJobs.com
founders entered multiple competitions and finally won at an
ITIDA competition and was incubated at Smart Village. With extensive networking and product development for years, WUZZUF then was offered an investment deal with OTVentures that
didnt finish successfully.
WUZZUF then received investment from 2 individual investors, who helped them pitch to global incubator
500Startups and there entered the acceleration program for three months in San Franciso.
WUZZUF is now claiming being #1 Job site in Egypt and actively raising more investments for expansion.
INTEGREIGHT
Started by 8 Egyptian Engineering students as their graduation project, the group was then accepted in Flat6Labs
accelerator, working on their Smartboard product, they
faced serious challenges and had to focus on a different
product.
In order to keep going they raised funding from Cairo Angels, launched a Crowdfunding campaign and was
able to raise 85,000 USD, they developed and launched their product in 2014.

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