Startups
The Entrepreneurship Opportunity in Egypt 3: B2C Tech products: are they free or sell-able?
Tech products are hands-down the most over-hyped and over-advertised as the high-risk-high-reward ticket to fame and riches through company exits. I started a tech product company based on a similar premise. I should know.
The rumors are not exactly false — tech products are A source of riches and company exits, if “done right”. What’s wildly outlandish is the presented odds of success and the tales of its smooth-sailing journey.
Many people naively and mistakenly think that once you launch a product that “everybody needs”, it will market for itself. It will break the internet. It will take a round-trip through all the accounts on Facebook.
While a miniscule set of products actually do create said kind of viral traction, for the majority of products, nothing could be further from the truth. You have to hit a very painful nerve in the market at the most opportune moment in time, in order for your product to market for itself completely by itself. And this cannot be something that happens with every product released into the market — at least out of sheer statistics.
My simple answer would be: pick a suitable vertical.
The keyword here is suitable, it shall be cleared up later.
So you are initially faced with one of 2 major directions: B2B or B2C tech products. Each direction has its merits and challenges. This article is about B2C tech products. B2B products are another story to be told in a future article.
B2C or consumer tech products
B2C tech products perhaps promise the most riches and glory. In fact, its promises are not entirely unfounded: B2C products have the potential to grow really big and build a massive brand with massive success. In addition, despite not being statistically representable, most unicorn tech products we hear of are B2C (a more objective overview here).
However, building a B2C product in Egypt does have its requirements, which are mostly tall orders. Here is the 1st one:
Don’t rely on app sales
A friend and fellow veteran entrepreneur — Mostafa Ashour, founded a company and created the app Boximize. It was on the top 10 apps list in the US for a while and got them a decent amount of sales — in the range of thousands of US Dollars. When its fame trickled down to the MENA region and it made the top 10 most popular paid apps list, their sales in Egypt, KSA and UAE never exceeded 300 USD total. Don’t get me wrong, Boximize is a success in the US, where they have launched it. It just didn’t do well in MENA.
Another example is Edukitten — which I’ve mentioned in a different context in my 1st article in this series. They started out in developing Arabic edutainment apps for kids of the age 2–4 years, targeting Arabian expats in the west and Arabs in the Gulf. Each of their apps had 2–5 stories and/or games and cost about 2 USD per download. While they suffered painfully to sell their apps, the noticed that parents were ready to pay 2–5 USD (or equivalent) per story to buy their kids physical/paper books and/or toys. The same parents were very reluctant to pay the same (or less) amounts for apps that did the same job, arguably even better. Even when their apps offered more value for money, it didn’t manage to change the mainstream parents’ position. And when they managed to sell their apps, they eventually lost due to the insanely high cost of acquisition they had to afford to advertise in the developed markets.
The list goes on. However, to maintain the integrity of my writing, there is an example that made it against all odds. It does have a pretty exceptional story that is really very difficult to replicate: iPhoneIslam.
iPhoneIslam started as an Arabic blog about iPhone related issues and Islamic iPhone apps. Back when it was incepted, there were hardly any blogs that curated similar content in Arabic. It built its audience upon stirring interest in KSA and among the Arabs in the USA by leveraging the fact that it was more or less alone in the market. The rule of thumb says that virality basically reduces your cost of acquisition, and all they had was vitality.
They have maintained a very high level of content quality and built a very cool app around it. The app is free, but they used their audience to push other paid apps of their own development onto the market. The large and very unique traction they had in their region was and still is the main reason enabling them to sell consumer apps to the public. iPhoneIslam is a combination of a set of unique unfair advantages that breaks my rule, and makes selling apps in MENA possible and profitable. However, if you are starting a company, it is extremely difficult to obtain iPhoneIslam’s unfair advantages, unless you are in fact, iPhoneIslam.
If you want to build an app and sell it, your best bet is to sell it in the USA and Europe. And to afford this, you need to build an app with killer UX and know the ins and outs of getting free publicity and exposure for it. Which speaks to the “unfair advantage” condition I’ve highlighted in my 1st article in this series. Otherwise you are screwed.
It has been brought to my attention by Muhammad A. Ali that the decline of the paid apps business model is a global phenomenon, not just an Egyptian or an Arab one. There is in fact a global expectation that apps are downloadable for free, and then you pay for other stuff, if any.
To anticipate the smarty-pants who will be reading this article, and will post some certain comments suggesting other business models, here is a quick disclaimer:
- I realize that there are multiple business models that can be deployed to keep an app free while having someone pay for other stuff. It shall be tackled in later articles
- The Freemium model can be interesting for apps (offer a limited version of the app for free and a full version for a fee), and it shall be part of a future article.
- Subscription models are a world of their own and they have their own dynamics — also part of a future article.
- Selling Digital goods basically makes you enter the realm of ecommerce — you guessed right, part of a future article.
- Advertising based business models — no you guessed wrong, it is not part of a future article, it is the next article 😀
Advertising has a lot of hidden dynamics that I will share with you next time 🙂
Stay tuned!
Al Nashmiah Farms, committed to aiding women burdened by debt and facing the threat of incarceration, offers a novel solution for them to earn their way to freedom. Under the leadership of Razan Harb, motivated by her family’s financial struggles, the farm has become a pivotal force in rescuing those ensnared in the debt trap, providing them with employment and a sense of purpose.
Harb, observing the plight of many women who took loans in hopes of improving their families’ fortunes, only to be overwhelmed by unfortunate circumstances, economic downturns, and oppressive taxes, has established a farm that serves as both a source of employment and a supplier of high-quality produce to major markets.
The farm’s operations include the provision of household essentials, emphasizing the importance of quality through methods such as nitrogen sterilization and the use of healthy packaging. Additionally, Harb has initiated work-from-home opportunities, enabling women to engage in the packing of vegetables and fruits for market and direct sales, thereby offering a sustainable model for economic independence and recovery from debt.
Selina Bieber, the Senior Director of Global Markets at GoDaddy, has predicted a significant increase in Egypt’s e-commerce revenue. By 2028, it could reach $9.88 billion.
Godaddy is forming strategic partnerships and launching initiatives to help local entrepreneurs. These efforts align with Egypt’s digital transformation goals and its Vision 2030.
In an interview with the Arabic financial news “Amwal Al Ghad,” Bieber spoke about GoDaddy’s plans and how they match Egypt’s 2023 strategy. She highlighted the company’s aim to provide effective, easy-to-use digital tools and services. By 2024, GoDaddy wants to serve more customers in Egypt by making its digital tools more widespread.
The company is working closely with the Egyptian government, especially the Ministry of Planning. They are offering training programs to improve the digital skills of startups and existing businesses. GoDaddy’s services in Egypt include domain registration, web hosting, e-commerce solutions, and digital marketing tools.
Recent surveys support Bieber’s positive outlook for e-commerce in Egypt. They show a clear trend towards digital strategies among small businesses. Many are realizing the importance of having an online presence for their growth and success.
As GoDaddy continues its partnerships and supports government digital initiatives, its influence on Egypt’s digital landscape is growing. The company is committed to sustainability and reducing its carbon footprint. It aims not just for business growth but also to contribute to a sustainable and thriving digital economy in Egypt.
The 2028 projection indicates a vast potential for e-commerce, with GoDaddy playing a key role in this digital evolution.
Lendo, a Saudi Arabia-based shariah-compliant debt crowdfunding marketplace, has raised SAR 105 million ($28 million) in Series B funding led by Sanabil Investments, a wholly-owned company by the Public Investment Fund (“PIF”). The round saw participation from Shorooq Partners, AB Ventures and other investors.
Lendo is a Shariah-compliant, debt crowdfunding marketplace that helps pre-finance outstanding invoices for businesses in Saudi Arabia. The platform is a community of creditworthy borrowers and sophisticated investors looking for alternative investments. The platform is licensed by the Saudi Central Bank (SAMA). Lendo will use the funds to support its fast-growing customer base in Saudi Arabia which has grown 3X year-on-year, introduce more innovative financing products, and accelerate market expansion plans.
“With this funding round, we are going to expand into new markets, support new and current customers, and launch new Shariah-compliant products, all the while continuing to innovate the marketplace for digital lending. We are going to make financial services more accessible, affordable, and inclusive for everyone. I am excited to see what the future holds for our company,” said Osama Alraee, CEO, and co-founder of Lendo, who also disclosed its plans for an IPO within the next few years.
Alraee has also expressed his gratitude to SAMA (Saudi Central Bank), Fintech Saudi, MCIT, Misk, and Monshaat for their unwavering support, emphasizing the pivotal role they have played in advancing financial inclusivity and fostering innovation in partnership with Lendo to reshape the financial landscape. Their dedicated efforts in advancing financial inclusivity and fostering innovation have been invaluable to us. We greatly appreciate their partnership in our mission to transform the financial landscape
Commenting on the announcement, Sanabil Investments said: “Lendo is a leading fintech company that is transforming the financial services industry in their specialist area of Shariah-compliant digital lending for SMEs. The Lendo team, especially the founders, Osama and Mohamed, have achieved a significant amount in a relatively short period, and we are eager to join their journey of increasing access to flexible financial solutions in Saudi Arabia and the region at large.”
“The growing demand for alternative, agile, and accessible lending solutions presents a significant opportunity. At Lendo, we are well-positioned to lead the charge in promoting financial inclusion not only in Saudi Arabia but also beyond. By fueling SME growth, we aim to contribute to the realization of Saudi Arabia’s Vision 2030 economic goals and to create a ripple effect of opportunity throughout the MENA region,” said Mohamed Jawabri, COO, and co-Founder of Lendo.
Lendo previously raised a SAR 27 million Series A funding round ($7.2 million) in 2021 led by Derayah Ventures with participation from Seedra Ventures and other investors, bringing the fintech’s total funding to SAR 132 million ($35.2 million).
Since the inception of Dec 2019, Saudi fintech Lendo has processed more than 2,500 financing transactions on its platform, providing over SAR 1 billion ($300 million) in financing to SMEs and generating SAR 140 million ($37 million) returns for investors.
The Small and Medium Enterprise financing landscape in the Middle East and North Africa (MENA) presents a substantial market opportunity as limited financial access continues to restrict the growth of the region’s businesses, with commercial banks hesitant to issue loans to SMEs at scale, resulting in a high percentage of declined financing requests annually. According to the International Finance Corporation (IFC), the SME financing gap is estimated at SAR 19.5 trillion ($5.2 trillion) every year in developing countries.
Lendo’s debt crowdfunding platform aims to bridge the financing gap for SMEs, which aligns with the Saudi Vision 2030 to significantly expand SME lending from 4% in 2018 to 20% by 2030.
The total value of debt crowdfunding in Saudi Arabia surged from 1.4 million SAR in 2019 to SAR 771 million in 2022, marking a remarkable 430% growth, according to SAMA’s annual fintech report 2022.
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