VC4Africa connects local and global networks of angel investors interested in Africa’s greatest startups. In the coming days we’re present at the Angel Fair West Africa event in Lagos and discuss angel investing at the high-level EU-Africa Business Forum in Brussels. Recently we also had a chance to speak with Hossam Allam, Founder and President of Cairo Angels, the first formal angel investor network in Egypt. Read the interview below.
Could you introduce yourself and the Cairo Angels?
“I discovered angel investing while studying for my MBA at London Business School. The school hosted a resident angel network and I enjoyed sitting in on pitches. A few years after graduating I made my first investment and then a few more.
When I moved to Egypt in 2010 I assumed that there was no start-up scene here, and no scope for angel investing; how wrong I was! There was a vibrant – if not nascent – entrepreneurship ecosystem forming and I wanted a shot at investing in great Egyptian start-ups. I pulled 4 or 5 like-minded friends together on the assumption that working together we would be more interesting for entrepreneurs to speak with than if we worked alone. Soon friends had pulled in other friends and associates and suddenly we were fifty people in search of some structure.
Today ‘Cairo Angels’ is a registered company that scouts for good ideas backed by outstanding teams, and creates a platform for them to meet its membership base of investors. It operates with a membership fee taken from investors. Cairo Angels takes no money from entrepreneurs, no fee on funds raised and no incentive on performance. We are neither a fund nor a cooperative: our members make their own investment decisions and write personal cheques to start-ups.
Since our inception in 2011 we have invested around USD 1.1 million in eight start-ups, with one more under negotiation. We’ve averaged one deal per quarter, and that under extremely difficult market conditions. Of course we would like to have a slightly higher investment rate than this, but our real priority is to increase the ticket of the average funding round from today’s USD 120,000 to more than double that. This requires that we find better deals, but also that we grow our membership base.”
Please give us some background on how you operate and your portfolio?
“For the time being we are sector agnostic; the market has too many underserved niches and our members are still relatively unspecialized. However, with time I think we will find sector-interested pockets of individuals arising from our membership base. That said, although we are not tech focused most of the opportunities we come across, even the more ‘terrestrial’ ones, have some sort of technological innovation that stands to propel growth and competitiveness.
The collective Cairo Angels investors in a deal most often will take a minority share in the company and get at least one Board seat in the company. Sometimes we are asked to take the Chairmanship of the company too. It is our hope that our members’ experience and contacts base can substantially influence the success of the start-up to the benefit of investor and entrepreneur alike.”
Could you highlight some success stories or interesting developments from your portfolio?
“Our first investment was barely two years ago, so it’s early days to be talking about commercial successes, much less those elusive exits. However, several portfolio companies have gone on to achieve great product recognition locally and internationally. Instabug by now is a famous name from San Francisco to Dubai in the area of identifying bugs in apps, and was initially funded by Cairo Angels. We are also proud of the two women founders of Eventtus, an online events promoter and ticketing platform that is picking up momentum by regional event organizers.”
Please tell us about the quarterly pitch events you hold?
“They are usually held at a hotel with all the presenting entrepreneurs in the room. Like membership to Cairo Angels, attendance at our pitch events is by invitation. Our members are under strict instruction to only ask questions that assist their decision whether or not to engage in further discussion or negotiation with the entrepreneur. That is to say that great ideas and suggestions are welcome in the coffee break, not in the pitch room! We leave lots of time for networking and side talks between investors and entrepreneurs, in the hope that interest is generated. At the end of the evening entrepreneurs are asked to retire from the room, while angels discuss each deal individually and a ‘deal leader’ is selected for projects that will be pursued.”
How do you work together with partners to reach your international ambitions?
“Cairo Angels has co-invested in start-ups opposite regional angels, venture capital houses and even multinational corporations. It is a tribute both to the quality of entrepreneurs in Egypt and to the credibility and reputation of Cairo Angels’ members that serious, professional investors are comfortable to work so closely with us.”
And you’re presently setting up a fund?
“We’re finding that there’s interest from investors who don’t have the time, capacity or experience to become angels, but want to participate in the asset class for returns or for the emotional connection. We want to give them the opportunity to do so and are investigating the most sensible models for doing so. This is the case for local and overseas angels. Seeing as we are not fund managers nor seek incentive fees we have built substantial credibility in the market to raise these funds. Now we just need to the find the best legal model.”
What are your tips to other investors active in Africa, to support and guide entrepreneurs towards success?
“Entrepreneurs are getting lots of excellent help across the Middle East and Africa. Sure there’s always room for more, but I’m much more interested in seeing more angel networks emerging. My advice to them is as follows. Every nascent angel community needs a champion who will pull in friends and associates, lobby for the start-up ecosystem, explain the rewards of being an angel and importantly demonstrate commitment by investing some of their own money.
I’ve seen countless NGO or donor led ‘initiatives’ to excite local investors; it doesn’t work. Investors want their hands held by someone who resembles themselves. Look around your community and see who could champion the angel space in your local market. If you don’t see anyone, maybe it should be you!”
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