When Mahmoud El-Zomor and his partners came up with the idea for an AI-enhanced fast transport platform to help Egypt’s food and beverage distributors in 2019, they had two angel investors and only a rudimentary knowledge of how to launch a business.
“There wasn’t much of a startup scene in Cairo at the time, but then I heard from a friend about Flat6Labs,” says El-Zomar of the IFC-supported accelerator that provides seed money, office space and mentorship to startups in the Middle East and North Africa. “They helped me refine my presentation and how to interact with investors, then invited me on a lot of road trips to meet investors throughout the region.”
Today the digital transport company ILLA has grown to 110 employees, supporting 3,000 independent truck drivers.
Flat6Labs is one of 19 funds in 24 countries IFC’s Startup Catalyst (ISC) program has invested in since 2016 to address funding gaps in underdeveloped venture capital ecosystems. Accelerators and seed funds play an important role in the venture ecosystem. They provide early-stage entrepreneurs with much-needed capital, as well as the technical know-how, support, and mentorship to scale operations.
ISC has helped create a pipeline of innovative companies with high-growth potential to receive later-stage investment by supporting accelerators and seed funds across emerging markets, including Egypt, Jordan, the West Bank, Pakistan, Tunisia, Kenya, Nigeria, Vietnam, and Mexico. As of December 2022, ISC has supported more than 2,800 entrepreneurs, including 700 women. Their numbers are growing, as IFC is doubling the size of the program by $60 million, mainly to focus on low-income and fragile countries and priorities such as female entrepreneurship and climate solutions.
“It’s exciting to see the startup pipeline grow and thrive in the emerging markets and attract investments from international investors,” says William Sonneborn, IFC’s Global Director for Disruptive Technology and Funds. “The trend validates IFC’s approach to focusing on strengthening venture ecosystems in nascent markets and supporting early-stage startups, including through incubators, accelerators, and seed funds.”
ISC is often the first institutional investors backing emerging markets early-stage venture funds led by women, such as Flat6Labs Cairo.
“IFC was the first major fund to invest in seed stage funds and support startup ecosystems in the (Middle East and North Africa) region,” says Dina el-Shenoufy, Partner and Chief Investment Officer at Flat6Labs. “IFC had the foresight to see what we were trying to achieve and was a huge validation that we catalyzed to help us close on additional funding as our portfolio strengthened.”
Flat6Labs alone has nurtured more than 100 startups, with seed funding ranging from 500,00 to 3 million Egyptian pounds, the equivalent of about $20,000 to $191,000. More than 90 companies funded by Flat6Labs have gone on to raise $162 million more since 2017. The fund’s managers have maintained a hands-on approach in building its portfolio.
“We realized we needed to think systemically to achieve a pipeline,” says el-Shenoufy. “We created bootcamps to turn people with ideas into entrepreneurs capable of launching a business.”
El-Zomor said Flat6Lab’s support made him feel empowered as a startup founder. “When you start your business, it's crucial to have someone that backs you up and gives you the opportunities to grow,” he says. “It's like kindergarten – if you're not entering that incubator or accelerator, it will take you so much more time and you may lose focus. They put us on the right track.”
The entrepreneur already had a background in the sector – his late father was a major beverage distributor in the country. But the younger El-Zomor dreamed of building a different type of company by leveraging the power of artificial intelligence, GPS, and digital platforms to connect with independent drivers and provide clients with a fast, efficient supply chain.
ILLA ensures that delivery trucks are full and choose the most efficient route, while easing greenhouse gas emissions by reducing the number of trips. The company is launching a last-mile fulfillment structure called Front Door, which is expected to reduce truck mileage of short-haul deliveries by 25 percent. Independent truck owners and drivers are considered partners, receiving free training in safe driving, financial literacy, and technical skills, says El-Zomor. The company offers them access to affordable health insurance and discounts on automotive parts.
By investing in incubators, accelerators, and seed funds, ISC is helping innovative companies like ILLA – and thousands of others across the world – scale to the point where they can raise additional funds and thrive on their own.
“Success breeds success, with startup ecosystems becoming self-sustaining,” says el-Shenoufy. “Successful companies attract more capital and more entrepreneurs ready to quit their day jobs, because they see the possibility of turning their ideas into viable and effective companies.”
For IFC, helping create startup pipelines in emerging markets aligns with the organization's overall goals.
“IFC is the largest global development institution focused on the private sector in developing countries,” says IFC’s Sonneborn. “We have seen firsthand how the startups we invested in become drivers of growth, increased productivity, and job creation.”
ILLA and other companies are dreaming big to solve today’s most pressing problems, such as logistics, supply chain, and climate change.
“Our goal is to be MENA’s leading supply chain solution for fast-moving consumer goods,” says ILLA’s El-Zomor. “The startup community here has brilliant minds with the capability and vision to build transformative companies that will change everything. We are pulling knowledge from IFC accelerators to get us there.”
Published in December 2022