CAIRO: “There is huge investment potential for venture capitalism in Egypt, with new money entering the region,” Ahmed Metwally, CEO of Timeline Interactive, said.
“Until this year, there was no one else besides the Technology Development Fund (TDF) in Egypt helping budding enterprises,” he told Daily News Egypt in an interview.
Timeline Interactive, originally led by Mostafa Hafez, the company’s technical director, and a few friends, received a boost from the TDF in the form of LE 6 million over two bundles. It was the first Middle Easter company to be certified to develop videogames for big names including Microsoft and Sony.
After the success of its first video game, Cell Factor Psychokinetic Wars — which made the top 10 list when released and is now available on both Xbox 360 and PlayStation 3 — Timeline Interactive has several more titles on the way, which already have publishing deals, and will be released within the next year.
Launched in 2002, the TDF — an IT venture capital subsidiary of regional investment bank EFG-Hermes — searches for Egyptian and MENA entrepreneurs who have innovative projects and are in need of financing.
“TDF helped me connect with Ahmed to drive the management side of the business,” Hafez said.
“As well, it aided with filling other essential functions of the business that were lacking such as human resources and other critical support structures as well as helping with accounting and legal aid,” he explained.
In fact, as Metwally pointed out, his firm is in contact on a weekly basis with the TDF and has joint board meetings every six to eight weeks.
Before TDF was part of the picture, Hafez was already steaming ahead in the videogame business.
By the youthful age of 14 he began working on his first professional PC videogame title, which was eventually launched just two years later in the US market.
Fast forward to 2005, Hafez entered a business plan competition. Even though he did not win the $100,000 in start-up cash, he did run into Ahmad Gomaa of Ideavelopers, an advisory arm of the TDF, who urged Hafez to join forces with outside help.
After deep reflection and a bit of gentle nudging from Gomaa, Hafez eventually agreed and teamed up with Metwally, who brought with him five years of experience at Microsoft amongst a dizzyingly long list of other tech-related jobs.
His arrival ushered in the management expertise Hafez needed.
When the company first started out, it had only eight employees, and has mushroomed to 35, which will double once the company’s second ‘core art studio’ will be operational in two years time.
Venturing out
“Hafez showed immense courage for a young man of 23 by going out and contacting a venture capital firm,” Metwally said, which should not be underestimated as many young Egyptian entrepreneurs are wary of partnering up with venture capital firms. They falsely believe that the firm will just inject capital and swipe the business right out of their hands, he said.
“Often these young people will go to their parents, who don’t understand the newly evolved business environment, for advice on whether to bring on board venture capitalists,” he explained. “These parents tell their children: do it on your own.”
Besides lack of awareness about the benefits of venture capitalism, which is stifling the industry, Metwally pointed to other obstacles that keep the industry from really taking off in Egypt.
It is difficult to find the right human resources, and when personnel are hired, the country’s rigid labor laws make it cumbersome to let an employee go if they are not the right fit, he bemoaned. This leads companies to hire on a definite contractual basis and continually renew the contract, rather than providing a long-term, stable work contract, he explained.
This dynamic results in “lost overhead as well as time” for employers.
Metwally and Hafez also stressed that with IP protection laws — critical for a videogame company like Timeline Interactive — being so weak in Egypt, they have had to resort to filing for patents and trademarks in the United States and Europe.
To sum up, “venture capitalism is still very much in its beginning phase in Egypt,” but has made strides as of late, Metwally said, which gives reason for hope.
When the TDF originally began, he explained, it focused primarily on service-oriented companies, then it shifted focus toward technology-driven enterprises to finally having a concrete investment strategy on how to drive the whole sector, which has been a positive development.
The government has also set out a strategy to attract Egyptians living abroad in hopes that they will return and instill their knowledge and experience to help new, emerging national companies get their feet on the ground.
Two other venture capitalism firms have recently been established along the same lines as the TDF, but they are still in their early stages and focus mainly on smaller companies, Metwally noted.
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Mostafa Hafez.
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