Cairo ranked third in a newly launched Startup Friendliness Index (SFI) comparing seven regional entrepreneurial hubs.
With a score of 46/100, Cairo came in 12 points behind the leader Tunis.
German non-profit association enpact launched the SFI under a new platform named Startup Meter, which uses an indicator-based approach to measure the framework conditions for entrepreneurship in different urban metropolises in growth markets.
Based on almost 100 indicators such as access to finance and human capital potential, the data is presented on an interactive online platform that helps users compare between Cairo, Tunis, Amman, Nairobi, Beirut, Accra and Rabat.
One aspect that supported its rank was Cairo’s openness, international influx and partnership with so-called “sister cities,” allowing for skill penetration and exchange. The city also offers a variety of skilled and affordable candidates to hire, specifically when it comes to software development.
One of the main findings of the data analysis was that there is no direct correlation between GDP per capita and the entrepreneurship indicator performances in these cities.
As an example, wealthier cities like Beirut did not perform better than the others, which is a sign that “economic conditions play only a partial role” when it comes to startup friendliness.
With the entrepreneurship sector growing rapidly in the region, several entities have taken it upon themselves to evaluate and research the comparative development of different markets.
“There is one big challenge, especially in the donor community: they do not know how to support entrepreneurship,” says Sebastian Rubatscher, founder of enpact.
“With the SFI, we want to give them a tool to improve startup ecosystems. We want to tell them where they need to invest funding and donor money.”
Enpact launched the the results of the study at a roofing ceremony for its new startup space in the heart of central Cairo, which will open early next year with support from the Drosos Foundation.
While the lack of data has been a longstanding issue in regional markets, this is now changing with the increasing availability of more frequent research utilizing creative methodologies. (See the recently published Funding Evolution report by Magnitt and Egypt’s Global Entrepreneurship Monitor).
Cairo ranks high in human capital, low in financing
“A very interesting domain [that was researched] for Egypt is Talent Pool. The talent pool is really good here. Of the seven cities that we analyzed, Cairo ranked highest because the many universities here and the [size of the population],” Rubatscher explains.
Still, some bottlenecks surfaced. “Cairo [scored] relatively poorly within the Financial and Startup Hub Domains. Startups seem to still be self-financing dependent, with banks lending being a constraint,” enpact states in its press release.
Regarding startup hubs, Cairo offers a total of 64 coworking spaces, which is considered the highest number in the study, but compared to the city’s population and size, there is still room for more.
Other concerns regarding the performance of the entrepreneurship ecosystem are political stability and the legal framework.
“Recent government instabilities and low level of democracy perceived are affecting the overall health of the ecosystem,” the data shows.
Also, the time needed for business registration seems “poor with wide gender differences, creating a barrier for female entrepreneurship.”
With Tunis leading the index this year with a score of 58.5, Amman came in second place with 54.7, being the city most comfortable for tech startups given its high ICT score.
Nairobi followed Cairo with 45.2, being the most active startup ecosystem in any of the recorded growth markets, and having over 20 startups with an equity funding of over $5 million.
Beirut scored fairly low in the Internet Connections domain, coming in fifth place with 45.1. Accra is most favorable in terms of labor markets for startups, with an overall score of 41.4, settling in sixth place and forecasting the largest growth rates.
Rabat, being penalized for its performances in the Financial and Startup Scene domains, followed Accra with a score of 41.3, but was promising in the roads, railroads, ports and air infrastructures field.
“The choice for the cities we examined were donor-driven. Those are the places in which our datasets were best equipped. We will expand it next year to up to 30 cities with our partners on the ground,” Rubatscher said.