MEASURING

POTENTIAL
SUCCES FOR
STARTUPS IN
EGYPT

Submitted by: Tarek Gamal

Submitted To: Dr. Ashraf EL Safty

ESLSCA Business school | 55D

1- Introduction:
Entrepreneurship is one of the latest business trends that has been tremendously
increasing all over the world, in which all countries around the globe with most
of its institutions; in both public and private sectors are encouraging youth
towards entrepreneurship, and establishing their own startups achieving their
dreams being their won bosses and unleashing all their creative & innovative
ideas to spread all being developed under the umbrella of public & private
incubators.

The Egyptian government has launched a national initiative to support national

startups and Egyptian entrepreneurs to start establishing their own business by
providing them funds, assistance and incubation for reasons of; overcoming the
unemployment especially among youth, attracting SMEs working under the
umbrella of the unofficial economy to the official and legitimate loop, and to
catch up with global trend of entrepreneurship that has been enhancing many
countries’ economies in the very developed economies and not only the
emerging markets.

Although, it has been realized that startups are the new fuel of economies not
only in emerging markets, but also in developed markets, but it has been
realized that most of startups die in the very early phases, destroying all hopes
of many of the entrepreneurs who have worked hardly to accomplish their
business objectives and transforming their career dream projects into reality.

This research is developed for measuring the potential success for new startups
especially in Egypt, to identify the greatest mistakes that lead startups to fail,
and what are the common reasons that have been recognized that resulted in the
failure of such many number of startups in the very early phases all over the
globe with specific focus on Egyptian startups.

2- Theoretical background:
I have developed stakeholders analysis and reviewed concepts and theories that
are related to the research.

3- The Research Problem:

Problem definition: Measuring Potential Success for Startups

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 As, per my discussions with some of the stakeholders who work as incubators,
entrepreneurs, university professors who work with their students on
establishing their startups.

The government is trying to support youth to establish their own business and
do not wait for public or private sector to employ them, so Nile University and
the central bank of Egypt established Nilepreneurs initiative to incubate
entrepreneurs in Egypt and provide them with requested funds that shall
support them to acquire their startup (Sami, 2017).

It seems that most of the startups faces sever failure and harsh challenges that
prevent it from proceeding with their objectives.

The national initiative for supporting startups launched by Egyptian

government and supported by many public & private institutions such as
Central Bank of Egypt, Nile University, Banque de Misr, and National Bank of
Egypt is not doing well up till now, as the initiative budget is EGP 200 Billion
to be distributed over five years, while two years have passed already and the
total value of cash outflow is EGP 20 Billion only (Sharaf, Financial Director,
2018).

The initiative target customers believe that the main objective is to get them in
the official economy loop and register their business in the taxable system,
VAT..etc as due to the sophisticated documents requests from youth point of
view (Sharaf, Financial Director, 2018).

There are many reasons behind the failure of most of startups; Lack of market
need to the startup product or service, Startups ran out of cash, Lack of teams/
investors synergy, Pricing and costs problems, and No financing or investors
interest (CB Insights, 2018).

WORKS CITED
CB Insights. (2018, February 2). The Top 20 Reasons Startups Fail. Retrieved from CBINSIGHTS:
https://www.cbinsights.com/research/startup-failure-reasons-top/

Sami, N. (2017, 8 15). Co Founder of Nilepreneur Initiative and MOT Professor at Nile University. (T.
gamal, Interviewer)

Sharaf, S. (2018, February 19). Financial Director. (T. Gamal, Interviewer)

Sharaf, S. (2018, 2 19). Financial Director. (T. Gamal, Interviewer)

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 4- Main Concepts:
4.1- Success & risks in the pre-startups stage
4.2- Startups Success criteria
4.3- Success & Risk Factors
4.4- Risk factors threating Entrepreneurs
4.5- Business Survival

Major Research Questions:

- To what extent entrepreneurs can ensure their startups success?
- What are the greatest mistakes that lead to startups failure?

Minor Research Question:

- What are the reasons that make majority of startups fail early?

Some people succeed in achieving their goals and establishing a successful business,
while the majority of people fail in the same objective. However most of the people
who failed in establishing a successful business worked hard, planned ahead and they
did their best to establish an successful business, but still they failed.

I believe that the Startups’ world is mainly based on a bunch of assumptions, and
predictions, that are responsible for making our hypotheses that we test in our
business research in order to take the decision of do or not to do our startup.

One of the very early phases in our research is to work on preparing and analyzing the
nine main elements of the business; Organization, Management Function,
Organizational level, Business level, Geographical, Industry, External Environment,
Internal Environment, and Time.

1- Organization:
Online reputation management agency, a new business in a blue ocean market,
dealing in virgin markets with a new technology & know how that customers
and service providers are not yet familiar with, with a vision for filtering the

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 social media platforms from negativity, and eliminating any un authorized
negative activities which negatively affect other entity’s business with a
negative impact on their profitability, image and reputation.
Startups could exist in different forms, which only two of them mainly that I
can consider for this case; either sole, or limited organization. In the startup in
hand it is a very hard to me to take such critical decision for me at a very early
stage, especially that each of both legal forms has its own advantages & dis
advantages.

The Sole organization; it is the only legal form that can be formulated for an
one person business, it provide the owner an exclusive privilege of decision
taking, as he is the only responsible for the company’s performance but it also
has a very risky dis advantage which is allowing creditors to take their money
from my own personal funds in case I faced loss that was not covered by the
company’s funds, which is the same case in the partnership but without
providing me with exclusive decision taking right.
In case the startup in later phases in the research indicated that I shall need
extra funds that I can’t provide for now I believe that a limited organization
would be the optimum solution for me to protect my personal funds from any
losses.

2- Management Function:
There are 4 main management functions which are; planning, organizing,
leading, and controlling.

A- The planning process for a startup might be the most important phase, in
which we can plan for the entity’s objectives in short, medium, and long
plan. A startup needs to have a flexible planning as to be capable to cope
with the market fluctuations that shall take place in market especially if it is
a blue ocean virgin market with no previous history or records for creating

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 more accurate forecasts and planning. Same for budget allocations and
securing sources of funds.

B- Organizing:
My startup shall be a flat organization with no complicated layers in structure
that shall prevent easy and fast two way communications between teams, also
as a startup the total number of employees will not all me to apply any other
forms as I will leverage at the beginning on only freelancers in order to reduce
costs as much as possible.

C- Leading:
Is mainly ensuring that there is no contradicting activities that preventing all
departments working in parallel together under same umbrella for achieving
same objectives.

D- Controlling:
Controlling the organization is very important as to be able to ensure that all
processes in the company is working as planned and meeting the time plan
properly. In this case I will be the planner, executer, and the supervisor on all
the business functions.

3- Organizational Level:
The startup will only have me as the only senior at least at the early stages for
cist reduction issues in order to be able to survive the cost while there is no
high value of income and will rely on freelancers till I can secure stable big
accounts that allow me to expand the company.

4- Business Function:
Due to the characteristics of my startup I shall not operate in all the existing
business functions; Knowledge, product/service, marketing & sales, human
resources, finance/accounting, IT, and R&D. I will apply these functions in a

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 very limited scope as I will be handling all the previously mentioned functions
solely, especially at the early stages of the company, in addition to postponing
the R&D function for a while as it costs huge amount of money.

5- Geographical:

The digital/ online based entities do not really get concern with geographical to a
very big extent due to the nature of the business it is all about nonphysical online
services, in which all the business process could take place online; approaching
potential customers, having online meetings via video conferences, all the work is
being done already and money collection takes place through online bank
transactions.

6- Industry:
The digital advertising or digital media industry is one of the booming
industries around the globe, it has been acquiring an increasing share from the
advertising industry overall. However the business I am considering is the
“Online Reputation Management (ORM)” which is considered to be a new
business that not everybody in the industry is aware about. So, it is a virgin
sector in a booming industry, which presents a good potential and opportunity
for growth however it needs hi investments for creating awareness among
potential customers.

7- External Environment:
The external environment reflects the uncontrollable factors of the business
environment which mainly are the PESTEL elements; Political, Economical,
Sociocultural, Socio cultural, Technological, Environmental, and Legal.
- Political: Current political environment in the middle east might be a ood
opportunity for our ORM business as everybody is just being aggressive
against whoever dare and have a different point of view, so I believe this
could be an opportunity to have a good business market.

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 - Economic: Currency devaluation, Inflation, high taxes all are considered to
be big challenges and obstacles in order to attract client’s due to their lack
of financial liquidity and they are even cutting costs of marketing activities.
- Socio cultural: increasing use and increasing number of social media
platforms accounts in Egypt every day. People in poor regions or who are
having low incomes sacrifice buying their basic needs to buy new cell
phones, with better internet options that facilitate their engagement on the
social media platforms, hiding from the real life into a virtual reality world
with fake characteristics and environment hiding from their pains n real life.
- Technological: there is a huge increase in mobile internet users in Egypt,
internet and telecom infrastructure are entering a new era in speed
“fiberglass cables” and the internet is now everywhere.
- Environmental: lack of ethical business attitudes among the majority so
many people could do blackmailing which is a potential for me to stand
against through ORM.
- Legal: no legal laws that effectively enforced that prohibit digital
blackmailing in an effective way.

8- Internal Environment:
The use of digital media and online marketing to create online protection for
public figures, business owners, corporations, and protect them from online
blackmailing.

9- Time: The problem has started since the Egyptian revolution in 2011 and
increasing with the increase of social media penetration and it is getting uglier.

5- The Research Objective:

5.1- Measuring startups potential success in Egypt
5.2- Measuring the impact of pre-startup phase on entrepreneurs’
performance behavior

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 5.3- Measuring the effect of the startups characteristics on potential
success.
6- The Research Hypotheses:
6.1- Most startups fail in Egypt due to lack of pre-startup phase
preparations.
6.2 Startups characteristics significantly affect the startup potential success