Promote successful exit strategies to attract more

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Promote successful exit strategies to attract more investors. 2.1.1.3. VENTURE CAPITAL What is it? Why is it important? Venture capital (VC) - a form of financing provided by firms or funds to emerging startups deemed to have high growth potential - is of critical importance in the early stages of tech-enabled, high-growth startups. Usually, a venture capital investment offers startups benefits beyond financial support, namely sustenance that can come in the form of mentorship and business development advisory. While the VC industry has seen significant growth in recent years, it has not yet reached its full potential. What is the problem? Lack of availability of VCs in relation to overall number of startups in Egypt. Lack of startup opportunities to invest in, which can lead to unduly high valuations. Lack of specialization across industries and ticket sizes. Lack of specialized fund managers. Focus on tech industry. Inhibited growth due to capital gain taxes. Absence of a definition for the startup-VC relationship. Need for sophisticated data / evidence to secure VC funding. Novelty of model in Egypt with a small number of successful exits to date. What should be done? Increase the overall pool of VC funding available by teaming up with banks and institutional investors. Ensure wide distribution of VC funds across different funding stages. Increase emphasis on specialized VC funding by widening industry focus and representing all ticket sizes to leverage on the full market potential. Develop trainings on valuations and returns for startups. Develop trainings for (potential) fund managers. Design trainings on startup specifics for funds across all positions. Establish startups and SME rating agencies based on non-financial metrics to increase access to funding. Regulate the VC industry by incentivizing investments, absolving capital gain tax, and facilitating public-private VC funds. Further build attractive exit scenarios for investors to increase chances of VC funding. 2.1.1.4. STOCK MARKET What is it? Why is it important? The Egyptian Exchange (EGX) has taken several steps in recent years towards the inclusion of the specific needs of SMEs. Most notably, the Nile Stock Exchange (NILEX) opened in 2010 through an initiative by the EGX. It is specifically designed to foster growth in SMEs across MENA. It shares most of the rules and principles of the main market but upholds less demanding listing and disclosure requirements, as well as smaller fees to attract small- and mid-cap businesses. While startups would only consider a listing on the stock market at an advanced stage, the existence and functionality of the stock market is essential for the ecosystem as a whole, as it is one of the few attractive exit options for early-stage investors, which indirectly influences the chances of securing early-stage startup finance.
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