Sequoia Backs Telda: $5M Pre-Seed for Egyptian Digital Bank

Egypt's Digital Banking Landscape: Telda Secures $5 Million Pre-Seed Funding

Egypt is home to a population exceeding 100 million individuals. A significant portion of this demographic – 61% – is under the age of 30, representing a young and technologically adept populace with substantial mobile and internet usage. Despite this youthful profile, a considerable two-thirds of Egyptians remain unbanked.

This situation mirrors the broader trend within the MENA region, where only 40% of the population currently has access to traditional banking services. Digital banks are therefore poised to fill a critical gap in financial inclusion.

Telda: Pioneering Digital Finance in Egypt

A newly established digital bank, Telda, has recently announced the successful completion of a $5 million pre-seed funding round. This investment will be used to modernize the ways Egyptians manage their finances – saving, transferring, and spending money.

Just two weeks prior, it was reported that Egyptian e-commerce fulfillment startup Flextock had secured the largest pre-seed funding in MENA. However, Telda’s recent raise has now surpassed that record, establishing a new benchmark for both MENA and Africa, exceeding Autochek’s $3.4 million.

Founders and Inspiration

Telda was launched last month by Ahmed Sabbah, serving as CEO, and Youssef Sholqamy, the CTO. Prior to founding Telda, Sabbah held the position of co-founder and CTO at Egypt’s ride-hailing service, Swvl. Sholqamy previously served as a senior engineer within Uber’s infrastructure team.

Sabbah explained that he and his co-founder had been observing the fintech sector during their previous roles. His perspective shifted after experiencing the convenience of N26 while visiting Berlin in 2015, sparking his vision for digital banking in Egypt.

Addressing a Critical Need

“The concept resonated deeply, stemming from the significant challenges with payment systems in Egypt and the surrounding region,” Sabbah stated in an interview with TechCrunch. “I anticipated this development in Egypt, and if it didn’t materialize, I resolved to pursue the opportunity myself.”

He further elaborated, “Youcef and I have been closely monitoring the space since the emergence of the first digital banks approximately six years ago, observing their growth in markets with more established banking systems. Consider the potential in a region like Egypt, where banking infrastructure is considerably less developed.”

Egypt's Cash-Dependent Economy

Egypt represents one of Africa’s largest consumer spending markets. Private consumption accounts for almost 85% of the nation’s nominal GDP, while cashless transactions comprise only 4% of the total GDP. This indicates a strong reliance on cash, and card usage remains in its early stages of adoption.

Driven by dissatisfaction with conventional banking experiences, Telda was created to offer a more customer-focused alternative.

Telda's Core Features and Regulatory Approvals

Like other digital banks globally, Telda allows users to open free accounts for sending and receiving funds. It also provides a card for online and in-store purchases, ATM withdrawals, and bill payments.

While the service is currently operational, the distribution of Telda cards to existing and new customers is still pending.

Telda has achieved a significant milestone by becoming the first company to receive a license from the Central Bank of Egypt (CBE) under its new regulations for issuing cards and onboarding customers digitally. This accomplishment demonstrates substantial progress for the one-month-old company, despite the extensive dialogue required to secure the license.

Navigating Regulatory Challenges

“First movers often bear the responsibility of collaborating with regulators and banks to establish a framework,” the CEO explained. “Convincing regulators to trust and regulate our banking business, and to provide financial services to consumers, was one of the most challenging aspects.”

However, Telda’s objectives aligned with the CBE’s vision of digitizing payments within the country, ultimately leading to the granting of the license.

Securing a Banking Partnership

Another challenge involved finding a partner bank to facilitate these services. Telda needed to demonstrate to the bank that its offerings were complementary and would not create direct competition.

“This necessitated maintaining a high degree of independence from the bank’s existing infrastructure,” the CEO continued. “It was crucial for us to operate with the agility of a startup, rather than being constrained by the bank’s technological pace and operational procedures.”

Building a World-Class Team

Leveraging the founders’ experience at Swvl and Uber, the importance of assembling a talented team was paramount. Given the lack of established precedents for launching a digital bank in Egypt, Telda prioritized hiring exceptional individuals.

The CEO stated that the team consists of Egyptian professionals who have returned to the country after working for prominent organizations such as Facebook, Microsoft, Uber, Noon, and McKinsey.

The Potential of Digital Banking in MENA

The MENA region is well-positioned for the adoption of digital banking. According to GSMA Intelligence, 280 million people in the region are mobile internet users, and this growth is continuing. Younger generations are particularly frustrated with traditional banks, seeking simpler, more user-friendly, and transparent experiences.

This demand has attracted a strong group of investors to Telda.

Investment Details and Sequoia's Entry

The pre-seed round was led by Sequoia Capital, with participation from Berlin-based Global Founders Capital (GFC) and emerging markets-focused fund Class 5 Global.

This marks Sequoia’s first investment in MENA and the wider GCC region. Eight years ago, the firm made a notable seed investment in Latin American digital bank Nubank, which has since grown to become the world’s largest digital bank with over 38 million customers and a valuation of $25 billion. Sequoia aims to replicate this success with Telda.

Sequoia's Perspective

“There are significant parallels between Brazil and Egypt,” said Sequoia Partner George Robson. “Both countries have large, young, talented, and tech-savvy populations with a strong desire for innovation. We are pleased to partner with Telda and make our first investment in the region.”

Future Plans and Expansion

Telda intends to accelerate card production and distribution with the new funding. The company currently has over 30,000 signups, with half of those already requesting cards. The CEO also plans to leverage Sequoia’s reputation to attract top talent and facilitate expansion.

“Hiring is key for us. We want to build a world-class team that is eager to capitalize on this opportunity. Our goal is to grow within Egypt, begin distributing cards to early adopters, and anticipate reaching close to a million cards in our first year.”

Egypt's Growing Investment Ecosystem

Investments in Egypt have been steadily increasing over the past three years, accompanied by a thriving ecosystem. Egypt recorded the highest number of investment deals last year, according to Partech Africa, completing 86 deals and accounting for 24% of all deals made on the continent.

Investor Confidence

GFC partner Roel Janssen stated, “We are highly impressed by Sabbah and Sholqamy and admire their vision for creating the region’s leading digital banking app. We are proud to be part of their journey. This is GFC’s first investment in Egypt, and we believe Egypt has the potential to become a significant hub in the global tech ecosystem.”

Class 5 global managing partner Youcef Oudjidane added, “Money has evolved into a form of self-expression—a representation of identity—rather than simply a store of value. Telda has done a remarkable job of integrating its culture and values into the product, both in terms of functionality and design.”

Update: A previous version of this article incorrectly stated that Sequoia had made several Sub-Saharan African investments in startups like Healthlane and OPay. These investments were actually made by Sequoia China (a subsidiary of Sequoia) and a Sequoia scout, respectively.