Interview: In a conversation with NowPay’s co-founder and CEO Mostafa Ashour

NowPay is a Cairo-based financial wellness platform that offers salary advances to corporate employees. It was one of the two fintechs that were part of Y Combinator’s most recent batch. Launched in 2019, NowPay is led by Mostafa Ashour who co-founded the company with Ahmed Sabry. The company today serves a variety of businesses – ranging from startups to large corporates. It has raised millions of dollars in venture capital including a round of fresh funds from Global Ventures, Beco Capital, Endure Capital, Foundation Ventures last month.

When Mostafa applied for Y Combinator’s Winter 2021 batch, it was his tenth application for the US-based accelerator. He had submitted his first over 14 years ago. In these fourteen years, Mostafa built/worked on different products including a physics simulation startup, a game, a stock market simulator, and a recruitment platform, and a few others. He applied to Y Combinator for each of these products. All those applications were rejected. NowPay was also rejected twice before finally being accepted for Y Combinator W21.

He had recently shared the YC journey in a social media post, with a message for the entrepreneurship community, “Keep trying. It’s the only thing you can control and it’s a long journey that pays off in unexpected ways.”

We caught up with Mostafa after their graduation from Y Combinator to learn about his experience of building NowPay, the challenges, YC experience, expansion plans and more. Here’s our chat with him.

Please tell us a little bit about yourself. How did you end up building NowPay?

I am a software engineer by education. I worked for IBM for a while and then co-founded my first startup back in 2005. It was a gaming startup and it was such an interesting experience at a very young age that I wrote a book about it.

A few years later my whole team joined Microsoft where I PM’ed an incubation team that was part of Microsoft Research. The team was chartered with incubating ideas, de-risking them, and pushing them all the way into a Microsoft product. Over 6 years we shipped ideas to Office, Bing, Bing Translate, SharePoint and a few other Microsoft products.

Since I love startups, and my stint at Microsoft has helped me better understand a lot of things. I went back to the entrepreneurship scene after 6 years at Microsoft. Led a startup for a while then had to leave for personal reasons to take on the family business in manufacturing.

There I saw lots of opportunities for tech to have a much wider impact on society. And that was one of my main drivers behind the idea of improving financial wellness for employees. I pinged my co-founder Ahmed Sabry who I had worked with previously and decided to take the new ride together.

For those who don’t know, what does NowPay do?

NowPay focuses on enhancing the financial wellness of employees. For someone to be financially well, you have to have four verticals in place. Saving, spending, budget, and borrowing. You need to be able to save well, spend less, budget/plan your financial life, and borrow seamlessly and effectively if/when needed.

Our beachhead product into wellness is payroll advances. The idea that you can get your salary at any point in time during the month to reduce financial stress. A huge problem for the workforce.

We also allow you to pay your bills upfront and contribute money to help your fellow workers.

We sign corporate deals with the companies that allow us to roll NowPay as a benefit to their employees.

What did your MVP look like? How much time did you take to build it?

That’s a very interesting question. My first MVP was actually a sales deck and a few screenshots from our very initial app sketches. We went out to companies and pitched NowPay and when we saw that there was a good interest we went out to fully build it.

How has the idea evolved since you first launched?

So the core idea hasn’t changed a lot but the details have definitely. We regularly talk to our users and get feedback and work on improving the product. Egypt is a complex market and it has its unique challenges. For example, a lot of our users are cash-based, so we started issuing debit cards that allow us to fund their advances faster. Users have requested their ability to pay their bills from their upcoming paycheck so we implemented that as well. Adapting quickly is key in startups.

How did you finance the startup early on? When did you decide to raise external capital and what was that process like?

We were lucky to secure very early funding and to have investors willing to bet very early on. The team has been part of the startup ecosystem for a long time and I’d say that we had good credibility for an early bet.

How do you finance the advances?

We bootstrapped using our equity but we are focusing on establishing the right financial partnerships that will enable us to scale. We recently signed an MoU with the Export Development Bank of Egypt in order to fund the advances and improve financial-wellness for employees in Egypt.

Why do you think NowPay is the right product for a market like Egypt?

We analyzed other markets and we found out huge startups in the US that focus on the idea of financial wellness. To us, it seemed that Egypt would make a lot of sense for a financial-wellness play. Huge population (100m), mostly unbanked or underbanked, and access to financial services is still very difficult. Financial education and literacy is still an emerging topic. I’d also say that as a team we have a good combination of both understanding the local market as well as global exposure to more developed markets. This allows us to tailor our approach as a mix between aiming as high as the more developed markets as well as staying grounded with the realities and complexities of Egypt.

What do you think is stopping the banks from rolling out similar products? Can NowPay continue to do well if they decide to do that?

With the emergence of fintechs, there was this idea floating around that fintech would kill banks. As the state of fintech advanced, a new reality has set in. I am a firm believer in collaboration between fintech startups and banks or established financial institutions. This is a partnership model that would definitely help improve the financial ecosystem. Startups like NowPay bring agility, speed innovation, a focus on technology, and a single-minded focus on user experience to the table, while banks bring in rigor, reach, processes and capital. This realization has set in and the model is now moving towards a collaboration model, not a competition model.

What’s the scale of NowPay’s business today? What do economics look like?

We have clients across all sectors from publicly listed companies like (Domty, Sodic, and MNHD) to fast-growing tech startups like (Wuzzuf, Vezeeta, ElMenus), to large players like Wadi Degla and Ora, to MNCs like (Axa, Schindlers, and others) to large retailers like Mazaya to NGOs like Misr El Khier. Egypt has 28m salaried employees and we believe we have only scratched the surface. Lots of room to grow.

What have been the biggest challenges of building and scaling NowPay?

Most fintech services in more developed markets rely on open banking standards. That’s still not available here in the region. There are attempts to solve this. It’s one of the challenges but it is an opportunity to innovate and get creative.

What do you consider NowPay’s biggest success to date?

Hiring! We have worked very rigorously on establishing a good team because we understand that at the end of the day it is about team skills. We have members who have worked for the likes of IBM, Microsoft, Amazon, EFG Hermes, Stanley Black and Decker, Glovo, Raya, Vodafone, Careem and we have ex-entrepreneurs onboard – people who have managed to build awesome things before. I’d say that establishing the mix of startup/entrepreneurial talent with experienced players who have seen larger companies at work is NowPay’s secret sauce.

I’d also like to add building the right investor network. We have worked a lot on having some of the best regional and international investors on our capable. The value that they continue delivering is of extreme importance to us.

What is the most difficult part of being CEO of a startup?

There are two sides here – what’s difficult in NowPay’s case and what’s generally difficult. In the general case, I think the most difficult part of being a startup CEO is the emotional roller coaster. The golden advice that was given to me early in my career and has helped a lot till today is “level your highs and lows”. Don’t get too excited because deals fall through all the time and also when things fall apart, you should that they (or maybe other things) will get better and it’s never the end of the world.

For me personally in NowPay, is that since I focused very much on hiring a strong diverse team. Maintaining a NowPay specific culture is always on top of my mind. We have people coming from Operational excellence backgrounds, innovation backgrounds, deal closing backgrounds all with strong characters and high levels of competence. Designing a culture that accommodates everyone’s unique strengths and discourages weaknesses is one of the most interesting challenges of running NowPay.

What are NowPay’s expansion plans – in terms of product, tech, markets.

We are firm believers in focus and I personally see that mistake happening to lots of startups in the region. There is the assumption out there that doing a lot of things at the same time makes you feel important/cool. The reality is spreading yourself too thin is one of the guaranteed recipes for failure. We are currently very focused on our beachhead product and on the current market while continuously eyeing the right opportunities for expansion as we scale the team.

Fintech has been attracting a lot of VC money lately almost all across the region. Why do you think so many investors are taking interest in this vertical? What has changed recently?

Venture funding, in general, has increased. A few years back I used to advise startups to avoid focusing on the region and to work on global plays. Back then the ecosystem was still very weak and my thoughts were that it was very difficult to grow a VC-type startup to scale in the region. I think things are changing now, the likes of Careem, Souq, and Fawry have turned the investor’s heads to what’s possible over here. Funding has increased dramatically and I think there are bigger opportunities now. Also in Egypt, we are seeing a bigger number of second and third-time founders, those people have developed and matured and are now driving forces in both establishing new startups and in pushing current startups to new heights.

What do you think about the regulatory landscape in the region? Which countries do you think are taking the right steps to create an enabling environment for fintechs?

As an observer, I see a lot activity in Saudi, Bahrain, and UAE. My experience with the Central Bank of Egypt has been very positive. We are in regular conversations with the Fintech team and the level of progressiveness that we are seeing on the regulations front is great.

What was the Y Combinator experience like?

The Y combinator experience is amazing. You get access to people who have built massive companies and seen tons of startups at work. The accumulated experiences and organizational memory that YC has built is one of the key missing ingredients to the success of the regional startup ecosystem. It’s amazing to see how valuable information flows to all stakeholders.

Interactions/advice from the likes of Michael Seibel who sold Twitch to Amazon for $1 billion, Brad Flora who invested in over 150 companies, and Tracy Young who sold her construction company to Autodesk is beyond valuable.

Why did a startup that already had significant traction and funding decide to apply to YC and then join the program?

We believe the value of the network (alumni, partners, and investors) will keep on contributing to NowPay’s long journey. Moreover, being part of YC is an international recognition that very few companies achieve. We feel honored that a regional startup is part of that amazing network.

Your favorite global and regional fintech?

Regionally, I am a big fan of Fawry and how they managed to reach that stage by consistently delivering value and pushing forward. The value of strong execution is something that we need to highlight consistently and is undervalued IMO in our ecosystem.

Globally – I’d say Paypal. Their focus on building a very strong team was very obvious after the fact when the “Paypal” mafia started spinning out major companies.

What’s your favorite book on startups/entrepreneurship?

I like Traction by Gabriel Weinberg the founder of the search engine DuckDuckGo. Lots of business books fail into the trap of elaborating too much on a single idea. Not that book.

I also like to read books about local players. “Sanayeet Masr” by Omar Taher (Egypt’s Craftsmen) which features the people behind brands that had a huge impact on Egyptian society. Also, “Pages from my journey” by Osman Ahmed Osman, the founder of Arab contractors, one of the largest regional construction companies in Egypt.