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Tue 1 Mar 2016 05:58 PM

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Chasing MENA’s first unicorn

The pioneers of the region’s e-commerce market talk about their beginnings, how they value their businesses and if there is a unicorn company among them.

Chasing MENA’s first unicorn
Ronaldo Mouchawar, founder of

Looking at the regional e-commerce market, the future looks brighter than ever. It is expected to reach $13.4 billion by 2020, up from $7 billion in 2014, according to e-payment gateway Payfort.

The sector has also proved as a fertile ground for unicorns - private companies valued at $1 billion or more – worldwide, according to a recent report by Spoke Intelligence and VB Profiles.

The report states that nearly a hundred unicorns are in the online consumer space, especially in retail and the sharing economy, with Alibaba, a colossal Chinese e-commerce platform being one of them.

“I think that the premise on which some of these companies are valued is not always correct,” says Paul Kenny, founder of, a daily deals voucher site, and co-founder of Envestors, an early-stage venture capital firm, on the sidelines of an event organised by Club Fit for Business and Creative Zone.

“For some that are now in the US valued at over a billion dollars…they have higher valuations than very big oil companies. I think that it will be interesting over the next two years that we will see some of these companies, which went public, going down in valuation.”

A number of globally-known tech start-ups have already seen their valuations sharply reduced, proving that private and public investors are looking for an agreement as to what internet companies should be worth.

In November last year Square, an SME payments and finance start-up founded by Twitter’s Jack Dorsey, went public at a valuation of $2.66 billion, which was significantly lower than its last private valuation of $6 billion.

Other examples are Fidelity Investments’ marking down the value of its investment in Snapchat by around 25 percent or in Dropbox by around 19.5 percent in September last year.

“I think that the focus on valuation is a wrong message to entrepreneurs,” says Ronaldo Mouchawar, founder of, in a phone interview with StartUp. “Sometimes if you make your valuation too high, it can make the company’s future more difficult.

“I think that it is more important to focus on bringing value to users.

“Bringing value to users will bring valuation but focusing on valuation will not necessarily bring value to users. That is critical for Internet companies.”

It will come as no surprise for many to learn that the list of unicorns has also become geographically diverse. More than 80 of the last year’s new entrants are based out of the US.

Akash Nigam, Matt Geiger and Evan Rosenbaum, co-founders of Blend.

Although half of more than 208 of all tech unicorns, counted for the report, are based in California, around 30 percent of them have joined the club from other parts of the world. The report further states that around 13 are based in Europe and 33 in China.

When asked whether there is one in the MENA region, Issa Aghabi, head of investments at twofour54, explains that currently there is no publicly announced start-up in the region that has raised such amount of money with such a valuation and neither has there been an exit worth that amount.

“If you ask me, I would keep an eye on, Careem and other similar great companies as they are potentially on the path to unicorn status,” Aghabi adds.

Mona Ataya, founder of Mumzworld, an e-commerce website with mother and child care products, says: “This market is ripe for new ideas as there are a lot of need gaps currently waiting to be addressed. We’ve seen some of the oldest e-commerce players coming into their own recently and I will expect at least one of them to be the first regional unicorn.

“Staying power, deep pockets and a business proposition that has evolved to become a unique and well executed offering will secure that unicorn status.”

“Yes, is one,” answers Kenny without hesitation.

In 2005 Mouchawar launched as an eBay-modelled site linked to internet portal Maktoob, which was acquired by Yahoo! in 2009 for $165 million.

Now in its eleventh year, has grown not only to become the Middle East’s biggest e-commerce site, but has managed to recreate the region’s e-commerce history when the site recorded  13 million visitors and nearly 600,000 sold items during White Friday – its answer to America’s Black Friday – last year.

“I think that there are many unicorns in the Arab world,” Mouchawar corrects and advises us to use the term ‘tech unicorns’. “If you look at Aramex, many real estate companies, many local food chains, big retail groups. There might not be Silicon Valley-style unicorns but I think that it is not fair to the region to say that there is no unicorn.”

Mouchawar and Kenny were among the few who took on the challenge to develop the region’s nascent e-commerce industry by educating local businesses on how to participate in e-commerce as well as the emirate’s residents on how to pay online.

“I remember we [Kenny and Mouchawar] were just talking at the time because it was such a small space for Internet founders. It was me, him, the guys from Dubizzle. There were few people in the market who were actually founding internet companies,” he says.

Mouchawar says: “There was very little online penetration, smartphones didn’t exist. Facebook, I think, had nearly launched. So we didn’t have social media marketing. Initially, we depended on Maktoob, which was the largest online portal in the Arab world, to get traffic.

Paul Kenny, founder of and co-founder of Envestors.

“Our challenge initially was to make sure that our team stays focused. We tried to attract the right talent and we tried to understand what our value proposition to our users will be.”

“Every venture starts with your conviction in your idea and putting the right team together, believing in your team, and the team believing in your mission. As you face obstacles, you need to remain very persistent in developing and communicating your idea.”

Not many of the region’s first Internet founders have persevered. In August 2012, LivingSocial, a global daily deals site, abruptly decided to “suspend its Middle East operations and direct company resources to other regions.”

Living Social had acquired GoNabit, the region’s first daily deals site, a year earlier. The move was hailed as a validation of the region’s e-commerce sector.

However, the company’s sudden exit in 2012 was described as ‘putting a nail in the coffin of the regional online retailing market’ by The New York Times.

Kenny sold to the Middle East Digital Group, which owns, in 2014.

“We believed in the long-term model and for us that has always been connecting more people to more products,” says Mouchawar. “We are a marketplace and it exists in the offline world and in the online world.

“That is a sustainable model. However, online marketplaces take longer to evolve, to get supply and demand, and to get the right platform.”

If announced as the region’s first unicorn, for example this year,’s overnight success would have taken Mouchawar 11 years.

According to the report, his peers around the world need half that time – it takes on average six years and $95 million in funding to build a unicorn company, in addition to clicking the boxes of starting with a great idea, stellar execution, and good timing.

The average funding amount indicated in the report does not take into account differences among sectors; however, for his capital-intensive business Mouchawar has managed to raise substantial funds.

In 2014 secured $75 million (AED 275.5m) from Naspers Limited, a South African multinational media and internet group, in two funding rounds. In 2015 it was announced that New York-based Tiger Global had come on board boosting the amount invested in to $150 million.

Mona Ataya, founder of Mumzworld.

At the time Mouchawar was rumoured to have sought $300 million (Dh1.1 billion) for expansion, which would have valued the company at about $1 billion.

A spokesman for declined to comment, but a day after the March issue of Arabian Business
went to print, the company announced that it had completed a funding
round of more than AED 1 Billion ($275 million) by New York-based Tiger Global
Management, South Africa’s Naspers Ltd, adding new strategic investors to
diversify its investor base, including Standard Chartered Private Equity, IFC
(a member of the World Bank Group), Baillie Gifford, and many reputable
regional and tech-focused financial institutions.

“Initially, we were with the Maktoob Group, which is a local company. As we grew we wanted to get strategic investor that would add value to our business,” says Mouchawar. “So there was a reason why we put the team together with these groups of investors. Each added value at a different stage. We have great relationships with all these investors.

“So there were also funds from the region, but definitely the venture capital market for non-early stage is more developed externally. However, we now see that the funding environment in our region, especially for start-ups and early stage companies, has expanded.

“I would like to think that Maktoob’s exit has encouraged the space to grow.”

Ataya agrees and says: “The investor community is evolving and today, although still very small, is better than what we saw just three years ago.

Disrupting traditional retail, Ataya’s niche-focused site offers more than 100,000 products and reaches over 650,000 mothers across the Arab world. In its sixth year of operation, Mumzworld’s prospects recently secured them “millions of dollars” in Series B funding round from Wamda Capital, twofour54 and Endeavor Catalyst.

 “We expect this trend to continue positively as more and more ‘wow’ ideas come to play and investors understand that proximity to the brand that they can add value to in a very lucrative market will benefit everyone.

“We see investors like Wamda Ventures, who are playing an active role in shaping the ecosystem, lead the way and create more comfort for other investors to join the bandwagon.”

Wamda Capital, an investment vehicle initiated by Aramex founder Fadi Ghandour, manages two funds – Wamda MENA Ventures I, a $75 million regional investment fund for growth stage entrepreneurs; and Mena Venture Investments, an angel investment network for early stage entrepreneurs.

“We are at the cusp of an incredible phase of growth in the MENA region’s tech sector,” Ghandour, a proven supporter of MENA’s entrepreneurs, was reported as saying last year.

However, Akash Nigam, co-founder and CEO of Blend, a San Francisco-based social networking mobile app, opines that his MENA-based peers still face numerous funding-related obstacles. “I think that the Middle East in general is becoming a lot more receptive to non-revenue generated companies, but I think they are still investing in those companies that are based in San Francisco,” he tells StartUp in a Skype interview.

“So there’s a lot of investments being made in the Middle East, but unfortunately they are being done in American companies. They are not investing in the companies of their own.”

Issa Aghabi, head of investments at twofour54.

In 2014 Blend was designed as a college-exclusive mobile app to allow users to interact with their favourite brands by creating a trend and nominating their friends, favourite brands, charities, and similar to join them. In return, the brands reward the users with the “best content” with gifts and discount codes.

“I think that in the Middle East in general there is not enough unicorn potential given that the first time entrepreneurs are not getting easy enough access to capital as probably the ones in San Francisco,” Nigam says. “And the ones that are unicorn-types are normally the crazy ideas of first-stage entrepreneurs.

“So I don’t think that the Middle East is quite there yet in terms of having confidence in their first-stage entrepreneurs but it looks like they are becoming more receptive given their commitment to their American first-stage companies that also are not that revenue-generated as are not their own there.”

With the number of daily active users increasing, the Blend team included a nomination process in their trend-sharing platform and opened it to general public.

    Following a seed funding of $2.7 million, the three co-founders raised $6.3 million in Series A funding from a number of investors, including the Al Nowais family from Abu Dhabi’s Waha Capital, last year.

“I guess that a lot of investors in the UAE are angel based,” Nigam continues sharing his insights into the regional start-up ecosystem having spent some time in the UAE in January. “There’s not a lot of big venture capital firms out there that are approachable by, I would say, just a normal entrepreneur.

“Most of the time in the UAE you need a connection to another connection. Whereas over here a playing field has been a lot more levelled.

“It just seems that later stage entrepreneurs are the only ones who have access to capital or venture capital (VC) interest in general. Whereas in San Francisco you’ll notice that a lot of seed stage entrepreneurs or even hackathon goers still also get the same level of interest from VCs if, honestly, not more just because they have a bigger shot.”

“I think there is a higher flow of companies that come from the US while here it is not too high,” says Kenny. “You look at a hundred deals to pick one. So to get a hundred of potential deals here would take us longer, and to get us to the one would take us even longer.”

Following his entrepreneurial success in the UAE, Kenny co-founded Emerge Investors to support high-impact early stage MENA technology companies.

The fund has invested in Lumba, a Dubai-based mobile gaming company recently recognised as one of Apple’s most noteworthy gaming apps of 2015; Elevision, a digital media network; and The Impact Hub Dubai, a popular start-up co-working space in Dubai’s Souk al Bahar.

The Impact Hub Dubai is part of a global network of community-oriented spaces which attract entrepreneurs, innovators and techies – described by Kenny as ‘real people’ – and one of the rare co-working spaces in the UAE that have a resident venture capital for entrepreneurs to have a casual chat with and get advice.

Impact Hub Dubai is part of a global network of community-oriented spaces, which attract entrepreneurs and innovators.

In his personal capacity, Kenny has invested in around 50 start-ups.

Similarly, Mouchawar points out that is now in ‘a job creation phase’ and develops various programmes to offer businesses and entrepreneurs in the region a multitude of ways to earn money through its platform.

“That’s why you will see me always focusing on what we are doing because we will be able to create employment and nourish our talent instead of bringing talent from abroad,” he says. “Also we will be able to give value to the merchants because we are giving them a platform to build their business and, especially when they are small, with our traffic they can compete with any big retail group.

“I think that we bring a lot of value to entrepreneurs. Some of them are launching their products on But also these entrepreneurs can see how may have evolved over the years.

“The fact that people look at it as a story enables others to become entrepreneurs.”

How to support and champion local businesses is often the only value creation-related topic that the pioneers of the region’s e-commerce sector are willing to comment on.