All eyes are on Souq.com's Ronaldo Mouchawar, the man who charmed Amazon's Jeff Bezos into putting his money in the Middle East. His winning formula is one he is happy to share, as he reveals he doesn't believe in winner takes all
“We lost 80 percent of our revenue in one night,” says Ronaldo Mouchawar, CEO and founder of e-commerce platform Souq.
Mouchawar is referring to the moment in 2011 when his company changed its initial auction model to a straight online shopping site. Thankfully, the move has long since proved to be the right one.
Less than a decade later, Souq.com is the Middle East’s largest e-commerce website, attracting over 45 million visitors per month with 9.4 million products available for sale.
In 2017, it was acquired by global e-commerce and logistics giant Amazon for $580m, the second company after Maktoob (now Yahoo Maktoob) he had managed to help develop and then sell to a US internet powerhouse.
And much like Amazon’s Jeff Bezos, Mouchawar has become a legend in the Middle East’s business community, credited with changing the face of regional retail. Candid, clever and a little reclusive, he is also similarly hard to catch – and even harder to keep up with.
Arabian Business meets him just as he is due to address a crowd of emerging business owners, eager to grasp whatever tricks of the trade he is willing to share.
As we find out over the course of our conversation, however, there is no secret to Souq’s success besides the old-fashioned principle of trial and error. But Syrian-born Mouchawar has good news for start-ups: it is getting easier.
“When I started Souq, there was not a single person in the Middle East willing to invest in us. It was really hard to get seed funding,” he says.
“We had to go abroad to raise capital. There was a whole year that I must have spent on a plane trying to get our funding round. The ecosystem has changed a lot, especially in the last two years.”
The success of start-ups such as Souq has been one of the main drivers in creating an environment attractive to regional investors, while the rise of mobile technology has helped uplift many small businesses.
According to Mouchawar, it is now easier to create ideas and attract funding in the Middle East, while foreign investors are also more confident about entering the market.
“We used to have to introduce the region, before telling them about our business. Investors would say, ‘I’m not comfortable investing there. Is it safe? How is corruption?’ That used to take a long time to overcome.”
Thankfully, the increase in regional investors has removed those barriers. “The good thing about locals is that they know the environment, so we don’t have to explain the region. We can just tell them about our business,” he says.
While the regional ecosystem was dominated by start-ups mainly from Jordan and the UAE, neighbouring Saudi Arabia and Egypt have also encouraged many rising concepts, leading to “amazing times” for the region, according to Mouchawar.
The funds are now definitely in place, with active players such as Middle East Venture Partners, Wamda Capital and MENA Venture Investments contributing to a total of $560m of investments made across 260 deals in 2017 – and that’s excluding amounts raised by Souq and ride-hailing firm Careem.
The figure represents a 65 percent surge from 2016, making it a record year for entrepreneurship in the area, according to data platform Magnitt.
Souq itself has nurtured a series of start-ups – eight to be exact – that complement its concept, an aspect of the business that Mouchawar is particularly passionate about.
Last year, the firm acquired delivery solution company Wing, which helped it deliver twice as many products during its White Friday sale as it did in 2016.
Without Wing, Souq would not have been able to keep up with the orders, Mouchawar told Arabian Business last year. Similarly, Wing needs Souq’s supporting platform to prosper.
“The investments that small businesses in the region are able to put into technology to get a return are high and difficult to acquire; the complexity of what you need to provide, the marketing and the reach that you need to make it all work… In Souq’s business model, we built our technology to make the lives of our sellers and SMEs on the platform quite easy,” he says of Souq’s growth into a supportive ecosystem versus just one site existing on its own.
What, though, makes a start-up worthy of a Souq investment? It begins with the entrepreneur. Persistence, dedication and flexibility are key characteristics Mouchawar looks for.
“Sometimes we don’t like the initial idea. Wing came in with a different business model. We told them, ‘We like you guys, but if you [change this], we will invest. That’s what they did and they’re super successful. So being flexible in the execution is important. I started Souq as an auction site and it ended up being a business to consumer e-commerce platform,” he says.
While the ecosystem continues to improve, the work is no easier than before. Indeed, it is getting more competitive as the landscape evolves. So Mouchawar advises start-ups to “fail fast”.
“You have to innovate, and you have to fail. Those are two things that every entrepreneur has to go through. If you’re failing, fail fast, learn fast. Innovation comes at the price of failure.
"You cannot experiment ten times and get the ten experiments right. That’s not going to happen. You’re lucky if you get two right. Even one is enough. Most of us have gotten one thing right,” he says.
Mouchawar admits that he didn’t always get everything right, having invested in several failed concepts himself.
“I’ve made hundreds of mistakes throughout. The key is realising it and fixing it. Someone on your team should also be passionate enough and empowered to come and tell you, ‘I think we need to do it this way’. I might be stubborn one time, maybe two times, but I’ll [eventually] change my mind. You have to be flexible,” he says, before adding, “And always work back from your customers.”
But what does that really mean? Simply, that your business model must include knowing the frequency of customer visits to your platform.
Mouchawar compares a service to a toothbrush; something customers use once or twice a day. If your service is something a customer needs once every five years, you’re going to have a tough time scaling, let alone acquiring and maintain a steady customer base. Second, the service must resonate with your customer.
“At some point, we saw the Souq numbers growing, but they were not growing the way we wanted. We couldn’t get the economics to work, we couldn’t get shipping to work, but we knew the demand was there. Every week, our traffic was growing, so that’s the signal that customers wanted this service.
"The critical aspect for a business is make sure you understand your repeat customer rates and make sure you are super tuned into why customers come or don’t come back,” he says.
The key to getting any aspect of a tech company – Mouchawar insists Souq is not a retail firm – to work is making sure you are equipped with the right skills to compete in today’s tech-dominated marketplace. That begins where many regional businesses are reluctant to go: continual education.
“What has been successful abroad – and we’re not there yet, but I think that’s the next step – is that many universities work with companies. But knowledge sharing between academia and business in this part of the world is not there.
"When I went to school in Boston, I was working with a famous camera company, and my function was to create the digital imaging for them, so they sponsored my research. Hence there’s someone who has an idea, wants to develop it, bright, young, without many pre-emotions and pre-assumptions and just going out and solving problems. But it’s not there yet in this region.
“I see many engineers, but they do not understand, for example, mobile development. We need android development, that’s where all the customers are; there is a skill set gap,” he continues.
“We as businesses should reach out. I don’t think universities would reach out as the professors may not know what to do. They may not know what we need, so we should reach out more.”
While Souq works with a few graduate programmes, there aren’t nearly enough to prepare the next generation for a tech-driven world. One of the reasons the region is taking longer than others to connect the world of academics and business is, perhaps, a shortage of tech companies.
With time and a more connected age group, however, Mouchawar hopes the connection will grow stronger and ultimately help encourage youth employment. Either way, he is adamant that Souq will be a part of the process.
I’ve made hundreds of mistakes throughout. The key is realising it and fixing it”
“For a long time, when people would ask me what my social responsibility was, I would say, ‘To create jobs for our young people in the region’. We have tech centres and we are continuously hiring engineers. We’re committed to the region. Even post the [Yahoo!] Maktoob exit, Samih [Toukan, chairman of Jabbar Internet Group] and myself stayed in the region.
"We invested in more companies here. We know the journey is hard and it takes seven to eight or ten years, maybe even longer because our markets are fragmented, so you have to have that perseverance. But the opportunities are coming. We owe it to us to stay in the region and continue to create jobs,” he says.
Few could argue that Mouchawar owes anything at all to anyone. After all, how much can one man do for an entire region? Only charm the world’s richest person and his tech empire to the Middle East.
But whether it is Amazon or a small crowd of young start-up owners, it seems that all eyes are on the candid, clever and a little reclusive former basketball player from Aleppo.
While his winning formula is one he is happy to share, competitors are rushing to keep up with the co-founder and CEO. The question is, how fast can they run?