As Lebanon’s entrepreneurial spirit continues to gather momentum despite the country’s dire economic conditions, several young and hungry entrepreneurs have rolled up their sleeves and set up shop online. Executive spoke to three new Lebanese online startups: a party supplier and two search engines, one for banking products and one for local fashion items. Facing several obstacles, from weak infrastructure to unfair customs, rendering their endeavor more challenging than it may have been in more developed markets, these new startups are still determined to make it.
Hide & Seek
Founder: Karen Zaatari and Fafi Merhi
Product: Party supplies
Market targeted: Worldwide
Total cost so far: $110,000
Projected revenues in 2013: $110,000 (worst case scenario)
Biggest challenge: Customs authorities
Meet Hyoo. This idiosyncratic chameleon is the mascot of Hide & Seek, an online provider of party supplies founded by two 27-year-old friends Karen Zaatari and Fafi Merhi. The idea to launch the startup came at a Halloween party in 2010 that the two friends were attending and for which they struggled to find funky costumes. From there, the idea to source costumes from several countries grew to include supplies for bachelorette parties — let’s keep that hush hush though — and original gadgets for parties, kitchens and offices.
Initially wanting to open a retail store to offer their products, their plans were held back due to the unstable political situation in Lebanon, as well as their studies that brought them to the conclusion that money for the extra-high rental cost of a retail store would be better utilized if deployed on the website.
Items ordered online can be shipped worldwide using Aramex’s courier services. In Lebanon, a flat $3 delivery fee is applied, or the items can be picked up from the startup’s office in Saifi for no fee. For payments, given that “some people are skeptical about paying online, we catered to this large community and that’s why we decided to accept cash on delivery,” says Merhi. Paying online or with a card on delivery is also available. Hide & Seek’s products are on display at three stores in Lebanon — Belly Button, Label Queen and Cookie Dough — with an aim to be in more stores in the near future.
The startup goes beyond just supplying party items; it provides targeted presentations for themed events. Let’s say you want to plan a “superhero party” for your brother. Hide & Seek will send you a customized presentation at no cost which would feature the different products you can buy from their online store for such a themed event.
Sourcing from China, the United States and the United Kingdom, Hide & Seek does not have exclusive agreements with the brands they supply, as they want to keep offering new brands to their clients. With a total value of $110,000 including stock held in two warehouses in Hazmieh and Qoreitem, the startup has been entirely self-funded thus far, with each founder providing 50 percent. For 2013, the founders aim to generate an average of $300 a day, which will allow them to break even this year.
Two big plans are on their agenda for the long term. “We see Hide & Seek as a home, a place you enter which will have our online operations, our office, a display room, the storage, everything,” says Merhi. Their second and longer-term plan is to store all the merchandise in the Jebel Ali Free Zone in the United Arab Emirates in order to avoid high taxes.
The biggest challenge? “Customs,” says Zaatari. “Every day the [customs officer] gives us a different calculation and interpretation of the products depending on how he categorizes them and on his mood that day.” Zaatari says this corrupt approach encourages “people who bring stuff in their bags at the airport and walk in; it makes it cheaper for you to get a [plane] ticket and go that way."
Despite this inconvenience, Zaatari and Merhi are sticking to their home base with the goal of selling their products worldwide. “We had an order from Paris today,” says Merhi with excitement, an order which gives them motivation that, despite the country’s numerous challenges, they can still make it in Lebanon.
Founder: Elie Bou Jaoude
Product: Search engine for banking products
Market targeted: Lebanon
Total cost so far: $200,000
Projected revenues in 2013: Not disclosed
Biggest challenge: Trust in transparency
If you need a car loan or a mortgage in Lebanon, you will either have to look on bank websites or call each bank to see which one offers you the best terms. Search engine Bnooki — Arabic for banks — aims at bringing this time-consuming exercise to an end by providing a platform to compare consumer and business banking products of all the country’s banks.
“If you want to go and visit the website of each bank, probably you won’t find the information, and if it’s there, you’ll spend the whole day on the sites. This is one factor that drove me to this idea,” says Bnooki founder Elie Bou Jaoude. Working as an investment manager for Lebanese incubator Berytech’s fund, Bou Jaoude began developing his idea and partnered with French company Ebizproduction for their knowledge in content management system technology.
Eventually a team of six, working out of Berytech offices, was formed and started proactively contacting all the local banks in Lebanon on a monthly basis to update a database of product offerings. Bnooki also gives banks access to the website to update their offerings. The search engine also shows when the last update was made and by whom — the bank or Bnooki.
Consumers can shop for banking products including but not limited to current accounts, savings accounts, home loans and car loans. Businesses can shop for products such as Kafalat loans, small and medium enterprise loans and venture capital funds. By clicking on a particular banking product, Bnooki links to the bank’s site and if the bank does not offer online services, there are options to send the bank a question or callback request.
The information, whether collected by Bnooki or provided by the bank, is included at no fee. Revenues are raised through three different avenues: advertising, fees for leads — every time an application form is submitted or a call is requested — and through the sale of information reports. Bou Jaoude did not disclose the revenues raised or his expectations for this year as he is in the process of raising funds.
Having invested $200,000 so far in the startup, partly through a Kafalat loan and partly in equity (the exact breakdown was not disclosed), Bou Jaoude is now seeking capital to pursue the expansion of Bnooki and intends to raise equity in the next two quarters from a venture capital firm.
The biggest challenge he faced when setting up his product was to convince banks that other banks would be transparent, provide complete information and allow such a product to be on the market. “We hired a very senior research team [and] working together with our team, we got all the information of the banks in Lebanon. It was a huge job, from mystery shopping, to checking online, to going to bank X, meeting retail and marketing managers, giving them back-end access to go online and check if everything is correct before we publish,” says Bou Jaoude.
For now, his focus is on expanding the distribution by providing Bnooki applications on smartphones and making the platform available in Arabic. In the next two to three years, Bou Jaoude has bigger goals as he plans on taking this venture to most countries in the Middle East and “possibly outside the Arab world; we want to be the reference. Whenever you want something from banks, you think Bnooki.com,” he says.
Founders: Serene Abbas, Narina Najm and Jad Sarout
Product: Search engine for fashion items in Lebanon
Market targeted: Lebanon
Total cost so far: $35,000
Projected revenues in 2013: Not determined
Biggest challenge: Setting up a pricing strategy
The migration from physically shopping to ordering products online has yet to really catch on in Lebanon, but Raghunter.com offers a smart way to virtually enhance real shopping.
Let’s say you’ve just finished work and on your way home you want to pick up a hot dress for a night out. By checking Raghunter.com before hitting the streets, this usually daunting undertaking can be planned with military precision from the comfort of your office. Launched by Serene Abbas (28), Narina Najm (29) and Jad Sarout (31), this online startup aims to provide Lebanese consumers — both male and female — with a search engine that shows them which items are available and where.
After undertaking in-depth qualitative market research, including extensive interviews with consumers, buyers and shop owners, the founders saw an opportunity. “Fashion retailers know they have to be online today but they can’t afford it and social media is not enough as they can’t just dump things online,” says Abbas. The need to be online combined with Lebanese consumer skepticism to spending via the web inspired the creation of Raghunter. In essence the website will be the online marketing partner for retail stores.
“Our main target is working people who are busy and value their time off. Shopping on weekends is stressful for them so we saw an opportunity to show them what is in the market before they go shopping,” says Abbas.
With 40 stores now providing items to list on Raghunter’s site, the founders have their hands full. Raghunter’s team collects the items from the stores, takes them to their offices in Ain El Mreisseh, photographs them, returns the items and completes heavy data entry and tagging. The tags allow an optimization search whereby consumers can look up by category, store, color, material and area.
For now, Raghunter is offering stores a six-month free trial. The trial period is expected to allow the startup to optimize their search engine and eventually come up with a pricing strategy. With no revenue generation yet and no direct advertisement planned on the site, the founders aim to make revenues by charging retail stores for traffic generated through the site and for top spots on the platform “à la Google”.
The founders have deployed $35,000 so far in their endeavor, yet are now in need of more capital and are looking to secure a $200,000 innovative Kafalat loan guarantee. Being a search engine, direct sales on their site are not available but, “if there is enough demand for that, eventually we will consider it but that’s a whole different business model,” says Najm. “If you can buy online, we would become diluted because everyone is doing that; our uniqueness is that we are allowing you to see and discover,” adds Abbas.
In the next two to three years, the founders’ target is to have Raghunter cover other countries in the Middle East such as Saudi Arabia and the United Arab Emirates. For now, they need to find a way to monetize their search engine. Until then, Lebanese shoppers have to wait to see what funky items are on sale around Beirut.