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Guess who’s coming to dinner?

Tokyo based Cookpad pays $13.5 million for Lebanon’s NetSila

by Livia Murray

In every corporate narrative, some dates are noted as remarkable, while others less so. For the founders of Shahiya, a digital portal for Lebanese culinary secrets and cooking instructions, January 28, 2015 is one such memorable date. It is the day when NetSila, the holding company that owns the five year young Shahiya recipe site, completed the last step of handing over its entire equity to Japanese acquirer Cookpad for $13.5 million, as well as the date they had to evacuate the Cookpad team on only its second visit to Beirut.

Just as the ink was drying on the papers that would finalize the acquisition, a cross border exchange of fire, including rockets, erupted on the country’s southern border in what is considered the most significant military confrontation between Israel and Hezbollah since 2006. There is perhaps no better example of the Lebanese security situation taking its toll on business than the anecdote of having to evacuate the buyer.

For those of us used to these cyclical bursts of violent happenings, generally without escalation, it would be good to remember this is not necessarily something that falls within the comfort zone of your average buyer — and certainly not your average Japanese one. Tokyo was ranked the safest city globally by the Economist Intelligence Unit’s Safe Cities Index 2015, with third largest Japanese city Osaka also ranked high at number three.

[pullquote]Cookpad is a rare example of a Japanese company buying an Arab startup[/pullquote]

Perhaps not surprising, then, is the absence of significant Japanese investment in Lebanon. Cookpad, which operates in the same digital space as NetSila but with global ambitions, is a rare example of a Japanese company buying an Arab startup. Though the Japanese embassy in Lebanon could not confirm whether Shahiya was the first acquisition made by a Japanese company, they did assert that Japanese investment in Lebanon was marginal. Japan does not appear on the United Nations Conference on Trade and Development’s (UNCTAD) list of foreign direct investment into Lebanon by country, which includes 15 states.

The business of food

But while Beirut and Tokyo are very different in terms of lifestyle, security and culture, there is something that brings Lebanese and Japanese people together: food.


Food, that is, and the internet. In the increasingly digital world, where content perusing has shifted to the web and mobile platforms, the Shahiya team is still convinced that some things have remained the same, particularly people’s appreciation of, and fascination with, food. “The tools are changing, but the relationship, the need, is constant,” says Daniel Neuwirth, cofounder of Shahiya. The portal, created in 2010, was focused on food all the way. “We really wanted food, the best in food, only food,” says Hala Labaki, cofounder and CEO of Shahiya. Labaki and Neuwirth are two of the four cofounders of the platform, along with Carole Makhoul Hani and César Gemayel.

Cooking up the concept for Shahiya in a period when digital business in Beirut was very young and new startups could still find virgin markets, the four founders tell Executive that they specifically moved back to Lebanon to start the venture. Living abroad at the time, they saw promising signs that internet penetration in Lebanon, which had been lagging behind, would increase. “We sensed very positive growth signals in this industry in particular. And we thought, ok, let’s do something,” says Labaki.

Five years on, the numbers proved them right in so many ways. Usage of the new site roared along with roughly 100 percent annual expansion in user numbers and peak consumption during Ramadan, the Shahiya team says, citing a “smooth” progression to 3 million unique visitors per month at the time of acquisition. In terms of turning a profit from their advertising based business model, the team would not say more than claiming they are “almost there.”

But present operational profits should momentarily be a reward of very minor concern for the founders and NetSila’s two local financial investors, Middle East Venture Partners (MEVP) and the Building Block Equity Fund. By far the most dramatic growth ratio in the venture’s short history is its increase in valuation when you compare the $13.5 million sale price cited by MEVP to the valuation in 2012 when MEVP and the Building Block Equity Fund injected $500,000 ($250,000 each) into the company. 

[pullquote]This is for Lebanese standards, an almost incredible valuation leap of 500 percent in under three years[/pullquote]

According to Walid Hanna, managing partner at MEVP, the two financial investors each took an 11.1 percent stake at the time, implying a valuation of $2.25 million. This translates into, for Lebanese standards, an almost incredible valuation leap of 500 percent in under three years. It also means that the two funds each walk away with close to $1.5 million and the cofounders with over $10 million shared between them. Labaki, however, would not go into those details and says the quartet did not wish to disclose the shareholding structure at the time of the exit.

For Shahiya, having no prior ties to Cookpad, it was a bit of a surprise when their eager Japanese colleagues contacted them via LinkedIn. Labaki acknowledges that while they hadn’t anticipated an exit so soon, when building a company that resembles companies in other more mature countries, the idea of an exit was not entirely far fetched. “You always think about what is the global player that can acquire you, because this is a big part of the game. You’re not obsessed about it, but you’re aware,” she says.

For Cookpad, the company had been waiting to sink its teeth into an Arabic language food portal. After investing in Indonesian recipe service DapurMasak in 2014 and acquiring American recipe apps provider Allthecooks and Spanish recipe provider Mis Recetas in 2014, the Shahiya acquisition was Cookpad’s fourth installment in their chosen quest of virtually conquering the food world.

While food appreciation remains a human staple, one thing the digital age has brought on is the appetite for user-based companies to expand globally. Tomoya Yasuda, head of international business development at Cookpad, had been busy scouring markets for potential buys, and settled on Shahiya because he claims they were the “largest in the region” in the domain of food. When Executive jokingly asked Yasuda if Cookpad was seeking world domination, his answer was short and to the point: “Yes.”

Big in Japan

Cookpad is listed on the Tokyo Stock Exchange (TSE) and has seen its share price grow by over 250 percent in the past two years, taking the closing of the NetSila deal on January 28, 2015 as a reference date at which the value of the Cookpad stock was JPY 5,000 (approximately $42). Coming after years when the Japanese stock market had been in slow-cook mode, the stock’s rise came in context of Japanese Prime Minister Shinzo Abe’s economic reform policy — coined Abenomics — initiated in 2012, which has consisted of fiscal stimulus, monetary easing and structural reforms that have led to a boom in the Japanese stock market overall. 


However, Cookpad’s share price growth was unusual even when taking this positive environment into account as the stock outperformed the TSE’s broadest index — the TOPIX general index — almost four times over the same two year reference period. 

According to Cookpad’s latest financial disclosures, the company achieved sales of JPY 6.7 billion ($56.4 million at current exchange rates) and net income of JPY 1.52 billion ($12.8 million at current exchange rates) in an eight month period ending on December 31, 2014. The company did not calculate percentage changes as the reporting period reflected a change in the financial year from April to December. 

According to its full year financial statements for 2013 (ending in April 2014), sales increased 30.5 percent between 2012 and 2013 from JPY 5 billion ($42 million at current exchange rates) to JPY 6.5 billion ($54.7 million at current exchange rates). Their largest revenue is in premium services, which make up over half of their sales, with most of the remainder in advertising. By the end of Q4 they had 44.04 million monthly unique users, with 1,300,000 paid members for their premium services business, served by 181 employees. In addition to their acquisitions of the other food companies, they also acquired Coach United, a Japanese marketplace of private lessons, to diversify their business in Japan.

The crossover

NetSila will become Cookpad MENA, which is wholly owned by Cookpad and registered in Lebanon. The Shahiya team will stay on board as managers to guide the growth of Cookpad MENA.

[pullquote]“Cookpad only gives us more means to grow faster and more aggressively in our strategy”[/pullquote]

Both parties are understandably excited about the amalgamation. “Cookpad only gives us more means to grow faster and more aggressively in our strategy,” says Labaki. “More technology, more experience in a lot of things: data, technology, user behavior, [user interface]. They have maybe one of the best [specialists] in [user interface/user experience] in Japan.” Both companies spoke of staff exchanges between the MENA team and the Japanese team, though Yasuda, when asked how that will be affected by the security situation, acknowledged “I don’t know, to be honest.”

Cookpad is set on the steady growth of Cookpad MENA. An investment from the parent company will help fuel Cookpad MENA’s growth in the region. While the Shahiya founders would not disclose the amount, Neuwirth said “it’s easily at par with [venture capital] funding.” He adds, “We always had ambitions about growing much larger than we are today but the difference now is that the partnership with Cookpad just came to the table and it came out that with Cookpad, we will be growing faster.”

Cookpad MENA is to turn into a subscription based business in line with its Japanese parent, whose managers are staunch believers in that model. “In terms of financials, as of today, subscription business [brings] major resources, and I think that’s what we should do … whether we can deliver enough value for the users, that’s the key,” says Yasuda. Subscription is the most profitable line of business for Cookpad in Japan.

For the Cookpad MENA team, as well as their Japanese parent company, regional expansion is the way forward. But this begs the question: since Lebanon and the Middle East have so many obstacles stifling business — the lack of credible capital markets, for one — would the kind of growth that Cookpad MENA is looking for be possible without the help of a larger, parent company? While Labaki has seen her fair share of obstacles, she was confident in the capability of Lebanese bred business. “With the right financing we could have become a very serious and annoying player,” she says.

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Livia Murray

Livia covers business, finance and economic policy for Executive.

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