Executive Magazine

Romney and the Middle East: Would anything change?

by Joe Dyke November 5, 2012

written by Joe Dyke

As the American people prepare to go to the polls to select their new president, incumbent Barack Obama and challenger Mitt Romney are on a desperate last minute race for votes.

But for those watching in the Middle East, unable to influence the result, the question is how a change in government would really affect the region.

Click here or on the map below for an infographic on how different Obama and Romney's policies on the Middle East are.

Also see our exclusive graphic Obama and the Middle East – did anything change?

November 5, 2012 0 comments

Business

Return to the chief’s chair

by Thomas Schellen November 5, 2012

written by Thomas Schellen

In 2002, Fouad Makhzoumi retired as chief executive of Future Pipe Industries at age 50 and handed the reins of day-to-day business to his son Rami. In April 2011, a brain aneurysm struck and Rami passed away in the middle of life. At age 33, he was father of two young children and the main decision maker in the business.

Makhzoumi says as painful as it was to lose his son, he had to quickly reassume the role of chief executive. “Then to step in and reposition, you must remember that Rami for 10 years was the only known figurehead and if I did not step in very fast, the whole thing would start shaking,” he said. “But luckily, I like to read and follow up, and Rami was copying me in on all his correspondence. He would consult with me for only one hour every day on the key issues. I was acting as a chairman, a non-executive chairman. So I was in the loop, plus this was a business that I built myself, so I could easily step in. Of course we also have a very good management that was there before Rami and is there after Rami, which means the adjustment process was not very painful.”

At the time of writing, preparations were being finalized to announce a Rami Makhzoumi chair for corporate governance at the American University of Beirut’s Olayan School of Business. Also, a global prize of jurisprudence bearing Rami’s name for outstanding scholars of law is being prepared on a level comparable to the Nobel Prize, according to his father.

Fouad Makhzoumi on…

…the Makhzoumis:

“We, the Makhzoumis, were in Mecca before Islam. Historically, my father, uncle, grandfather and great grandfather were part of the Ottoman Empire. We believe in the establishment of government. My generation was the first that decided to step out of government and establish our own business.”

…rights and their misperception in the region:

“We don’t understand freedom and don’t understand our rights. We think that if we can remove [former Egyptian President Hosni] Mubarak, we can remove anybody. The process of change is a series of education. We are not educated in this region to understand what it means to have rights. All the time we revolt against the regimes that take our rights away but guess what — we have no idea what our rights are. Look at Lebanon. We are now waiting for a bunch of yo-yos to [give] us the election law that we are pursuing in order to reproduce the same group.”

…his venture in Akkar and Lebanese industrial politics:

“At one point we had 850 employees in Akkar; it was the only investment that ever existed in Akkar. But neither were the Syrians happy for me to generate jobs nor was the Beirut government interested. Instead of trying to help, they blocked me from selling to Syria… There is no intention in this country to try and support industry. For the political regime in Lebanon it is much easier if you are a trader because your profit is a function of the political decision.”

…encounters with the Muslim Brotherhood in Egypt:

“I have a factory with 2,000 people in Egypt. Some time before the ‘Arab Spring’ started the Muslim Brotherhood came to me and said ‘you are not a true Muslim [because] you are supposed to be helping us against the Christians.’ I said, ‘I have a global company, so I have Muslims and Christians, you name it. I actually have 29 nationalities working for me and so I am sorry, I don’t play this game.’ Then, all of a sudden, we had a fire in the factory.”

…Iran:

“Elections in Iran are coming up in 2013. I believe we will come to a deal between Iran and the United States by the end of 2013. The question is what advantage we can give Iran to not put them in the same position as North Korea. They are not willing to back off, because it has become an issue of national pride at this stage. Iran is a much bigger country than Iraq, three times the size, and it will be the focal point together with Afghanistan, to have all these cross[-continental] pipelines.

It is important that we try to encourage the region to come to a deal with Iran. I know the Gulf people may not be comfortable with Iran but at the end of the day, Iran will have to deal with reality, just as we, the Arabs, will have to deal with reality. I believe that if we can do that, it will be done by this time in 2013.”

November 5, 2012 0 comments

Society

Where luxury meets utility

by Nadim Mehanna November 5, 2012

written by Nadim Mehanna

Every time the curtain rises on a motor show these days, it seems a new luxury sports utility vehicle (SUV) is crowding the limelight. A year ago it was the Ferrari FF, four seats, four-wheel drive, a 650 horsepower “family car” targeting the snow-bound vacationer. This spring we got our first glimpse of Bentley’s XP9 concept, the “Queen’s Car” for the super-rich soccer mom, packing both a 12-cylinder engine and a built-in silver-and-Lalique crystal picnic set.

A month later, Lamborghini unveiled the Urus at the Beijing motor show, signaling its own entrance into the luxury SUV ring. Three makers, 7,500 miles apart, but as the saying goes: Once is an anomaly, twice is coincidence. But three times makes a trend.

The entrance of these ultra-luxury brands solidifies a trend started more than two decades ago. It was 25 years ago, after all, that Lamborghini sortied what many consider the first luxury SUV, the LM002 — a chiseled, muscular SUV that would have been right at home in the movie ‘Jurassic Park.’ The car, originally modeled on a military-purpose vehicle codenamed “Cheetah”, sold out almost overnight. Then, of course, there was the Cadillac Escalade — a revamped version of the GMC hauler — bombarded with derision until its sales numbers shut up the critics for good.

The real pace-setters for the modern wave of luxury SUVs came in the late 1990s, in the form of the BMW X5 and Mercedes-Benz M-Class. These “crossovers” were the first to take the concept in a truly new direction, moving away from the militaristic ruggedness of the old design toward something closer to a synthesis with the sports car model. But what started as a trickle has since grown into a flood. Luxury SUVs are taking an increasing share of the limelight, attracting a new class of car buyer — the top-dollar family man, the ultra-rich soccer mom. And that means new business — a lot of new business.

Business is ‘bigger’

In part, the movement toward luxury SUVs has simply been a matter of market inertia. Many people outside automotive circles will tell you that the heyday of the SUV waned a decade ago; that, like the dinosaurs, the big-car movement of the 1990s tripped into a tar pit of high gas prices and drowned, succeeded by a generation of fleeter, more economical sedans. Nothing could be further from the truth. In the commercial markets, many makers are counting on big-car sales to flush out their profit margins this summer. Ford Escapes, Honda CR-Vs and the new Mazda CX-5s are selling like hot cakes, so much so that many dealerships are struggling to keep them in stock.

You can see similar patterns in the sports car markets as well, with sales of BMW’s “sports activity vehicle” segment — the X3, X5 and X6 — up more than 20 percent, and Audi’s Q5 Crossover SUV up an incredible 60.5 percent.

Porsche, one of the first makers to branch into the luxury family vehicle, saw more than half its June sales claimed by two of its break-out models, the best-selling Cayenne SUV and the Panamera four-door sedan.

For commercial and luxury markets alike, SUV sales have never been better.

Trimming down the Hummer

Some things have changed. The new genesis of utility vehicles has less and less in common with the behemoths of the 1990s, such as the Hummers and Mega Cruisers, designed for armored convoys and co-opted by suburban driveways. Sales of those hulking gas-guzzlers did, in fact, tank with the oil price spike of 2002, and today make up less than 10 percent of the big-car market.

The SUV idea has itself evolved to fit the times. The credo of “bigger is better” has been tempered by the reality of gas prices and the more carbon-conscious consumer, so that each new luxury SUV seems to compete for the mantle of greatest fuel-efficiency. Relying on clean fuels and ultra-light carbon-fiber components, the SUVs of today outdistance the Hummers of yesteryear by an order of magnitude.

Currently, the vast majority of SUVs sold are small and mid-range vehicles, defined by their high carriages and focus on front or all-wheel drive. These are family autos for the all-purpose urbanite — a synthesis of power, prestige and, of course, utility. The Bentley XP9 packs a W2 engine, 600 horsepower and enough cargo space for a family of five. The Urus’ chief designer, Filipo Perini, told Forbes Magazine that he wanted the car’s trunk low enough for the family dog to jump in the back. Size has given way to an emphasis on handling, speed and, of course, all the latest gizmos and gadgets to trick out your dashboard.

The marketing angle here is no mystery. While high-end sports cars have traditionally targeted young and middle-aged men, women make up more than half of all SUV drivers. Access to this sizable and previously untapped market segment has been largely responsible for the surge in sales that many of the early pioneers have enjoyed in recent years.

Super cars and Soccer practice

This creates a possible dilemma for the brand, of course. Not every critic out there is happy to see Lamborghini marketing family vehicles. In general, their arguments run as follows: It takes years — decades — to build a brand, to imbue it with certain qualities that go beyond carbon-fiber and chrome. For super cars, those aren’t necessarily qualities that mesh well with soccer balls and picnic baskets.

The machines that Maserati and Ferrari build are supposed to be pure experiences, works of art that sit outside the realm of the day-to-day. You wouldn’t treat them like a family minivan, the argument goes, any more than you would prop up a table with one of Michelangelo’s marble busts. The very idea of “utility” in conjunction with these brands seems heretical.

Ten years ago, just as the Cayenne was being unveiled, I posed this question to the president of Porsche. I told him I couldn’t believe that now, on some wind-blown highway outside of Dubai, I might come across a Porsche towing an Audi through the desert. He laughed, and assured me that the brand was safe. The SUV, he said, represented a new branch in the company’s activities, but not a new direction. This was hardly a step toward becoming a mass producer, and it wouldn’t shake the company’s focus on its core market — the fast, sleek sports cars that will always define the high-end auto consumer.

That much, at least, has stood the test of time.

And despite the many hybrids and crossovers to make their way into the market, when it comes to rough terrain, many believe the originals — Nissan Patrol, Range Rover, and of course, Jeep’s many iterations — still do it best.

Because seriously, if you’re going off-roading in Iceland, are you really going to risk the fenders on a $200,000 car?

November 5, 2012 0 comments

Economics & Policy

Obama’s record in the Middle East: Did anything change?

by Benjamin Redd November 5, 2012

written by Benjamin Redd

Four years ago, new US President Barack Obama promised better relations with the Middle East after years of strained relations under George W. Bush.

But, as Obama plans his second term, how much has really changed?

Click here or on the map below to see how much has changed in US policy

November 5, 2012 0 comments

Finance

A cyber siege on Lebanese banks

by Maya Sioufi November 5, 2012

written by Maya Sioufi

When news broke out in August that a cyber virus dubbed ‘Gauss’ attacked bank accounts in the Middle East, with the vast majority being Lebanese accounts, senior management at local banks must have said to themselves “just when you thought it couldn’t get worse.” With the banking sector’s challenges already piling up — from a war in neighboring Syria to dwindling domestic economic growth to increased international scrutiny — banks now had to add a cyber war to their lingering list of concerns.

Kaspersky Lab, a Moscow-based information technology (IT) security vendor, discovered the Gauss virus and claimed it began operating in September 2011, attacking around 2,500 machines in the Middle East, of which 1,600 were in Lebanon. According to Kaspersky, Gauss is capable of stealing browser history, cookies, passwords and system configurations as well as accessing credentials for various online banking systems and payment methods, targeting the clients’ bank accounts and not the servers of the banks.

Kasperky claims that six Lebanese banks saw their clients’ bank accounts affected by the cyber virus: Bank of Beirut, Byblos Bank, Credit Libanais, BLOM Bank, Banque Libano-Française and Fransabank. The total number of online accounts in Lebanon is not readily available information — neither the Association of Banks in Lebanon nor Banque du Liban (BDL), Lebanon’s central bank, were able to provide this information (“Banks do not provide us with the number of online accounts, merely the total accounts,” says a spokesperson at the BDL). A chief information officer at a leading local bank however, assumes this figure does not exceed 300,000.

In response to this cyber virus, BDL provided security recommendations to the banking sector in order to prevent future attacks and limit the spread of the virus. “For instance, if there is no need for a USB, don’t use it; if you have to use it, do a scan before opening it,” says Zeina Assi, head of the IT security division at BDL. She claims that the impact on the banks was limited but “there was theft of information of course.” The central bank cannot impose on banks which software to use; its role is merely to recommend certain security measures to the IT teams of the local banks, which are responsible for implementing the necessary measures to protect the banks and their clients.

BLOM Bank’s chief information officer Antoine Lawandos claims that their customers were not impacted by the Gauss virus because of the technology offered to their clients when they access online accounts. To login to eBlom, clients must input two factors: a password as well as a four-digit one-time-password (OTP) sent on their mobile phones via SMS — in IT security jargon, this is called “dual authentication”. “So even if the client’s PC has been infected by Gauss, his digital identity could not be intercepted,” says Lawandos.

Credit Libanais also claims it was not affected. “As far as we know, none of our systems were penetrated and no customer information affected,” says Najib Ghanem, head of IT at Credit Libanais. “We use Virtual Keyboard (think of the iPad’s keyboard for instance) and Volatile Matrix (meaning the numbers on the “virtual keyboard” change places after an input) technology to authenticate clients signing onto our online banking service. These techniques ensure that hackers cannot use “keyboard sniffers” (which track keys entered on a keyboard) to record and steal passwords and PINs [personal identification numbers]”. He adds that Credit Libanais considered adopting OTP technology but did not see the need to at this point.

If attacks of this sort are the new face of wars in the Internet age, banks are going to need to increase investment in technology to protect themselves and their clients. “Chances are that there will always be fraudsters who will try to attack banks and financial institutions,” says Lawandos. “As an industry, we are under constant attack from many different directions and every indication is that this is likely to increase in the future,” adds Ghanem.

Deploying appropriate and up-to-date technology to counter the likelihood of attacks means piling up more costs, which have been already mounting this year from increased regulations to wage hikes imposed by the government. With the sector suffering from falling revenues this year, bearing additional costs is unpleasant, but with more cyber attacks expected, the sector really does not have a choice.

November 5, 2012 0 comments

The Buzz

Morning briefing: 5 Nov 2012

by Executive Staff November 5, 2012

written by Executive Staff

Economics

US aerospace giant Boeing Company has secured a contract valued at US$4bn to modernise the Royal Saudi Arabian Air Force's fighter jet fleet, according to the Pentagon.

Q&A: Khater Abi Habib

by Maya Sioufi November 2, 2012

written by Maya Sioufi

Many entrepreneurs have had their chance at launching a business thanks to loans supported by Kafalat, the government-sponsored loan guarantee company. In fact, of the 20 entrepreneurs featured in this month’s Executive report on entrepreneurship, seven received funding from Kafalat. Given the company’s essential role in bracing entrepreneurship in Lebanon, Executive sat with Khater Abi Habib, chairman of Kafalat, to discuss his views on the issue.

Total Kafalat loans reached $109 million for the first nine months of the year. That’s down 14 percent on the same period last year. Are these loans falling because of a reluctance to increase lending in these challenging economic conditions?

The fall is due to three factors. Most fundamentally, when there is political and economical uncertainty, people defer their [financing] decisions. I suspect that when people get used to the fact that we live in stressed times, demand will increase a little. In addition, we had some banks reducing their lending activity [due to the economic crisis]. Finally, some banks used their limit of Lebanese lira statuary reserves at the central bank as they went into a house-lending spree. They are now waiting for an augmentation of the reserves.

What percentage of Kafalat loans goes toward funding startups?

Fifteen to 20 percent of loans go to absolute startups, companies that are just formed. Then around 30 percent go to relative startups, companies already in business but wanting to expand because [they have a] new idea, there is a new trend, etcetera, and they want to grow beyond their saving ability. Finally about half or more of Kafalat loans are for well-established businesses that want a fresh expansion and need loans.

Do you intend to increase loans to startups going forward?

It is a matter of demand. We are there for them and we have the capacity to do it. Let them come. They have to come and be serious about it. Our innovative loan, which is dedicated to startups, encourages banks to lend as we give a 90 percent guarantee [on the loan]. That’s like saying we take all the risk.
We are advocating startups to resort to seed capital whenever possible. We are absolutely dedicated to lending to them but from experience, when they have seed capital they behave better entrepreneurially. When they have a loan to repay even though conditions are good, they reduce their strategic vision and become hasty to reach cash. With equity funding, especially from an institutional source such as venture capital (VC) funds, there is less of an urgency to cut corners on governance, transparency and so on. It also brings strategic minds with it, people with experience. We favor this and we have been trying to promote the notion of seed capital and in its absence, we are ready, willing and able to provide loans.

What are the major obstacles you face when looking at startups?

Sometimes good entrepreneurs are not disciplined in their approach to money and that is dangerous. Sometimes, they have a good financial plan but they are weak on execution. Both are sources of failure. When you have a good balance, enterprises take off very smoothly. I encourage people to have the right mix.

Specialized technologies still account for just 1.5 percent of Kafalat loans. Is there a plan to provide more loans to this sector going forward?

We supply the demand. This sector is also getting equity with several VC funds and also implicit VC funds investing, such as family offices. The International Finance Corporation, the private lending arm of the World Bank, has also invested in a tech company based in Tripoli that started with a small loan with us.

I understand that Kafalat is considering investing in equity. Is that correct?

There are advanced stage discussions with the Lebanese state and the World Bank that a certain line of long-term capital will be committed to Kafalat’s care and will be co-invested in equity [along with the Kafalat loans]. But it is not yet here. We are always ready, willing and able but it depends on other parties. The fund will be a few tens of millions of dollars in size but I am afraid I would rather not discuss this further at this point.

What is missing from the entrepreneurial ecosystem?

We need more and better VC and seed capitalists; more funds which understand both languages, the local market language with its institutional and structural elements as well as the principles of entrepreneurial capitalism. When you have the two, you get very effective results.
If one takes the last five years, we have been filling many bits of the matrix. At the beginning, there was Kafalat, then came the Berytech incubator, then we started to have other incubators — one in Tripoli and one in Saida — universities started tinkering a little, but it was more for show; and then we started having VCs such as the Berytech Fund and then associations like Bader who provide entrepreneurial support; then we got [the] first business angel network where people get seed capital with somebody coaching them. Now in Hamra, there are accelerators. We hope very soon to have most slots in the matrix not just filled but filled amply.

If we play our cards well, all the elements will come together not necessarily like a clock but in mutual support. We have to be serious and not let each other down. The bits are falling into place fairly quickly and consistently. It is not a rushed job but I prefer it not to be a rushed job.

What advice would you give to Lebanese entrepreneurs?

I would tell them to collect as much information as possible and read thoroughly. When they are in doubt go to people who might know and ask. It will never be frowned upon to ask. Come to us, to associations, to incubators and university professors. No one amongst us knows enough. One feels that one has to learn every day of the week if one wants to be close to best practice. We are a very sociable and approachable nation and networking is very easy in Lebanon. Let’s not just use it for pleasantness, which is superb, but for action as well.

November 2, 2012 0 comments

Economics & Policy Entrepreneurs

Growing support for Lebanon’s entrepreneurs

by Maya Sioufi November 2, 2012

written by Maya Sioufi

Bit by bit, the Lebanese entrepreneurial puzzle is coming into place. A startup in Lebanon now can have access to incubators, accelerators and associations supporting entrepreneurship as well as financial backers. “The entrepreneur does not feel alone anymore; he would get enough support now to succeed; a lot of things are happening,” says Sami Beydoun, managing partner of Lebanon-based incubator Berytech’s fund.

As the bits of the puzzle come together, the financial investors — keen on supporting entrepreneurship but also of course driven by profit — become more interested in the space. Startups can also have access to subsidized loans offered by Kafalat, the government-sponsored institution supporting small and medium enterprises, which guarantees up to 90 percent of a startup loan taken by a commercial bank. Startups are also increasingly getting access to equity offered by various venture capitalists.

Initial backers

The first venture capital (VC) fund to set up shop in Lebanon to invest in local talent only fours years ago, with Berytech launching a $6 million fund in 2008. The fund reached its four-year mandate to complete investments this year, and has extended it by another year with an aim of deploying the remaining 30 percent of the fund in the next six months. Berytech is now raising capital for a second fund expected to be between $20 million to $30 million in size, and be up and running by the first half of 2013.

Following Berytech’s move into the equity space, other venture capitalists started stepping in. Examples include Middle East Venture Partners’ $10 million fund launched in 2010, Cedrus Ventures’ $5 million fund launched a year ago and the $50 million Lebanon Growth Capital Fund — with $30 million committed so far — of Riyada Enterprise Development (RED), part of Abraaj Capital, the Middle East’s largest private equity firm, also launched a year ago. Accelerators are feeling the equity buzz as well with Beirut-based Seeqnce injecting capital into newly formed startups in August of this year.

“We need more and more venture capitalists” says Khater Abi Habib, chairman of Kafalat. In fact, the government-sponsored institution might be drifting away from just providing loans. According to Abi Habib, there are advanced discussions with the Lebanese state and the World Bank to launch a long-term capital fund to invest in entrepreneurship alongside Kafalat loans. The size would be “tens of millions of dollars” says Abi Habib, while declining to disclose additional information for now.

Finding the right deals

Raising equity in Lebanon with a goal of injecting it into Lebanese entrepreneurial ventures is a different ballgame to the capital raising process undertaken in the developed world. First and foremost is the lack of a key exit strategy for equity investments: a liquid and attractive stock exchange. Other factors come into play as well. “At the international level, pension funds strategically invest in private equity as part of their asset allocation,” says Elie Habib, Lebanon’s country manager of RED. “Here in Lebanon, it’s high net-worth individuals who don’t have a strategy to invest in private equity and as such, it’s a different type of fund raising than what you see in the Western world.”

While raising equity is a demanding task, especially given the dire economic conditions in the country prompting investors to hold tight, some VCs consider the lack of deal flow as the major challenge they face. “Capital raising is the least difficult part; the harder part is the deal flow and finding the right deal to invest in,” says Beydoun. For the deal flow that they do come across, lack of quality management seems to be a key issue. Michel Nehme, founder of Cedrus Ventures, is mostly concerned about the caliber of the team. He has not invested in a single startup yet and says he is looking for “complete teams ready from the get-go”.

Problems with valuation

One gripe that venture capitalists Executive spoke with all agreed on is the valuation issue, stating that VCs and entrepreneurs are often at odds when discussing valuation and the gap between what the entrepreneurs expect and what the VCs demand is significant. “Entrepreneurs spend more time on dreams than on facts. If they spent more time on facts then it would work out,” says Beydoun.

When valuing a startup, each VC adopts its own method, as it is not a perfect science. “There is no truth with a capital ‘T,’” says Nehme. The task becomes more daunting when the startup is newly established and has no historical performance to base the valuation on.

If the venture has been in operation for a few years, the method most commonly used is the discounted cash flow method, consisting of forecasting future cash flow generation and discounting it back to the present. “We always go for discounted cash flow; it is important because it is a good way of looking at the overall health of the organization versus its ability to translate value proposition into free cash flow to investors” says Habib.

Other methods used for valuing companies are less efficient in Lebanon — mainly the comparable method and the multiples method. The comparable method consists of looking at financial transactions such as mergers and acquisitions that have taken place in the same industry as the company being valued and assign a valuation based on those comparisons, but “they are hard to find,” says Beydoun and “if you find them, they are secretive about their numbers”.

The multiples method consists of looking at multiples such as the price to earnings multiple more commonly known as the PE ratio or the EBITDA (earnings before interest tax depreciation and amortization) multiple of companies in the same industry, then applying a multiple to the company being valued in line with the industry. Given the political risk inherent in Lebanon, a discount must be applied to the company being valued. This is done on a case-by-case basis, as it depends on how exposed the company is to the country, what other countries it is exposed to, etcetera. “If a company has contracts in Africa for instance, the discount applied is different to a company with all its business in Lebanon and so very sensitive to the turmoil going on, but they all get discounted,” says Habib.

A newly formed startup, however, would not have generated cash flow or not enough cash flow to be able to forecast future payments and base a valuation on those payments. In this case, a more subjective method is applied consisting of analyzing the team and the amount of money and time invested. “The highest value we put is on the team at this stage of life of the company. Are they capable of taking it forward?” asks Beydoun.

Different expectations

Regardless of the valuation method used, entrepreneurs need to demonstrate ambition, vision and the determination to succeed, and acknowledge that they are operating in a different environment and cannot expect the same valuation given to companies in the developed world. “I want to tell entrepreneurs: don’t go read TechCrunch or Venture Beat [technology web publications] and come and say, ‘look what’s happening and I want the same thing’. We are in a completely different sphere, planet and galaxy,” says Habib. “Collect as much information as possible and read thoroughly and when in doubt go to people who might know and ask,” recommends Kalafat’s Abi Habib.

With increasing support for entrepreneurs in Lebanon, their chances of success should increase. Despite the lower valuations people need to accept for their startups relative to the developed world, more entrepreneurs will come forward and take the chance of launching their own businesses as the entrepreneurial puzzle completes. “You need more entrepreneurs at the end of the day to make it happen,” says Habib.

November 2, 2012 0 comments

Economics & Policy Entrepreneurs

The top 20 Lebanese entrepreneurs

by Maya Sioufi November 2, 2012

written by Maya Sioufi

Lebanese with entrepreneurial spirit and a business idea are no longer left to their own devices. Locally, they can find an incubator willing to provide a place to work from and assist them through mentorship and support. Alternatively, they might choose an accelerator eager to speed up their idea is solid enough, entrepreneurs might even win a prize or two from one of the various entrepreneurial awards being offered in Lebanon. And for financing, the main option a few years ago was to beg for dough from family and friends, whereas now entrepreneurs are increasingly likely to be granted a loan, or even equity from a number of venture capitalists that have set up shop in Lebanon.

Granted, the obstacles to reaching success are numerous – from the lack of a solid information technology infrastructure to political instability made worse by last month’s bombing in the heart of Beirut – but with talent and ambition, entrepreneurs are increasingly able to overcome obstacles like these and thrive. Executive picks the top 20 Lebanese entrepreneurs that look to have what it takes to make it, and marks its favorite five with our exclusive stamp of approval.

AdTech

Entrepreneur: Joseph Massih
Age: 28
Industry: Technology
Established in: 2011
Number of employees: 4
Revenues: $30,000 in 2011 (the company started operations in August of that year); in the first three quarters of 2012, the company generated around $180,000 in revenue and expects to reach $200,000 by the end of the year. Revenues are expected to reach $400,000 in 2013 after the start of the E-scrap management program.

The offering: AdTech started out importing high quality used electronics (i.e. laptops, desktops, monitors and accessories) from the United States and selling them to several resellers in Lebanon. Having identified an arising issue related to the disposal of electronic waste, the company decided to expand by developing a management program for retired IT assets. This program consists of a set of services that will assist corporates and individuals in disposing of their old electronic devices. Through this IT-Scrap Management Program, Adtech will be acquiring retired IT electronics from consumers and corporates in Lebanon in order to either resell them or dismantle them and use them again. The obsolete and non-usable parts will be sent to specific local and foreign recycling companies for material recovery.

Achievements: Sold approximately 2,200 units, with revenues exceeding $200,000, in a year. Winner of the 2012 “Grow My Business” competition ($33,000 grant), a joint initiative between Beirut Traders Association, MIT Enterprise Forum for the Pan Arab Region and Bank Audi.

Financing so far: Mainly self-funded.

Capital raising: Looking to raise $300,000 by the first quarter of 2013 from experienced investors in the electronic scrap business.

Strategy going forward: 1) Deploy the E-Scrap Management Program; 2) Develop an effective marketing campaign to promote the program; 3) Increase work force and capacities.

Where do you see yourself in five years? “Building on the business model of our partners in the US that provide responsible recycling for IT scrap in addition to management of retired IT assets, our goal is to be pioneers in implementing such a management process in Lebanon, and hopefully in the Arab states and MENA region in the longer term,” says Joseph.

Anghami

Entrepreneurs: Elie Habib & Eddy Maroun
Age: Elie 39, Eddy 37
Industry: Internet
Established in: 2012
Number of employees: 10
Revenues: $0 in 2012 and $1.5 million expected in 2013

The offering: Anghami is an application that provides unlimited Arabic & internationally licensed music to stream and download. Launched on the iTunes store last month, it will be available for free for the first three months. The company expects at least 250,000 subscribers across the MENA region by the end of 2012. Anghami will allow users to stream millions of tracks from major Arabic labels such as Rotana, Melody, Mazzika, Platinum and others as well as international labels such as Sony, EMI, Universal and Warner for a monthly subscription fee, unlike the iTunes store which charges $0.99 per song and is not available in the region. It will be available on Android and Blackberry by the end of October and on Nokia by mid-November. A Windows Phone version is planned but the release date is not available yet.

Achievements: Awarded Red Herring Asia Top100 Finalists award in 2012.

Financing so far: Raised $1 million in equity from Beirut-based venture capital Middle East Venture Partners for an undisclosed stake.

Capital raising: Not for now.

Strategy going forward: 1) Provide all new, old and classical Arabic and international artists to Anghami subscribers; 2) Allow subscribers to share and discover music through a smart-recommendation engine and from friends’ playlists.

Where do you see yourself in five years? “We want to be in every device that plays music. We want Anghami to become synonymous with music listening, discovering and sharing,” says Elie.

At7addak.com

Entrepreneur: Brahms Chouity
Age: 34
Industry: Mobile gaming
Established in: 2011
Number of employees: 11
Revenues: Generated more than $700,000 in the first three quarters of the year and expects to generate $3 million in 2013. With no subscription fees, the company generates revenues through sponsorship of its tournaments. Its client-base is made up of high profile names: American video game developer Electronic Arts, Swiss provider of PC accessories Logitech, American semiconductor company Advanced Micro Devices (AMD) and video console provider PlayStation ME.

The offering: At7addak.com is an Arabic gaming website allowing users to challenge each other on their favorite video games for cash and prizes. Using their existing gaming platforms (such as consoles, PCs, mobile devices etc.), gamers can compete head-to-head or in teams. The site also boasts exclusive content including news and game reviews, both in English and Arabic (see more in Executive’s September issue).

Achievements: 80,000 registered users as of August. 5 million page views on their website per month and 250,000 fans on their Facebook page, the second highest number of fans of any website in the Middle East. Winner of the the Wamda Award for Best Startup (2011). Selected by Endeavor, a non-profit nongovernmental organization that supports high-impact entrepreneurs in emerging markets.

Financing so far: Self-funded.

Capital raising: No intention to raise capital at least for the next year or two. Looking to sell the business at its peak.

Strategy going forward: 1) Perfect the concept through At7addak.com version 2.0 (coming in three months); 2) increase the website traffic; 3) increase the online advertising revenue.

Where do you see yourself in five years? “I would like to find a successful and rewarding exit out of At7addak.com. In five years, I will probably be doing what I’ve wanted to do all my life: running my own venture capital firm with my best friends. One non-stop party,” says Brahms.

Box Automation Services

Entrepreneur: Anis Rahal
Age: 38
Industry: Mobile payments
Established in: 2007
Number of employees: 10
Revenues: $1 million in 2011 and expects to generate $1 million as well this year, which was dedicated to investments with the opening of an office in Beirut and New York, along with the sponsoring of events (see below). BAS expects to generate $2 million in 2013.

The offering: BAS is specialized in cash management, audit and treasury solutions which enable full control and visibility over cash positions to manage domestic or cross border payment processes. It offers three main products: 1) C2Box, a solution for reporting and cash control; 2) C2Pay for the management of payment processes; 3) C2S to convert payment files to messages accepted by the Society for Worldwide Interbank Financial Telecommunication (SWIFT).

Achievements: Clients include Orange, CGG Veritas and Ipsos in Paris, Accelya in Barcelona and Majid Al Futtaim in Dubai. Strategic partnership with SWIFT. Sponsored major conferences in 2012 such as the Association of Corporate Treasurers in Paris (AFTE), Dubai (ACT) and the Association of Financial Professionals (AFP) in Miami.

Financing so far: Raised a first round of equity capital from Sigma Gestion, a French small and mid-sized enterprise fund, in 2009 for an undisclosed amount and a second round of financing from Middle East Venture Partners and Sigma in 2012, also for an undisclosed amount.

Capital raising: Not looking to raise further capital.

Strategy going forward: 1) Invest in research and development; 2) Continued participation in events such as AFTE, ACT and AFP; 3) further develop the sales team with salespeople already present in Europe, the Middle East, Africa and the US.

Where do you see yourself in five years? “We aim to become the leader in the GCC and the US market,” says Anis.

BSynchro
Entrepreneur: Michel Chammas
Age: 41
Industry: Computer Software
Established in: 2005
Number of employees: 50
Revenues: $1.2 million in 2011 and expects revenues to reach $1.7 million in 2012 and $2.5 million in 2013

The offering: BSynchro (Business Synchronization) is a Business & Information Technology service firm, which provides design, development and deployment of a range of software solutions in order for customers to enhance the user experience, improve process efficiency and increase profitability. The company offers a range of professional high-end software solutions responding to financial, marketing, sales, communication, customer experience and decision-making enhancement purposes.

Achievements: More than 50 customers in more than 10 countries. Applications used by more than 100,000 people.

Financing so far: Raised $600,000 in equity capital from Berytech Fund in August 2011 for a 35 percent stake valuing the company at $1.7 million.

Capital raising: Looking to raise $1 million next year to enhance the company’s presence in the Middle East, with a preference for strategic business partners

Strategy going forward: 1) Enhance the development of cloud-based products; 2) Develop regional presence starting with Saudi Arabia and the UAE by the middle of next year.

Where do you see yourself in five years? BSynchro used the Berytech investment to develop one innovative software that is currently being finalized and prepared for sales. In five years, the aim is to “provide innovative IT products software that are competitive on the international markets,” says Michel.

Butterfleye

Entrepreneur: Hind Hobeika
Age: 24
Industry: Sports technology
Established in: September 2011
Number of employees: 5
Revenues: None for 2011 and 2012; cannot disclose expectations for 2013

The offering: Butterfleye is a hardware design startup specializing in the field of sports technology. The first product is a patent-pending digital monitor in the form of goggles for swimmers due to be released in early 2013, which tracks the heart rate of an athlete as well as laps, calories and flip turns and gives a real-time visual feedback. A tiny bulb at the top of the lens goes green if the swimmer is in his target zone, yellow if he needs to speed up and red if he needs to slow down. The products will be sold online at a price of $150 per pair. The aim of Butterfleye is to eventually develop a product portfolio that includes technological sports equipment, such as an MP3 player, lap counter, stop watch and distance counter.

Achievements: First prize MIT Enterprise Forum Pan-Arab Business Plan Competition 2012. Third prize Stars of Science in 2010, a Pan-Arab reality-TV program initiated by Qatar Foundation. Featured in the TED2013 Auditions

Financing so far: $100,000 equity financing from Berytech Fund in 2011 for an undisclosed stake.

Capital raising: Looking to raise $600,000 in equity funding before the end of the year from both individuals and venture capitalists.

Strategy going forward: 1) In early 2013, start the sale of the product online; 2) Later in 2013, release the second version of the product; 3) In 2014, expand the technology platform to other sports activities.

Where do you see yourself in five years? “A high tech hardware design company that produces tools for athletes and for people with diseases that need constant tracking,” says Hind.

Cinemoz

Entrepreneur: Karim Safieddine
Age: 28
Industry: Media
Established in: August 2011
Number of employees: 11
Revenues: First dollar generated in May 2012 and more than $200,000 in Ad Sales bookings were made in the following six months. Cinemoz expects to cross $1 million in advertising revenues by the end of next year.

The offering: Cinemoz is an online video-on-demand platform for and from the Arab world. Free of charge, it provides access to a library of premium Arab films, TV shows, documentaries and live events. It has recently launched applications for iPhone and Android devices providing mobile access to their content.

Achievements: More than 1 million unique monthly viewers as of August 2012.

Financing: Established with a $200,000 Kafalat Innovation Loan in August 2011. One year later, it received $3 million for a $10 million valuation (investor to be announced in December 2013). In the first phase, $1 million was deployed with the remaining $2 million to be invested progressively over a year.

Partnerships: Strategic Technology Partnership with Brightcove, a leading provider of online video platforms (clients include Showtime, Virgin Media, New York Times, National Geographic and Al Jazeera). Content Partnership with ART (Arab Radio and TV networks), the largest library of Arabic content, with more than 3,000 titles licensed to Cinemoz throughout the next three years. Facebook Partnership, allowing the Cinemoz development and marketing teams to work in tight collaboration with the Facebook development teams. Partnership with LG to release the Cinemoz Smart TV app by fall 2012.

Capital raising: A second round of investment is expected in July 2013, most likely to be more than $2.5 million from a strategic investor.

Strategy going forward: 1) Build new partnerships with regional broadcasting networks such as Abu Dhabi TV, Rotana, Fatafeat and LBC; 2) deliver the most efficient and targeted digital ads in the region; 3) develop and release globally innovative video viewing and sharing features; 4) launch a data analytics program as Cinemoz aims to be the first platform to gather and monitor data from its users and analyze online user behavior in the Arab world in order to provide marketers, agencies and other industry players with detailed regional and local analytics services on consumption of Arab media; 5) develop their first own original series productions.

Where do you see yourself in five years? “The big dream is to disrupt the state of things across industries and be part of the founding fathers who built the ecosystem we still lack in the region while giving back to that ecosystem,” says Karim.

Dermandar

Entrepreneur: Elie-Grégoire Khoury
Age: 40
Industry: Internet
Established in: September 2010
Number of employees: 5
Revenues: Undisclosed but company was valued at $5 million in 2011 following the acquisition of a 5 percent stake for $250,000 by Georges Harik, a former Google employee who was director of Googlettes, Google’s in-house incubator.

The offering: Dermandar is an online platform allowing users to create 360 degree panoramic pictures taken through the application available on mobile devices. By rotating the phone when taking a picture, the Dermandar application creates the panoramic picture. The application is available on the iPhone and Android devices. On the iTunes store, the app is sold at $1.99 and is free on Android devices.

Achievements: The Dermandar mobile application was downloaded 4.5 million times in the past 14 months and has 50,000 daily active users. It has been described by the Wall Street Journal “as the easiest-to-use panoramic picture app on the iPhone.”

Financing so far: $460,000 raised in equity: $250,000 from Harik last year for a 5 percent stake and $210,000 from Lebanon-based incubator Berytech in 2010 for a 35 percent stake.

Capital raising: Looking to raise more capital but details are confidential.

Strategy going forward: 1) Become the leader in panoramic photo creation and sharing with an expectation of reaching 30 million downloads next year; 2) provide more image processing apps.

Where do you see yourself in five years? “A very profitable company or maybe even an acquisition by a big Internet player,” says Elie.

East & East

Entrepreneur: Nada Debs
Age: 51
Industry: Interior Design
Established in: 2005
Number of employees: 44
Revenues: Around $3 million

The offering: East and East designs, manufactures and retails furniture and home accessories. The company has three retail outlets in Beirut and is represented globally in New York, Paris, Dubai, Geneva, Toronto, Cairo and Amman. Other sources of income include interior projects, corporate gift orders and exhibitions.

Achievements: Sold to more than 3,000 clients with such VIP Clients as the Modern Arab Museum of Qatar, the Ministry of Foreign Affairs in Abu Dhabi and the Royal family of Jordan. Selected by Endeavor, a non-profit nongovernmental organization that supports high-impact entrepreneurs in emerging markets.

Financing so far: Self-funded.

Capital raising: Not at this point.

Strategy going forward: Focus on international growth especially in the Middle East and the US with a goal to be represented in major cities worldwide, either though agents or through retail outlets.

Where do you see yourself in five years? “[We plan to] improve the furniture & craft industry in the country which we aim to do by bringing international expertise to help us create a streamlined assembly factory,” says Nada.

Eastline Marketing

Entrepreneurs: Marc Dfouni & Nemr Nicolas Badine
Age: Marc 35, Nemr 35
Industry: Online marketing
Established in: 2006
Number of employees: 15
Revenues: $800,000 in 2011 and expect to reach $1.2 million in 2012 and $2 million in 2013.

The offering: Eastline Marketing creates and executes online marketing strategies for their customers across the digital landscape. Their services cover social media marketing, search engine optimization, paid search marketing, online advertising and online public relations. ELM also developed its own proprietary technology to create market-leading social media campaigns on social networks for brands looking to grow and strengthen their client base.

Achievements: Developed campaigns for Kimberly-Clark, Toyota, Majid Al Futaim, DHL, FXCM as well as local banks Audi and Fransabank. Selected in 2011 by Endeavor, a non-profit nongovernmental organization that supports high-impact entrepreneurs in emerging markets. Two Webby Awards (annual international award given by the International Academy of Digital Arts and Sciences for excellence in Internet) in 2010 for their online marketing of website “Love Letters to the Future.” Gemini Award given by the Academy of Canadian Cinema & Television in 2010 for “Love Letters to the Future”.

Financing so far: Received two Kafalat loans: one in 2009 for $90,000 and one this year for $240,000

Capital raising: Looking to raise $2 million to $3 million from strategic investors by 2013.

Strategy going forward: 1) Offer 360 degrees digital marketing services (social media marketing, search engine marketing, display advertising, mobile marketing); 2) Expand the social media marketing software platform.

Where do you see yourself in five years? “A leading digital marketing player in the Middle East region with the aim to become a business worth more than $20 million by 2016,” say Marc and Nemr.

ElementN Holding

Entrepreneur: Rabih Nassar
Age: 41
Industry: Technology
Established in: 2003
Number of employees: 60
Revenues: $2 million in 2011, expected to grow by 75 percent in 2012 to reach $3.5 million and $5 million in 2013

The offering: ElementN Holding is a group of companies based out of Beirut and New York that provide a number of technological products and solutions. ElementN Technologies offers mobile operators a number of solutions to enhance the customer experience using the web, mobile and call center channels. CADstrata is a software that provides a comprehensive standardization and collaboration solution for architects and building design professionals who use Autodesk, Adobe and Microsoft products. Apstrata is a leading mobile back-end-as-a-service, meaning it takes care of the back end code of an application and allows developers to focus on the front-end code. This service helps mobile developers cut their costs and accelerate the development time. (See more in Executive’s September issue).

Achievements: Selected among the top five fast growing Lebanese startups in 2010 by AllWorld Network, a non-governmental organization. Selected by Endeavor in 2012, a non-profit non-governmental organization that supports high-impact entrepreneurs in emerging markets.

Financing so far: Initially self-funded then raised $1.2 million in equity financing from Berytech Fund in 2010.

Capital raising: Currently in the process of raising $7 million in equity in a second round of investing.

Strategy going forward: Establish Apstrata as the leading global back-end-as-a-service used by application developers and mobile operators.

Where do you see yourself in five years? “A recognized leading global technology provider operating from Lebanon, offering continuous thought leadership and innovation for cloud-based application development,” says Rabih.

Fresh Natural Products (FNP)

Entrepreneur: Ramzi Jalbout
Age: 30
Industry: Consumer goods
Established in: 2008
Number of employees: 6
Revenues: $60,000 for 2011; 2012 was dedicated to investments as the products were not available for sale from March of this year, with a repackaged product due for launching in November. For 2013, FNP expects to generate $420,000 in revenues.

The offering: Under the brand name Krock’s, FNP produces and packs Labneh (strained yogurt), and Kaak (sesame covered breadsticks), for the Lebanese market. The products are sold to supermarkets such as TSC, petrol stations such as Medco and to all schools, universities and hospitals catered by Universal Services and Maintenance Catering, a Lebanese company specialized in food services. Through intellectual property firm Saba IP, FNP registered in 2008 a patent with the Ministry of Industry covering the packaging for 25 years; three years later it registered a copyright for life through Saba IP to protect the different flavors in 121 countries. FNP is currently working on a repackaged offering with the products due to be launched in November.

Achievements: Second prize ($75,000) in Future TV program Dragons’ Den awarding entrepreneurs in 2007. First prize for LBC’s product of the year competition in 2011 granting FNP $75,000 worth of media exposure on LBCI which will kick off in November . Products sold to 130 clients including retailers, schools and universities.

Financing so far: Combination of debt and equity: Secured two Kafalat loans for $133,000, one in 2008 and another one in 2012; $40,000 in equity investment from Angel One Holding in 2011 for a 34 percent stake. Angel One Holding was established by Blom Bank’s chairman Saad Azhari, Middle East Venture Partners’ managing partner Walid Hanna and Ramzi el-Hafez, general manager of Lebanon-based publishing and business research company InfoPro.

Capital raising: No more investment needed.

Strategy going forward: 1) Develop a marketing plan for the new pack; 2) Standardize the production and the supply chain; 3) Expand beyond Lebanon by starting off with Turkey, Saudi Arabia, Egypt and the UAE.

Where do you see yourself in five years? “Easily with eight flavors, five different products and 25 different franchises in the world,” says Ramzi.

M District. (Milia M)

Entrepreneur: Maroun Milia
Age: 41
Industry: Fashion
Established in: 2000
Number of employees: 11
Revenues: Roughly $500,000

The offering: Milia M is a fashion brand that has a retail store in Beirut and sells in 13 countries: France, Spain, the UK, the US, Malaysia, South Korea, Taiwan, Venezuela, Australia, UAE, Jordan, Kuwait and Senegal. The brand combines a couture flair with modern trends. It has produced 22 collections.

Achievements: Exhibited in the major fashion design “salons” in Paris, Milan, Japan and Abu Dhabi. Designs featured at prominent international events such as the International Design Biennale at Saint Etienne, the Sawaya-Moroni event “Switch on Lebanese Design” show (2004), and the Boghossian Foundation Exhibition at the Villa Empain (March 2012) in Brussels.

Financing so far: Self-funded until September this year when M District raised $1.3 million through Med Securities for an undisclosed stake.

Capital raising: Just raised capital.

Strategy going forward: 1) Boost international expansion by increasing its wholesale through higher exposure, PR actions and fashion shows; 2) opening flagship stores in Europe.

Where do you see yourself in five years? “A true powerhouse in the global ready-to-wear market,” says Milia.

MobiNetS Off Shore S.A.L

Entrepreneur: Labib Shalak
Age: 39
Industry: Software technology
Established in: 2003
Number of employees: 94
Revenues: Refused to disclose revenues.

The offering: Mobinets’ solutions assist network operators in managing their mobile networks by providing them with operating support systems providing improved visibility and control over the networks. Mobinets’ fully automated platform eliminates the need for multiple databases and spreadsheets to manage network inventory and helps operators improve operational efficiencies and reduce costs while enabling rapid new product/service roll out.

Achievements: Solutions used by 18 clients across the EMEA region. Selected in 2011 by Endeavor, a non-profit nongovernmental organization that supports high-impact entrepreneurs in emerging markets.

Financing so far: Raised $2 million in equity capital from the International Financial Corporation, a division of the World Bank.

Capital raising: In advanced communication to raise $5 million from a local investment bank.

Strategy going forward: 1) Solidify position of mobile operators in the service fulfillment, the supply chain activities which provide services to subscribers, and service assurance which guarantees a predefined quality of service; 2) Continue on growing within Europe and abroad.

Where do you see yourself in five years? “We see ourselves as a major player in the service fulfillment and service assurance [sector]”, says Labib.

Mosaic Marble

Entrepreneur: Taline Assi
Age: 34
Industry: Retail
Established in: 2003
Number of employees: 14
Revenues: $1.5 million in 2011
The offering: Mosaic Marble offers more than 5,000 mosaic designs as well as custom made orders sold through their website, eBay, a showroom in Lebanon and several resellers scattered worldwide. Their main market is the US, accounting for 60 percent of their orders and their main customers are retail clients.

Achievements: Custom orders from Oprah Winfrey, the municipality of Rome, Queen Elizabeth Theatre in London and a landmark project in New York. Products sold to more than 7,000 retail clients. Website available in 13 different languages. Selected by Endeavor, a non-profit nongovernmental organization that supports high-impact entrepreneurs in emerging markets.

Financing so far: Received a Kafalat loan for $450,000 and other credit facilities; received $100,000 equity capital injection from a new partner.

Capital raising: Looking to raise $1 million next year in a first phase of financing from a strategic investor in order to set up a showroom in California in 2014, hire a salesperson to target professional clients in the Middle East and for other expenses.

Strategy going forward: 1) Cater more to professional clients such as architects and construction companies; 2) Target markets in the Middle East — such as Saudi Arabia, Qatar and Kuwait — but also beyond the region, more specifically Japan, Russia and Australia; 3) Move production from Syria (where currently 70 percent of production takes place) to Lebanon.

Where do you see yourself in five years? “Being the worldwide leader in hand cut marble mosaics”, says Taline.

Shahiya

Entrepreneur: Hala Labaki
Age: 36
Industry: Internet
Established in: 2010
Number of employees: 8
Revenues: Refused to disclose revenues. They are generated mainly through advertising on the site.
The offering: Shahiya.com is a website in Arabic specialized in recipes, cooking tips and giving advice on diet. Its members, Arab home cooks, add recipes to the site. Carole Hani, a US-based registered dietician who trained at the Harvard Massachusetts General Hospital, supervises all the diet content on the site and offers healthy and diet recipes as well as the nutritional facts of each recipe. In July 2011, the company launched an iPhone application for Lebanese cuisine available for free. In July this year, it launched another iPhone app followed by an Android app in August that are a full version of the website, also available for free.

Achievements: 50,000 registered members added more than 6,000 recipes since the launch. 30,000 daily visitors to the site from the MENA region. Applications downloaded more than 600,000 times.

Financing so far: Shahiya received a Kafalat loan in 2011 for an undisclosed amount. It closed in September this year a first round of equity financing from Lebanese venture capital fund Middle East Venture Partners for an undisclosed amount.

Capital raising: Not at this point as just closed a round of financing.

Strategy going forward: Continue on investing in services offered both on the web and mobile.

Where do you see yourself in five years? “Our big dream is to become the ultimate source of information about food in Arabic. Reaching 5 millions unique users per month is one of our milestones, becoming profitable is another one that we hope to reach soon,” says Hala.

O’BOX

Entrepreneur: Myriam Hoballah
Age: 42
Industry: Consumer goods
Established in: 2011
Number of employees: 5
Revenues: $120,000 expected in 2012 and $300,000 in 2013
The offering: O’Box is an organic, ready-made food retailer catering to individuals who wish to eat healthily. It is certified by the Mediterranean Institute of Certification (IMC) in Italy and accredited by the European Union. It started selling its products at TSC Signature Store in Beirut Souks in December 2011.

Achievements: Listed in IMC’s “Know your meal” guide and received three cockerels (IMC awards) for the quality level of its products, as well as three green leaves for the O’Box food supply system’s environmental performance. Member of the Lebanese Franchise Association, a non-profit organization promoting Lebanon’s franchising sector.

Financing so far: $85,000 Kafalat loan in 2011.

Capital raising: Looking to raise $200,000 in equity capital in the first quarter of 2013 for an undefined stake in order to open a new outlet outside TSC Signature Store next year.

Strategy going forward: 1) Take key locations in Beirut (not secured yet); 2) expand to the regional markets starting with Dubai, Kuwait, and then expand in Europe and the US through franchising.

Where do you see yourself in five years? “As the main organic ready made food brand strategically present in key markets covering the US, Europe, Middle East and Africa, and Asia” says Myriam.

Olive Trade

Entrepreneur: Youssef Fares
Age: 33
Industry: Consumer goods
Established in: 2004
Number of employees: 10
Revenues: $350,000 in 2011 and expect a 20 percent annual increase in the next two years

The offering: Olive Trade produces and sells products derived from olives in Lebanon. The company is involved in the entire process chain from production, for which it engages local farmers, to putting the products on the shelves. Under the brand name Zejd, meaning oil in the ancient Phoenician language, its products are sold in Lebanon to gourmet and organic retail shops such as Live Organic and Aziz, to hotels such as Le Grey, to caterers such as Nicolas Audi catering and to restaurants such as Basilico and Talleyrand. The products are also exported on demand and they have been sold in Japan, the United States, Nigeria, France, Switzerland and Saudi Arabia. The range of products includes extra virgin and aromatized olive oil, pickled and stuffed olives, tapenades and olive oil soaps.

Achievements: First prize of “The Maurice Fadel Prize” for the best business plan in the north of Lebanon in 2012. Second prize of “Grow My Business” in 2012 ($13,000 grant) and 3rd prize of the same competition in 2011. Bronze medal at the Los Angeles International Olive Oil competition in 2012.

Financing so far: Received a $200,000 Kafalat loan in 2004, paid back in full.

Capital raising: No plan for capital raising at the moment.

Strategy going forward: 1) Developing export markets; 2) Launching a specialized olive derivative shop called “House of Zejd” in Ashrafieh; 3) Opening a second outlet within a year; 4) Developing a franchise system and selling the franchise to independent entrepreneurs.

Where do you see yourself in five years? Youssef expects at least three “House of Zejd” shops in Lebanon in the next five years.

Print Works

Entrepreneur: Jad Khoury
Age: 46
Industry: Media
Established in: 1999
Number of employees: 275
Revenues: Around $15 million
The offering: With offices in Beirut and Dubai, Print Works offers printing and fabrication solutions, often incorporating a variety of mediums in addition to distribution and installation. Print Works’ services cover printing and production for traditional large-scale advertising (billboards, branding on vehicles), promotional events (product launches, sponsorship events), and longer-term brand experiences (podiums in malls, point of sale display stands).

Achievements: Sold printing and fabrication solutions to around 3,000 clients including Yves Saint Laurent, Louis Vuitton, Channel, Cartier, British American Tobacco, JWT and Leo Burnett. Selected in 2012 by Endeavor, a non-profit nongovernmental organization that supports high-impact entrepreneurs in emerging markets. Selected in 2010 to be part of the Arabia 500 by AllWorld Network which provides ranking for the fastest growing private companies in different regions in the world. Selected also in 2010 to be part of AllWorld’s Lebanon 25 ranking.

Financing so far: Self-funded with facilities from local banks.

Capital raising: Not looking to raise capital.

Strategy going forward: Plan to open an office in Riyadh in the middle of 2013 followed by an office in Erbil, Iraq.

Where do you see yourself in five years? “The leading full service provider in the printing and production space in the region,” says Jad.

Wixel Studios Offshore

Entrepreneur: Ziad Feghali, Karim Abi Saleh and Reine Abbas
Age: 35, 29, 34
Industry: Internet
Established in: July 2012
Number of employees: 7
Revenues: $150,000 in 2012 and expects over $400,000 in 2013

The offering: Wixel Studios creates games on Apple and Android operating systems for the Middle East and North Africa region. Previously, Wixel used to create online games on their website and developed five online flash games localized for the Arab audience in addition to many advergames, with Almaza and Master Chips among their clients, and edugames for the Lebanese Civil Defense and the European Union, among others. They have stopped developing such games and are now focused solely on developing games available on mobile devices. They will be releasing their first mobile game Abou Ahmad El Arabi (AAA) in November on both the app store and the android market, with expectations for 500,000 downloads over a 12-month period and another game before the end of the year. The price of AAA will be between $0.99 and $1.99 depending on the version. The game will require the user to play extensively and frequently to compete or use shortcuts using cash (i.e. pay to upgrade the car and weapons). For now they have developed a game entitled “My Balls” available for free on the app store and the Android market and downloaded 3,000 times.

Achievements: Third place on the 2012 MIT Grow My Business competition ($6,600 grant).

Financing so far: Raised equity funds from Middle East Venture Partners and Berytech in June 2012 for an undisclosed amount.

Capital raising: No plans for one-and-a-half years.

Strategy going forward: 1) Create internationally recognized and successful games for the Arab audience; 2) grow the team to 15 employees in the coming one and a half years; 3) open offices in different Arab countries.

Where do you see yourself in five years? “One of the top mobile games publishers in the Arab world,” says Ziad.

November 2, 2012 0 comments

Automobiles Economics & Policy

A potentially disastrous diesel plan

by Paul Cochrane November 2, 2012

written by Paul Cochrane

In March this year the government drafted a law for the importation and use of cars that run on ultralow-sulfur diesel, also known as “green” diesel, in compliance with the European Union’s Euro 5 emissions standards. Though the law is still awaiting ratification, dealerships are up in arms about the plan, describing it as “stupid,” “nonsensical,” “not feasible” and “only in the personal interest of politicians.”

The rationale behind the law is that, in the words of the Ministry of Justice, it “will contribute to preserving the environment as green diesel is free of sulfur and the percentage of tar is 50 percent less than [in] the diesel that is currently being used.”

While importing cleaner diesel would be far better than the currently used Euro 3 diesel, with 350 parts per million (PPM) of sulfur, or the red diesel with 5,000 PPM, Euro 5 diesel is not sulfur free – it has 10 PPM. What is more, the draft law comes at a time when Europe is mulling banning diesel vehicles outright in cities due to its health risks. In June the World Health Organization decreed that inhaling diesel fumes can cause lung cancer, adding diesel fumes to its list of Group 1 Carcinogens alongside arsenic, strontium-90 and neutron radiation.

While dealers are concerned about the environmental consequences if diesel cars are allowed, they are wary of a repeat of 2001, when law 341 amended a 1995 law that restricted the use of diesel to trucks and busses by banning vehicles with engines smaller than 3,500cc from running on diesel. As a result dealers and drivers had to convert engines, at an estimated cost of $6,000 for a mini van.

If the law is passed, dealers are worried that it may be overturned just years later, which would have a negative effect on inventory and after-sales, as well as cause expenses due to the importation of specialized equipment needed to service diesel cars. Furthermore, certain manufacturers are planning to stop producing diesel vehicles altogether, including Ford, BMW and Nissan, to focus on hybrid and electric cars instead.

“I don’t understand the objective of the government — to reduce fuel costs or save the environment? Diesel may be cheaper but if it is taxed like petrol it is the same price, especially ‘green’ diesel, and the cars are more expensive,” said Cesar Aoun, general manager of Gargour & Fils, distributor of Mercedes. “And will we reach the Euro 5 level? Come on. We need to stop the import of cars older than five years.”

Old cars emit more pollution than newer models and their prevalence on Lebanon’s roads is an environmental problem. Some 52.5 percent of registered cars currently on the roads are older than 15 years, and 29 percent between nine and 15 years old, according to the Automobile Importers Association (AIA). A further argument against importing green diesel cars is the price of high-level filters that limit nitrogen oxide (NOX) particles from entering the air, at between $1,300 to $2,600. As the Ministry of Environment has noted, cars that run on Euro 5 diesel “are equipped with a special filter that is installed in the car exhaust, and this filter should be maintained, cleaned and emptied regularly.” The big question here is whether there would be actual checking of filters by the authorities, as well as proper storage of Euro 5 diesel at gas stations.

After all, enforcement is not a strong attribute of the state when it comes to vehicles, as some statistics show. According to the AIA, out of the 1.3 million cars registered in the country, approximately half a million did not go for the annual “mechanique” road test last year, and some 30,000 cars are illegally running on natural gas. There are some 33,000 registered red license plate taxis whereas 55,000 are actually plying the roads; 4,000 red plate mini-buses registered but more than 6,000 in operation; and 2,000 red plate buses while 6,500 are on the roads. At the gas station level, out of 3,250 in the country only 1,450 are actually licensed by the government, according to the Ministry of Energy and Water.

Marwan Naffi, general manager of Gabriel Abou Adal and Partners, distributor of Volvo, believes a solution would be taxing vehicles that have higher carbon dioxide emissions and giving tax breaks for vehicles with lower emissions instead of introducing “green” diesel.

“Today you can’t sell a car because of its lower emissions whereas elsewhere you get tax incentives,” said Naffi. “If you look at our Volvo T4 with 180 horsepower (HP) and the T5 with 250 HP, they would be the same price in Lebanon whereas the T5 in Europe is more expensive. We will not import the T4 for the Lebanese market as there is no incentive to do so.”

November 2, 2012 0 comments