Philip Bahoshy is founder of online startup directory MaGNITT, which connects MENA entrepreneurs with investors. With over 3,000 startups in the directory, he gives his lessons for success
“When we launched in the Middle East in October 2015, there was a lack of transparency in the MENA startup ecosystem space,” says Bahoshy.
As a startup operating in the business of startups, MaGNITTt’s founder is no stranger to the world of young companies and the various stories of success (as well as failure).
With 3,713 startups currently on the platform, as well as a mixture of angel investors, corporates and VCs, Bahoshy is hoping to connect the dots between the different players – as well as dispel some myths around startups in the MENA region. Below, he reveals his key lessons for startups in the MENA region.
Lesson 1: Be transparent
Online, not offline, there was a lack of visibility about what was going on in the startup space. What I found was, having been in a coworking space and having spoken to many entrepreneurs, was that it is very difficult to identify the different stakeholders and protagonists in the ecosystem. What we tried to do was create an online community where startups are able to connect with people like investors, corporates, service providers, talent or just individuals – fellow startups.
Lesson 2: Rethink what ‘innovation’ actually means
E-commerce is definitely the largest sector in startups, with logistics, e-commerce and, to a certain extent food and beverage and fin-tech, being the largest sectors in the MENA region. It’s simple to see why. In an ecosystem where the innovation is predominantly in efficiency rather than creating new platforms, many of the success stories, especially in the exit space, are startups that find efficiency where it didn’t exist. Your cars, your food deliveries, your payment gateways – your pick-up and drop-off platforms. Fundamentally, the e-commerce sites developed in the MENA region that succeeded, like Namshi or Souq.com, did so because of their delivery and availability of choice – being able to bring products to consumers they didn’t have access to. It’s innovation in the region, even though it existed elsewhere. I think it’s a great concept and we continue to see that trend, whether it’s in this, fin-tech or healthcare.
Lesson 3: Know when to bow out gracefully
As founders, we all know that operating a startup is complicated. There is never an ideal time to sell, but know that a founder that started a company and hustled to get it to series A or series B may not also be the right person to lead a company moving forward. But that doesn’t mean you need to exit the company; it might just mean you need to have a change in leadership. You can remain a shareholder without needing to be a manager.
On the other hand, if the offer is lucrative – it may make sense to do so. If you speak to any founder, the decision will come down to their vision, their energy their drive – and whether they believe that the acquiring company has a similar vision to take it forward. Financials do play a part, but you don’t need to be Mark Zuckerberg and own a billion-dollar company.
Lesson 4: Don’t be put off by startup myths
For several years, there have been people that say there haven’t been exits in the MENA region. There might not have been IPOs or huge exits until this year, when we saw the acquisition of Souq.com and Namshi and a consolidation in the e-commerce space, but in reality there have been –you just need to take all of the wins into account, not just the big ones. There have been several exits and that should provide some comfort for entrepreneurs.
The second realisation is that it takes time. Our research suggests it takes on average seven years before you exit, in fact its similar to what the state says which is seven years from your seed round of investment. Moreover, quite a lot of acquiring companies, around 50 per cent, are based in the MENA region, which is positive.
Lesson 5: Give VCs time to catch up
Many people complain, and rightly so, that there isn’t enough funding in the startup space in the MENA region. But this needs to be put into context. Many of the VCs started two to four years ago. So if research suggests that it takes seven years for a successful startup to exit, then we should be seeing more and more exits which should direct cash-flow back to the VCs, which means they can prove to investors their ability to make money, as well as put capital into their future funds and more startups. While there has only been a few acquisitions within the VC community, there has at least been some and that, I think, will only continue to grow.