Habib Haddad

Starting a new adventure; Joining Wamda

Wed, 10 Aug 2011 09:30:00 -0400

I am happy to announce that I will be joining Wamda as its new CEO.

When Fadi Ghandour emailed me last April to see if I’d be interested to join him and Abraaj to change the early stage entrepreneurship ecosystem it was a no brainer that I would say yes.

As many of you know I have been a huge believer in the entrepreneurship scene in the Middle East and passionate about making an impact. A few years back while in Boston I decided to venture in this market and started Yamli with my good friend Imad Jureidini. As I was growing the company in the MENA region I faced many frustrating obstacles that I haven’t experienced in my previous US startup life. Back then it was virtually impossible to find Angel investors, the press was not a big supporter of Startups, the private sector did not respect “small companies” and it was very hard to convince good talent to join a “risky” venture. Although the picture looks better today there still exist a lot of obstacles, but one thing remains for sure, the MENA is a hot emerging market and growing.

A couple of years into Yamli, I decided to give back and founded YallaStartup with two of my friends Elie Khoury and Sami Shalabi. Through my engagement with YallaStartup I met many budding entrepreneurs that made me even more excited about the region. I saw talent that could easily compete on a global level.

After 4 years of running Yamli, we grew the company to become a household brand name in the Middle East serving more than 100M words per month. With the help of our partners we also managed to get to profitability through our enterprise packages, but it was not an easy ride. At one point in time and to maximize my cash flow I had to sell my furniture (minus my bed) and to exchange the foreign bills that were left over from various trips.

Luckily the company is doing much better today and no longer needs my full time operational engagement so I am pretty excited to dedicate my time helping other entrepreneurs through Wamda. Although I am not ready to talk about the details of what we’ll be exactly doing in Wamda, what will drive us is palpable impact. I have lived it and saw many others live it, so we will strive to add not just financial value but also value that can help take entrepreneurs to the next level. We are up for a big challenge, but I am confident with the support of people like Arif Naqvi, Fadi Ghandour and others that we will make an impact. Fortunately there are also other players driven by the same passion and we will collaborate with them on this journey.

No journey can be successfully accomplished without the right team. We are just getting started and looking for people who are passionate to make a change in the entrepreneurship ecosystem on all levels (media, community, investing, partner relations, events…) So do drop me a note or email if you are excited in shaping this journey :)

Localization: imitation or art ?

Tue, 22 Jun 2010 08:05:00 -0400

When the Chinese internet giant QQ released Fanfou a few years ago many criticized it as an obvious clone to twitter. The same again happened with the launch of Watwet the Jordanian startup. After all, at first glance the sites do look a lot like twitter. Maktoob, the company behind the Arab internet success story was always described as the Yahoo of the Middle East because of the very similar services it provided. It didn’t come much of a surprise when Yahoo actually acquired the company in 2009.

But is localizing an existing product or business idea imitation or art, and does that limit innovation or actually requires it?

There are mainly two types of innovations, incremental and transformational. Incremental innovations are improvements built on existing products that add benefit to the user. Suggested search in Google and Yahoo is an example, higher resolution on the new iPhone is another. Transformational innovation on the other hand is much more disruptive, it creates dramatical change in industries. Creation of the web, invention of the wheel and in my opinion the iPhone itself are all transformational innovations.

Smart localization would fall under incremental innovation and a number of web companies in the Middle East have been doing a good job at that. Bayt has taken Monster.com model to the Middle East but was innovative in its business and sales approach that allowed it to flourish in a fragmented market. Maktoob was able to capture users by localizing Yahoo services by capitalizing on forum’s (Bulletin Board System) popularity in the Middle East and using its true understanding of the cultural intricacies. A good example of that is BentElHalal the matrimonial forum/service.

Twitter clones are good examples of how localization could be incremental innovations. In Japan, Digital Garage has partnered with Twitter to localize it but has taken a very innovative approach. In fact one might argue that Twitter Japan has been even more innovative that the original company with the earlier release of a mobile version and ad platform. Watwet has replicated Twitter in the Middle East but focused on the SMS by signing deals with operators to wave the charges. SMS GupShup in India has done an amazing job at that by quickly capturing 30 Million users and adding an SMS advertising platform.

The real problem however, is when it becomes a blunt copy paste . The copy paste approach is not only unethical, but does not offer a sustainable advantage and more seriously discourages innovation in the company or even country at large.

An example of a blunt copy paste is Biglion the russian clone of Groupon. The company went even to the point of ripping off the site’s design and navigation. In an emerging market like the Middle East, there still remains a lot of white space to fill. While a blunt copy paste is very tempting it that it’s important to not forget that it’s not only a bad business approach but also a recipe for suffocating innovation at large.

In my opinion, for localization to really work it does require some amount of innovation and art, and that’s where players like Maktoob and Bayt have been very successful at. But what we lack in the Middle East are transformational innovations and while signs of those still exist I am confident that as the “cost of failure” gets lowered, culturally and financially, that we’ll witness much more transformational innovations.

Governments on "lowering the cost of failure"

Wed, 16 Jun 2010 08:57:00 -0400

I participated yesterday in the Economist Roundtable in Beirut. The theme was around “how Lebanon can reach its full potential” and mostly focused on the role of government. There were some impressive talks by various Ministers including Charbel Nahas, Gebran Bassil and Mohammad Safadi. My panel discussed how to foster and keep Lebanese talent in the country, obviously I vouched for innovation and entrepreneurship especially among the youth.

I won’t try to be comprehensive in this post on what I think governments should do in general to foster innovation and entrepreneurship but I would like instead to talk about their roles on what Joi Ito a great friend and mentor always talks about as a key factor to increase innovation: “lowering the cost of failure”.

Although the “fail fast, fail cheap” mantra is mostly talked to in regards to internet businesses it does apply to all industries. Obviously some governments can afford to take a very proactive role to spur innovation like with the tons of money spent into military research that got us the Internet. However even in those cases, it’s only when governments liberalize the base layers they created that creativity starts to take place on top of them.

If governments focus, in their own capacities, on setting channels that lower the cost of failure then step aside, it could have a tremendous trickle down effect on innovation. Think about it this way, it’s not the rate of failure that matters, it’s the cost - time and money - and associated risk that would be problematic. As Scott Anthony, a frequent writer on the subject, puts it: “the only way to successfully innovate is to be prepared to iterate like crazy”. With a low cost of failure, one has a leeway to iterate a number of times and increase the chance of successfully innovating.

In the case of Lebanon, it is obvious that broadband infrastructure is a huge impediment to creativity and innovation both because it’s expensive and inefficient. [According to Minister Nahas it seems though, that a project is under way to improve bandwidth within a year. I hope he will be able to smoothly execute without much interference.] Other countries in the Middle East have different kind of restrictions like censorship or the use of VOIP. This is exactly the type of things that increase the cost of innovation and that governments should NOT do

Registering and liquidating a company are also still costly in Lebanon and across the Middle East. It still is very difficult to liquidate a company and in some countries in the Middle East declaring bankruptcy results in imprisonment.

Another important area that could lower the cost of failure is access to capital. Regulations imposed on bank lending to businesses require having collateral assets. Although a much better way of startup financing is the one that add value - Angel investors and VCs - banks remain one of the first financing destinations for young Lebanese entrepreneurs but having collateral assets is not always easy, so most end up abandoning their projects. Relaxing those regulation and putting tax incentives on banks and wealthy individuals to invest in human capital would lower the cost of financing and therefore allow recipients to focus on what they do best.

One last point that was recently brought by my friend and Woopra founder Elie Khoury is about encouraging multinationales to open R&D shops in the countries. While I don’t really see this as being part of the “lowering cost of failure” context I do agree that it’s of huge benefit to spurring innovation. It’s the likes of PayPal, Ebay and Google that are breeding the new generations of entrepreneurs.

So although I do believe governments could and should play a huge role in accelerating entrepreneurship and innovation the general question remains not what governments should do, but rather what they should NOT do!

The Arab entrepreneurship opportunity

Sun, 13 Jun 2010 12:59:00 -0400

The Middle East and North Africa region is home to 350 Million Arabic native speakers, 65% of which are under the age of 30. While internet penetration is still low at 20% it’s growing at the fastest rate in the world, mobile penetration however is at 80% with about 220M users. The education and health are booming due to the fast population growth. This growth coupled with the wealth of some countries especially in the Gulf is creating significant opportunities that are yet to be explored.

However a large portion of the massive GCC sovereign wealth funds was historically invested in markets like USA, Europe and Asia, but the recent downturn has put pressure to finally look and foster opportunities in the MENA region itself. Governments all over the Arab world are also keen on accelerating entrepreneurship and have been shifting the mindset of their funds towards more early stage deals, hoping to create that ecosystem. The challenge here is that it’s not just a shift of mindset but also a shift in required skills; Investing in startups and SMEs in the MENA emerging market is far from similar to investing in a developed ecosystem where the returns and exits are more or less established.

Incubators are also proliferating in the region aiming to foster early stage entrepreneurship. While I am a big fan of mentorship and truly believe it can add tangible value I am not sure traditional incubators are the answer. Those risk of becoming real-estate projects and can lose the energetic culture that they were set to create in the first place. Great entrepreneurs would want to tap into the contacts that the incubators provide but would graduate when the right time comes. The program/mentorship incubators that were pioneered by the likes of YCombinator and TechStars could work well but it’s important to not forget that the MENA is no Silicon Valley so we should be careful when adapting those concepts in the region. Meydan is one example of a TechStars model that launched in Jordan a few months ago.

One big gap remains in the seed investing with virtually no Angel network. It will require a generation of successful entrepreneurs to exit, make their fortune and turn to angel investing - while adding value - but in the meantime our bet still remains on incubators and on convincing wealthy individuals that investing in people is much more impactful then investing in buildings.

It will require a bit of testing and adaptation until MENA startups, VCs and Angels figure out the best model(s) but it’s important in my opinion to not to try and emulate the Silicon Valley but rather to focus on finding our own competitive edge. Taiwan for example was able to first position itself as a hub of semiconductor manufacturing and it actually did so by leveraging it’s competitive advantage: The Taiwanese Diaspora working in tech companies in the Silicon Valley. Rwanda is another example of how Government was able to make a transformational change. In just a few years after the 1990 genocide Rwanda ranked 67 in the world bank “ease of doing business” index ahead of many Arab countries. Rwanda also focused on it’s competitive edge and in this case it was Coffee. Now that Rwandan Coffee is selling at a premium price on US shelves, it has created an entrepreneurial revolution back home. Businesses including technology oriented ones are emerging to serve this industry.

Going back to the MENA region I believe the conclusion is that we need to focus on our competitive advantages. Lebanon for example has been a historical creative hub and the birth place of many renown artists. This has pushed Cisco’s CSR arm to invest in fostering a Lebanese creative cluster, an admirable move that could have a long lasting effect.

On the other hand, international companies are also getting interested in the region and have started entering it, mind you each with different strategy. Google for example has set up sales and marketing offices in Egypt and the UAE and have assembled an engineering team in Zurich, Yahoo has acquired Maktoob the largest Arabic portal and Facebook signed a deal with ConnectAds a MENA ad agency to sell ads on its behalf - I will address the benefits of each to the local entrepreneurs in a later post - So while the painting of the entrepreneurship ecosystem hasn’t yet been completed, the MENA market offers a very fertile market, and it’s huge!