6 unsettled debates from Arabnet's first Dubai summit

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“How was the new Arabnet?” People have been asking since I returned from Dubai last week.

Quickly: it was sleeker, with more industry heavyweights, more international players, and less startups. It also was very much the same Arabnet, with several regulars in attendance, the same two-room panel structure, and the same snarky Twitterfall. In a word, it simply had more gravitas. 

Over the three day conference, attendees were treated to a smorgasboard of content, perhaps even a bit too much; although, as Alexander McNabb, the director at Spot On PR, pointed out, the last panel on the last day was completely packed, which is unusual for any conference.

Two highlights you can read/watch now:

  • Narain Jashanmal’s excellent ramble on the essence of shopping, human identity, 1984, the integration of technology with humanity, and what makes e-commerce human. (Slides here; talking points here).
     
  • Benedict Evans’s presentation on how Mobile is Eating the World

Low points: The panel on women’s content. It wasn’t McNabb’s fault at all- he politely fielded both droning answers from the panel and fiery questions from the crowd- but let's hope the next Arabnet has more women, and a wider range of us (Omar: I'd be happy to help moderate).

It would be impossible to summarize the entire event, but here are 6 questions it evoked:

1. Are investors shifting towards fewer, larger investments?  

On the first day, I moderated a panel on the state of venture capital, which involved, ironically, a few entities that are not VCs: Honeybee Tech Ventures, which funds startups in-house, and N2V, which has stopped investing and is focusing on its portfolio.

The news that N2V is no longer investing surprised several people, I was later told. The holding company is clearly trying to focus on increasing its value in preparation for an IPO, but all the same, perhaps it's a large shift for an entity that once focused on supporting idea stage startups, by running N2V Labs (and what has N2V Labs produced?) and Startappz, a mobile-focused startup accelerator.

Others were pivoting as well. Dany Farha of BECO admitted that, “If you had asked us a year ago what our investment model was, we didn’t have one,” while today, after investing in Duplays, TravelerVIP, and Propertyfinder.ae, the firm is focusing on heftier Series A investments. Focusing on a slightly later stage, with a hands-on approach, might be one of the few ways to guarantee startups make it, Salam Saadeh of Y+ Ventures, agreed in a chat later.

STC Ventures is following in a similar mold, with a few $1 million+ investments lately, and Middle East Venture Partners, which remains focused on early stage startups, is creeping towards larger ticket sizes with a recent $1 million investment in Cedar Books. It’s not the series A you might find in Silicon Valley, but are bigger ticket sizes a growing trend in the Arab world? Will the post-seed round cliff get steeper for startups?

Wamda Capital, for one, remains focused on early stage investment (I suppose whether that’s a shameless plug or not depends upon your opinion of early stage investment).

2. Does equity crowdfunding have a shot in the Arab world?

An announcement came through yesterday that virtual skills marketplace Nabbesh had reached its goal in only 12 days on equity crowdfunding platform Eureeca.

Are many of us skeptical of their immediate success? Yes. Was most of the investment likely negotiated ahead of time? Alex Tohme and Loulou Khazen of Nabbesh both admitted that several investors had agreed ahead of time to invest, but insisted that several were a surprise.

I’d still like to see what happens when we turn off that tap and someone launches an organic campaign that simply solicits equity crowdfunding from, well, the crowd.

It may have a chance, panelists concluded on the Crowdfunding panel, moderated by Jason Best, Co-founder at Crowdfund Capital Advisors. Christopher Tyrrell, a board member at the Australian Small Scale Offering Board, which has been running crowdinvestment services in Australia for 7 years, says that startups that receive equity crowdfunding have a higher success rate than those funded by friends and family. 86% of the businesses ASSOB has helped fund over the past 7 years are still operating.

Darren Westlake of Crowdcube, the first U.K.-based equity crowdfunding platform, agreed. “Of the 55 businesses that we've funded, not a single one has gone bust,” he said. This is because of the rigorous processes that Crowdcube puts startups through, and the three stages they have to go through to secure funding," he said. “They go through internal due diligence, due diligence with the crowd, and then they have to get people to want to invest in them. You have to be the best of the best.”

3. Can the major e-commerce companies survive adolescence?

On the panel on “Big E-Commerce,” Ahmed Khatib of MarkaVIP, Ronaldo Mouchawar of Souq.com, and Sherif Nassar of Egyptian online retailer Nefsak revealed their struggles with scaling.

If MarkaVIP does 60% of its own logistics, is it building a logistics company? Arabnet founder Omar Christidis asked. “Is that a sustainable model for you?”

It doesn’t really matter if it’s sustainable or not; it’s the only way Marka has found to keep customers happy. “We didn’t see any other way to provide convenience to the customer,” Khatib said. Otherwise (I believe he said), their returns would be half.

Cracking the code of logistics in the region is still the only way that many e-commerce companies expect to create value for potential acquirers, Khatib pointed out: “Amazon isn't here because they haven't figured out the logistics. Once we figure the math out, you'll see Amazon coming and buying three to four companies.”

Maybe. The second biggest challenge at both MarkaVIP and Souq.com will likely be maintaining internal consistency and a healthy culture. Marka currently has around 330 or so employees, with only 8 engineers, while Souq has scaled from around 300 to 800 employees in the past 8 months, after remaining relatively small for over 5 years.

Like any scaling company, they’ll both now be working hard to stay efficient. There have been some rumors of difficulties with the culture at Marka, but the company is working overtime to institute corporate values and tie performance goals to values (more on this soon). Souq is also rushing to put structures in place to keep its teams aligned with central tenets; decentralizing management and putting an HR department in place will be critical.

When it comes to marketing, Khatib admitted that Marka has scaled back its once-ubiquitous online ads. These days, Google AdWords is providing the flash sales site with the best conversion rates. Mouchawar of Souq, on the other hand, cited video in Saudi Arabia as the “best place for turning offline shoppers into online shoppers."

Christidis also asked a question that I thought was worth repeating: “What ever happened to that E-Commerce Task Force that was launched last year?”

4. Will we see banks in the Arab world innovating anytime soon?

On the second day, the always entertaining Alexander McNabb kicked off a panel on banks by saying “Let's agree that banks in the Arab world are rubbish!”

Pedro Cardoso, the Head of Multichannel & CRM at Emirates NBD, bravely joined to answer directly for the banking sector, while Graham Thomas of Radical and Kieran O’Sullivan of HeathWallace both happily chatted about the innovative products they had built for banks abroad.

Sadly, Cardoso kept promising upcoming innovations, but wasn’t clear on exactly what those innovations were.

“Banks really need to catch up and the senior management is very aware of that,” Cardsoso said. “You’ll be surprised with some of the things that are coming,” he insisted, describing that ENBD had recently introduced an interactive teller machine where you can use your ID to make a deposit, open an account, or deposit multiple checks and get one receipt- “This is an example of innovation in the region.”

I may have missed something, but if innovation is depositing multiple checks and getting one receipt… ruh-roh.

On his blog, however, McNabb threw Cardoso a bone: “I came away from the session with the feeling that people like Pedro are fighting against legacy systems and legacy-minded management, while banks in other parts of the world - leaner, meaner and generally more competitive - are providing some really smart digital services.”

Joining the conversation at Arabnet, at least, is a start. 

5. Do your telecoms know more about you than your social networks?

On the panel on Digital Strategies for Telecom Operators, telecoms companies generally agreed that they wanted to partner with digital agencies to create innovative products, while Ismaeel Makdissi of Intigral baldly shilled the agency’s digital products.

Paranoia struck the Twitterfall when Samer Geissah of du mentioned off-hand, “We have more insight about our customers than Google or Facebook. If we can find the right partner, who can take that information and make their lives easier; then we have a winning combination.” Several tweeps began posting about PRISM, setting off a discussion Geissah hardly meant to invoke.

PK Gulati slammed telecoms for not innovating faster in the UAE. “A mobile wallet has launched in Egypt, people in Afghanistan, Benin, Togo, can pay their electricity bills online. Why can’t we?” he cried from the back of the room.

In a word: regulations. “We have to comply with the rulings of the Central Bank,” Khalifa Alforah of Etisalat admitted. “This will happen once the central bank gives us the green light.”

The counterculture thread continued as Abdullah Hamed asked the telecoms panelists pointedly about Google Loon; more about that here.

6. What is premium content these days?

On the third day, I missed a fiery panel on The Future of Video. Apparently, David Butorac, the CEO of OSN, kept insisting that premium content remains within the purview of television alone, and that it would never gravitate to free sites like YouTube. Abdulrahman Tarabzouni of Google (and many in the audience) clearly disagreed.

“Premium content is elusive,” Tarabzouni said in a chat after the panel. “For us it's all about the user experience. What matters should be searchable, identifiable, and there when the user is looking for it.”

This year, Google will be “socializing and channelizing” YouTube, honing its recommendation algorithms to dramatically step up its presence as a landing page. 

Overall, I thought Arabnet did a good job of seeding some fun debates. What did you enjoy the most? 

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