Basel: Hello this is Basel with TechSparks. It's a pleasure to welcome our guest today, Dan Stuart, who founded and was the CEO of GoNabit, which was acquired by LivingSocial in June of 2011. He currently leads LivingSocial for the Middle East region. Prior to that, he led many senior positions at Bayt.com. I invited Dan today to learn about the acquisition of GoNabit. Dan, welcome.
Dan: Thank you, it's great to talk to you.
Basel: Likewise. Let's start by asking you what instigated the idea of GoNabit's creation?
Dan: Well, it seems like a long time ago now. It was December of 2009, and people refer to it as group buying, it was the early days then. It was basically in the U.S., it was in Canada, it was in Europe a bit, but even then it wasn't really talked about that much. So, here you hear about sites here, sites there and whatever, and it was kind of like it might have been in other places, but it didn't really rise to the conversation and the real topic that it has in the last year or so.
Looking at sites like LivingSocial and Groupon in the states were really the main ones that I knew. Looking at it as nonecessarily this great heritage of e-commerce that existed in the Middle East but much more how daily deal sites, in a sense, are kind of an easy in for e-commerce into markets. So we don't ship product. My product is a voucher that goes by email. So, I get around barriers of things like poor address systems and referential addressing and P.O. boxes and this type of thing. All I need is an email address.
I looked at it as maybe, an easy in, or easier, for e-commerce into a market where the tradition hasn't been very much at all, if any. The other thing, too, which seemed like a good ecosystem opportunity, was that for businesses that were going to work with us at the time or I thought businesses I might work with, these are businesses that might not have much online presence, if any.
So, it was an opportunity to really not necessarily drive traffic to their online presence, but actually be their online presence for those couple days while that person was running. So it was really those kind of different reasons, I guess, why someone might think to start a site like this somewhere else, but it seemed like worthwhile challenges to approach in this part of the world.
Basel: You spent a lot of time at Bayt.com, and again we're talking about the early stages of GoNabit. How did working for Bayt help you in starting your company?
Dan: I did a lot of different things there; everything from…I built and managed sales teams to senior business development to leading projects really from the product side, revamping job seeker side and employer side of the website. I launched and ran our corporate venture capital arm. So, it was the venture capital piece, the sales manager piece, the site development piece, the product management piece. And so, a lot of those things came together and, I guess, it was the skills that I needed early on. For sure, the sales bit, because if you don't have that it's very difficult to launch anything, because ultimately we're a sales business.
I think a lot of it, too, is really having worked with a site that was a high traffic site, so you're trying to optimize people's behavior on the website and trying to reduce friction to the objectives that they're trying to achieve, just kind of using a lot of those things, and a lot of thinking went into it. My partner primarily covered sales. I was doing marketing and product, working with developers, pretty much doing all of the business development and also the capital raising and business modeling.
I was the finance department, I was the HR department. It was good that I was exposed to lots of different things, because I needed all of those - maybe not skills, I don't know if I reached the point that I'd call what I had skills, but I think having that exposure and maybe, some aptitudes in lots of different areas really helped out.
Basel: So let's stick with the early stages again, and this ties into what you just explained. Going into things like securing deals, hiring people, funding, and the marketing aspect, how did you overcome those, I would say challenges, not obstacles?
Dan: Sure. You know what's great about challenges, too? If there are no challenges when you're entering a market, even if you progress through it, there are no challenges for anyone else to begin progressing through it to as well. As an entrepreneur I'd generalize and say: if there's no challenges or hurdles in whatever market that you're trying to address, maybe it's not as worthwhile. You might get to a certain point but there's no friction to those people that are catching up to you.
I was at an event in the fall, and someone was saying, "It'd be great if it was easier to incorporate all these different countries in the region" because we had created our footprint. We were in the UAE; we were in Lebanon, Jordan and Egypt. I said, "Look, I don't want it to be easy. I've gone and incorporated in all of these places. I've spent the better part of a year incorporating. I don't really want it to be easy for other people to fairly quickly mirror that footprint.
I think for us the key was, I don't see e-commerce as a whole lot different from a store in the mall in that you need stuff that people want to buy, a price they're willing to pay, and really the store needs to look like the kind of place somebody wants to buy from. It needs to be professional, clean and functional and everything else. But also there needs to be somebody to answer questions before, during or after purchase. We just took that approach. I think a lot of it was that. We were doing something where we would speak to merchants. You had to put it in a frame of reference of what we were doing, so we became a performance-based ad unit.
We put in a frame of reference that businesses were probably used to, but maybe not in a context of what we were doing. I think a lot of it was really securing deals for us. It was hard work, feet on the street, phone calls, lots of meetings, and then just putting what we were selling, because it was new, in a context of something they were maybe, familiar with. Really, a lot of it was just a lot of work.
In terms of hiring staff, I think what helped us hire staff is that we set a set of values from the beginning that we wanted to operate against, and then we hired against those set of values. You're not always perfect on that, but if people buy into it, they need to be the right person for the role but also at the right timing for you as a business. So, the person you hire as your first person may be a lot different than the person that you hire to be your 150th staff because the level of change and uncertainty day to day is much different when you're three people versus 150.
So, you have straightforward conversations about what it's like to be in a company when there are three or four or five or six. You work hard to find the right people. I was the HR department until we were about 45 people, so I hired everybody in four different countries. I posted the jobs, I filtered the candidates, I screened everybody. That was one of the many jobs that I had, but it made it super important. When you're starting a business, you want to find the right people, keep the right people, and never run out of money.
That's the three things. If you can do those three things, I know other things are important, but those three were always at the top of my list. Literally, it was linking all of those things together. No matter how we marketed, how we operated our business, how we spoke to merchants, it was really kind of driven, and the values that we created were really driven about how we wanted to run our business, and how we wanted to do what we were doing, not just what we were doing. We made some decisions against those values as we went. We probably left some money on the table sometimes by sticking to them.
Maybe, we missed some pretty good candidates sometimes, but you also have to come into work everyday and enjoy the people that are around you. You have to also feel like they're the ones who are going to represent you whether dealing internally or externally. I think really for us, it sounds great to say, but that core set of values you operate your business by impacts everything else that you do: your business decisions, how you model your business, how you model growth, how you hire staff, how you retain staff, how you raise funding, how you market your business. I think that was really important for us.
We didn't spend a huge amount of time on it. We didn't spend a lot of time in GoNabit just because we had spent a lot of time probably in the last five or ten years just working at other businesses bringing together a set of values that if and when you want to start your own business what it would look like. So, I had a list already. If we ended up with six company values, I had four of them already that I knew when I started a company those are going to be four of my company values. A lot of what you do is a product of where you've been.
Basel: So looking at, you just mentioned hiring people. What's the toughest talent to find in terms of backgrounds and programming, maybe? What's the toughest talent to find?
Dan: People will say that…I read a lot online, things that are based in the U.S., let's say. They always talk about programmer, developer, founders, these are key. Business side founder is always a bad sign for a business and this type of thing. I might argue that if you look at some of the most prominent startups that have become ongoing businesses in the Middle East, very few are developer founders, I think, because we have a lot more business challenges than development challenges.
Our challenges are things like legal, corporation, funding, this type of stuff, which is not so much product-based. So yes, the product is mammothly important, but I think our hurdles don't necessarily lie in product as much, they much more lie in the business and legal side, and so I think that's why you've seen more business side founders than programmer side founders. And right now, I think we're at a stage still where you don't win so much based on technology, you win so much more on business model and implementation.
So, I think that there's been almost like, not a forced de-emphasis on development, but it's just that it's not as vital. Don't get me wrong, it's super important, but if you had to choose, if I could go be 51 to 49 of one of those sides, I'd still be business than development right now just because our business wasn't technical innovation. A lot of the businesses when you look at some of the businesses raising money, they're not technological innovations - the flash sales sites in the region, the new guys coming up with shoe stores, the subscription commerce and things, they're not technical plays. They're business plays. They're marketing communication plays.
I think that's where we are right now. So technology and developer experience, I mean, I ended up hiring one of the guys I worked with at Bayt, for example, because I knew he had experience on high scale websites, multiple languages, scalability, development. He didn't have much experience with the platform that we worked on, but he learned that. But he had the right experience for high scale sites, which again, there's not that many people in the region that have experience with high-scale websites that aren't fairly static forums or whatever, that actually have user registration credentialing, especially commerce, as well.
I think one of the hardest things for us to find has been, or was, people that had experience marketing and branding in the online space and user acquisition toward conversions. There were lots of people who work for agencies, and they're doing the online media buying for FMCG, working toward brand building or whatever. Ours is user acquisition to conversion, email subscribers and transactions.
There's just not many people that had experience doing things like that, really implementing budgets online, so I kind of did all of that, too, for the first year or so as well. I knew some stuff in the first place and learned as I went. I think that was one of the biggest challenges was that kind of experience with really, not digital marketing, because there's a lot more of that now, but really online commerce-driven, conversion-driven marketing.
Basel: Looking at the part of the company, looking at the acquisition process. That was an exciting part of the lifecycle of GoNabit. Can we talk about that? How did the process start? Did you approach them or was it the other way around?
Dan: It's a funny time, you know. It really kicked off I'd say in December of 2010.
Basel: How long was it after you started the company?
Dan: We launched our first deal in May of 2010. And in December of 2010, I got some advice from actually Rabea, the CEO of Bayt. He said, "When I started my business before, what I did is even though it was early on, I reached out to the larger players and said, 'Come and buy me. Here I am, I'm on the map, I'm in this part of the world. If I ever scale to the point, if you're ever looking to move to other parts of the world, we'll start a conversation'".
So, that's really what I did. I reached out to a few different people. One reached out to me. In the course of December I had three different initial phone calls. We were in the process of looking to raise some money. What kind of really quickly turned into, by January, we had three term sheets for full or partial acquisition of our business. We didn't really expect that to happen at that time. I'm not going to tell you when we started the business we expected seven months in or eight months in to have term sheets for acquisition.
I think a lot of it was we could tell an understandable story. We launched our business as a credit card based transaction business, and it was something that for guys in the U.S., for example, it's what they know. They know credit card transactions. When you talk scalability numbers, they know credit card. They don't understand if you talk about, if you take cash payments, you can tell the story around, it's a product that reaches the ecosystem and whatever. But for us, we were pure credit card at that point. It was an understandable story. We had very good metrics against things like revenue per user or user acquisition costs.
I took a few flights; I went to a few different places in the states. We ended up in January with a few different offers. Sounds great, seems easy. Then, it's challenging. If I give you one thing and I say "Do you want it or not?", sometimes it's a bit easier than if I give you three things, and say, "Do you want them or not, and if you want one, which one do you want?", especially if they're very different. So, I think that was one of the things for us that became challenging where we had to discuss a lot what the best thing was for us as a business. What was the best thing for us as shareholders? What was the best thing for us as staff? What was the best thing for us as managers in the business that were going to stay with the business? Who did we want to keep working with?
I think a lot of the way we went through that process really indicated for us…and actually, I was wearing three hats. I was wearing the hat of shareholder, I was wearing the hat of manager of staff, and staff person and I was wearing the hat of chairman, with responsibility to the other shareholders. So those three hats, I actually felt like I needed to change them. What might have been right for me as a shareholder might have been maybe, not the best decision for me as the chairman of the company.
We went through that process, and eventually in February we agreed to go the LivingSocial route. A lot of it was part of the process. So my partner, Sohrab, and I had been to the states in Washington DC to see them in December, and a few other places I went. We went back in February. I basically said, "Look, you don't really know us that well, we don't know you that well, we're going to come out for a couple days. Can you make some time for us?". We spent two full days a couple hours with the CEO, a couple hours with the CTO, sales managers, research manager, CRM, the legal team, the finance team.
They gave us a lot of time. They really exposed the business to us, and to their credit, got us excited about being part of what they were doing and the vision they had. So it's the easy part, you've got term sheets, it's a piece of cake, you look at all three of them. Great, "give me that one", and then we're four more months, I'm kidding by the way, it's four more months of lawyers and due diligence. I'm not going to lie and say we were perfectly packaged up for a transaction.
You have to do a lot of different things as a business. We were also a Dubai company, a Lebanon Company, an Egypt company, a Jordan company, we were a Cayman holding company, we had a Canadian subsidiary. We were doing due diligence on six companies essentially at once. It's six times as expensive, legally, it's six times. I literally spent 50% of my time for four months doing the transaction to a point where, by the time it was done, people were asking, "Aren't you excited?"
I'm actually relieved that process is finished because it's exhausting. Good problems to have, not complaining, but I learned so much from that experience, it was excellent. It was frustrating, at times. What you think is going to be finished in a week is finished in two more months or whatever, but it's all good problems to have.
Basel: What part of the acquisition is valuation? There are not many acquisitions taking place in the Arab world right now. How did you go about the valuation? Did you hire a company to do that, did you just justify the numbers yourself, how did that go?
Dan: We didn't hire anybody. A lot of it was part of our company structure, but also, too, very quickly what a lot of us did in the daily deals industry was is we reached out to each other in different parts in the world where we thought we would never end up and try to perform connections. I knew guys running a company in Singapore, I knew guys running a company in Canada, I'd interact with some guys in Eastern Europe. So, it gave me a non-competitive support group that you could ask vague questions on what they were seeing in terms of things like this.
But also, too, what was probably most critical for us is that I had the guidance of the fact that one of our investors was Bayt. Major investor in Bayt is Tiger Global. I'd get on the phone with one of the guys from Tiger and ask, "What are you guys putting money in that? When you put money into Brazil and you put money into Australia in similar industries? What kind of valuations?" So we were very much a part of their conversations. That was really a critical part of that process.
So, it wasn't like someone took the process away from me, but I had great support in terms of that, and I guess I was fortunate to have someone who has done a few deals as Tiger to really be supportive in terms of the experience. Just because they've done deals in other places doesn't mean it's the best structure of valuation for us, but I couldn't think of many other people in the world who would have had as much experience really doing valuations, especially in emerging markets, so that was really invaluable for us.
Basel: So you are guys are pure e-commerce play. Do you see cash on delivery models applied in places like Egypt?
Dan: We have the honor of being the first country in the world where LivingSocial has done cash payments as a model. We actually launched it the other day in Egypt and Lebanon. We're looking at it for other markets. We had it with GoNabit, and we toughed it out. We were really stubborn about it. What we did is it was more about the story we were telling. I'm going to give you my tired analogy and say: we entered every market basically saying, "I have water for you to drink. And I'm going to keep offering you water for a long enough time that I know if you're ever going to drink it, you know you're going to take this water from me."
I'm going to go into Lebanon, I'm going to only take credit cards, I'm going to do it long enough that I'm going to know for sure whether you're going to use your credit card or not. If that means you need to go to the bank and get it web enabled, which is a big issue in countries like Lebanon and Egypt, where people have credit cards, but because there's nothing to buy online, the banks don't default them to being web enabled. And so, our support guys know really well how to tell someone to go to their bank and what to ask for in terms of getting their card web enabled. We did a lot of these things as part of the process.
A lot of it was the story, and about after nine months in Egypt we started doing cash payments. In Lebanon it would have been a year since we launched that we started doing cash payments. We still saw the majority of payments coming from credit card. And then when the transition happened, when we moved to a LivingSocial brand and website and platform in October, we didn't have COD-enabled, and we actually, we're pretty deliberate about it because we want to get the right solution. COD is very complicated. It's not complicated, cash is very simple.
What's complicated is the process. You come on a website, you make a payment, you pay with your credit card, your system has instant status updates. I know did a credit card go through or not, do I have money or not, can I release the product or not. There's no real delay time, the only real delay time is if you're using a hosted payment gateway, there's that time where you leave my site, go to the gateway, and how much time I give you to come back and complete your payment. If you don't come back after an hour, I might cancel your pending transaction.
With cash, it's different. You have to keep this open status where you're waiting for a payment collection. You need to optimize the data you send to whatever partner you're using to make sure that you increase the conversion percentage on successful collection versus attempted but incomplete collections. There's a whole optimization process around that. We did a lot of work with that.
We use Aramex as our selection partner, so it's funny how they're a logistics company but somehow they've become a payment company a little bit, too. They've been really good, but at the same time I feel like there's an opportunity in us to help them move into a space that they wouldn't actually think they'd go into in terms of that. They're kind of being pulled into being a payments company a little bit. I still think there's a lot of room for disruption in that sense in terms of more savvy payment options, and it's the facilitation of it, but I think there's a lot of room for innovation in these markets.
I think it was something for us where we wanted an automated solution, so yes, we do cash payments. It's good and bad. As a buyer, I wouldn't be a huge fan of it, just because I like a little more instant gratification. I actually feel like a credit card's very accountable. I can see instantly charges; I get notifications when I make a charge. Cash is just a bit cumbersome. Again, I need to be home. I need to be there for someone to come and collect my money.
Egypt, it was something where it was something on scale for the market. Lebanon, it was nicer to have for us. Would we do it in other markets? We wouldn't necessarily do it as a function of necessarily increasing the business as opposed to maybe, that type of payment works better for different price points or different transaction sizes. Even if you have a credit card, even if it's web-enabled, if I try to sell you something that's $1000, you might only have a limit of $500, for example, so it helps with these kind of things, too. So we look at it that way.
Basel: What's your biggest market right now?
Dan: I guess biggest means a few different things for us. We have user base, gross revenue, net revenue and these type of things, but right now I think UAE is the biggest market for anyone in the region doing what we're doing. I think for some of the flash sales guys I think probably Saudi's bigger right now in terms of business. But for us the UAE's still the market.
I was talking to some guys who started a site in Lebanon a year or so ago, and I was saying, "The advantage that we had is that we paid for Lebanon from the UAE, and you're paying for Lebanon from Lebanon". We had the advantage that UAE was more of a now market as opposed to a soon to be market, or a today market, not tomorrow market. We could fund our growth from the UAE as opposed to trying to fund it from Egypt or Lebanon. The market's just not there the same way there as the UAE today.
Basel: If you were to start a whole new GoNabit again, or just a pure e-commerce site, which country or which city would you choose to start the company from a town perspective, from investment perspective, Dan?
Dan: Yes, I can hear you.
Basel: I think I lost you for a moment, hold on one second. OK, it's still recording. I think your cam is off now.
Dan: We're doing pretty good considering we're talking from opposite sides of the planet.
Basel: Exactly.
Dan: We just dropped the call a couple seconds.
Basel: No problem. Let me just repeat the question again to make sure you got it there. If you were going to start GoNabit again, or just any other startup that you have ideas for, what's your favorite city or country to start that company? We're talking about e-commerce, maybe play, looking at things like investments, legal, the talent perspective, what would be your choice? You've been doing this for quite some time but just in general.
Dan: I think what's interesting is that I've thought about this quite a bit, actually, in terms of how refer to it. I can probably name 10 or 15 different websites, and if you asked me where they're from or ask somebody where they're based, a lot of the time it would be: what difference it makes. You see a lot of the online commerce guys in the states, so a lot of the Amazon properties now, will ship to the Middle East, literally list them as shipping destinations, list flat rate shipping whether expedited or not to Qatar and Saudi and UAE, so endless.com, which is one of the Amazon.com properties.
Does it make a difference to me as a consumer if it's an American company? All I know is that if I want four-day or five-day shipping and it's $25, but if something's on sale I'm going to save $25 anyway. If it's something that I can't buy in this part of the world. $25 is a bit irrelevant because it's a price I'm willing to pay. When you're competing on e-commerce, you're competing on free commerce, you're essentially competing on price, two of the three, at least, of price, availability, and convenience. So I'll lose convenience but it's still fairly convenient. Price, let's say that's competitive, and availability is the king, because maybe it's something I can't buy in this part of the world.
I would look at it and say, "Where am I able to compete on price, convenience, and availability?" Right now, you're competing globally. So shop and ship by Aramex, where I order things that are only available in the U.S., but I get it sent to my P.O. Box in New York, and it gets sent back to here. That means the companies that are selling similar products in this part of the world are now competing globally with those markets, the companies that are selling things like Endless or Myhabit or the Gilt guys that do flash sales. The ones that are doing it here, even the offline retailers, they're competing with them as well.
So it's almost irrelevant these days where things are being sent from and shipped from, as long as whatever that shipping cost is, is manageable as part of that total price offering. I would look at it and part of me would say, "What don't we have here that I'd like to have here as a consumer?" I kind of start from there as a starting point. What am I able to scale to markets? If I'm going to be the biggest group-buying website in Dubai, is that good enough? Is that enough? Is that worth it? Maybe not. It's just not enough scale.
I would look at something where what are the underserved markets. If you think about it, e-commerce is hard to enter in this part of the Middle East region. Why? Because of payment gateways. It's not even that there aren't any. It's that the minimum barrier to entry from a cost perspective makes it prohibitive to young start-ups. If I'm asked for 50 or $75,000 collateral, and I've only raised $300,000, that's a huge chunk of my capital I've raised to lock away with my payment gateway provider that gets completely removed from working capital. So there's that challenge.
But I think marketplace models still work. There are a lot of people that make cool things. There are a lot of people doing fashion in the Middle East region and doing fantastic stuff, but don't have the scale. Almost picture like an Etsy for fashion and that kind of thing where you're basically providing this facilitative marketplace, really pulling together a lot of the people that are out there that maybe don't have the scale on their own to really create that marketplace.
But you're kind of creating that online shopping mall a bit. Again, look at some of the businesses that have reached scale in the marketplace: Bayt, marketplace, job seekers and employers coming together; Souq, marketplace, sellers and buyers coming together; GoNabit, merchants and customers coming together. We're the facilitators. We're in the middle. I think it's thinking along those lines of not so much what are you able to build and sell, but it's what are you able to facilitate amongst people that are already looking to buy and already building things to sell.
Basel: That's really interesting. You worked for GoNabit, and now you're working for LivingSocial. Did the DNA of the company change much? How about revenues, did you see a significant increase in revenues?
Dan: One of the things that appealed to us about LivingSocial was that I could literally take our six company values with GoNabit and map them to the five company values at LivingSocial. We had things like "Race like a pro - fast and smart" was one of our values, and one of LivingSocial's values was "Live hungry". I could very much map those as part of the story. I could map things like "Surprise and delight" from LivingSocial and "Leave happiness in your wake and be remarkable daily" with GoNabit. I think we meshed a lot as a business.
It was funny because even some of the feedback post-transaction, when some of the integration team came in from the U.S. to Dubai, they were saying, "This is pretty easy because I can picture all of your staff sitting in our DC office because it's kind of similar: similar profiles, stage of life, personalities, and everything else". So I think internally, we kind of went through phases. And some of the phases, I have to admit I didn't really expect.
You go through the phase when you're going through the acquisitions process where you're conscious as a founder and as a CEO that you don't want to create false expectations with your staff, so you keep a lot of that process to yourself to the point that people knew something was going on, but I would freely admit something was going on, because as a start-up you're either in some version of spending money, raising money, something all the time.
So, there's always capital conversations going on, so that's no big secret. Once we got closer and I was locked in a room for half the day for four months, people knew I was doing something. I'd better be doing something, not playing Scrabble or something. There's that initial phase of great, exciting. Then it's like, what's in it for me. Then it's like, okay, so what does this mean for me? Are Dan and Sohrab leaving? Are they staying? Do I report to somebody different now? Is someone coming from the U.S. to this business?
We kind of had a Q&A around that, we were very straightforward. The approach from LivingSocial was: we don't want to do anything to knock you off your stride, we want to help you be able to run faster. Not slow you down at all. So there's always going to be a bit of that. Especially when we switched platforms, we literally changed every single system that we had. At the same time that we're trying to run our business normally, speak to merchants, service clients, pay merchants, answer the phones for customer support calls, market our business, we're also behind the scenes completely shifting every single platform, every system we have. CRM system, SMS system, the system where we build our deals, our analytics and everything else.
Everything changed completely, exporting, importing data, all these things. Training up all our staff across four different countries, so there was a bit of a challenge around that. It was an interesting process for us. I liken it to when you move houses. Basically, you move, you get moved, and all your stuff is there, you start eating there and sleeping there, and you think it's all done.
But then, you spend weeks or months afterward hanging the pictures and fixing the leaky faucet you didn't know about, painting it the color that you want and everything else. So we went through that phase, we moved, our furniture was there, we were eating there and sleeping there, but then we spent a few more months hanging the pictures and painting the walls, buying new furniture, getting new drapes and whatever. So, we spent a lot of time with that.
Look, there's been mammothly more complex transition processes but it was work. There was work to do. I feel like now, the last few weeks we've hit our stride where we've done all of those things. We're actually hitting our stride with using all of the tools of the platform, all the analytics of the platform, and so we're really excited for this year moving forward. I was super excited about the fact that I can build a mobile app, but there's no real payment gateways in this part of the world to support actual card on file, purchasing through the app, we ended up with that. It's fantastic. We're the first e-commerce app in the region. It's fantastic, I'm happy to be first in these things.
We're already seeing five or six percent of our purchases coming through our iPhone and Android apps, which is huge when you think about it because that percentage of app installs, they're very much punching above their weight in terms the percentage of our user base. So I think again, it's a new opportunity for people, it's convenient. Not trying to get into products specifically, but just those kind of opportunities were also what appealed for us, but it was also a transition for us as a business, a transition and a buyer mindset and things, too.
Before we had that, you didn't ever think: which app am I going to open today and buy something? There were none, so now it's a new opportunity. So, you have to make people aware of the new opportunity and things grow over time. It's nice to chart new pathways and things, too. It's fun challenges to be doing these things.
Basel: So looking forward, what are the future plans for LivingSocial Middle East?
Dan: Basically, what we're doing is there's a core to our business. The core to our business is that service-based daily deals business. This year will be interesting. I think this year, if the last couple years were about scale years, this is a bit of an evolution year, in the sense where - the way we talk at LivingSocial is that daily deals were our way to scale a business, and now that we have this user base and people that are used to coming to our site to look to connect and discover with local merchants, there are different things that we can do that still fall into that ecosystem.
So, there's still going to be that core deals business. But we're looking at it and saying, so globally and regionally, we're very big in terms of the travel, which is a whole different buyer mindset, it's a different set of merchants. Family-specific deals for us that we run, I still consider part of that daily deals business, but it's really saying we are and want to be a local commerce company where we're ultimately the go-to for people looking to connect and transact with local merchants.
So whether that means, if you look at some of the stuff we're doing in other parts of the world that we might see in other parts of the world this year, we're doing things like online ordering in the U.S. now. So, we've entered that in some markets where I want to order from a restaurant, I either know what I want or don't know what restaurant I want, who delivers to where I live, transact. People are already coming to us to connect with local merchants, and now it's getting into that potential food ordering business. That's something that we're doing in Washington DC and a couple other markets right now and we're testing it as a business to see if it fits with the user base and things. But again, it's around connecting with local merchants.
Our instant product wraps a deals layer onto that ordering piece. Looking at things, too, we recently got into something at GoNabit that we thought for a long time, which was this concept of selling physical products. Is it more complicated than selling vouchers for services? Probably, just because price points are different which has impacts on payments, which has impacts on fulfillment. It's a different kind of fulfillment because it's not like I'm going to go to the restaurant when I want to. It's that I bought that thing; when is it coming to my house?
Basel: Different value chain.
Dan: That whole piece is much different, and it's different in different parts of the world. If you buy a voucher from me in London, you buy a voucher from me in Dubai, I still send it to you by email. But the whole concept of delivery and fulfillment, and different places, and who's doing it, is very different in different parts of the world. Again, I think it comes back to what I said right in the beginning. These are interesting challenges to overcome because I think they're worthwhile challenges to overcome, so we're looking at lots of these different things. Keeping the core business strong, growing that as a real driver of our business, and looking to see what are kind of shoulder markets that also fit into the brand premise, and really consumer interest in every market that we operate.
Basel: Coming to the last question of the show. We've taken a lot of your time, it's been really exciting. What pointers would you like to give our audience regarding building startups that grow and can be targets for acquisition?
Dan: How long do you have? I think some of the keys I went through with my experience was I had seen a lot of proposals and business plans when I was running Intilaq with Bayt, the corporate venture capital arm, and I guess a couple things that I didn't see from most of them is founder commitment. How much are you willing to do? For me, it's almost exactly two years since I incorporated GoNabit. Within a couple days, I think it's this weekend. I was willing and I did…my wife was nine months pregnant, I liquidated all of my savings, I quit my job and I started a business.
People were like, wow, that's a huge risk to take. How did you know it was going to be successful? I didn't. I felt like I set some milestones so that I'm going to go all into this. It was something that I had bought into. I had good initial feedback that other people were going to potentially buy into it, and I thought it was kind of a game worth winning. There was opportunity for success in it, but at the end of the day you don't know. So sometimes you have to risk it, and it's not like, let me do it part time for the first little bit. I don't know, maybe that works in some cases.
All I knew is I had to do it full time, full money. I funded the business myself for the first six months. It was all the money I had, it was all the credit card room I had, and everything else until our first capital raise came in, our only capital raise came in. It's what I had to do; that's what I was willing to do. You have to ask yourself: pick the right horse, or pick one that, at least, looks fast, and if you're going to put all your money into it, go for it, put what you're able to. But ultimately, if it's a game worth winning and playing, then someone else is going to start playing, too. So, you need to make sure that you're running fast enough that you're trying to create daylight between you and someone else. I think also, too, for us was having a business model that had clear milestones and metrics. We sell stuff. So I could see there was immediate business model feedback.
So day one, we launched the website, May 26th. We either sell stuff or we don't. Day two, new deal. We either sell stuff or we don't. Day three, day four, day five, day six. So let's say ten days go buy and we sell nothing. We can try to do some things about it. Day 12, day 15, day 20, we sell nothing, sell nothing, sell nothing. I guess fairly early on we could pull the rip cord and get out. It's not like building up hundreds and thousands and millions of users and then figuring out a way to monetize them.
Investors like models, especially in markets where there's limited legacy of exits and transactions. They like more easily understandable business models which are revenue driven, which have key drivers. Ours was really what? What's it going to cost for us to bring someone to the website? How many people are going to buy something, what percentage do we think when we model it? How much are they going to be spending, and how much of their spending are we going to keep? That's really our revenue model of anything.
It's an understandable business model; it's a business model that's thousands of years old. It's something we can do. Twitter would be tough to start in this part of the world and get funding for, because it's like, "How are you going to get money?" And if you're in a part of the world where there's a legacy of product exits and founder exits and talent exits, great. But we don't have that. So it's business model exits. I think, too, the documents that you use to found your business, your capital raising documents, your shareholder agreements, they're not one-way tickets, they're return-trip tickets.
So, what you define in your shareholder agreements and your share purchase agreements initially, you define how everyone's entering the business, but you're also defining the framework for how you'll exit, because everybody exits. You either sell your shares, you sell your company, you go bankrupt, you die, you quit, you something. Everybody leaves the business at some point. So, you need to make sure that you've defined and agreed how each one of you is going to exit the business, and how you're going to make decisions around the exit of the business when you're entering.
We probably didn't spend a lot of thought and time on that in the beginning, but we had good lawyers that set it up well, so it actually made our lives easier because we might not have always agreed 100% on the form of exit, but we had documents with less pressure earlier on where we defined how we were going to do that. So, when we had more pressure around these exit discussions, we had already kind of set up 90% of the guidelines for how we were going to potentially exit the business. I think that's really important. Thinking that you can raise money without a lawyer and things, too Look, you don't have to spend a fortune, but the money you spend on proper legal advice and document structure is well worth it. Within reason, it's well worth it.
I mean, you're willing to put a couple hundred thousand dollars or $50,000 or you're going to go raise money into a business, but to have an uncertain structure about ownership and minority rights and shareholder rights and all these things, it's vital you have these in place. Because otherwise you're adding a significant amount of risk to your particular investment into the business.
So, I would say that really is it, a really clear business model, I would say, going all in, if you can. Finding something you're willing to go all in on, and finding someone else who says, "Yeah, I'd go all in on that, too". Capital raising structure. Also, finding a co-founder that's as or more passionate than you are, because you know what? It's tough to do by yourself. I struggled at first because I was trying to do it by myself.
When my partner, Sohrab, and I…we knew each other for three days before we started working together. We had met for a couple hours, but you know what? He had been in a bunch of startups before. He started a few businesses, he had the passion for it, he was ready to commit 100%. That was as much or more important than anything else, and it worked out OK.
Basel: Well, Dan, that was very delightful having you with us today. It was an incredible interview. Thank you so much for your time.
Dan: Yeah, a pleasure.
Basel: And we'll look forward to hosting you again.
Dan: Thanks, Basel. Appreciate it. Thank you.
Basel: Have a good one. Thank you.
Dan: Thank you, bye.
About the Guest:
Dan Stuart was the founder & ceo of GoNabit. He currently leads LivingSocial for the Middle East region after LivingSocial acquired GoNabit in June 2011.
Dan is a popular public speaker in the region on e-commerce, e-retail, online payments, entrepreneurship, social media marketing and venture fundraising.
Before founding GoNabit, Dan was Chief Possibility Officer at Bayt.com. Dan oversaw strategy, product development, user experience design and new initiatives, as well as, strategic and emerging business development both within and outside the scope of Bayt as a job site. Dan Stuart was also Director of Intilaq - Bayt`s corporate venture capital arm. Previously, Dan was Head of Strategic Initiatives and Business Manager for the Enterprise Sales Division at Bayt.
Dan holds a Masters Degree in Curriculum, Theory and Learning from the University of Toronto in Canada.
Dan Stuart a passionate entrepreneur, and an e-commerce expert. Dan was the founder of GoNabit.com a daily deals website in the MENA region which was acquired by Living Social in June 2011. Now Dan leads Living Social for the Middle East.
