Why the Yahoo! Maktoob deal is so important

September 7, 2009 at 12:01 PM Leave a comment

While the global media was racing to cover the biggest story yet about entrepreneurship in the Arab world, while the story itself was hitting the sixth top spot on Twitter, a feat never before achieved by an Arab event, while the regional online community was abuzz with the news, the Arab mainstream media, with a few telling exceptions, was snoozing through it all.
Yahoo!, the global Internet portal and search engine, acquires Maktoob, the largest Arabic portal, in a landmark deal that speaks volumes about Arab entrepreneurship, and our media was just not interested because, well, it was clueless.

So, for these snoozers, here are a few clues about why this acquisition is such a big deal.

It finally puts us Arabs on the global Internet map. It will get people to pay attention to this region’s knowledge-based industry, where there is an impressive number of technology entrepreneurs.

It is the ultimate success story in a region long used to failure. For our younger generations, it is a wonderful example of how a dream can turn into a brilliant achievement through a combination of boundless creativity and down-to-earth business sense.

For our leaders, it is hopefully a painful reminder of the distance between their priorities and the ambitions of an increasingly wired younger generation (16.5 million of whom are unique visitors of Maktoob’s) eager to move away from a state-driven, oil-dominated future.

For our wealthy Arab investors, it is a wakeup call that true value lies in our youth rather than in real estate, and that talent is closer to home than they could have ever imagined.

For the Arab world, it is proof that money may count for something but, in the final analysis, an education, smarts and determination count for much more, because the two entrepreneurial gentlemen who made Maktoob started out in Jordan – their home and, it just so happens, one of our area’s more resource-poor countries – and, even when their company reached way beyond it, never left.

We should, therefore, celebrate the story of Maktoob, and we should hail its founders, Samih Toukan and Hussam Khoury, for being such tenacious entrepreneurs, at once innovative, patient and practical. But before the acquisition becomes yesterday’s news, as an early investor in Maktoob, as a friend of Samih and Hussam’s and, yes, as an occasional mentor to both, I would like to share with you the lessons learned from this experience.

Lesson 1: It is not about vision; it is about a tedious process of discovery. It is about a unique product at the right time for the right geography. Maktoob started as a consulting company, then changed to become one of the first (if not the first) Arab website developers, and then moved on to inventing Arabic web email. They saw the niche and they went all the way, building everything around that niche.

Lesson 2: Conserve your cash. There is nothing more important for your survival than cash.  Cash burn is not something to be proud of, so burn the least amount possible. That means founders should not take salaries as long as the business cannot afford them. Maktoob lived off bread crumbs for the longest time; they kept developing the business until the first venture investor came.

Lesson 3: Don’t fall for the hype. When Maktoob happened, cash burn was the fashion, but Samih and Hussam kept their eyes on the company, did not become seduced by sexy trends and kept building value. None of their much richer competitors survived the dotcom crash. Maktoob flourished.

Lesson 4: Build your team. This is a no brainer, but few entrepreneurs realize that it is always about your team no matter how good you are. Build the team, retain it, reward it with stock and give it freedom to innovate.

Lesson 5: Mentors are important, so listen to them and seek them out all the time. They will always give you a different perspective, challenge you and keep you on your toes. Dig deep into their knowledge: It is priceless.

Lesson 6: Aim for success not exits. Two decades of building a business is a long time. Samih and Hussam knew the exit will come only with a good brand and a viable business.

Lesson 7: Your shareholding percentage does not matter. What matters is building value for your clients, and the rewards will not be too far behind. The value of your business is what you build, and how much you own is relative to that value. It is about how to get to the exit in dollar terms, not the percentage you own; 50 percent of $10 million is half of 10 percent of $100 million.

Lesson 8: Partner with your venture and PE capital investors. Set the terms of reference early on to make sure that they understand your business and leave you alone to run it. Abraaj and Tiger understood that, and Samih and Hussam were left to build value. All equity partners made lots of money because they understood this basic rule.

Lesson 9: Split your responsibilities very clearly and very early on. The combination of Samih and Hussam as a team, as friends and as partners is unique. I don’t know anyone that had the ability to split responsibilities the way they did – and with a smile.

Lesson 10: When exiting or negotiating with someone like Yahoo, keep your eye on the ball, don’t get arrogant and keep someone to run the business in case of a no go. When Samih was on the road Hussam kept the engines greased and running.

Fadi Ghandour is the founder and CEO of Aramex, the global logistics provider. Ghandour co-founded Aramex in 1982 in Amman, Jordan and has served as CEO since then.

Ghandour  is also a founding partner in Maktoob.com.

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