...and 3 reasons not toMay 26, 2015 9:00
Cobone founder: ‘Best we’ve ever been’
In an exclusive interview with Kipp Report, Paul Kenny talks about Cobone's acquisition, entrepreneurship and a change of strategy.
June 19, 2013 2:22 by Muhammad Aldalou
Paul Kenny, co-founder and chief executive officer of Cobone.com, tells Kipp that since the company was founded in 2010, they’ve made many, many mistakes. In fact, they’ve made hundreds of them. But they’ve also learned a lot along the way.
When first starting out, there were very few internet companies in the region and no money coming in. At the time, he also quickly realised that, particularly when it came to hiring, the pool of talent was quite small.
How many people in the Middle East have worked for an internet company? How many have been working on Search Engine Optimisation (SEO) for a multi-million dollar e-commerce website when the industry itself had only just started to blossom?
Kenny says it was, and still is, quite hard to find an e-commerce veteran with 15 years’ experience in the region, because the industry just isn’t old enough.
During the past six months or so, and particularly since the daily deal site was acquired by Tiger Global Management for a rumoured $40 million, the Irish entrepreneur stresses the company has ‘never been steadier’ and more structured.
To start with, what exactly did the acquisition mean for the industry?
If you go back to when we launched Cobone about three years ago, there was literally no money coming in for internet companies in the region. At the time, everyone was talking about Maktoob, Maktoob, Maktoob.
Within the space of three years, we’ve launched Cobone, GoNabit has been acquired, and we’ve seen MarkaVIP, Sukar and Souq.com grow substantially. In that space, all these companies have raised a lot of money and scaled significantly.
This acquisition is just vindication that the digital market is here and that the e-commerce industry is going to continue to grow. When we launched, there really wasn’t anything. There weren’t many people doing anything in e-commerce. Since then, it’s become really exciting that a lot of money is coming into the market.
I think that a big deal like Cobone’s acquisition shows that there are opportunities for people to go out there and start an internet company and – if they want to – be able to sell it or receive funding.
There’s a lot more emphasis on entrepreneurship now with many more incubators starting up, and if the first three years were like this, imagine how the next three to five years would be.
You mentioned you were approached by several regional and international investors. What did you feel they lacked that Tiger did not? Secondly, why did you decide that the ‘partnership’ with the Jabbar Internet Group wasn’t enough?
Some investors wanted to flip us; invest the money, turn the business around and sell us again. Some had local connections, but no international expertise and others had international expertise but no knowledge of the local market. Tiger had both; they’ve got the money and they’re incredibly good at what they do. They’ve invested in Apple, Facebook, and almost any major company you’ve probably heard of.
As for Jabbar, it was just that there was just a point where we had to raise money. In an internet company you need to raise money to grow and then we realised a lot of people were interested, and that’s how the flow started.
Normally, the bigger a company gets, the harder it can be to maintain quality and a standardised image. What’s your plan to maintain Cobone?
For the first two years, we were a company going through ridiculous growth, growing so fast every month. We honestly couldn’t keep up with the demand – and we’ve obviously made a lot of mistakes along the way.
The past six or seven months have been significantly more structured than they’ve ever been, and rather than growing quickly, we’ve been growing steadily and consistently.
We’re more of an established company now and we have the structure to build upon. We’ve made so many mistakes, launched so many things that didn’t work. We’ve tried everything from countries that didn’t work to music sections. It’s good to make mistakes. I’d rather make a thousand and learn from them than none at all.
What has changed since the acquisition?
A lot of things can change during an acquisition. In our case, we haven’t rebranded so aside from having financial backing, we changed our strategy by no longer selling products and focusing on what we’re really good at which are local deals and another piece of the business which I can’t talk about.
The Middle East is a land of opportunity and you feel like you can do everything here. The only problem is, when you do everything, you realise you’re only doing everything half-well. I’d rather focus on what we’re very good at and build upon that rather than doing twenty five things at once.
If a regional start-up is looking for funding, or to be acquired, how should it go about it?
Don’t put short-term gains ahead of long-term benefits. Invest in products, platforms and people that can last much longer than a year or two. In terms of raising funds, it’s generally not very easy to do in this region unless you can build something that has a strong enough competitive advantage and a natural barrier to entry.
What you have to realise is that this market is complex with many barriers to entry. As I said, when starting out, there was literally nothing. The pool of talent here was quite small, although it’s obviously growing now. But there were no internet companies we could go to and ask for information on how they launched, how they got their license or how they established a payment gateway.
If you’re in Europe or the United States and you want to know how to obtain a license or establish a payment gateway, then there are 100,000 companies that have done it already.
Most importantly, though, I think if you’re setting out to build a company to sell it, that’s the wrong strategy. You should never create something with the aim of selling it within 12 months because that usually ends up in failure. You’re going to build things for the short-term rather than something that could last a lifetime.