BEIRUT: Despite an underdeveloped telecommunication infrastructure compared to its regional peers, Lebanon has managed in the past few years to lay the foundations of a supportive environment for startups.
Entrepreneurs who a few years back struggled to secure funding to launch their businesses are today more likely to gain the backing of financial institutions.
The trend may gain further momentum now that a number of startups have managed to scale their operations and attract international buyers, says Herve Cuvilliez, a co-founder of Lebanese-based regional news platform Diwanee.
Diwanee, a digital media company that specializes in content creation targeting women in the Middle East, was recently acquired by French digital publishing company Webedia.
“The deal proves that international companies aren’t afraid to acquire a Lebanese-based or regional company, and I believe more deals will follow, which will encourage financial institutions to invest more in the ICT sector,” Cuvilliez says.
Cuvilliez didn’t disclose the financial terms of the deal but told The Daily Star that it was one of the biggest involving a startup from the Middle East.
According to a number of reports, Webedia made an investment of $12 to $15 million for a majority equity stake in Diwanee, which was valued around $25 million.
As part of the deal, Webedia also injected an additional $5 million in cash into Diwanee.
More important than the cash injection, according to Cuvilliez, is the technological dimension that Webedia is now helping Diwanee with.
“Online publishing is a business with a very large technological dimension, especially when it comes to new advertising techniques such as targeted and real time advertising,” Cuvilliez explains.
“We reached a point that requires us to develop our advertising techniques to be able to compete for advertisers with larger companies in the Middle East. There is no way that we could have made that investment alone on the regional level.”
Diwanee’s most recent round of funding prior to its acquisition by Webedia was a $3.25 million private placement last year by MedSecurities Investment, a BankMed subsidiary.
Diwanee has a predominantly female audience of over 5 million monthly visitors, with a portfolio of sites that includes such subjects as fashion, beauty, entertainment and ecommerce. Webedia attracts over 40 million monthly visitors to sites of the same category.
The similarities between the two companies allow them to share and co-develop the same technologies, Cuvilliez says. “An industrial partnership with Webedia makes sense from a financial point of view.”
Diwanee generates most of its revenue from advertising and branded content, with 70 percent of its visitors coming from GCC countries, while the remaining 30 percent are from the Levant, Egypt and other countries.
As a result of its acquisition by Webedia, Cuvilliez expects Diwanee to double the number of its monthly unique visitors in the next two to five years and increase its audience in Egypt and the Levant.
A short-term goal for Diwanee is also to begin monetizing in 2014 and 2015 its traffic originating from the Levant and Egypt and to grow its ecommerce platforms, which also generate a part of its revenue, Cuvilliez says.
A subscription-based model to generate profits is not on the menu in the short to medium term, Cuvilliez adds, arguing that offering paid content in the Middle East requires further growth in online payments and credit card penetration.
“Instead, we will be looking in the future into selling subscriptions to premium services within our websites,” he says.
Diwanee, which has offices in Dubai, Belgrade and Beirut, currently employs around 130 individuals, with the majority of its staff based in Lebanon. Following its acquisition by Webedia, Diwanee hired 15 more employees for its office in Beirut.
“Most of our websites content is generated in Beirut, whereas the technology operations are handled in Belgrade,” Cuvilliez says.
Despite the high Internet cost in Lebanon, Cuvilliez says the total cost of operating in Beirut is cheaper than other place, particularly when taking into account the country’s highly skilled workforce.
“It is true that we are paying much more for an Internet connection in Beirut than in Belgrade. But it is also true that it costs a lot more to hire people in Dubai than in Lebanon, which is a country rich in talent.”
Source: The Daily Star