Online businesses in the Middle East need more nurturing, says one of the region's early internet pioneers.
Ihsan Jawad, a partner at the technology incubation company HoneyBee Tech Ventures (HBT), based in Dubai, says investors are still risk averse when it comes to online start-ups.
HBT has launched two Web businesses - a jobs site called Laimoon and a restaurants app RoundMenu - and has an e-commerce-related site under development.
Ten years ago, Mr Jawad co-founded the Zawya business portal, which this year was acquired by Thomson Reuters for about US$40 million (Dh146.9m).
Here, Mr Jawad talks about where the online industry stands today, especially given the rise of daily-deal websites such as Groupon and Cobone.
More than 20 daily-deals websites have launched in the UAE. What's your view of that segment?
It's not really a sustainable business model. For the small merchants [that take part in the offers], it's very detrimental to their business in the long term, and sometimes in the medium term. They get an injection of morphine to get a lot of traffic. But it damages the business because it's not sustainable.
Does LivingSocial pulling out of the Middle East suggest it's hard to create a viable online business in the region?
We did [create a viable online business] with Zawya and we're definitely going to do that with Laimoon and RoundMenu. But there is no ecosystem in this part of the world like there is in the United States or Europe. We think technology ventures need more nurturing and more hand-holding. The investors are scarce. Large businesses have not developed big trust with new digital start-ups. And the number of people on the internet is limited compared to what you have in the US or Europe.
So is it hard to raise funding for online start-ups?
People are still very risk-averse in this part of the world. They've seen a lot of ideas - especially on the internet - come and fail. The internet has made it very easy for people to set up business. There's a low barrier to entry - but that doesn't mean you'll succeed.
You raised $730,000 funding for your RoundMenu restaurants app. How did you manage that?
The thing about HoneyBee is [its partners] do have a track record with Zawya. And there is a trust element that comes from that.
What is your forecast for break-even on your projects?
You'd expect a break-even and profitability in between two to three years. This is the investment horizon we are targeting.
Is HoneyBee open to ideas from outside entrepreneurs?
We're talking to a few guys. The idea behind HoneyBee is that it is not a [venture capital firm] as such - it is more of an incubator that focuses on digital ventures for the region, or maybe beyond. But we're not putting up a big sign that says, 'Welcome all entrepreneurs'. We don't have a fund - we're investing our own capital. And it's one venture at a time.
* Ben Flanagan