SME profile: Start-up funding just the ticket for Presella
In September 2012, with only one semester left before graduation, Walid Singer dropped out of his bachelor’s degree in marketing and events management at the Lebanese American University, and decided to throw himself entirely into the life of a start-up entrepreneur.
“I was desperate – I was in a very expensive university in Beirut, and couldn’t afford it,” he says.
So that month, Mr Singer attended an “event party” at Seeqnce, a two-year-old, Beirut-based accelerator founded by the serial tech investor Samer Karam, where 400 budding tech entrepreneurs met to find new business partners and brainstorm ideas. Mr Karam decided that Mr Singer, with his events background, should work with Louray Kadri, an engineer, Ali Koubeissi, a developer, and Karim Muhtar, a graphic designer.
“You’re a business person, here’s a designer, a developer, and an engineer – yalla, it’s an obvious marriage,” Mr Singer remembers Mr Karam saying.
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Mr Muhtar, who moonlit as a bassist in a local band, had a problem. Getting people to actually show up to his concerts was difficult. You don’t want to plan an event that nobody shows up to – so being able to guarantee a certain number of ticket sales before the event begins would be ideal. But, Mr Muhtar realised, the ticket buyer would also want to guarantee that enough people were going to attend before committing to going. How, then, to guarantee that events cross this threshold?
“I’ve been an event manager for the past 15 years,” says Mr Singer. “I’ve always had the problem of not knowing ahead of time whether an event will go through or not.”
One way to solve this problem, Mr Singer, Mr Muhtar, and team reckoned, would be apply the crowdfunding model to event management. If people would be willing to commit in advance to events – and would have the safety net of getting a refund if not enough people bought tickets – then both punters and bassists could guarantee that an event would be at least tolerably full.
“Incurring all the costs [of booking an event] is a big problem – so having a website where you can crowdfund events eliminates that risk,” Mr Singer says.
At the end of this train of thought, three months later, Presella was born.
Early on in launching the website, Mr Singer and team noticed that companies were just as interested in selling tickets to existing events as crowdfunding hypothetical events. In its first year, Presella was focused solely on Lebanon, but Mr Singer has now relocated to Dubai.
Getting the capital needed to grow is the company’s main challenge. “We are up against old industry experts who have been in the industry for 10, 20, 30 years. They’re already very well funded because they have existing overheads and revenues. We need funding so that we can take a bite out of their market share,” says Mr Singer.
But the funding obstacles for small companies in the Middle East aiming to grow big are numerous, as has been well documented. The IMF reckons that loans to SMEs account for only 4 per cent of issued bank loans, while the Dubai SME Agency believes that 80 per cent of start-ups don’t have access to bank credit. The terms offered by retail banks to SMEs, even when loans are extended, are usually stringent.
“Getting funding for a start-up isn’t easy in the Middle East. There aren’t enough angel investors, the Series A funding round [a start-up’s first major sale of equity to venture capital and private equity firms] is misunderstood – investors think Series A firms must already be profitable – and the start-up scene in the Middle East hasn’t matured yet, even though it’s well on its way,” says Mr Singer.
So far, Presella has had two successful rounds of funding, and is seeking its first round of Series A funding. Presella got US$76,000 in funding from Seeqnce, and completed a $300,000 funding round in 2013. That followed a Lebanese central bank initiative to boost start-ups – where the bank promised to underwrite 75 per cent of any investment in a start-up. The cash so far has been spent on “in-house developers to build the website and mobile app, design expenses, incorporation costs and salaries for business and development team”, says Mr Singer.
Presella is now seeking $1.5 million from a Series A round. That will enable the company to “saturate Dubai and Beirut – and then target Qatar and Jordan”. Series A is the “key to Presella’s future success,” Mr Singer says. It will allow the company to “hire staff, expand, be more aggressive, [buy] a lot of advertising and marketing, placements, and find offline locations to sell tickets”.
High investor expectations, and a relative paucity of early-stage angel investors means that the tech scene can be unforgiving.
Without cash, it’s difficult to get people to commit to working on a project. “If you’re not a well-funded start-up, you’re messing with employees’ lives,” says Mr Singer. Eventually two of the founders, Mr Muhtar and Mr Koubeissi, left the company because of the difficulties of raising enough capital to grow the business more quickly, according to Mr Singer.
Cash troubles, a shortage of skilled staff, and the lack of success stories and positive network effects these produce, are all familiar troubles for Middle East entrepreneurs. “Just like any other industry, you need a portfolio of good results. [The sector] needs more investments, more press coverage – we need people to see that these companies can become the next Twitter, the next Eventbrite, if you give them a chance,” he says.
Mr Singer plans for Presella to go global: “You need an idea that must be viable in the US and Europe. For Presella, we’re considering a global play, not a local play.” And he wants everybody to learn just how important computer science and the tech sector are for changing people’s lives. “I want my kids to use WhatsApp and know that it was sold for $19 billion by a bunch of guys who couldn’t work for KFC,” he says.
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Updated: October 3, 2015 04:00 AM