A Saudi unicorn in the making

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Thank you once again for joining Termsheet.

(If you’d like to know who am I and why have I started this, you can skim through the details here.)

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Not Stc Pay (if that’s what you’re thinking - after reading the subject).

If you’re someone who’s keeping a close eye on what’s happening in the startup ecosystems across the Middle East, you’re probably aware of Western Union’s $200 million investment in Stc Pay which was announced a week ago.

The deal that still needs regulatory approvals (probably a formality) valued Stc Pay at $1.33 billion. Stc Pay and its parent company Stc, which is the largest telecom company of the region, celebrated the news by calling itself the first Saudi unicorn, and the first fintech unicorn of the region.

Its status as a unicorn can be debated as Stc Pay doesn’t exactly qualify as a startup. It is a subsidiary of a publicly listed telecom company and as a result of this deal now has one more entity on its cap table.

But, as I said, this Termsheet is not about Stc Pay. I’ll probably discuss it in a different edition. Today, I am going to talk about another Saudi startup.

(If you’re still interested in reading more about Stc Pay, here’s a piece I wrote about them after trying their cross-border money transfer service - which is powered by Western Union - for the first time.)

Startup Trivia

Question: What was the codename of Careem when Mudassir Sheikha and Magnus Olsson had just started working on it? They were, in fact, still exploring different ideas - but this project had a code name.

You can find the answer at the bottom.

A Saudi unicorn in the making

In 2006, a student at King Fahd University of Petroleum and Minerals wanted to message an entire student body (that had close to 400 members) about a particular event but there was a problem. He could text only 10 people at a time using his phone and using the phone also meant that there was a limit of 160 characters. Being a Software Engineer, he knew that there had to be an easier solution.

He called his younger brother, a computer nerd, to see if he could help him with it. And the nerd did not disappoint. Four months later, the two brothers created a website that could be used to send a text message to multiple recipients in one shot.

All one had to do was enter the phone numbers and message, in the website and hit the send button.

It solved the problem at hand but the website also gained popularity with word of mouth (apparently first in the university and then) outside the university with people using it to send SMS invitations for family gatherings, weddings, and work events.

They were making a small amount of money by apparently charging people to send the bulk messages but it was still not a proper business.

The duo decided to launch a proper venture around the website in 2008 and that’s how the company that is today known as Unifonic was born. (I am not sure about what it was called back then). The student at KFUPM was Ahmed Hamadan who co-founded the company with his brother Hassan.

Many were still using it to send wedding invitations - and it’s because of a user who sent wedding invitations using the website that the company earned its first big break with Toyota Saudi Arabia joining them as a client, in 2010. An employee there had used the service and that’s how the company learned about the website and started using their services.

There’s very little known about Unifonic’s journey from that point onward as the founders and the company were very low-profile. But by 2013, they were able to turn that simple website into an API-powered cloud-communications platform (also known as Communications Platform as a Service or CPaaS).

What it does: Unifonic enables companies of almost all sizes communicate with their customers for different purposes through three channels: SMS (that it had started with), Voice (that it added a few years later), and WhatsApp (which is its most recent product). So basically all the authentication codes that you’re required to enter when you’re using online banking, for example, are sent by using (API of) a service like Unifonic.

It today serves over 5,000 businesses with these services - responsible for more than 5 billion transactions (messages, calls, etc.).

Unifonic makes money every time a message is sent or a call is made by the businesses that are using its services. In some cases, the money comes in by selling bundled plans as well.

After being low-profile and bootstrapping the business for over ten years, Unifonic raised $21 million in what was the largest-ever financing round of the time for a Saudi startup, in October 2018. The investment was led by the region’s largest VC fund STV. It stayed in the news cycles for a few days and then went back to being a low-profile startup which was now backed by some of the leading investors of the region, and Endeavor Catalyst.

What set Unifonic apart was the fact that it was profitable at the time it secured this investment. As it was being bootstrapped all these years, it is safe to assume that Unifonic was profitable from its early days.

Its current annual recurring revenue from what I have been able to learn is over $70 million, which would put it in the company of elite scaleups of the region (and beyond).

For context: Twilio, the world leader in CPaaS, has reported a revenue of $1.2 billion for the first nine months of 2020 - that translates into $1.6 billion annualized revenue - which means that the company is trading at a 30x revenue multiple.

I am not suggesting that we could use the same multiple for a company like Unifonic.

MessageBird, an Amsterdam-based similar platform (which is also known as Twilio of Europe), recently raised $300 million at a valuation of $3 billion, last month. It was reported that the company is on track to do a little over $350 million in annual revenue which is roughly an 8.5x multiple. MessageBird serves 15,000 customers.

Stockholm-headquartered publicly listed company Sinch is also in the same business. It should bring in about $800 million in revenue this year. It currently has a market cap of $7.2 billion. Multiple? 9x.

Even though all these companies, including Unifonic, are in the same business, they’re obviously different from each other in many ways (including their offerings). These numbers alone cannot be used to get to a valuation. There’s a lot more that you would need around EBITDA, churn, CAC, LTV.

But what they do tell us (if the $70 million ARR number is true) is that Unifonic today is worth hundreds of millions of dollars and it is on its way to a billion-dollar valuation. The unicorn status for Unifonic, IMHO, is only a matter of when.

It is the first software unicorn of the region in the making.

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What’s up

Speaking of software startups from the region, the last few weeks have been really well (at least in terms of raising $$) for them.

  1. Salla, the Saudi startup that has been building a Shopify for the Arab world, has raised $8.5 million in a Series A led by STV. It is the first SaaS startup in the region that STV has invested in. Salla enables individuals and businesses to build online Arabic stores with its Arabic-only platform.

    Here’s the interesting part: In 2018, when Salla had raised its seed round (from Vision and Raed), they had 8,000 online stores built on their platform and had facilitated a GMV of $2.6 million by then. In their latest announcement, they now claim that the stores have processed 8 million orders with a total GMV of $533 million to date. So they’ve added $531 million of GMV in about 30 months.

    The number of stores they serve now, according to their website, is 10,000. But this 10,000, Salla’s founder has told me, refers to the paying customers only. It does not include the users of the free tier. (The numbers from 2018 - 8,000 stores - included all the stores on the platform - free and paying merchants).

    What does this tell us: A lot of people and businesses are actually selling a lot of stuff online in Saudi without providing a cut to third-parties like Amazon and Noon. There may be a large number of sellers that are trying to sell on both their own platform and marketplaces but the large GMV proves (to some extent) that the independent platforms for SMEs are working really well.

    The increase in GMV is great for Salla as they’re empowering people to sell online but it doesn’t really have any impact on company’s bottom line as they charge a flat subscription fee from their sellers (without taking any cut).

    They have two subscription plans (in addition to the free tier): SAR 99 and SAR 299. Assuming that out of the 10,000 paying customers, 1,000 (10 percent) are using the SAR 299 plan, and the rest have SAR 99 plans, Salla’s ARR will be somewhere around $4 million.

  2. A similar Egyptian startup ExpandCart also announced the closing of their $2.5 million Series A led by Sawari Ventures earlier this month. ExpandCart is focused on omnichannel so in addition to their store-builder, they also have a POS that integrates with their store builder - so you can basically use them to manage both your in-store and online sales.

  3. Wuilt (also based in Cairo) has built a no-code website builder for Arabic websites. They recently announced closing of their seed round with half a million dollars. And with this money, they’re now building a new product to enable people to create their online stores.

  4. When you have people building their online stores, they’re obviously going to need different types of services to be able to serve their customers - including payments and logistics. Online store builders alone won’t cut it.

    Quiqup, a Dubai-based logistics startup has raised $5.5 million led by Delivery Hero (they’re just everywhere) last week.

    They offer different logistics services to retailers (online and offline), and even restaurants. The services include same-day and on-demand deliveries.

    So let’s say that you’ve built an online brand on Instagram selling cosmetics - delivering your products through a small courier service or maybe even shipping the orders yourself. Your next step would be to build a website and a mobile app around that brand with the help of a service like Salla, ExpandCart, Zid, or anything similar (maybe Shopify if it’s going to an English-only online store).

    And then for same-day deliveries, you partner with a player like Quiqup.

    The same goes for restaurants. To walk away from Talabat or any other aggregator of the region, you build your own channels using Taker, Blink, or something similar. And then have a service like Quiqup or RoadRunner pick the food and deliver it to your customers.

    Do you notice a pattern yet? The startups empowering individuals and businesses to go independent or reduce their reliance on marketplaces are receiving both attention and money from investors.

    You never know, they might end up helping someone in the region build the next Huda Beauty or Shawarmer.

A startup to keep your eye on

One startup that I really like from these new players trying to help businesses and individuals sell (more) online is Blink. It’s basically Shopify focused on quick commerce, enabling the businesses to build their branded websites and mobile apps.

So if you’re a business selling products that the customer expects to receive right away after placing an order, you’re potentially a target customer of Blink. Restaurants, grocery stores, pharmacies - or anything else that you can think of.

Blink had originally started as Eat Mubarak, a food delivery platform in Pakistan. They pivoted with the launch of their SaaS offering earlier this year and are currently serving customers in the UAE, Saudi, Qatar, Iraq, and Pakistan.

What I like about them:

1) They’ve previously tried building a food delivery platform. In the process, they’ve learned a lot about the problems faced by restaurants and how they can solve them with an offering like Blink.

2) They’re focusing on mid-to-large clients.

3) Their CEO.

There are some other interesting details that I know but as they’re not part of the public record and I have not obtained their consnet, I won’t be sharing them.

Beyond emerging markets

Charli D'Amelio has become the first person to get 100 million followers on TikTok. This is super interesting because:

Everyone who reached 100 million followers or likes on the leading social media platforms including Facebook, Instagram, and Twitter was a celebrity before they joined these platforms. On Facebook, it was Shakira, in 2014. For Instagram, it was Selena Gomes, in 2017. And for Twitter, it was Katy Perry in 2017.

Charli, on the other hand, became a celebrity because of her TikTok videos - that she had started posting in 2019.

It is not just Charli. TikTok has created thousands of influencers across the world that have become insanely popular in almost no time in their countries. And some obviously have been able to build a global audience.

It is still not used as an effective marketing channel - at least by the smaller brands/startups - in the region. I am not talking about investing money in TikTok ads. That should also be an option but for now what I am referring to is having a presence on the platform and using it whenever there’s an opportunity to engage with the audience there.

Ask an Expert

In this section, I am going to help the readers of Termsheet get their general questions about startups and venture capital answered by the experts in the region. You can share your questions using this form. Please keep in mind that it has to be a general question - something that other readers could also benefit from - e.g. asking your favorite entrepreneur from the region about how they got their first hundred customers.

For this first edition, I have taken the liberty (even though I am not an expert) to answer a question about startup PR.

How do you get your startup covered by online media outlets?

You have to pitch your story to a specific person at the outlet. Unfortunately, many in the region have an assumption that for getting their work covered, all they have to do is draft a press release and send it to media outlets - and the outlets are obliged to cover them.

That is almost never the case. Yes, some websites (NOT media outlets) publish press releases about startups in the region and they would probably happily cover you as well by pasting the release as it is, on their website.

But if you’re looking to get your startup covered by any reputable media outlet, you need to do some basic research on who writes for the outlet, what kind of stories are they usually writing about, which part of your story could be interesting for them/their readers.

After doing this research, write your pitch in an email keeping these things in mind with a document that has more details on the story or your startup (it could be a version of your deck minus details that you don’t want to go public or a press release) and send it to the person you’ve identified at the outlet (someone you think is best suited for what you guys are building).

You can send a follow-up email a few days later but don’t try to chase the writers or editors on their Facebook, WhatsApp or phone. And more importantly, don’t think that a media outlet is obliged to cover your story.

(This is a quick answer. There’s obviously a lot more that I’d like to share on this but let’s leave that for another edition of Termsheet).

Termsheet Numbers

I will share the progress Termsheet makes on a regular basis with you. It currently has 494 subscribers - most of which signed up after I wrote about it on social media. First, there was a subtle mention in one of my posts that brought about 50 subscribers and then I wrote a dedicated post about why I am starting it - which has helped me gain more than 400 subscribers until now.

In the next edition, I’ll also be able to share the open rate and some other details.

Answer: Project Bamboo.

Your feedback is super important to help me improve the Termsheet. If you enjoyed reading this, please spare a minute to share what you liked and things that can be improved (or added as new sections).

See you next week.


The issue was updated (in the archive on the website) after it was sent out with the details about stores Salla hosts on its platform after receiving some updates from their team. The original newsletter had noted that Salla in 2018 at the time of its seed round had 8,000 online stores using its platform. The number of stores it hosts now is 10,000 but these 10,000 stores refer to its paying customers only.