PS: Context matters. The F bombs he is referencing were out of sheer surprise, not anger 🙂
The Sweet Spot Of Talabat’s Business
Talabat is the first tech unicorn of Kuwait, and it could be the last.
Mijbel broke the news in the Startupq8 whatsapp group..
“Guys, we got our 1st +100m startup.”
The reactions have all contained versions of the F-word. And rightly so. Talabat has managed to unseat Maktoob with a ~$170 million price tag and take over the title of Middle East’s Biggest Acquisition in tech. The hard work that put Talabat and, consequently, Kuwait on the map shouldn’t be understated or dismissed as money laundering.
Just a few days ago, a friend of mine asked me to look him in the eye as he told me to give up on tech startups in Kuwait. “Ma yamshi 3endena,” he said. I have to admit that I believed him for a second. My faith is renewed.. but I have to say this: I don’t think there’ll be another Talabat-size acquisition in the next 5–10 years coming from Kuwait. Well, maybe the game developer Lumba Inc. can pull it off. Maybe the guys at Nabdh will. But it’s incredibly hard to match that 9 figure. The reason has nothing to do with the lack of talent or hard work — although Kuwait generally has to make up a bit on that front.
Talabat was and continues to be in a sweet spot. Between Moh’d Jaafar’s purchase of Talabat in 2010 for USD ~$3 million and the sale at ~$170 million, the market had matured significantly. But why has it been so good for Talabat especially?
Well, here’s my best explanation..
Talabat offers value at the very base of Maslow’s pyramid — food!
Startups at every level on Maslow’s pyramid have been valued/acquired with greater valuations (e.g. whatsapp, instagram). But the catch is this: the closer you are to the base, the higher your average customer lifetime value, and consequently, you’ll need fewer of them to achieve the high valuation. In the case of Talabat, they offered a service to an essential and frequent need. That commanded a decent CLTV.
Why does that matter? For a Kuwait-based startup, you have to operate knowing that your target market (Kuwait, or GCC) is a fraction of, say, the US where we usually see those high valuations. In a realistic best case scenario, you can take on all of the Middle East — but most of the Middle East is unbanked. In fact, the population size of those who have bank accounts and live on more than $5/day are estimated to be only 45 millionfor all of the MENA region, including the Gulf. With smaller markets, transaction frequency matters.
Talabat is piggybacking on the growth of four overlapping macro factors..
- growth in household income levels & purchasing power,
- growth & innovation in the restaurant industry,
- changing consumer habits towards lazy on-demand meals, instead of home cooked. My mom knows this one too well.
- growth in mobile penetration and usage. The shift from desktop to mobile upended the entire tech industry, but not Talabat, which positioned itself well to serve the always-on mobile customers.
All without the operational headache of running a restaurant chain
Several entrepeneurs have started amazing food concepts and are doing remarkably well. PICK is one of my favorite examples. But the sheer challenges that surround the operations — expanding physical locations and kitchen to mention two — can wear down any energetic, focused and hard working entrepreneur. This is not to understate the challenges that Talabat faced, but to emphasize that scaling a technology-based business that exists largely online can be done relatively faster, especially in a country that ranks low in the business friendliness index (and dropping every year).
It managed to convince businesses and customers to pay a small fee on every transaction
I asked friends to help come up with alternative startup ideas that fit all these criteria combined: a scalable tech, a sizable market, a transaction-based revenue model, and a frequent need. We failed.
Talabat is the first tech unicorn of Kuwait. And it could very well be our last. That being said, there’s still hope for the rest of us at the 6–8 figure level. Cheer up amigos!