Did The Technology Industry Reach Its Plateau?

The Technology Hype

There is too much hype around staggering technology startup valuations, unicorns, Apple’s cash position, Alphabet’s vision, and many more. Most of what I hear and read is whether or not the technology industry reached a plateau. Partly the reasoning is the exaggerated valuations, sometimes lavish life style of few technology entrepreneurs, and whether we really want so much new features in our mobile devices, or augmented reality?!

The Scope of the Research

That’s a very broad subject, and I spent time researching various angles that can tackle some of the questions that arise towards the technology industry. In essence, I decomposed the questions I want to answer based on different stakeholders:

Venture Capitalists: Should we raise a new fund? Should we continue investing in more startups? Is there enough room for mergers and acquisitions activity so we exit our positions?

Entrepreneurs: Should I start a new tech startup? Doesn’t it seem a bit too much crowded now to start yet a new startup? Would the big boys with big bucks have any interest/capital in the next 5 years to buy out my startup?

Executives of tech companies: How much more room we have for growth? Can we still play the acquisition game to grow our market share?

Methodology

Obviously, those questions cannot be answered in a one page blog post. However, a simple yet data driven approach can give us amazing insights into answering them.

Business Consolidations

Industries go through four stages until they become so called “mature” or “stable”. Based on the article “The Consolidation Curve” in Harvard Business Review, the four stages are Opening, Scale, Focus, and Balance and Alliance.

Briefly describing, the article tackles the consolidation curve of industries by measuring the market share of the top 3 players of the industry.

  • Opening: A monopoly that soon vanishes and the top 3 players control between 10% to 30% of the market due to an influx of competitors.
  • Scale: Major players emerge and buy up competitors. Top 3 players control between 15% to 45% of the market.
  • Focus: Top 3 players focus on aggressive growth and control 35% to 70% of the market. Still 5 to 12 major players are around.
  • Balance and Alliance: The top 3 players control about 90% of the market and form alliances between themselves.

Current Market Analysis

So if we take that segmentation as a basis to find out how much the technology market has emerged, and how much growth can it still absorb, then what we need to find out is how the top 3 players of the technology market stack against the entire market.

Unicorns and Listed Companies

My assumptions going forward would be the following:

  1. The basis of the research is the United States market.
  2. Listed Technology companies in the NASDAQ market comprise all the publicly traded technology companies. Link to the list.
  3. Private technology companies that matter are the Unicorns, i.e. startups that reached beyond the $1 Billion valuation. Link to the list.

Total Addressable Market

Screen Shot 2016-05-26 at 10.59.44 AM

Top 3 Players of the Tech Market

Screen Shot 2016-05-26 at 10.59.54 AM

Scale Stage

Sum of the top 3 players’ market shares is: 27.9%. This puts the Technology industry into the second stage of scale based on HBR’s article.

So What Does This Mean?

To answer the questions we addressed at the beginning, we need to take a look at the scale stage. Here’s how it’s described based on HBR’s article:

Because of the large number of acquisitions occurring in this stage, companies must hone their merger-integration skills. These include learning how to carefully protect their core culture as they absorb new companies and focusing on retaining the best employees of acquired companies. Building a scalable IT platform is also crucial to the rapid integration of acquired firms. Companies jockeying to reach stage 3 must be among the first players in the industry to capture their major competitors in the most important markets and should expand their global reach.

This describes the rapid M&A activity by large players trying to acquire as much good startups as possible to ensure their own survival. In summary, the answers to the questions would be:

Venture Capitalists: Should we raise a new fund? Should we continue investing in more startups? Is there enough room for mergers and acquisitions activity so we exit our positions?

Answer: In short: Yes. There is still room. However, funds should predict the estimated timing of stage 3 of the market. VCs should focus on growth startups in the industry’s transitioning phase into the third stage. Reason why is that the big players won’t have enough time to buy out startups at early stages and can only accommodate growth startups that will immediately add to their top lines and make fast synergies with their businesses.

Entrepreneurs: Should I start a new tech startup? Doesn’t it seem a bit too much crowded now to start yet a new startup? Would the big boys with big bucks have any interest/capital in the next 5 years to buy out my startup?

Answer: While entrepreneurship is always encouraged, and one should be dedicated to growing his/her company, I think with the tech scene becoming too crowded, tech entrepreneurs should have a solid idea regarding their possible exit strategy to one of the major players in the technology scene. That may seem trivial but from personal experience, I see lots of startup founders tackling legitimate problems but not having an idea about their exit strategy. Also, it does not necessarily mean that the exit synergy should ONLY be with Apple, Google, or Microsoft. Although these three are the giants, other major players are still very legitimate options since the industry hasn’t gone through the third stage yet.

Executives of tech companies: How much more room we have for growth? Can we still play the acquisition game to grow our market share?

Answer: Yes. There is plenty of room to grow. 27.9% of the market is way behind the 90% mark. However, acquisitions should be targeted smartly in various verticals in the sense that not only adds to the top line directly, but also makes it harder for the competitors to join that specific vertical. In short, release products and acquire startups revolving around the product to make the barriers for entry in that product’s vertical harder bracing for an aggressive competition in stage 3.

StartupQ8 Event for April reveals a secret to Silicon Valley

On April 24th, we hosted our monthly event which was extra special thanks to guys from Flexport, and our panelists Dr. Mussaad Al-Razouki, Philip Pasler and Abdul Qader Hussain.

The event was held at Mefazec, a venue provider for Coded’s spring bootcamp. It started along with Flexport team, Sanne Manders and Ryan Petersen, who talked about their startup path.

If you weren’t familiar with this San Francisco based startup before, it is a licensed freight forwarder that uses people and software to manage the complexity of international trade. It is also a Y Combinator and Google Ventures backed startup that has been featured in Bloomberg, Forbes, and others. They move lots of air freight and thousands of containers of ocean freight every month, and also provide all the necessary coordinating functions.

During the talk, Sanne mentioned that startups need to concentrate on a customer experience and not look so much on a marketing, shareholders etc. According to him, focusing on a customer experience is the key to a Silicon Valley.

The other part of event was dedicated to angel investor and VC panel where entrepreneurs and investors discussed fundraising for startups. White answering the questions from the audience, Dr. Mussaad emphasized the importance of a good team. Investors don’t invest in your idea, they invest in you and your team. So, if you are running a startup, be sure to find the right people for your team – not only because of potential investments, but your business and success.

After the event came to its end, we rounded it up with networking with pizza as we usually do.

Keep an eye on our Instagram and Twitter account and be the first to find out about StartupQ8’s events!

Announcing: StartupQ8 Event for April 2016

We have an extra special event on Sunday (April 24), with global startups and investors!

Our first speakers will be Ryan Peterson & Sanne Manders from Flexport, a freight forwarding startup out of San Francisco. Flexport is a YCombinator & Google Ventures backed startup that has been featured in Forbes, Bloomberg, WSJ, among others.

Their team will speak about the Flexport story and how it’s revolutionizing international trade.

Following that, we have an Angel Investor & VC Panel featuring Dr. Mussaad Al-Razouki, an entrepreneur and regional investor, alongside Abdul Qader Hussain, a seasoned investor and former consultant with AT Kearney, and Philip Pasler, a Berlin based investor and healthcare sector consultant.

The event will be held Sunday (April 24) @ 7.30 pm at @Mefazec (Alhamra Tower, 16th Floor). Here is the schedule

7:30– 7:35 Welcome
7:35 – 8.20 Flexport
8.20 – 8:30 Break
8:30 – 9:15 Angel Investor Panel
9:15 – 10 Networking pizza
. . .
As always, the event will be in English and it is open to everyone (no need to register). Check our blog more info.

See you there!

When the Oil Wells Run Dry: The Industry That Can Save Us

This article appeared in Khaleejesque Magazine, INDUSTRIAL Issue, published November, 2015. It is published on this blog with the consent of the author and magazine. All credits and copyrights are reserved to Khaleejesque, 2015. Click here to subscribe to Khaleejesque, or follow them on Instagram @Khaleejesque 

Author: Hashim Bahbahani

Magazine Artwork: Reema Motib

5 min read.

On April 15th, 2015 there was an incredibly important global announcement that went unheeded by the Khaleeji mass media and general population. It was an announcement that could propel a series of life altering implications for every Khaleeji citizen.

The announcement, which was kept secret for months, was made by Tesla Motors CEO and founder Elon Musk. Musk revealed that Tesla had invented and commercialized the Tesla Powerwall, a new “home battery” powered completely by solar panels that could potentially power an entire house for a fraction of what conventional electricity would cost.

The goal of the solar powered home battery is to lessen the demand and reliance on petroleum and gasoline. In other words, with Tesla’s Powerwall, the world is a step closer to needing a lot less oil.

While Tesla’s battery on its own will never be enough to completely wipe out the demand for oil, it does signal the start of a realistic and feasible movement away from gasoline and into other more sustainable energy resources. The thing to remember about technology is that it grows exponentially, and there is no reason why that wouldn’t be the case with alternative energy. In fact, since President Obama took office, the United States “has increased solar electricity generation by more than twenty folds”, according to the White House official website. It is not unfathomable to think that the world could start harnessing alternative energy more efficiently, and almost completely move away from a reliance on oil in the course of the next twenty years. That is not as long away as it seems.

So what happens to our Gulf when our oil is no longer needed – no longer pumped – and all the oil wells dry up?

It is a predictable and daunting scenario. The Arabian Gulf is barren of valuable natural resources. The climate is unbearable, and the current infrastructure is unsustainable without a continuous influx of money and natural energy. Deprived of oil, the economy cannot support the current population.

We could be facing impending socio-economic extinction without even knowing it.

But there is still hope; there is still time.

Beyond investing in alternative energy, the Gulf must look to build an industry that is capable of surviving in a post-oil world; an industry that can vitalize an economy without depending on natural resources. But it also has to be an industry that is considerable and substantial enough to provide economic vitalization to the region.

The only industry that fits into that mold is the software technology industry, or as it is more commonly known “the tech industry.” This industry is built fundamentally on human intelligence. When it comes to developing software, there are no substantial hard assets in play, nor is there any significant reliance on natural resources. The rise of any tech sector is almost purely dependent on the capabilities of the people involved in it.

Undoubtedly, a strong tech sector can invigorate an economy. Today, two of the five highest valued companies in the world are software companies, Google and Microsoft; seven of the top thirty are highly involved in software engineering. In the U.S., the software technology sector provides the highest paying jobs, and consistently beats new employment figures for all other sectors, including oil and gas. Jobs in the tech industry are high in both quality and quantity.

But above all else, there is one factor that makes the tech industry our best bet for economic survival: speed. We, the GCC Nations, need to start realizing that time is no longer on our side. The biggest danger we face today is that we are in voluntary oblivion of the ever accelerating possibility of economic demise. If the demand for oil drops significantly, the ramifications will hit us hard, and they’ll hit us very quickly. Will we wonder at that time how we could’ve been so oblivious to our collective fragility?

Successful technology companies can give rise to a strong tech sector relatively quickly. The nature of software products allows technology tech startups to scale and grow at lightning speed. Take, for example, Uber, the real-time ride request platform. After only six years of existence, Uber has reached a valuation of approximately $50 billion. To put that in perspective, Uber is already bigger than gigantic companies that have been around for decades, like Deutsche Bank, Sony, Phillips, FedEx, and many more. Another example is Google, which, only after sixteen years of existence, employs over 55,000 people, providing those employees with unparalleled pay and benefits. The examples are endless.

If the right steps are taken, there is a real possibility that over the next twenty years the Gulf can transform into a new Silicon Valley and a breeding ground for global tech giants. A Khaleeji tech hub will also attract entrepreneurs to establish their startups in the area, and thus increasing the possibility of more successful tech companies blooming out of the Gulf. The main economic value for the region will come in the tax revenue captured from the financial success of these companies. Another important economic value will be in job creation, as large tech companies can provide high paying jobs at different levels and across a wide variety of specialties.

So what needs to happen for the dream of a Khaleeji Silicon Valley to become a reality? The task of establishing a dynamic tech industry is monumental and complicated. But it is highly possible nonetheless. In broad terms, there are three fundamental steps:

–   The current surplus of money from the oil and gas sector must be invested in building a technological infrastructure – internet and network systems, mobile connectivity, etc – to support software innovation. Additionally, governments must systematically invest in startups that might appear too risky for private investors.

–   Governments must revise rules and regulations surrounding software technology companies and e-commerce to allow companies to scale and grow to their maximum potential without unnecessary barriers.

–   Most importantly, the private and public sector must take a proactive approach towards developing and cultivating software engineering talent. In other words, we need to invest in producing better coders. Remember, the success of any tech sector is mostly reliant on human capabilities and intellect. The best way to produce world-class programmers is to provide Khaleejies interested in coding with the right education and training. It’s simple, but imperative. Recently, I co-founded “Coded”, the first coding academy in the Gulf, with a mission of offering world-class software engineering education to aspiring young men and women in Kuwait. Our hope is that Coded is the first of many local coding schools that aim to cultivate a new generation of topnotch Khaleeji coders.

Today, the Gulf is ripe to be a new global tech hub. There is an abundance of private and public investment funds, high consumer purchasing power, and a plethora of market opportunities. But beyond that, there is an ambitious and daring generation that is passionate about turning their dreams and ideas into reality using technology and software engineering. Investing in that generation is our only true hope.

There is a dark cloud hovering on our Khaleeji horizon, edging ever closer to us. We have willingly chosen to ignore it thus far, unconcerned with the storm it carries within it. But if we act purposefully and quickly, we can prepare ourselves for what’s ahead. And we might – just might – catch a glimpse of a silver lining.

 

This article appeared in Khaleejesque Magazine, INDUSTRIAL Issue, published November, 2015. It is published on this blog with the consent of the author and magazine. All credits and copyrights are reserved to Khaleejesque, 2015. Click here to subscribe to Khaleejesque, or follow them on Instagram @Khaleejesque 

 

Building Your Startup Clan: Three Traits to Look for in Early Employees

This article appeared in Khaleejesque Magazine, CLAN Issue, published September, 2015. It is published on this blog with the consent of the author and magazine. All credits and copyrights are reserved to Khaleejesque, 2015. Click here to subscribe to Khaleejesque, or follow them on Instagram @Khaleejesque 

Author: Hashim Bahbahani

5 min read.

“Would you take this job if you had a medical diagnosis that says you only have a year left to live?”

If you were asked that question during the job interview you attended for the job you currently hold, what would’ve been your truthful answer?

Brian Chesky, co-founder and CEO of $20 billion lodging rental website AirBnB, directed the “one-year-to-live” question to candidates for the first few core job openings at AirBnB.

The question, while perhaps disturbing and extreme, aims to gauge the candidates’ passion and dedication for the company. It might be incomprehensible to expect that anyone would answer “yes” to that question given the miniscule size of AirBnB at that time. However, after four years of running a startup myself, I can understand the importance entailed in the answer to that question.

In the startup world, where there’s always a ceaseless debate on the validity of every step towards success, there is a rare consensus on founders hiring the first few employees: get it wrong and your startup will fail. It is that bluntly unforgiving. That is because the first batch of employees will have the biggest impact on the longevity and future success of any startup. At such an early stage, their contributions and shortcomings can make or break a company.

There are several factors to consider when hiring the first few members of your startup clan, mainly: domain expertise, education, professional background, and personality. But because startups are unique organisms with specific requirements for their survival and growth, there are other more fundamental character traits that early employees must possess. In my own startup experience, I progressively became more aware of which qualities in a candidate truly matter.

The following three traits are what a founder should look for in an early employee:

 

Dedication- belief in the startup’s mission

Think back to Chesky’s question. What he’s really asking is “do you believe in what we’re trying to do here passionately enough to dedicate your life to it?”

No matter how trivial or profound the purpose of your startup might seem, every member of the team must wholeheartedly believe in the venture’s ultimate objective. Often, founders are tempted to look for “hard working” employees. But I don’t believe that there is such a thing as innately hard working individuals. Rather, hard work is an organic result of pursuing a grand mission. Therefore, it is more fruitful for a founder to identify individuals who fully share their passion for the startup’s vision and goals.

Honesty- belonging to the clan

A startup is more than just a group of individuals working on a project. A startup is a family, with shared values, beliefs, and objectives. As it is true with any family, honesty is the backbone of collaboration and teamwork.

And while honesty in communication is imperative, there is an equally important form of honesty that cannot be understated: honesty in self assessing work-product. In a highly pressurized setting such a startup, it is easy and tempting for a team member to compromise the quality of their work because founders do not have time to check over every nook and cranny. Therefore, founders must hire individuals who share their standards of quality and excellence, and who have the integrity to autonomously hold their work to those standards.

That kind of honesty is what allows trust to thrive among members of a startup clan.

Curiosity- a willingness to learn

By the time I hired my sixth and last core employee at my e-commerce startup, I valued curiosity above all else in my team members.

True curiosity can often be mistaken for passing interest. There is a simple way to identify a sense of genuine and potent curiosity: look to see how much work and effort has been exerted in pursuit of an interest.

One of the people I was considering as a co-founder told me he was interested in becoming a triathlete. He had no experience whatsoever in the sport. He simply thought it was something he could do well. I was skeptical, and asked what he had done to pursue that interest. He told me he had already dedicated himself to a rigorous workout program, hired a personal running trainer, and had pinpointed a local triathlon in which to compete within a few months. I knew at the point that this person would not shy away from a challenge, and that he had the desire to constantly explore new opportunities.

Fortunately, I wasn’t mistaken. He led our business development team successfully, and has recently competed in an international triathlon competition.

In the ever-changing and dynamic world of startups, a willingness to learn new things becomes a team’s greatest asset. Founders must look for individuals who thrive beyond their comfort zone.

A founder is best advised to never compromise on any of the aforementioned traits when hiring, especially at the early stages of a startup. Those traits are always associated with highly motivated and talented individuals. A startup’s success hinges, above all else, on the core team; and a tightly knit team of dedicated, honest, and curious individuals is a force to be reckoned with.

Although it was spoken in completely different context, I can’t help but recall Margaret Mead’s famous quote:

“Never doubt that a small group of thoughtful, committed citizens can change the world; indeed, it is the only thing that ever has.”

This article appeared in Khaleejesque Magazine, CLAN Issue, published September, 2015. It is published on this blog with the consent of the author and magazine. All credits and copyrights are reserved to Khaleejesque, 2015. Click here to subscribe to Khaleejesque, or follow them on Instagram @Khaleejesque 

Customer Acquisition For The Newbie Entrepreneur

Customer Acquisition and Startup Failures

This is a post for newbie startup founders, and fresh entrepreneurs willing to land their very first set of customers. Often startups fail because of lack of customers (about 80% of the time). There are some obvious reasons for that:

  1. Founders are too technology/product oriented, they forget to connect with potential customers.
  2. The product doesn’t solve a real pain.
  3. The value proposition is too confusing and difficult to communicate

There maybe other reasons too, but I found those to be the most common occurring ones.

The Customer Acquisition Guide

You’re probably reading here to know a practical tip on customer acquisition, well, ask yourself these questions:

  1. How many potential users of my product did I talk to before actually building the product?
  2. Who tried my prototype?
  3. How many people praised my prototype? How many neglected it? How many said it’s awful?

The Steps to Customer Acquisition

  1. Read the questions again, and literally take a piece of paper (or an Excel sheet if you’re fancy!) and write down the names of people for each question.
  2. Now scratch the names of your family and friends who praise you no matter what you do, unless you strictly know they are pragmatic and objective people.
  3. Put an asterisk next to names who neglected your product, or said it’s awful.
  4. Now look at the list again, do anyone of those people made an investment in your product? An investment could be devoting their required resources to reach the goal you had for your product. For example, if you have an e-commerce app, the goal is to buy a product through your app, that’s an investment. For Instagram, an investment is to make an account and follow a few people and like their photos.
  5. If not, then you need to get back to your team, sketch a fresh new BMC, and start figuring out new value propositions by reshaping the problem, and the solution.
  6. After you’ve done that, get back to the list of people you made earlier, propose the new prototype with new value proposition, and record their feedback.
  7. If there is an investment, then you’ve nailed it. If not, redo the steps from all over.

Tips on Customer Acquisition

  1. Try to have a large number of people in step 1, since you’ll be filtering out the ones not needed.
  2. There is no magic number of people for your customer acquisition list.
  3. It’s not necessary to talk to your potential customers face-to-face, although it’s the most useful. You can use other channels such as Twitter, or plain-old Email.
  4. Try to expand the radius of your potential people, don’t think close friends and family. Tap into your college network, your past job, friends of friends, etc.
  5. It’s always better to show a product/prototype to your potential customers, than to just convey words and/or pictures. This way, you can immediately see if they’ll make an investment in your product and basically turn them into customers, rather than just get a verbal commitment that they will use your product!

The Conclusion on Basic Customer Acquisition

The idea here is to create a list of potential people around you, that you think may find your product attractive, and refine this list. Once you refine it, see if they have already generated revenue for you*, then they are already your first set of customers! If not, then the problem is either with your value proposition, your solution, or your implementation (the product). Go back to your team, refine those three things, and approach your potential customers again and see if they’ll do an investment this time. Redo until you hit the jack pot.

Also, don’t be shy to ask, if you’re too lazy to ask again or afraid you’re asking too much, then probably you need to rethink why you chose entrepreneurship!

 

 

* Or made a considerable time investment in your product if you don’t have a revenue generating business model yet.

Announcing this week’s Coffee Meetup + Scrum Talk

Everyone,

Just like last week, this week’s Coffee Meetup will be held at the VIVA Coded Academy. For you who aren’t familiar with our Coffee Meetups, they are a casual get-together for local entrepreneurs and tech enthusiasts to meet, network, share ideas and collaborate over some good coffee.

This week, there’ll be a talk on Scrum Methodology following the meetup immediately (at the same place). The talk is part of the Google Developers Group weekly meetup.

We think this talk is a MUST for anyone who wants to start a tech startup or is currently involved in one! One of the biggest challenges startup founders face is how to best manage a software project. Often, founders make fatal management mistakes that kill their startups early.

Whether you’re a technical or non-technical founder, this talk will help you understand the principles of running a tech project, and avoid very critical mistakes.

The talk will cover “Scrum” management methodology. “Scrum” is an agile software development approach that greatly minimizes the risk of failure. It is a great framework for building and managing a startup team.

The talk will be presented by Hamad Mufleh, founder and CEO of YallaWain. He is a product designer and developer who’s been on all sides of software projects; as a client, manager, developer and ui/ux designer.

Details:

When: Wednesday, August 26.

Schedule:

7.15 pm- Coffee Meetup

7.45 pm- Scrum Talk

9.00 pm- Discussion, Network, and Pizza!

 

This is an open invitation. See you all there!

RECAP: StartupQ8 Monthly Event (August ’15)

Every month, StartupQ8 hosts two speakers from the startup world to talk to the Kuwaiti startup community about some of the lessons and experiences they’ve went through, and talk about the startup they’re currently working on. Last night, the event took place at The VIVA Coded Academy. The two speakers were Ali Abulhasan, co-founder of goTap, a new payment ecosystem for Kuwait, and Saleh Almusallam, co-founder of Prodesign IT, the makers of FanScan (Instagram based app that has over 3 million downloads).

The two topics of discussion were mirrored around how a technical founder deals with the business side of a startup (Saleh’s part), and how a business founder manages a technical project and a development team (Ali’s part).

Both speakers offered valuable insights on their respective approach. For Ali, he admitted having initial trouble bridging the gap between himself and his technical team. One of the ways he mitigated that was by educating himself on some of the fundamentals of software as related to his field (payments) in which he already had previous experience. The other way was for him to board on developers who had the right mindset for a Tap’s philosophy of focusing on user experience. Ali admits that he would love to have more developers on his team, but that a lack of coding talent has restricted him greatly in that sense (we hope our Coded students can solve that problem!). To combat that issue, he tries to work with freelancers who might have the potential and intention to become full-timers at Tap.

As for Saleh, he faced a different dilemma. Saleh is a technical founder, and has had experience launching a few applications and websites. In his talk, he discussed the importance of learning on how to stay “lean”. He warned that the biggest pitfall for a technical founder was not in disregarding the business side, but rather the need to perfect a product before launching. Saleh advised the audience that “done is better than perfect”, alluding to the importance of launching a product early to gain feedback and data on usability. As for dealing with the business side, Saleh is a believer in first making something people love, than backing that up with venture financing and a strong business model that comes naturally with the product. He did, however, warn against sticking to a single revenue stream or remaining inflexible when it comes to changing the business model.

 

Stay tuned for more of our monthly events to hear more from startup founders and entrepreneurs! Don’t forget to follow us on Twitter and Instagram @startupq8

Ephemeral Messaging: A Trend That Won’t Disappear

This article appeared in Khaleejesque Magazine, POP Issue, published January, 2015. A PDF copy of the article is available here. It is published on this blog with the consent of the author and magazine. All credits and copyrights are reserved to Khaleejesque, 2015. Click here to subscribe to Khaleejesque, or follow them on Instagram @Khaleejesque 

Author: Hashim Bahbahani

Print Artwork: Lulwah Al-Homoud

6 min read.

When Reggie Brown walked into Evan Spiegel’s room at their Stanford fraternity, Kappa Sigma, little did the then 19 year old Spiegel know that he was about to hear a statement that would kick start one of the most important trends in software technology this decade.

Brown had said back then: “I wish there was an app to send disappearing photos.”

Over the following three years, Spiegel and his team developed Snapchat into the leading mobile application for sending disappearing messages (or, as they are more technically referred to: ephemeral messages).

Today, Snapchat processes over 400 million disappearing photos, videos, and text messages on a daily basis. The application boasts approximately 100 million monthly active users, and sits comfortably among the top ten apps both in the App Store and in Google Play (US).

Snapchat’s soaring popularity has caused a stir in the world of technology.  Everyone wants to build an ephemeral messaging app and serve it up with a twist. In the past year alone, three semi-popular ephemeral messaging startups raised over $43 million (namely: Wickr, Frankly, and Cyber Dust) while Snapchat alone raised $200 million. “Blink” is another startup in the same category that was acquired by Yahoo for an undisclosed amount; Facebook introduced its second attempt at an app for disappearing photos; and Apple is rumored to be introducing a self-destruct feature for its native messaging app, iMessage. The ephemeral messaging trend has also infiltrated the GCC startup scene, with one startup in particular gaining traction. That startup is “Vonce”, an application that allows users to send 14 second voice notes that disappear after being played once. Vonce was created in Kuwait by Saleh Al-Musallam who has previously developed an Instagram analytics application called “Instafan” which has over two million downloads  to date.

In short, an obsession with sending disappearing multimedia messages has taken over the world of internet software technology. However, some experts still maintain that communicating via disappearing messages is a fad that will unlikely continue beyond a few years of popularity.

Don’t be fooled. The signs point towards a clear conclusion: ephemeral messaging is here to stay.

The first sign is Snapchat’s latest valuation. Snapchat garnered investment at a value of $10 billion dollars this year (in other words, investors believe that Snapchat is worth $10 billion); a valuation that clearly reflects the tremendous confidence that Silicon Valley elites and venture capitalists have in the future of ephemeral messaging. In the past four decades, every startup that has been valued at ten figures or more has gone on to establish a new field in technology. Take, for example, Facebook, Google, Yahoo, Twitter, and Amazon; Silicon Valley rarely gets such big bets wrong.

The second sign is in the reason claimed by most people as to why they use ephemeral messaging services. Users believe that ephemeral messaging is the form of cyber communication that most closely resembles the characteristics of “real” in-person or over-the- phone interaction. Uttered words are seldom recorded, and the images we perceive with our eyes are rarely saved and replayed. They are fleeting moments. Ephemeral messaging apps, like Snapchat, transmit the temporary, unrecorded nature of real life interactions to the digital world creating unaltered moments captured and shared in real time. This in itself spells a valuable proposition in this age of social technology.

The third sign is apparent in the technological up-build around ephemeral messaging applications. For any new communication platform to prevail, technology must be built upon a platform that allows a more diverse usability.  Extensive horizontal features, such as video, captions, commentary, and event streaming are being developed on ephemeral messaging platforms. Additionally, new areas of integration are being explored on apps in this category. For example, a few months ago Snapchat announced “Snapcash” (in association with payment service provider, Square), a feature that allows Snapchat users in the United States to transfer money with a simple “money text” via the texting feature.

The possibilities of ephemeral messaging are vast and diverse.

“Snapcash” has sparked a debate as to what the next big step for ephemeral messaging might be.  It is my opinion that electronic commerce is the logical upcoming destination. The temporary nature of disappearing messages could strongly encourage “quick deals” and impulse purchases. Given that most users of ephemeral messaging apps are college and high school students, the platform has the ideal demographic looking for coupons, deals, and promotions.  In fact, a study conducted by Sumpto, a marketing company that surveys 50,000 influential college students on social media (as described by renowned business website, Business Insider, who have also quoted the study) shows that 58% of US college students would likely purchase a product from a brand that sent them a Snapchat coupon. The same study also indicates that 67% of the college students would most want to receive brand promotions on Snapchat. It is therefore not surprising to find that brands like Taco Bell, MTV UK, and 16 Handles have already effectively executed Snapchat based coupon campaigns.

There were two missing links for commerce to be viable on Snapchat: payment processing, and a checkout process. The former seems to be ready for integration with Snapcash. The latter is simple enough for the Snapchat team to develop. Thusly, Snapchat might lead the way in what could be dubbed “the new e-commerce”, Ephemeral Commerce. Perhaps it would be centered on the concept of taking advantage of a deal and clicking “buy” within ten seconds, or the deal disappears forever. There are, of course, many wrinkles to be ironed out before such an idea becomes a reality, but the foundation for it already exists.

The GCC market could be a perfect fit for “ephemeral commerce”. The GCC has a young population (54% of the population are under the age of 25) that is heavily engaged with social technology and e-commerce. In addition, relative to the Middle East in general, the GCC has an above average consumer purchasing power. These factors have made the Gulf an enticing opportunity for discount-deal startups such as Yabila (Kuwait) and, more importantly, Groupon (Dubai). Groupon is a group discount website based in Chicago. Groupon launched in the Emirates in mid 2011, and has been growing exponentially in that market ever since. Groupon’s success in the Gulf will encourage other deal-based startups to launch in the region. As such, if an existing ephemeral messaging giant like Snapchat develops an “ephemeral commerce/ deals” application, the GCC can be a market in which the concept can thrive vastly.

If electronic commerce is seamlessly and properly integrated with ephemeral messaging, it could create a new exciting angle for varying fields and activities in commerce. Effectively, such a move could cement ephemeral messaging in the technology framework for many generations to come.

Whether it is in commerce, marketing, communication, or otherwise, ephemeral messaging has the potential to disrupt existing fields of technology. Industry giants are beginning to fully understand that potential. It is not a hidden fact that in late 2013, Spiegel had a closed door meeting with Mark Zuckerberg, CEO of Facebook.  Zuck, as he is commonly nicknamed, made Spiegel a $3 billion cash offer for Snapchat. Spiegel turned down the offer. Had he said yes, he would have netted $750 million in cash, at the age of 22. It takes more than guts to turn down such an offer; it takes remarkably strong conviction in the future of your technology, supported by a plethora of data and quantitative analyses.

To most aptly conclude: ephemeral messaging isn’t disappearing any time soon.

Khaleejesque-POP Issue- Jan 2015 Artwork credit: Lulwah Al-Homoud

Khaleejesque-POP Issue- Jan 2015
Artwork credit: Lulwah Al-Homoud

Khaleejesque-POP Issue- Jan 2015 Artwork credit: Lulwah Al-Homoud

Khaleejesque-POP Issue- Jan 2015
Artwork credit: Lulwah Al-Homoud

This article appeared in Khaleejesque Magazine, POP Issue, published January, 2015. A PDF copy of the article is available here. It is published on this blog with the consent of the author and magazine. All credits and copyrights are reserved to Khaleejesque, 2015. Click here to subscribe to Khaleejesque, or follow them on Instagram @Khaleejesque 

Should you do an MBA or start your own business??

I did my MBA in Hong Kong at HKUST (Hong Kong University of Science and Technology). The school is amazing and currently ranked#10 worldwide by the Financial Times. Moreover, I learned many things in many fields and I built a great network spread in all five cotenants. I also had a great opportunity working and living in many different cities (Hong Kong, Montevideo in Uruguay, Granada and Barcelona in Spain). So the experience was simply awesome. However, I realized that the MBA as a studying curriculum was not that useful for people trying to start their own business, especially if the school is not focused in the Entrepreneurship field. If you are between starting your own business and doing an MBA, then I’ll strongly suggest to start your own business.
After finishing my MBA, I thought I know everything in the world in every field. Seriously, you’ll think that you are better in marketing than a guy who worked 15 yrs in marketing, just because you took 3-5 marketing classes. I thought I knew a lot about strategy and management just  because my professor used to work at Mckinsey.
Basically, you know many things and you want to use what you learned. I have a bad news for all of the MBA’s, your MBA is not that useful in the Startup world. What you learned can be applied in big companies, not in startups. Startups are not a small version of big companies. In a big company you have a proven business model with a known customer, a known market with a known product. In a startup everything is unknown, and you will not learn until you try and fail. In the MBA they teach us how to avoid failure, while in a startup you should fail to learn.
Even if you are doing an MBA just to learn new things, then you’ll probably learn much more things if you started your own business. If you want to do a full-time MBA then consider working in your startup full-time. Investors and people working in the Startup field appreciate a guy that failed 1-2 times with previous startups 10x times more than a regular MBA guy. As a matter of fact we are embarrassed sometimes to say that we have an MBA, especially in front of VCs and investors.
Things that I wished that they taught us in the MBA:
Still I don’t regret doing my MBA at all. I made a lot of great friends all over the world and I also met my colleagues and co-founders that together founded our first startup in Spain.
By the way, my friend just arrived from Hong Kong with my MBA degree and I’m going to receive it today, I hope he will still give it to me after reading this post 🙂
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