According to Bain&Company’s report on E-commerce in MENA, the MENA e-commerce market in 2017 is worth $8.3 billion, and the average annual growth rate is 25%. The Egyptian consumers may purchase less frequently, but they spent as much as per purchase as shoppers in the UK, US, and China. The report says that the e-commerce penetration of total retail sales in Egypt is comparable to that of Indian and Indonesia.
All these statistics made me quite curious about ExpandCart, a SaaS business that allows people to set up an online store in minutes without any technical skills. It is said to be one of the largest e-commerce platforms in the Middle East. So far, more than 2000 online stores have been built through its platform.
ExpandCart offers 15 days free try out, so I signed up to see how it works. My first impression is that the website user flow can be improved, but it offers quite comprehensive features to sep up an online store.
The Co-founder and CEO Amr Shawqy studied engineer at Cairo University. He started his career as a software developer and worked as a CTO in an early-stage tech startup. Starting a company for the first time is hard, and bootstrapping is painful in the early days.
The majority of first-time founders won’t make it, and most startups fail because of a lack of funding. ExpandCart is Amr Shawqy’s first SaaS company, and he has been bootstrapping for 6 years. I think what attributed to their current success is product-market fit - they are solving a real problem for their customers. I hope that you will enjoy our conversation below.
How did you and your co-founder identified the problem? What were the challenges when you started in 2013?
Sameh Nabil and I started the ExpandCart. Yasser Seleem later joined us. It all started when Sameh and I owned an online electronic store. Both of us were working full time as software developers, and we did not have time to run the online electronic store.
So, we decided to sell this online store to a retailer in Egypt. Soon we receive many requests from other retailers asking if we can build an online store for them. It made us start to think about what if we could create something that enables people to set up their online store without technical experiences? This is the birth of ExpandCart.
ExpandCart started as a side project because both of us had full-time software development jobs. The biggest challenge when we first started was lacking time. Therefore, it took us a much longer time to build the product.
We had experience in e-commerce, especially in marketing and sales because we had experience in running the electronic store. But we have no experience in fundraising, and we didn't join any accelerator. We have been bootstrapping since 2013. We joined an accelerator and raised funding in August 2019. For a long time, we had to find creative ways to acquire merchants, build software, do marketing and sales with a limited budget.
Our first version was ready by the end of 2013 that took us around 9-10 months to build. But that solution was not 100% market-ready, so we sold to a few retailers in Egypt. It took us 3 years to build our second version, and we launched it in January 2016.
But we started to go to the market around that time. In those early periods, we had around 150 clients, and we only focused on building products. There were moments that we wanted to give up because it was challenging working full time while building this complex product. But once in a while, we had unexpected tractions, and this motivated us to keep going.
Tell us one of these unexpected moments?
For example, when we started in 2013, we released our first version. It was not perfect. We had monthly and yearly packages. The monthly package was quite affordable like $20 per month, while the Annual package starts around $300.
As I mentioned before 2016, we had around 150 merchants in our platform. We started to provide proper customer service for them, but we were not ready to support all the customers. What about removing our monthly packages, we asked ourselves. Since most merchants subscribed to our monthly package, this would allow us to reduce the number of merchants we serve so that we could control the quality of our customer service.
However, the result took us by surprise. The next month, people started to register on the annual packages with almost the same rate that we used to have. It was a decision targeting reducing the number of customers, but it did not happen.
Instead, we got more customers! So it was a pretty exciting experiment. It proved that our solution was needed in the Middle East market and there was no better alternative. This was why people kept subscribing even on a yearly basis.
How does the comptitor landscape look like? What are ExpandCart’s competitive advantages?
When we started in 2013, there were no other solutions in the Middle East at all. There were mostly custom software development houses that built customized solutions for large retailer brands.
Now the market is completely different. E-commerce is growing at a high pace. The COVID situation accelerated the growth in almost all the countries in the region. Over the years, we have seen new startups trying to create a similar product. Also, the custom software houses started to provide package solutions for the clients. Of course, the huge market in the Middle East created all the competitions.
Our first competitive advantage is that we have the capabilities, the team, and the techniques to operate across all the countries in the Middle East. There is no other solution in the Middle East that operates across all the countries. They operate like one to three countries maximum.
We also have many integrations that we have solved so many problems in the e-commerce cycle that all kinds of merchants can benefit from. It also means that we can enable cross border commerce much easier than any other platform in the Middle East. This is one of the main functions that ExpandCart focuses on.
Secondly, our platform is much more mature than any other platform in the Middle East. We have first starter advantage because we had gained a lot of experience in e-commerce and software development to build ExpandCart. As a result, we have big brands and big retailers from the Middle East that use our software. These clients are generating revenues like in the range of $2 million a month. Our software enables them to can process thousands of orders per month.
It has all the features they need for product management and order management. We offer a comprehensive selling solution, including features such as point to point sales system for their retail stores and mobile apps. We offer everything merchants need to succeed.
Finally, we’ve focused on software development and we offer features that can support segments of online sellers that nobody else can do. For example, we are the only platform that has direct integration with Facebook shops and Instagram shop. It means we can support social media sellers. We also have integrations with AliExpress and other platforms that can support drop shippers. We can serve segments of sellers that they cannot find the proper solution yet in the Middle East.
What kind of customers are you targeting at in Middle East? What are the common reasons that the customers stop using ExpandCart?
Currently, we have 7,000-10,000 paying merchants. We have a set of segments that we are targeting.
First, international brands have manufacturers presence in multiple countries.
Second, all types of retailers from the large, medium, and small. Small retailers may have one offline store, medium retailers are those that have 7-10 branches, and large retailers may have more stores in multiple countries.
Third, online sellers. These sellers do not have a physical offline store but sell through marketplaces and social media.
Forth, drop shippers. They don’t have a product, but they drop ship to sell online to monetize the products of a manufacturer or a supplier. Another small segment is merchants who make handmade products.
There are many reasons for churn. ExpandCart is not software like Microsoft that people use almost every day. It is more similar to Shopify and Wix. It is not only about the software. It is also about the business that you are starting. You need to be able to grow your business. You need to have an organized plan, understand what you are doing online and you need to invest, at least with your time. If a person does not have any of the requirements, this could a strong reason that causes him to churn.
Some customers may not have enough experience with e-commerce and online marketing. So there was a lot of awareness and education involved in the onboarding process. We offer different online training to guide people how to build a successful e-commerce business.
Also, we offer different payment gateway and shipping gateways available in different countries.
Your team was selected to join the Hong Kong accelerator Betaron. How was the fundraising journely look like and how was the experience in HongKong? Any tips for other founders?
In August 2019, we closed our first seed round from investors in the Middle East and Silicon Valley. We had Agility Ventures, a corporate venture arm of Agility, Graphene Venture from Silicon Valley, and we had two other angel investors from the Middle East. We got introduced to Agility Ventures in Riseup Egypt. We started to explore the idea of raising capital since December 2018, so it took us around 8 months to close the funding.
One month later, we joined Betaron. We believed it was also important to join an accelerator because we wanted to gain more experiences and knowledge on strategies, fundraising, legal and financial issues. So we were quite excited to join Betaron. We raised $150,000 from them.
We knew that we also needed the experience to understand more about the fundraising and investment ecosystem. It was a 3-month program and we had to do demo day in HongKong and Singapore. It was a rewarding experience to meet other startup founders and international investors.
It was quite an insightful experience because it helped us understand what investors are looking for and how they evaluate startups. I would say that Hong Kong and Singapore are much more mature in terms of venture capital. I think they are like a generation ahead of the investor that we have here in the Middle East.
For startups at the very early stage that are raising money from angel investor versus venture capital, my advice would be that they must understand venture capital will require many details of your business. They will ask for very detailed financial information, complicated business metrics, so you have to know very well about your business.
When it comes to legal issues, they will have legal counsel to go through many documents so it requires your business to be mature enough to have all these numbers. You need to be patient to go through a long legal process with them. Angel investors do their due diligence which is not as detailed as VC. Also, a VC will support your business because they have so many connections they can introduce you to other investors and other companies.
Especially in the case when the investor is familiar with your field. In our case, Agility was in logistics and their experience was quite helpful to our e-commerce business.
For example, Agility is a partner for logistics in different countries in the Middle East, so they can open doors for. They’ve made some introductions for us with some big retailers. It was quite helpful for us to grow our customers in certain countries.
What do you think are some of the challenges you are facing right now in product and business development?
In terms of our product, we are targeting to become the go-to name brand for e-commerce in the Middle East. This requires our platform contains all the features that are needed to support all the segments of merchants. It must be easy to use and have an intuitive user experience. At the same time, we must provide a strong customer experience. The main challenge is to ensure the scalability of the technology as we grow.
As for business development, we already have merchants from over 40 countries. Most of them are from Gulf countries, North Africa, and Europe. Our goal is to have an offline presence in those countries over the coming years. We are in the process of setting up offices in these countries so that we can better serve our customers. The next country we aim to set up an office is Saudia Arabia because it is one of the largest countries that we have our customers.
You have grew your team to more than 80 employees now. What are some of the management and leadership challenges that you face?
The COVID situation gave us the opportunity to help thousands of merchants to use ExpandCart. We are growing much faster than than 2019 because e-commerce allows people continue living and buying stuff in a safe way. Now we have 150 employees. Back in 2016. It was only me and Sam. So, it has been a very long journey, and we have learned a lot in managing people and resources.
It was challenging to manage different departments. Like most startups, I think the main challenge is to build a strong middle management team. The leaders need to support the middle managers to move towards our growth goals. I am working to give our managers all the support that they need. It is normal sometimes that they do not have the right answers for certain challenges. But I am here to support them to come up with answers. Another challenge is to make sure we use our resources efficiently.
I'm trying to build a work environment that everybody is comfortable to work at. I believe that ownership is one of the most important values. It means being helpful. People need to step up and help others. Naturally, you will have an informal communication process that will keep your startup running, so it is important that people we connected and help out when it is necessary.
I also try to make sure everybody understands our our our vision and mission. I make them understand what is the idea behind a certain decision. We do not just make decisions. Instead, we have to reach a consensus and let people understand what's the idea behind this decision. The people must be engaged and are working in the same direction.
We are not an established company like DHL where they have a detailed organizational structure to deal with every detail. In startups, there must be some missing spots in the organization chart. That is why everybody has to have to show ownership and is committed to filling those gaps.
How do you think the startup ecosystem has been changed in Cairo in the past years since you started your own business?
When we started, I don't recall that there were any accelerators or incubators or VCs even in Egypt. I think in other countries like the UAE, there were some incubators. But in most countries, there was no accelerator and incubator.
Things have been evolved significantly. We have incubators or accelerators in every country in Egypt, Saudi Arabia, Kuwait, and UAE. This is huge progress. Also, angel investors and VCs start to appear. Now there are established VCs in Egypt, Saudi Arabia UAE, and Kuwait that support seed startups, some of them work in series A to Series B.
I think it is easier to start up a company now because you can get access to different mentors. I think the challenges nowadays for the first time founders are having the right mindset. The founders have to understand what they are doing. They have to invest their time and effort.
In Egypt, the local government has put much effort. I think there are two or three accelerators and incubators backed by the government. Some of them have programmes that do not take any equity. I know some startups that went through the programmes from the government. The programmes provide wonderful workshops and information and also introduce to potential investors.