English Managing Editor Stephanie d'Arc Taylor contributed to this report.
The closure of Dare n’ Deal, Egypt’s biggest daily deals website, last May came as a shock to many. The company had been extremely successful in its two years of business, aggregating 150 employees, 600,000 mailing list subscribers, 40,000 buyers, and more than a million followers on its Facebook page. Dare n’ Deal was the most popular website of its kind in Egypt.
But the drama that led up to the announcement, and that which has ensued since, puts the initial shock to shame.
“We’ve been intimidated not to say what happened” between Dare n’ Deal staff and investor OT Ventures, says Abdel Latif Alma, executive manager of Dare n’ Deal, before he told me exactly what happened.
The desire to keep things under wraps is understandable. OT Ventures, part of the Orascom group owned by famous Egyptian businessman Najib Sawiris, has its reputation to preserve. Alma and his partners, on the other hand, are only individuals.
The relationship started off well before turning sour. Riding the 2010-12 wave of crowd-buying sites, Abdul Latif Alma, Karen Mao, and Oussama Al Batran launched their company on June 1st, 2011, spurred by Groupon’s announcement that they would not expand to the Middle East. They thought crowd-buying had a lot of potential for success in countries experiencing political tension, as people in these situations are often especially interested in saving money. (Groupon itself was founded during the global financial crisis in 2009.)
Verily, even through the political turmoil in Egypt, company profits remained solid. Hundreds of items were sold every day.
As Dare n’ Deal began succeeding, in autumn 2011, OT Ventures approached the team with a lucrative offer they couldn’t refuse: three million Egyptian pounds (about $435,600 USD) as a capital investment, as well as a 7.5 million Egyptian pound (over $1 million USD) current account ‘loan’ that Dare n’ Deal didn’t have to repay unless the company was sold.
Further, OT Ventures offered to finance Dare n’ Deal’s expansion into Saudi Arabia.
But, in the excitement of having his startup funded by such a big and important organization, Alma failed to properly review the contract he was signing – this, he says, was his first mistake. The agreement, signed on October 2011, gave OT Ventures a 51% share increasing to 60% within a year.
Further, according to the contract, Alma is banned for working in e-commerce for two years after leaving Dare n’ Deal. This clause is inconsistent with the Egyptian constitution. Alma concedes that attorneys representing both parties should have been present when signing the contract. But, wanting to save time, Alma acted as his own lawyer, negotiating directly with OT Ventures’ attorney. Therefore, the contract articles weren’t in his favor and violated his rights as stipulated by the Constitution.
Here’s where things went really awry: According to Alma, OT Ventures didn’t pay the amount agreed on in the contract. Rather than paying the initial promised amount, OT Ventures deducted the marketing and advertising costs carried out by its Connect Ads company. This prevented Dare n’ Deal from using its current account to pay salaries, make investments, etc.
As the crowd-buying model began to decline worldwide, things got more dire. Alma proposed to establish an e-commerce platform including a comprehensive market for products and offers, allowing stores to manage their own dedicated pages, like Jumia. Several attempt to garner new investors for the new project failed due to OT Venture’s overvaluation of the project, according to Alma. He attributes these failures to the fact that the company didn’t want to take risks inherent to the startup experience.
A last ditch attempt in November 2012 to harness the Gulf market – the Kiwi card, offering discounts at different businesses – was launched to a disappointing reception. This led to both a tarnished reputation in the Gulf, and increased internal divisions, as Dare n’ Deal and OT Ventures staff blamed each other for the failure. Alma says OT Ventures objected in particular to the performance of Al Batran, Dare n’ Deal’s Saudi manager.
As a result, Al Batran left and at the beginning of 2013, OT Ventures decided to close Dare n’ Deal in Saudi Arabia.
Last March, the company announced that it wasn’t able to pay the employees’ salaries, or its traders or retailers. Dare n’ Deal went into debt, to the tune of 500,000 Egyptian pounds ($73,000 USD). Some employees organized demonstrations to get their back salaries.
Tensions were ratcheted up another notch when the OT Ventures executive manager, Hanan Abdel Majid, expelled the Dare n’ Deal General Manager, Karen Mao, from her office after a heated dispute. As a response, the OT Ventures accounting team were expelled from the Dare n’ Deal headquarters. OT Ventures called for a General Assembly in the same week. It was an illegal move, as General Assemblies must be called with notice of at least two weeks. Alma hired an attorney and the assembly was called off.
Meanwhile, the site began to stagnate. Alma helped employees find new jobs.
Alma is reflective. “Our problem is that we handle things with the mentality of small entrepreneurs; we all performed the same tasks,” whereas OT Ventures approaches everything from the perspective of profit, not passion.
Alma is waiting now for the General Assembly expected in the first quarter of 2014. During this Assembly, decisions should be made. As OT Ventures holds 60% of the shares, there isn’t any other solution for Alma and his partners but to find a compromise.Both OT Ventures executive manager Hanan Abdel Majid and media spokesman Assem AlBassal were unavailable for comment on Alma’s comments.