I recently returned from a reporting trip to Pakistan, one of the most fascinating countries I’ve ever visited. My first story, “Into the Fray,” ran in the July 20 issue of Forbes. It’s a profile of Monis Rahman, an entrepreneur who was born in Lahore and educated in the U.S., where he started a tech company during the height of the dot-com bubble. After running out of money in 11 months— and unable to raise more— Monis realized that if he started another venture, he would need to be hyper-vigilant about managing expenses. To do so, he took a drastic step, selling everything he owned and moving back to Lahore. Read below to find out how he did it, and whether his bet paid off.
During my trip, I had the privilege of meeting with members of the Lahore chapter of The Indus Entrepreneurs, a networking group for entrepreneurs from the region. We spoke at great length about the challenges and opportunities facing entrepreneurs in Pakistan, the world’s sixth-most populous country. High on their list of grievances was the absence of a strong rule of law: Entrepreneurs have limited legal recourse if a competitor steals their IP, or an investor violates a contract. Pakistani entrepreneurs also struggle to attract talent, both because they can’t offer new hires equity and the prospect of big IPO, a la U.S. startups, and people working outside of Pakistan often refuse to relocate there, due to safety concerns. VCs, angels and incubators are nonexistent, and banks rarely give commercial loans. But for entrepreneurs like Monis and many other people I interviewed, the promise of doing business in Pakistan outweighs the frustration. The country has over 187 million people, a nascent online economy, and—for startups—limited competition from big multinationals.I could spend days writing about what it felt like to travel alone in Pakistan as a blond, female American, a month after U.S. forces killed Osama Bin Laden. The very fact that I got there was something of a miracle, courtesy of the consulate staffer in D.C. who agreed to give me a journalist visa. I’ll write about my trip in subsequent blog posts. For now, enjoy Monis’s story and, as always, feel free to comment below.
In the game of can-you-top-this entrepreneurial hardship–who slept the least, whose office was tiniest, who choked down the most Ramen noodles–Monis Rahman holds some formidable trump cards.
Four years ago Rahman, a serial entrepreneur, launched Rozee.pk, now Pakistan’s largest jobs website, with 500,000 unique visitors a month. While Rahman was raising money in 2007, terrorists bombed the homecoming procession of former Prime Minister Benazir Bhutto. The Pakistani government subsequently suspended its constitution and declared a state of emergency. (A gunman assassinated Bhutto the following month.) When one of Rahman’s potential investors called to express his firm’s misgivings, Rahman e-mailed him a “Top Ten Reasons to Invest” list. Reason number nine was: “‘We’re headquartered in Lahore, where there haven’t been any blasts,’” he recalls. “Then I pressed ‘send.’ The next day in Lahore, the high court was bombed.”
Welcome to the Wild East of Web prospecting. Over tea on a 102-degree morning in Lahore, Rahman explains why now is the time to invest in Pakistan, the world’s sixth-most-populous country, with 187 million people and plenty of inexpensive labor. Obstacles abound, starting with the fact that only 17% of Pakistanis have Internet access. The country also suffers from low literacy rates, massive corruption, frequent blackouts and a weak judicial system.
“You tend to hear the worst 5% of the Pakistan story 95% of the time,” says Rahman, 41. “There’s a perception arbitrage, and it’s providing a window of opportunity for entrepreneurs.”
Rahman was born in Lahore but spent his childhood in the U.S. and Saudi Arabia, where his father worked as an urban-planning advisor for the United Nations. He studied engineering at the University of Wisconsin at Madison and then helped develop the Itanium microprocessor chip at Intel. That experience led to his first venture, a chip-design consulting firm that he abandoned after a year, seduced by the dot-com boom. In 1999 Rahman and a partner started a company that installed cameras in day care centers, allowing parents to watch the video streams online in real time. Edaycare.com attracted $2.5 million from investors, including Ron Conway, an early backer of Google and PayPal. A year later the men ran out of money, forcing them to sell the company for stock that was ultimately worthless
To conserve cash Rahman moved back to Pakistan and into his parents’ house, where he converted a guest room into an office. (He registered his parent company, Naseeb Networks, in the U.S. to make it easier to raise money and subleased a small office in San Jose, Calif.) This time he spent only $60,000 in total startup costs, in part by doing some of the initial programming himself. To prime the market, he used equity in the company to buy the electronic greeting card site eidmubarak.com, which Muslims used to send cards for Eid, a Muslim holiday. Three thousand people from the site’s 1-million-strong mailing list signed up immediately. Annual memberships cost $40, and by 2005 Naseeb.com was generating $300,000 in revenue.
Rahman soon needed more programmers and support staff, and buying ads in local newspapers was expensive. So he decided to build a “quick and dirty” job site to post his own job openings. Other local companies noticed, and Rahman agreed to post their ads for free to help boost Naseeb’s traffic. He offered the largest companies the ability to search for résumés, as well as software to power their own company job boards and the right to post their logos on the front page of his new site. He named it Rozee–which, roughly translated, means “Blessed Livelihood.”
By 2007 Rozee.pk was generating more traffic than Rahman’s thinly veiled matchmaking site. He used Naseeb’s proceeds–and $2 million from Draper Fisher Jurvetson and ePlanet Ventures–to hire salespeople to go after large corporate clients, most of which still advertised job openings in newspapers. Today 5,000 companies actively post openings on Rozee.pk, paying between $29 for a single ad and up to $20,000 for a suite of services. (For now Rahman isn’t focusing on Naseeb.)
Bartering is a big part of Rahman’s low-cost strategy. Three hundred rickshaw drivers in Lahore use Rozeebranded vinyl wheel covers and glow-in-the-dark stickers that Naseeb provides for free. Rahman convinced Sign Source, an advertising agency, to promote Rozee on 300 baggage trolleys in the Karachi airport in exchange for helping the company build a website that tracks the availability of outdoor media, like billboards. “We have to measure advertising dollars very carefully because it’s easy to spend and not recuperate,” says Rahman.
Huge short-term challenges remain. Turnover on Rahman’s 45-person sales staff drains capital: For every three salespeople he hires and trains, only one stays on for more than a few months. Then there’s the matter of collecting payment. Only 10% of customers–contributing 5% of sales–pay online using credit cards, while 60% pay with checks and 20% pay with cash, mailing payments to one of the company’s four outposts. A Rozee.pk rickshaw also travels around Lahore and picks up checks and cash.
Tougher still will be avoiding the fate of Monster.com and other U.S. job sites that are gradually taking a backseat to LinkedIn, where employers conduct targeted searches through their own professional networks. “I think it’s a difficult business,” says Salim Ghauri, chief executive of software company Netsol Technologies, a Rozee.pk client. “If companies don’t get good service, they will find another way, because they can’t stop hiring. The biggest challenge is quality control, which is not that easy.”
Rather than go head-to-head with the big social networks, Rahman aims to join forces with them. When employers post a job on Rozee.pk, they can simultaneously broadcast it on Facebook, LinkedIn and Twitter. “We’re prepared so that when the technology evolves here, as it has in the United States, we’ll be in a position where we already have a social graph on our site,” says Rahman.
Easier said than done, perhaps. Monster recently rolled out an application that lives on Facebook, giving users a place to interact with professional contacts, without sharing photos and other personal details. In July LinkedIn prevented users of the application from inviting their contacts directly from LinkedIn.
Rahman says that Naseeb Networks pulled in $1 million in sales last year and turned “cash-flow positive” in March. He wants to mount a broader assault on the Middle East this year. “If I want to get bigger from a market-size perspective, I need to move beyond Pakistan,” he declares.
That means more turbulence ahead–and, chances are, more ways to win that can-you-top-this game.
