Selling cars during COVID-19: MAGNiTT interviews Tarek Kabrit, CEO of Seez
MAGNiTT recently caught up with Tarek Kabri, CEO of Seez - a tech startup that developed the Seez app, leveraging proprietary AI, machine learning, and data to facilitate and automate the car shopping journey. Tarek discussed how Seez responded to COVID-19, the measures that helped them to overcome the crisis, the response of their investors, how they adapted to the new normal, and more.
They also announced their $6M Series A funding round in February 2020. Check out the interview below.
Q1. COVID-19 impact: how did your startup respond to the lockdown? What measures helped you to overcome the crisis?
Operationally there weren’t too many changes. The Seez team is spread across 3 hubs in UAE, Lebanon, and Europe. Our tech team is based between Denmark, Germany, France, and Italy. Our Lebanese team had mostly been working at home in recent months because of what has been happening in the country. So, many of our team members were already used to working remotely.
We did implement a work from home policy for those who normally worked out of our Dubai office, but overall it was quite easy on the team because they were used to this kind of work culture. Slack was already our office. We started using Zoom more. We also came up with a way to have digital “awkward water cooler chats” — using an algorithm we pair up random team members and get them to chat for 5 minutes every week, which is something that normally happens in a physical office. Some of our teams also use the gaming software Discord, which is like a voice chat room, so everyone is always connected and can ask anything any time, instead of having to jump on a call every time they have a quick question.
In terms of cash flow, we had raised funding in January so at our current run rate we can keep going for a while. We made the conscious decision not to lay anyone off or decrease salaries. However, we did pause new hires in March, but we’re in the process of hiring some of those roles at the moment. We cut our marketing spend by 70% in March. Since then we have increased our budgets slightly and are planning on increasing that further, but we are playing it by ear as we see how the global situation unfolds. Our revenue dropped by around 70% so we’re relying more on funding now; however, this is beginning to pick up again in June.
Strategically, it was already part of our long-term vision to focus on our online car buying and cross-border car buying products, so we made sure to push on those. There’s been a huge shift towards online buying because of COVID-19 and we were one of the first movers into that space. We really doubled down on that in recent months, and we’re currently talking to over 15 car dealers in UAE, KSA, and Kuwait. Initially, we wanted to create a marketplace, but we realized that in order to do that the dealers themselves need to first digitize their operations and it might take them a long time to do that on their own. So, we jumped in and we are now leading them on their digital transformation. COVID-19 really gave us and them a reason to accelerate this.
Q2. Adapting to the new normal: the imposed digitization of business models happened overnight, making digital tools the most important value proposition for the industries that were not tech-heavy (e.g. the automotive). How did your cooperation with corporate players evolve?
Cars are one of the very few things people still don’t buy online. Part of the reason for that is it’s a big-ticket item and people feel they want to touch it and feel it before they pay so much money. But the other reason is that car buying is a very complicated purchase process. Typically, with e-commerce, you need a website, payment gateway, and logistics for delivery. For cars, you also need to be able to handle large payment sums, sometimes you need bank loans, there’s car insurance, you need to register the car with the government, etc. This is one of the reasons why dealers have not been able to do it.
What we’re doing now is helping dealers understand the complexity of a true digital journey, and we’re going outside of what we initially planned to do as a company, to digitize the rest of the process. We are collaborating with different entities to make that happen. We’re working with banks (FAB, Emirates NBD, and others), with tech companies to digitize the insurance process, and also with a regional government agency on digitizing transfer of ownership in under 5 minutes, which will go live later this year. Once we have this in place it becomes attractive to dealers, and we can help them get on our platform and really implement that. They are all interested now, they get it and they understand the urgency and business need for digital transformation.
Q3. What was the response of your investors? How did you adjust your business model?
Our investors have been very understanding. They like the fact that we identify an opportunity in this situation, and we’re pursuing that. Some of them have even expressed interest in participating in the next round.
Regarding our business model, we’re a data-driven company and we provide a business intelligence tool to car dealers on a monthly subscription basis. It’s a fairly high-ticket item that doesn’t do as well when budgets get cut. That’s why we are moving towards transactions. This gives us more control, as opposed to waiting for companies to have the budget to pay us. That shift in business model towards moving down to the transaction, vs. being a purely SaaS product will hopefully help us with future fluctuations like this one.
Q4. What is your overview of the next year? What would be your advice to both founders and investors?
It’s a good time for investors. Some of the startups with weaker business models will drop out so the survivors after this situation will be more solid companies. Right now, investors might even find better deals on valuations. New business models will also emerge, so this is a chance to be early investors in new trends — just as what happened after 2008 and the on-demand economy.
For founders, I think profitability will come to the forefront. For the last 5 years “growing at any cost” was the mantra. Now there needs to be at least a view for profitability. Don’t stress so much about valuation at the expense of losing a round or a good investor. I would say focus on profitability, hoard cash as much as you can, and raise more funding than you think you need because you really never know what can happen.
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77% of startups have not yet benefited from any government support policies, and 27% of investors are changing their mandate towards positively impacted technology-driven industries, our latest report on the impact of COVID-19 on MENA's startup ecosystem has found. Discover more in our FREE H1 2020 MENA Startup & VC Sentiment Report.