The Startup Rollercoaster: An Entrepreneurial Story; From Inception To Exit
Melltoo co-founder Sharene Lee reflects on her entrepreneurial journey, all the way from its inception to its recent acquisition by UAE-based reverse logistics platform Cartlow.
It's been eight years since my husband and co-founder, Morrad Irsane, and I launched Melltoo, our tech startup based in the UAE and Saudi Arabia. In between, we've become a family of nine (yes, we have seven children), we've moved from the UAE to Saudi Arabia, we've gone through a pandemic, and we are now living through a "global recession." From an entrepreneurial perspective though, after eight years of occasionally exhilarating, heart-wrenching, euphoric, ulcer-inducing moments in our startup journey, we finally have a happy ending with the acquisition of Melltoo by Cartlow.
For those of you who are thinking of launching a startup, are in the middle of building a startup, or are close to exiting a startup, this story is for you. Read on as I recount a few harrowing experiences from my startup journey, from running out of cash, to pivots and investor fails.
The Launch: Build it and they will come? Not really
Melltoo is a peer-to-peer transactional marketplace for secondhand items. The vision has always been to reduce the friction inherent in secondhand marketplaces by using technology to bring together a community of buyers and sellers in a fair and transparent marketplace. In August this year, Melltoo was acquired by fellow UAE-born startup Cartlow to further that vision, and to join Cartlow's journey toward dominating the recommerce marketplace in MENA.
How did it all begin, you ask? It started in late 2013, when Morrad and I conjured up the idea for Melltoo while on a teaching stint in Ha'il, Saudi Arabia. We were serial entrepreneurs, and we quickly tapped into our existing knowhow and networks to get the company off the ground. While it wasn't our first business, tech was new to us. Because Dubai was the startup hub of the MENA at the time, we moved back to the UAE, and we started building in earnest. By then, we had seen the "overnight" successes of Facebook, Whatsapp, Souq.com, and a number of tech startups that were coming up at the time.
So, we figured that since we were smart, experienced entrepreneurs, we were the one in a million, and that we would, of course, be able to make it. It didn't quite happen like that though. Thinking back, I'm ashamed at just how arrogant we were. We were like teenagers who think they know better than their parents. We thought our incumbent competitors were clueless and out of touch. We thought we could build better technology with an outsourced team (!!) than established players. We attended startup events, and we practically scoffed at mentors who pointed out flaws in our business plan- to these mentors, you know who you are, I am sorry!
Sharene Lee and Morrad Irsane, the husband-and-wife entrepreneurial duo who founded Melltoo, with Mohammed Sleiman, founder and CEO of Cartlow. Source: Melltoo
Approximately six months after we started building, we launched our app in the app store and then… crickets. Someone suggested that we buy cheap downloads on Android, so we started burning our own cash to buy low quality downloads that were not converting to users and actual business. But hey, the business was "growing," said our vanity metrics. We went to all the startup hubs and did "mini launches," and some of our kind and charitable fellow entrepreneurs attended to hear us give our spiel. But no one was using the product. More importantly, no one really cared. People will never say anything negative to your face (they usually reserve their negativity for Twitter), so those we spoke to were always agreeable and encouraging, but no one cared enough about what we were doing to use the product.
We soon came to realize that the best feedback was usually critical, and, thankfully, those alarm bells finally got through. After blowing through a lot of our own cash buying useless downloads for a product that was substandard, we pivoted our product and growth "strategy"- after all, it wasn't so much a strategy as an answer to "What should we do today to get more downloads?" In this time, we had hired a Chief Technology Officer (CTO), who, little did we know, couldn't code, but still managed to build a strong tech team around him. However, after several months of careful maneuvering, we managed to extricate ourselves from our no-code CTO. We were introduced to a clever app store hack by a fellow entrepreneur, which involved cloning our app, and naming the clones as popular search terms, and things started to grow organically.
Fundraising Fails: Running out of money 101
At this point in our startup's lifecycle, we were able to raise some amount of funding that we put toward aggressively growing our user base. That's when we launched the first iteration of our referral program. It was uncapped, and referrals were unverified- and things got exciting as we were essentially giving away free money to customers. In fact, we were tripling our gross merchandise volume month-on-month. To be fair, the referral program got out of hand, because we were unable to iterate the technology fast enough. We needed to add in a number of verification mechanisms and limitations for the program to be unit-economically viable.
However, growth is addictive, and repairing an airplane's engine as it is ascending is never an easy thing. We were cognizant that this growth strategy was a risky one, but we didn't really have a choice, and we needed to continue growing to get us to our next round of funding. And, you know what, we almost made it… almost. We were in talks with the most important venture capitalists (VCs) in town (this was 2015, so there were, like, three of them) who all wanted to lead our bridge round. Cocky in our hypergrowth, we kept burning cash with the expectation that more was on the horizon.
Melltoo at the turn8 launch event in 2014. Source: Melltoo
Unfortunately, MENA VCs do not have the risk tolerance of Softbank CEO Masayoshi San, and after several months of deep due diligence, it dawned on them that we were not being prudent with our growth strategy. One pulled their term sheet, another then decided against taking us to the investment committee, and the last said an emphatic no. Now, at this point, we were in deep doo-doo. This period of time was the most stressful in my entire life. Don't get me wrong, we have run out of money many times since then, but the first time is always the most traumatic. I remember calling my mother in tears, asking her to loan me US$30,000- she ended up mortgaging her house to help us.
We sold the last of our gold (yes, we were gold bugs, now bitcoiners) to keep the company afloat. Each day, I woke up with a pit in my stomach, and at the end of it, I went to sleep stressing about how to pay creditors. We really scrambled, we tried to scrounge up a last-minute funding round, we reached out to potential acquirers who may have been interested in a fire sale, and we even ended up in the home of a Russian oligarch- no further comment. Those were dark days.
Fortunately, Morrad is tough as nails, and he stayed positive, and he kept hustling. We had to announce to our team that a round of funding fell through, and that we couldn't pay them. We had to lay off half the team, and we asked everyone remaining to go part-time. Some of the team even stayed on as volunteers. To this day, I am grateful to them for their support. We had to call suppliers and explain that we couldn't pay them- these were the same people we had sold dreams of grandeur to. We had to call customers and tell them that we had to delay payouts. Morrad made these dreadful calls- you would think that he would have been devastated by each call, but in fact, people were often sympathetic, and our proactive effort to reach out salvaged those relationships, and allowed us to continue the business. This was 2016.
Rising From The Ashes: Pivot, pivot, pivot
There is simply no shortcut to building and growing a business. All of those so-called overnight successes mask years and years of iteration and hard work. Once we stabilized the finances, it was time to get back to work. By that time, we had spent countless nights trying to figure out how to get rid of the business only to realize that we were both still bullish about its prospects, and that it was not time to give up.
As Morrad would say, stick around long enough, and you'll be the last man standing. But getting back to work wasn't easy either. It's one of the most difficult things for a startup that is growing rapidly to reset to zero, and then try to restart growth again. That was the situation we were in. We started by putting the needed guardrails in place around our referral program, which dramatically reduced our revenue, and it felt like starting from scratch. We needed to go back to the drawing board to figure out what really brought value to our customers, and why people were using our product. In other words, we had to -as Ross in Friends put it- pivot, pivot, and pivotttttt!
Sharene Lee at the 2017 Global Ventures summit pitch. Source: Melltoo
You see, the underlying business model was sound, but the product was immature, and our focus on growth was misplaced. We had to start building out operations in other directions, and also open up new revenue streams in order to bootstrap the business. I believe that the near-death experience taught us the humility we needed to talk to investors. We were transparent about what went wrong, and it was on this basis that we began to regain investor trust, and be able to raise funding again to continue building out the new business streams.
I cannot overemphasize the importance of resilience in startup life. It's not talent, networks, experience that matter when times are tough; it's resilience. You keep going even if there doesn't seem like a future, you keep going even if there's nowhere to go, you keep digging until you break through to the surface- or you end up buried and dead. If you're not prepared to be resilient, then give up now. The story doesn't end here, and we went through several more years of highs and lows. Funding opportunities missed, a lack of focus causing us to go off-course at times, almost running out of cash multiple times. But all throughout, we continued to build our product, and grow our customer base.
The thing I am most proud of is that we brought value to our customers, and that we became a small -but important- part of their lives. It was always a pleasure to hear from our customers, even when they were complaining- I recalled the days when nobody even cared to complain, and I was happy to hear them passionately bashing our customer service. And the compliments were even sweeter. People cared about what we did, and they supported us- and there is nothing better than that.
Honorable Mentions: A few (noteworthy) odds and ends
One day, perhaps, I will write a book about my startup journey, but today is not the day. However, I'd like to include a few fun stories as honorable mentions. When we first launched, I had a three-month-old baby that I was dragging around to events and meetings, including investor pitches. He was a quiet baby, and so, while I did get a lot of stares and raised eyebrows, it was generally uneventful.
However, during one unfortunate investor pitch, my baby woke up, and he was hungry, and so, I proceeded to discreetly nurse him while continuing our pitch. Normally, he would fall back asleep, but on this day, he was annoyed, and he started fussing. To keep him quiet, I got up, and I started pacing around the room while rocking the baby. As it turned out, he had had a giant bowel movement, and it was leaking all over his white pajamas. But I kept a poker face, and I continued to discuss the financial model with the investor. The investor was extremely polite and cool about everything, but, needless to say, we didn't get that investment.
Melltoo won the Best Female Led Startup title at GITEX in 2017. Source: Melltoo
On more than one occasion, we've been either directly told or indirectly hinted at to rethink our Muslim "costumes"- Morrad is heavily bearded, and I wear a niqab. One investor even said that he was sure that he would succeed in getting Morrad to shave his beard after some time. Another investor told me that there is no need for my niqab, and that there's no point in me wearing it. But despite such comments, we have not changed our "costumes," and we have no plans to.
Having said that, interestingly enough, despite their misgivings, the aforementioned investors (and many others) did invest in us. I think they understood that our convictions in our personal lives reflected our convictions in our professional lives. The lesson here: stay true to yourself. Six months after we first launched, our biggest competitor (and the market leader) -the one we don't speak of- launched a copycat product of ours that was well-funded, well-designed, and heavily marketed. We were then told by well-meaning fellow entrepreneurs that this competitor would crush us. But from the very outset, this new product struggled, and they kept mimicking us in whatever we did, from product to marketing. At one point, because we were able to scalp many of their customers, they even sent us a cease and desist letter. We were intimidated at first, but then we realized that they were pretty much as clueless as we were. They shut down three years later in a whimper. We barely noticed.
Time To Let Go: Our baby is all grown up
Fast forward to 2022, and Melltoo has now been acquired by Cartlow. The acquisition was a journey in itself, and it's perhaps best left for another discussion. One chapter of my life has concluded, and a new one is about to begin. While I'm pleased with the outcome in general, I am also wistful as I'm suddenly faced with an empty nest. So much of my mind space in the past eight years has been filled with Melltoo, and now, there is a void. Since the acquisition has been announced, many have reached out to congratulate us, and we are grateful. I have spent the bulk of this story focused on our failures, even though we've had a lot of successes.
After all, we've won a bunch of pitch competitions, got funded by the top VCs in the region, mentored a bunch of young people who I believe have been positively influenced, and built a company of value that customers have benefitted from. Along our journey, we've worked with many amazing people, whether investors, team, partners, or customers, and I'm grateful for you all. Nonetheless, I am telling this story through the lens of our failures, because nobody ever talks about their failures.
There is a damaging false narrative that startup life is going from one success to the next. That's not true at all- startup life is going from failure to failure, with occasional stops for successes. Everyone is there with you to celebrate the wins, but no one is there for the losses. So, I hope my story will be a companion to you in your startup journey, especially when things get tough. Be comforted in the knowledge that the startup journey is one of many failures, and that if you persevere, you will find a way through.
Melltoo at the 2017 Sharjah Entrepreneurship Festival. Source: Melltoo
Epilogue: Starting up from scratch… again
I always thought that when we finally exited Melltoo, we would find an island somewhere, and then stay there and ponder life for our remaining days. And I used to scoff at founders who sold their companies only to turn around and start a new one- what were they thinking? After years of toil and hard work, why would anyone do this again? Well… it turns out that entrepreneurs are crazy. No, really. We love the thrill of the chase. I suppose it's like spicy food- it burns the tongue, but once you get used to it, everything else tastes bland.
After years of riding the highs and lows of the startup rollercoaster, normal life feels bland. And as such, we're ready to get back on. Today, we've found a new passion, and each day that I'm immersed in it, I grow more passionate. Web3 is the future. The ethos of decentralization and the flurry of startup activity around it reminds me of the early days of the internet.
So much is new, and so much is being built- a whole new world is arising. And we've found our new calling: TAKADAO. TAKADAO is Shariah-compliant takaful insurance built as a decentralized asset organization (DAO) on the blockchain. Takaful is the OG decentralized insurance community that existed since the days of the Prophet Muhammad, peace be upon him.
Now, with the advent of Web3, TAKADAO can now be built as a global community mutually protecting one another across national borders. It is only with crypto and blockchain technologies that this vision is now possible, and we are excited and emboldened to commence our new startup journey. Will you join us for this new ride?