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Muxlim Debate A Great Reminder - Startups Far From Mainstream

Much of the Finnish startup scene has been debating the aftermaths of an article Helsingin Sanomat (largest Finnish daily) published on Sunday about the CEO and founder of Muxlim Inc, Mohamed El-Fatatry. The title of the article, directly translated, is Mohamed's Bubble. We've covered Muxlim in the past as well. In the article, Helsingin Sanomat journalist Esa Mäkinen, paints quite a dim picture of the entrepreneur and how he received hundreds of thousands of euro in government support and then shut down the site.

"Having this kind of an article published does not improve the public's perception of growth entrepreneurs, of who are in dire need to save the Finnish economy."


Having this kind of an article published does not improve the public's perception of growth entrepreneurs, of who are in dire need to save the Finnish economy. However, it has to be said that the article itself is factually quite correct (even though the figures differ slightly from El-Fatatry's corrections, shown below) - one statement is completely off, and this is where Esa Mäkinen states Mohamed El-Fatatry donated over €40 000 to Eva Biaudet's presidential campaign. There was a correction regarding that in today's paper - El-Fatatry did not donate any money to the campaign, even though he supported her presidency.

The article paints a picture of El-Fatatry as a resemblance to an American business man that talks a lot with his hands and is good with words. In doing so, it also makes a point in saying El-Fatatry's company Muxlim Inc. received more than €400 000 in government support, meaning of course tax payer money, before it shut down. Mäkinen is also careful to note that in 2010 El-Fatatry's income was around €6000 a month.

The article continues to paint the picture that the company was overly hyped in global media as El-Fatatry also received the Finnish President's Internationalisation Award as well as other awards.

The journalist seems to state that all of these people have somehow been cheated, since the company is now shutting down and failing on its original idea.

This is a great reminder to all of us that the general public at large, still does not share the same amount of appreciation nor understanding towards growth companies and how they are built, if this kind of an article is able to generate so much debate.

Failure is part of creating high growth businesses and it's a lot more common than success.

So how did El-Fatatry and Muxlim actually do then? El-Fatatry put out a fact sheet yesterday on his site where he tackles some of the figures represented in the Helsingin Sanomat article. With permission from El-Fatatry, we have posted this below.

Even though we have not had the chance to fact check this, it is inline with our own calculations. The company raised €1.425 million in foreign investments to Finland. From this and the Tekes money (€385k), it paid tax-like expenses back to government €470k. In doing this the company also created jobs worth 34 employee years in Finland.

The only big contradiction I caught from this are the traffic figures and those cited in public. The media has cited Muxlim reaches 25 million people around the world. To get this sorted out, we interviewed Mohamed El-Fatatry himself. Below are his answers.

ArcticStartup: Do you feel like you've been creating a bubble around Muxlim?

Mohamed El-Fatatry: Every startup entrepreneur creates a kind of hype to get their startup noticed. Some do it better than others, and in our case, most of the attention seemed to come from mainstream publications that are not specialized in tech-news as most other startups. This meant that while we tried to communicate and explain all the intricate details of our metrics, etc. it was sometimes inevitable that they misquoted or misrepresented the numbers. This never happened when we talked to specialized publications such as ArcticStartup or Techcrunch.

AS: One of the biggest items people seem to complain about is the misled figures of the site. You say Muxlim reaches more than 25 million in 190 countries, but today in a post on the Disruption Manifesto you say the site had around 580k uniques and the ad network some 2.3 million. Where does the 25 million come from?

MEF: As the factsheet states:

Muxlim.com: 0.58M uniques/month
Muxlim ad network: 2.38M uniques/month

However, for the whole advertising network which includes Muxlim + IKOO + other partners (we have an exclusive representation agreement in Europe and North America) the only metric we could find to highlight how many total people are reachable by advertising with us was the aggregated total of all the people on all the sites combined over a 12 month period which amounted to approx. 25 million. The main purpose of this metric was to show that the Muxlim ad network amounts to approx. 10% of the total Muslim online population (250 million people per year; reference: Handbook of Islamic Marketing), a fact that is important for large advertisers who want to cover a large segment in one shot. The statement was obviously promotional and meant for advertisers, but we did explain how we came up with that number whenever someone asked.

Also as an example, Unanimis in the UK uses a similar metric: http://www.unanimis.co.uk/about/

"With a reach of over 73%* in to the UK online population, Unanimis creates value from online audiences for both advertisers and website publishers."

"The company is not over."


AS: What do you think led to the failure of the company?

MEF: The company is not over. A re-launch with a new strategy is currently on the table, and I don't think we should be celebrating the demise of any startup company prematurely when we all know that for example, Google changed it's business model 3 times before finding the right one. It happens in startup world. Muxlim Oy and Muxlim.com are two separate entities. The site was shutdown to search for a better business model, but the company is still around.

***

El-Fatatry also states that he finds it odd that people are celebrating the failure of a Finnish company to this extent in media and in conversations.

He also got back to us with another follow-up comment regarding the interview:
As much as people like to look back and rationalize a reason for a failure, the fact is our traffic numbers had nothing to do with the difficulties we faced as a company in generating revenue (the traffic numbers are not bad, and have delivered value to many advertisers over the years). The main reason for the difficulties was the inability to scale our sales/business development operations abroad which required a lot more money and time than we had (and we were constantly running out of both). When the book comes out, you will see in detail how we actually got disrupted mid-way through product development by the financial crisis, and were never able to raise the amount of money we needed.

Our plan was to raise €5M as a first round, and we ended up raising a total of €2.5M over 5 years so we were either in survival mode, or bootstrapping mode (never really in growth mode apart from the first few months and before the financial crisis). In some cases, we were not able to capitalize on a good pipeline or partnership because of the inability to scale abroad. Let's not forget that the company was founded in December 2006 (during the myspace days) and the advertising industry has changed a couple of times since. Once after the financial crisis, and once after Facebook became an advertising giant. The name of the game was stamina, and we just couldn't get more of it no matter how hard we tried with our old business model. So we decided to shut down the site for the time being, search for a better business model and re-launch on more solid grounds.

I think it's important to note that whatever the outcome of our new strategy, we believe the existence of the company had a net positive effect on Finland and the ecosystem. The people who have worked for Muxlim have gone to join startups or start startups, and the tax-type payments made by the company exceeded the government support we have received. Our Finnish company will always be credited to have written the digital chapter of the 1st industry guide to a huge global market, and many institutions are better of for understanding this community in a better way because Muxlim existed. Finally, all the valuable lessons we have learnt over the last 5 years across three countries (Finland, UK & US) are being shared in my upcoming book Mohamed 2.0: Disruption Manifesto, for the benefit of everyone in Finland who is thinking big. Napster didn't make any money, but it changed the world.

***

But this whole case and discussion is a great reminder to all the people working in the startup community that we're still very much in our own bubble. Startups are not mainstream, nor is growth entrepreneurship. Once they are mainstream, failure is tolerated and those affiliated with the venture won't feel cheated - they had a good run at it.

It is a completely different question though, how much an early stage entrepreneur should take out in salaries from their company or how much they should pay to consultants. Market forces and an able board of executives ought to help out there.

But looking back at this over the past few days, the only bubble that has been created - is the bubble all startups are involved with and that's called over optimistic supporting of entrepreneurship and the thought that the general public, including the media at large, shares that notion.

Update: changed 0.58K to 0.58M to reflect the correct figure.

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Kristoffer Lawson March 20, 2012

A good, balanced article on this particular startup story. Every startup is, indeed, a bubble on some level, until they either burst, or go through a magical process whereby that bubble turns into a magnificent stone tower.

We all hope and dream that magic will happen, and most entrepreneurs work very, very hard in their attempt to make it so.

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Antti Vilpponen March 20, 2012

Thanks Kristoffer, appreciate it.

One thing I'd like to add to the article is the fact that constructive criticism and debate about these issues are very welcome. In the end they raise awareness for startups and growth entrepreneurship in general.