Beirut to Dubai: Lebanese-Canadian expat restarts start-up eyeing a crypto and Metaverse future

‘Cost efficiency is a mentality and not about numbers’: Lebanese-Canadian expat resident Rayan Najdi, 29, learned this money rule from his first job as an electrical design engineer when he handled the design and furnishing of all electrical systems in a five-star hotel in Riyadh, Saudi Arabia.

During a meeting with their client then, Najdi was insisted to justify the budget for ‘exit lights’, the smallest items on the project’s budget, to which he responded that a cheaper option would not have made any significant difference. The client’s feedback surprised him.

"When I asked the client about it, he told me you don't care about saving Dh367 ($100), then you won't care about saving a million," said Najdi stated. This taught him to make cost efficiency a mentality that now he applies to every process in the business.

"If you can get the same result (sometimes better) with a cheaper option, you should do it even if it's only changing your stationery store," he added.

How did the idea of launching an Edtech (educational technology) start-up come to your mind?

Najdi said, "I studied electrical and computer engineering at university and worked as a design engineer and field engineer for about three years. I observed a gap in what we were taught in schools and universities compared to what was required in the job market, which always peaked my curiosity."

"The professional world was booming with new opportunities in gaming, cryptocurrencies, AI (artificial intelligence), and quantum computing. At the same time, students' interaction with technology was limited to an excel session at the school computer lab.”

This is why Najdi started ‘Geek Express’, a Middle East-focused technology school that offers K-12 online classes. It was never about starting a business; for Najdi, it was his passion project that he and his business partner managed to grow into a company.

"We started in Beirut from a local gallery store in 2017 when I was 24. I had met my co-founder Manal Hakim who had a concept art gallery in Beirut and was selling an electronic educational toy."

Hakim had a full-time job back then but was very interested in how the educational toy democratised the field of electronics for kids and teens. So, he proposed to run workshops over the weekend to teach kids about the product as he worked during the week.

He said, "Having run the workshops with my co-founder's kids and their friends for over six months, we saw the overwhelming need for tech-based education amongst parents and their kids. Then we decided to turn our initiative into a full-fledged Edtech start-up."

So, you started your business in Beirut or Dubai?

He had moved to Dubai two years ago; previously, he lived in Beirut. "With everything happening in my country and with our plans then to pivot towards an online model, I looked for a city that could offer growth opportunities for me and the business in a safe environment. Dubai was a perfect choice for me."

"We set up ‘Geek Express’ at Dubai Knowledge Park, got our KHDA (Knowledge and Human Development Authority) license, and were ready to go in mere weeks. Our vision was to test the market with what we had before raising a round at a good valuation. We needed rental space for the workshops, which we managed to get for free at a vibrant, newly opened co-working space called ‘Antwork’."

(Co-working is an arrangement in which workers of different companies share an office space, allowing cost savings and convenience through the use of common infrastructures, such as equipment, utilities, and receptionist, among others.)

"We built a website on WordPress, my friend helped with the initial design and marketing launch, and we got 20 laptops. I taught the first classes, and we started with five students (now we're at 1,800)."

With the revenues of the workshops, they covered their costs for a whole year. Bootstrapping allowed them to be creative in their acquisition strategies and test the market need.

How did you fund your business’ initial costs?

Najdi said they raised through the first angel investor (individual who provides capital for a business) round towards the end of 2018, raising Dh1.2 million at Dh7.3 million valuation. "We used the funds to hire our content, technology and sales team, in addition to the marketing budget for digital media and influencer mums."

"The round was planned to give us a 12-15 month runway (how many months your business can keep operating before it's out of money). We focused on allocating it towards human resources and marketing to drive our growth, something which we do up until this day following a formula.”

The formula is 50 per cent towards research and development (content, tech), 40 per cent towards marketing and sales, and finally, 10 per cent for general administrative expenses like rent, accounting, legal, and travel.

Najdi stated that their vision was to build a state of the art technology academy that could be franchised across the Middle East. "Within two years, we were able to sell our first franchise in Doha. However, by the end of 2019 and the beginning of 2020, the Lebanese economy collapsed, coinciding with the pandemic's start. This made our model no longer viable, and we adapted by pivoting to an online model."

What was your main challenge and how was it overcome?

Their challenge was how to shift the operations, content, and tech stack (combination of technologies a company uses to build and run an application or project) fast and with no money.

Najdi and his partner Hakim went out to raise a round from international investors while their team worked hard day and night on the content and tech adaptation.

"It was the toughest four months for the business,” said Najdi. “We managed to secure a round of Dh1 million, take on a Dh367,310 project, and even grow our community.”

Najdi shares three entrepreneurial lessons he learnt:

Lesson #1: Keep a proper check on the collection cycle, as cash is king.

"We had a lot of receivables (balance of money due to a firm for goods or services delivered or used but not yet paid for by customers) that defaulted with the pandemic, so we had to raise a round to be able to do the pivot. Today we keep a close eye on our collection cycle and cash flow; it's as crucial as the P&L (profit and loss) figures."

He stated that ideas are plenty, a technology stack is fairly easy to build now, and talent is there. The biggest challenge the entrepreneurs face - and most start-ups don't succeed - is correctly managing their company's finances.

"People tell you to focus on your business, and money will sort itself out. That's not true; you should always know how to read your numbers, forecast, and drive business decisions accordingly. For example, if your P&L is good but not your cash status, you have a wrong collection strategy."

"If you dip below your five-month runway, know that a fair valuation would be hard to negotiate with investors. Generating traction and revenues are good, but not at the expense of unit economics. Growing revenues with a fixed cost is a myth, so forecast accordingly."

Lesson #2: Money is not free; you need to work for it.

When Najdi was young, his parents gave me a weekly allowance that went up with age until he started working summer jobs. His parents encouraged him to take summer jobs to teach him that money is not free but needs to be earned.

"I have worked as a waiter, bookshop salesman, and bakery cashier since age 14. It may seem obvious, but it's not - whether facing customers or investors, this lesson always stuck with me: no one likes to pay money. I learned that if you bring enough value to them and consistently achieve your promises, they'll happily trust you with it."

"I'd do the same with my kids; the only difference is I'll teach them the importance of looking at money beyond the cash perspective. This is also part of what's missing in our K-12 education: financial literacy. It is a subject we intend to offer at ‘Geek Express’ in 2022 as part of our mission of preparing Middle East kids for the future."

"Kids might not understand concepts like hedging, options, or taxes on profits. However, we must teach them the meaning of a university tuition loan, inflation, credit card, interest, etc. They will tackle these concepts as soon as they finish high school."

"A simple exercise any parent can do is give your kid a small limit credit card instead of the monthly allowance and tell them about return and default interest rules. Teach them that they can use it to buy a skateboard or a stock such as Twitter and that one is an asset, and the other is a liability. Watch as the magic happens," he explained.

Lessons #3: Always go for a long-term game for savings and investments.

"I believe in the compounding effect of small profit, as described by Einstein as the eighth wonder of the world. If the average inflation is 3 per cent per year, a balanced portfolio of stocks, cryptocurrencies, and commodities, should easily beat this. And since you're on the positive side, it's only about gradually increasing your portfolio's worth over the years, and early retirement becomes achievable."

Currently, he is increasing his portfolio's worth gradually in stocks, cryptocurrencies and commodities. For stocks, and being a technology geek, Najdi picks blue chips tech stocks and invest in growth tech stocks, generally with a P/E ratio, or price-to-earnings ratio below 70, and a Beta below 1.4 - specifically in the fields of semi-conductors and AI.

Najdi strongly believes in the potential of smart contracts and DeFi (decentralised finance) technology for cryptocurrencies, so he has gone long on Ethereum and Solana. DeFi offers financial instruments without relying on intermediaries such as brokerages, exchanges, or banks by using smart contracts on a blockchain.

"I have a small position in Bitcoin, but I prefer to focus on currencies that will create new models of economies and drive businesses, rather than use them as a hedging instrument. I make it a habit to invest in future driven equities regardless of their current price. I've tried the buying a dip tactic, and it never worked for me."

"Real estate will come in the short-term future. I try to achieve an 8 per cent yearly return in the face of inflation and grow my portfolio's worth every year."