Sunday, August 01, 2010

The restaurant that Facebook built

“We started raising money through word of mouth and the use of social media. We wanted Mybar to go viral,” one of the brothers said. Philip Cheung / The National

For three years, the brothers Haytham and Nael Nasr toyed with the concept of Mybar, a restaurant-bar that opened last month in the heart of posh downtown Beirut.

Encouraged by investor interest in an earlier pub project, they decided to go ahead with the venture. But instead of going the traditional route to line up investors, the brothers took a more innovative approach: they got funding via YouTube and Facebook.

“The easy solution was to find two or three investors,” says one of the brothers. “However, we wanted to keep the direction of management and spread the risk. Having a larger number of investors also allowed us to tap into a wider customer base, with each investor having their own crowd of friends.

“We started raising money through word of mouth and the use of social media. We wanted Mybar to go viral.”

In two years, Mybar was able to attract about 90 investors and about 40 per cent of the US$1 million (Dh3.6m) they needed through social media.

“We created several video bites of two minutes each, which we then posted on YouTube. Sir Richard Branson [the billionaire founder of the conglomerate Virgin] picked up on it and we were asked to do a pitch, which was voted to be posted on Virgin Atlantic’s in-flight entertainment system. We also created a Facebook group,” he adds.

The company’s website was launched in parallel and received, he says, as many as 4,000 views a month. “Today, social networking sites have become the most impactful medium. For example, my Facebook friends have the option of posting Mybar on their status, so one can end up with an extended network of hundreds of thousands of people.”

Some people were wary of investing in Mybar online, fearing it was an internet scam, he says. The brothers were still able to raise $300,000 in the first phase and securing a location significantly sped up the process. The venue was financed through the sale of what the brothers call “Bar Notes”, each valued at between $2,000 and $20,000. The notes are a form of permanent membership and the amount of the investment carried different advantages. Bar Note holders are not entitled to Mybar equity, but still earn dividends. Holders of $20,000 notes, the maximum amount, have a 2 per cent voting right on the design of the bar and are entitled to 2 per cent of its dividends, while the holders of the $10,000 notes had a 1 per cent vote and 1 per cent of dividends.

The investors also have access to Mybar’s weekly sales report. And each category – Gold ($20,000), Platinum ($10,000) and Silver ($5,000) – provides perks, including priority reservations, reserved parking, engraved names on the wall and access to VIP areas.

Although imaginative, not everyone, was sold on this unorthodox financing scheme. “While I thought the Mybar marketing campaign was ingenious, I was disappointed when I discovered that ownership was limited to Bar Notes and not actual shares, in spite of the fact that the slogan on the Mybar website read ‘Mybar: own it, live it, profit’,” says one person who asked to remain anonymous.

From a legal standpoint, there are questions. “The information available on the website and prospectus does not clearly determine, from a legal perspective, how Mybar SARL, a limited liability company, issued a certain type of title to inject money in the company,” says Lina Charbel, a lawyer. “It is also unclear how it intends to distribute future dividends to ‘Bar Note’ holders instead of partners.”

But the brothers say Mybar’s unconventional leveraging was necessary because of the difficulty of doing business in Lebanon. “Financing a project in Lebanon is a Catch-22: a bank will only give you money if you have money, and if you have money you don’t really need the bank. Kafalat [the Lebanese national credit company providing subsidised loans] usually shies away from bars and restaurants,” they explain.

Yasser Akkaoui, the managing editor of Executive Magazine, a business publication, agrees with the assessment of the investment situation in Lebanon. “The problem actually lies beyond the system. Angel investors are simply not part of our culture and the idea of venture capitalism in the real meaning of the word does not exist here yet.”

But Mybar is proof that creative financing does exist. And now the brothers and their partner Karim Arakji plan two new ventures, Myhotel and Myspa.

Islamists Gain Upper Hand in Russian Republic

Nowhere in Russia is the situation so explosive as in the autonomous republic of Dagestan. An ongoing Islamist insurgency has plunged the corruption-plagued region into near civil war. Some high-ranking Russian officials believe it will take years to defeat the extremists, if it can be done at all.

An old man is trudging home through the narrow, dusty streets of Gubden, carrying a last memento of his murdered son in the pocket of his trousers. The photo of his eldest son, which the man has stored on his mobile phone, shows a gaping hole next to his left eye. "They killed him when he could no longer defend himself," says the man, whose name is Magomedshapi Vagabov.

Vagabov takes off his grey, sheep's wool cap. His house lies in the shadow of a mosque that towers like a fortress over Gubden, a village in the mountains of Dagestan, a Russian republic in the Caucasus region. Representatives of the central government in Moscow rarely come to Gubden without the protection of armored vehicles and helicopters. It's not Russian criminal law but Sharia law that applies in this village of 4,000 inhabitants, many of whom sympathize with the Islamist insurgents who have spent more than a decade trying to establish a theocracy that would extend from the Black Sea to the Caspian Sea.

Close to 9 million people live in the autonomous republics of Russia's northern Caucasus. Since the collapse of the Soviet Union, each of these republics, particularly Chechnya, has been plagued by terrorism and war. But nowhere is the situation today as explosive as it is in Dagestan. This desperately poor strip of land on the western shore of the Caspian Sea, which is smaller than the US state of West Virginia, is home to several dozen ethnic groups that are bitterly at odds over government posts and grazing land, while an Islamist insurgency wages a war against Moscow and Dagestan's Russian-controlled government.

Almost Ungovernable

The resistance against the military campaigns of Czarist troops began in Dagestan more than 150 years ago. Russia needed a force of more than 300,000 to finally subjugate the region after a war than raged for about 30 years. The spirit of resistance continues to shape the republic today. Two decades after the collapse of the Soviet Union, chaos prevails in Dagestan, primarily because of the activities of radical Islamists. The Caucasus republic has become almost ungovernable.

In less than four years, the world will come together in the region for the 2014 Winter Olympics, which are being held in the city of Sochi. Russian Prime Minister Vladimir Putin insists that this will not be a problem, and yet his Interior Ministry has just reported that the number of terrorist attacks in the northern Caucasus has more than doubled. Only last Wednesday, armed men stormed a hydroelectric power plant in the Kabardino-Balkar Republic, where they detonated three bombs. Sometimes the attacks even hit the Russian capital: In late March, a group of young female suicide bombers from Dagestan blew themselves up in the Moscow subway, killing themselves and 40 others.

In Makhachkala, the Dagestani capital, there are reports of attacks on a daily basis. In the last two weeks alone, a high-ranking judge, a Christian priest, three police officers and mayor were shot to death, policemen were injured when a bomb exploded, and another bomb caused a train to derail.

'All My Son Did Was to Preach Pure Islam'

Magomedali, the son of Vagagov, the old man in Gubden, also became a casualty of the de facto civil war when he was ambushed on July 18, 2007. The police had suspected him of being an insurgent and had ordered him to appear for questioning in the district capital, Karabudakhkent. As he was returning home, unknown assailants opened fire on his rickety Lada.

Magomedali was wounded, but not seriously, as the doctors later reported. He was taken to the hospital in Karabudakhkent, which the police had sealed off. They didn't even allow his father to visit him. When old Vagabov finally saw his son, he was already dead, with a single bullet hole next to his eye.

"All my son did was to preach pure Islam," says Vagabov. "He wasn't an insurgent."

Since the death of Magomedali Vagabov, the conflict between the government and Islamists in Gubden has expanded into a war between local clans.

Taking Matters into Their Own Hands

Vagabov points to a fist-sized hole in the wall of his living room. The village policeman was shot dead shortly after his son's death. The policeman's family immediately assumed that the Vagabov clan was to blame and decided to take matters into their own hands. The son of the policeman launched a grenade at Vagabov's house, causing a blast so powerful that the windows were shattered in six nearby houses.

Soon afterwards, the policeman's son torched a newly built house owned by Vabagov's relatives. Then the widow and daughter of the policeman were ripped apart by a mine as they were visiting his grave.

"We had nothing to do with it," Vagabov claims. He is 85 and a respected man in the village. And yet he doesn't have enough fingers on his hands to enumerate the dead in his clan. Only recently, elite troops from Moscow killed one of his nephews in a counterterrorism mission.