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Michael Lahyani, the founder and CEO of Property Finder, advised entrepreneurs in a 2016 Interview with Entrepreneur Middle East not to “build a business just to sell it.” Although a lot has happened since then for the UAE-based proptech business as well as the MENA startup eco-system at large, this statement seems to still epitomize Lahyani’s belief in his company.
Lahyani raised US$90m in debt financing for Property Finder in May 2024 with the aim of buying back shares from UAE-based BECO Captial who was the first institution investor in the company. Lahyani stated in a press release that “our commitment to the real-estate market remains firm as we strive to continue driving strong returns for our eco-system.” “I hope that this event will set the precedent for other entrepreneurs in the region, allowing them to take their innovative businesses to new heights and attract global talent. This, in turn, will fuel the entrepreneurial ecosystem in the MENA.”
Property Finder was born in 2005, as a UAE property print magazine named Al Bab World. By 2007, Rupert Murdoch’s online real estate advertising group REA Group bought 51% of AlBabWorld.com and rebranded it as Property Finder. Three years later, despite all the negative effects of the financial crisis in 2008-2009, Lahyani, along with his co-founder Renan Boudeau, bought back REA Group’s stake in the business. Since then, Property Finder’s growth trajectory has been on an upswing. Property Finder now serves more than 5.5 millions active users every month in the UAE, Qatar and Bahrain, Egypt, Saudi Arabia and Turkey.
It has also received consistent support from venture capitalists through multiple funding rounds. This includes $2 million in 2012 from BECO Capital, $20 million in 2016 from Stockholm Exchange-listed investment company Vostok, and $120 millions in 2018 from US private equity firm General Atlantic. BECO Capital, as the first institutional investor, played a key role in the development and success of Property Finder. But backing it at its early stage brought a strong return to the venture capital firm. BECO Capital was able to achieve a 2,41x ratio of paid-in capital to distribution from its Fund I due to its $1 billion valuation exit.
Related: Breaking Ground: Propertyfinder Group Founder And CEO Michael Lahyani
BECO Capital founder Dany Farha. Source: BECO capital
Lahyani and BECO capital and its CEO Dany Farha have been in a productive partnership for more than 12 year now. The synergy that they have developed can teach other entrepreneurs a lot about what makes a good founder-investor relationship. Farha said that Lahyani was a trustworthy partner because he was competitive and ethical. He always wanted a good deal, but never at the expense of the other party. Michael had a lot of leverage when we first started buying a company. Michael still acted with fairness and balance, taking a win-win strategy, leaving money on table and creating a fair outcome. Michael has done the right thing and not the most profitable thing on many occasions in our journey. This is very important to BECO. Integrity is a core BECO value, specifically doing the right thing and not only the most profitable.
Farha says that Lahyani displayed the same principles to the very end of the journey their enterprises took together. Farha says that they found themselves – for the first time in their relationship- on the opposite side of the table. But we both continued to live our values and achieve a win-win result. “The other thing that I’d say about Michael is that he, like all exceptional leadership, has an incredible clarity of vision and a robust, dynamic decision-making frame work. I would even say that we were mentors to each other on several occasions. I find the best relationships are not just those that are professional, but also those where both parties grow and improve as a result. Michael was a loyal and supportive friend. My best founder relationships are those that are reciprocal.
Lahyani believes that trust and alignment of value are the two most important foundations for a successful relationship between a businessman and an investor. But, he says, these are not built during a single meeting in a conference room. “There’s no substitute for spending quality time working together,” he says.” Time is a precious commodity, especially for an early stage investor who, by nature, will have several companies and an early stage founder with a seemingly endless list of tasks. Travel was the way Dany spent quality time with me. We attended conferences, held board meetings abroad and visited companies that run similar businesses in other markets. We visited Summo in Japan, the largest property portal there. It was a memorable trip. We always took the same flight and sat next to each other. We also booked the same hotel. Over 11 years, these small details made a huge difference. We built a unique relationship through these trips that was strong enough to survive any challenges the business would throw at us. We didn’t realize it until much later. We did it because we liked eachother. As a result, I would tell early-stage founders to avoid taking money from investors with whom they don’t get along. It won’t lead to anything positive, because you will run into challenges and if there isn’t a solid, good relationship, things can get ugly fast. Once you reach scale it’s a completely different dynamic. Your relationships with investors can become more formal. Mine are not, but in the beginning, those tight bonds were crucial to success.”
Lahyani received debt financing to complete Property Finder’s buyback from Francisco Partners, a global firm with offices in San Francisco, New York and London. General Atlantic, Property Finder’s last institutional investor, also supported the strategic decision. Lahyani says the whole process taught him that there were other ways to create liquidity, than raising a second round of investment, for an early investor. “To have options you need two elements,” he says. “First, you must run a successful business. Allocating funds to a share purchase when your business needs to invest to grow is not a smart business decision. Second, a good relationship with the investor will help you reach an agreement on the price.
Dany Farha, Michael Lahyani. Image courtesy of Property Finder.
Lahyani also learned that raising debt is “trickier than raising equity”. “The term sheet represents the tip of the spear, and the real negotiation happens when you draft the contracts. In contrast, equity rounds are pretty standard once you have agreed on the terms.” “It has also become evident that traditional lenders do not feel comfortable funding buyback transactions. They look for hard assets to use as collateral. Private credit funds understand this and know that a buyback is accretive and gives existing shareholders the opportunity to own more shares of their company while allowing the lender to earn healthy returns. Running a tight ship and bringing your company to profitability creates flexibility. It’s because we consistently produce free cash flows that are able to borrow debt. It is important to have the right advisors at every stage of the process. I wouldn’t recommend going it alone.”
According to a new report by Managing Partners Group, institutional investors are increasingly focusing on yield rather than growth. This is due to the changing macro-economic and geopolitical environment. In the MENA, Farha is more optimistic about the future of local markets. He is one of a few investors who have made their second $1 billion valuation. BECO Capital I’s exit history also includes Uber’s high-profile acquisition Careem for $3.1 billion in Jan 2020. Farha says that in just 10 years we have made tremendous progress. “We had $50m invested annually, few investors, few founders, little government support for the digital and innovation sectors, and virtually no digital infrastructure. We also had no exits. We now have $3 billion invested annually. Hundreds of regional and international VCs, professional investors, and homegrown VCs are actively investing in the area. Plot the graph and see where it is heading. “With our young, affluent population and forward-thinking leaders, the genie has been let out of the bottle and it is not going to be put back in.”
Lahyani says that despite the current challenges in the global startup funding landscape (Crunchbase reports the overall startup funding was down by less that 20% compared to years before the COVID-19 Pandemic i.e. The UAE/MENA region is one of the few markets where capital continues to be invested in early-stage businesses. Lahyani says that, relative to other emerging markets, the UAE/MENA region is better. “Many investors were burned post-pandemic because they backed companies that had grand ambitions but little profit in sight. My advice is to not promise something you can’t deliver. You can lose the trust of an investor at deck level if you make unrealistic assumptions about revenue growth. You want to appear as if you are thoughtful, credible, and logical. Stick to business models that have proven results, good unit economics and healthy margins. Lahyani advises to not raise funds unless absolutely necessary, as “this is the time to focus your operations, improve margins, and fine tune your products and/or services.” Lahyani advises those who need to raise money now to seek out founder-friendly investors. “They must be investors who are willing to stay invested for an extended period of time, like BECO Capital,” he says.