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.

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