Ammon News - AMMONNEWS - MarkaVIP, founded by a Jordanian-American with his roots in Silicon Valley, is attracting dollars and users to flash sale sites in the Middle East.

Two American venture capital outfits are putting money into a region not normally known as a VC magnet—the Middle East. But they’ve chosen a company in a hot area, flash sales, for that investment.

San Francisco’s Lumia Capital and New York’s Invus Financial Advisors have invested $5 million in a first round of venture capital for MarkaVIP, a company founded by a 33-year-old Jordanian-American who earned his tech chops in Silicon Valley working for companies including Zazzle.com.

“This is our first large investment in the Middle East,” Martin Gedalin, managing partner at Lumia Capital, told Portfolio.com of the investment announced this morning. “It’s just a really exciting place that not a lot of people are talking about.”

MarkaVIP founder Ahmed Alkhatib said he planned to use the investment to grow operations into new Middle Eastern countries. Launched in Jordan and Saudi Arabia in 2010, his company has since expanded to Gulf states including Bahrain, Kuwait, Qatar, and Alkhatib said is pulling in about $3 million in incoming orders per month.

But with each new market the company has met challenges such as delivering across boundaries from a country with one set of laws to another with a different set. Another challenge: payment types. The company has had to deliver to customers with a different payment system than western sites like Gilt Groupe enjoy. Alkhatib has had to allow for cash on delivery payment, for instance, because customers have less trust of online payment systems.

“We’re in eight countries and it’s not easy to work across eight countries,” Alkhatib said. At the same time, he wants to expand into still more countries, like Egypt, the largest Arab state by population.

“Egypt is a very interesting market, there’s 20 million users online,” he said. “The users are very savvy there, they overthrew the government with Facebook.”

Alkhatib said that when he decided to strike out on his own as an entrepreneur, he chose the Middle East in part to be close to his family. And he chose the flash sales business model because he had seen similar companies succeed in such emerging markets as Russia and Turkey.

He also saw an opportunity to introduce brands that were popular in North America, Europe and East Asia, but largely unknown in the Middle East. “You have so many brands that don’t exist in the Middle East,” he said. So his company acts as a sort of canary in the coalmine testing the potential for new brands in the region.

For Gedalin, the combination of regional savvy and growth made MarkaVIP a good shot to take in a new region. And though he thinks there could be similar investments available, he’s still cautious about the region.

“It’s a company that has built up so much internal acumen and know-how,” Gedalin said. “It’s not something that we think will be very repeatable in the short term.”





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