Multiple stakeholders in Islam- and Muslim-focused tech agree 2017 was a year of increased traction and validation for start-ups but it was an announcement about a government-led initiative that ended the sector’s year on a high forward-looking note.
On December 20, Malaysian authorities announced that the country’s Islamic Digital Economy (IDE) framework is expected to be ready by the first quarter of 2018. The framework is being built by the Malaysia Digital Economy Corporation (MDEC), the Department of Islamic Development Malaysia (JAKIM)–which is known globally as Malaysia’s national-level halal certifier—and Shariah advisory firm Amanie.
An MDEC official told local daily New Straits Times the framework is meant to guide start-ups and venture capital players in the Islamic digital economy. It will cover areas including halal and Shariah compliance, funding and financing, Islamic digital economy regulation and halal and Shariah business operation frameworks.
The Malaysian government deserves mention for building the country’s Islamic digital economy in a manner that brings together multiple stakeholders across sectors, which it can now boast to be doing after four decades of developing and strengthening the separate pillars of Islamic finance and halal food, cosmetics and pharmaceuticals.
Their Islamic Digital Economy framework is definitely a development for the global Islamic economy to keep its eye on in 2018. Throughout 2017, however, the biggest developments in the Islamic digital economy came out of the start-up world.
FIRST BIG ACQUISITION
In August, Singapore-based Bitsmedia’s flagship Muslim Pro app was acquired by Affin Hwang Asset Management and CMIA Capital for an undisclosed amount. The app offers prayer times regardless of where the user is in the world, an in-app Quran, and provides suggestions for halal restaurants and mosques within the user’s proximity. According to Bitsmedia CEO Erwan Macé in August, the app had been downloaded 45 million times.
Salaam Gateway was able to ascertain that Macé increased the start-up’s valuation north of $10 million without any help from venture capitalists prior to acquisition. The deal is likely the biggest exit for an Islam-focused tech company to date, and what some consider a validation of more investor interest to come.
“The acquisition was not just an important happening for us at Bitsmedia but also a major milestone for the Islamic digital economy,” Macé told Salaam Gateway, adding that the deal was testament to the “strong interest” that large private equity players in Southeast Asia are starting to show for tech and lifestyle start-ups addressing the needs of the Muslim community.
Other players agree. “The clear big win this year was the private equity acquisition of the Muslim Pro app which essentially rubber stamped the space as investable,” said Ali Debaja, founder and CEO of Hajjnet, a firm that delivers web and mobile apps to help Muslims perform their haj or umrah.
“Large multinational corporations like Nike rolling out products such as the Nike Pro Hijab was also a key indicator for us. Where the world seems extremely polarized, major corporations are keeping their focus on opportunities,” added Debaja.
Another of those opportunities picked up by a major name in the mainstream tech industry was Muslim dating app MuzMatch.
SILICON VALLEY BACKING
This year, UK-based MuzMatch raised $1.75 million in seed funding from a mix of Silicon Valley investors, including the famous start-up accelerator Y Combinator, to which the start-up was accepted into over the summer.
Launched in 2015, MuzMatch now has nearly 350,000 members, its CEO and founder Shahzad Younas told Salaam Gateway. “Users are approximately 40 percent from the United Kingdom, 30 percent from U.S./Canada, Europe and [the remaining from] the rest of the world. We have members from over 160 different countries,” said Younas.
The largely freemium app earns its revenues from a combination of subscriptions and individual consumable purchases for instant matches and extra swipes, according to Younas.
MuzMatch will use the seed funding to boost membership and develop features that are “not seen in any relationship app – not just a Muslim app”, said Younas. “With the significant funding we have in place, we plan to grow to over a million members worldwide,” he said.
Also over the summer this year, Y Combinator admitted its first Malaysian start-up, the healthy food preparation and delivery service Dahmakan, which operates in Kuala Lumpur’s largely-halal food ecosystem. The company won $1.3 million in a seed round in February. It told tech publication Techcrunch then that it wasn’t planning on expanding across Malaysia but is eyeing other parts of Southeast Asia.
HALAL FOOD TECH
Two other Islamic economy food-focused start-ups and tech caught our eye in 2017.
In August, UK-based food takeaway portal HalalEat launched a crowdfunding campaign that hit 59 percent of its 100,029 British pounds target ($130,408) in just four days. The campaign was extended and eventually closed at 104,314 pounds ($140,225) but in a twist, HalalEat opted instead to turn down the entire crowdfund to go with a single investor, who founder and CEO Abul Rob told Salaam Gateway would give the platform a ‘more assured’ international expansion into the United States by the end of 2018.
The investor was named as Mian Ali, who is the founder and chairperson of Pakistan-based outsourcing company TransData, which was originally hired by HalalEat for its back office needs. Ali told Salaam Gateway he sees HalalEat catering to the needs of the growing Muslim population in the UK and that it’s doing so using a “rigorous halal validation process” to onboard restaurants onto its platform.
“Halal validations are always a tricky domain and it just takes a single act of negligence to lose your loyal customers’ trust,” Ali told Salaam Gateway.
This is also a key point for Malaysia’s national-level halal certifier JAKIM, which this year stressed on consumer awareness and public education. This year, it approved a mobile app that verifies the halal status of food products certified by bodies that it recognises. The app, called Verify Halal, was developed by local company Serunai Commerce.
The company’s CEO Amnah Shaari told Salaam Gateway in November that the app had been downloaded around 22,600 times from over 110 countries. According to her, Verify Halal currently holds information on eight countries, including Malaysia. JAKIM currently recognizes 67 foreign halal certification bodies so there’s a lot of room for growth for Verify Halal.
ACCELERATING THE ECOSYSTEM
Islamic economy start-ups such as MuzMatch and HalalEat have benefited from being part of accelerators that provide a mentoring ecosystem. HalalEat is a 2016 alumni of MassChallenge UK, which is a no-equity and not-for-profit accelerator and competition with a focus on high-impact early-stage entrepreneurs.
Following his experience at MassChallenge in 2016, HalalEat’s Abul Rob announced in late 2017 that he would be launching Salaam Ventures, his London-based, zero-equity accelerator for ethical and socially-conscious start-ups. While Rob is responsible for the inception and financial backing of Salaam Ventures, the accelerator is run by CEO Suki Fuller. The programme is set to include workshops, mentoring and personal development sessions for participating companies. The accelerator had not been launched as of this writing.
Dubai has also stepped on the gas pedal. In November, the Dubai Islamic Economy Development Centre (DIEDC) organized its first Islamic lifestyle mini bootcamp for both digital and off-line start-ups and entrepreneurs.
DIEDC told Salaam Gateway in November that there will be more of similar initiatives for the Islamic economy in Dubai. The Centre had previously focused on working with partners such as the Dubai International Financial Centre (DIFC) on initiatives such as fintech instead of dedicated and standalone Islamic economy bootcamps or incubators.
Meanwhile, Shahed Amanullah, co-founder and chief technology officer of U.S.-based Affinis Labs has also been busy.
Affinis Labs is a self-proclaimed social innovation firm that announced a $250 million investment fund for seed stage tech start-ups operating in the global Islamic economy just prior to January 2017.
Its portfolio of initiatives has since come to include Minbar–an initiative launched in Tunisia in February this year that supports entrepreneurship for youth and women in marginalized communities–and Haqqathon, a 3-day hackathon in April that brought together experts in technology, youth culture, entertainment, Islamic scholarship, and other disciplines to create solutions for promoting peace.
INVESTMENT
Propping up and helping the digital Islamic economy ecosystem grow are the much-needed financial investments.
HalalEat’s Rob believes 2017 was a good year for Islam- and Muslim-focused tech. “The whole scene is getting an uplift thanks to some well noted achievements such as the acquisition of Muslim Pro, MuzMatch making Y Combinator, and even our little success with HalalEat raising investment,” said Rob.
Considering these “achievements”, Affinis Labs’ Amanullah told Salaam Gateway that while he has noticed an increasing number of mainstream investments into tech start-ups that develop products and services for Muslims, the majority of the money in the space is still relatively risk averse.
“We need to create innovation in the way we leverage the financial resources of global Muslim markets, which are still too risk averse to take start-ups in the space seriously,” said Amanullah. “We could have had wins in this area in 2017, but we’re still fighting to make this a reality.”
The digital Islamic economy needs more investors such as HalalEat backer Mian Ali, who told Salaam Gateway his current portfolio is mostly in technology in advanced and emerging markets. He’s backing healthcare, entertainment, and artificial intelligence-driven business services.
Ali sees real potential in Islamic economy start-ups. “Halal and Islamic-related companies have huge potential given they are able to identify the right needs of growing Muslim populations worldwide,” said Ali.
MuzMatch’s Younas also underlined this issue. “Muslim minorities in non-Muslim countries are a different demographic and consumer base versus Muslims in Muslim-majority nations,” said Younas. “Smart companies can tap this by understanding those differences and coming up with a cohesive way to target and appeal to both sets.”
Younas added that the Islamic digital economy is “far behind” in terms of success stories and has a “real lack” of role models and real knowledge experts within the Muslim community when it comes to tech.
“There is a lack of diversity in tech in general, and more so in the investment community. We as a community need to be more supporting of Muslim start-ups both in terms of business intros, investor intros, risk appetite and confidence in ourselves,” said Younas.
HalalEat’s Rob suggested that investment appetite could be boosted if the right analytics were made available. “I know the Islamic economy is growing and the consumers are now very savvy, but I believe the resources to analyze the Muslim consumer sentiments by region and country are still missing,” said Rob.
“There is massive data gap in my opinion and a lot of numbers are being thrown around which should be taken with a pinch of salt. We need better insights and somehow need to pool the data while preserving individuals’ rights on privacy, in line with any data protection laws.”
Amanullah is taking a wait-and-see approach with regards the sector’s growth. “Basically, the ground is being laid for the next generation of start-ups that leverage Muslim resources, values, and capital to create something new and interesting for the world. Let’s wait to see what 2018 holds.”
Source: Salaam Gateway
