Interview with the Founders of Netbarg, the Iranian Group Buying Website

Netbarg is one of the fastest growing and profitable startups in Iran. The company was launched in early 2011 by two cousins named Alireza Sadeghian and Saman Sadeghian. Netbarg has grown enough that the cousins are now leading the teams behind a couple of new online ventures in the country.

Netbarg is an Iranian e-commerce marketplace which connects hundreds of merchants and service providers with thousands of users in Iran. Customers can buy online coupons on Netbarg to receive discounts from a selection of merchants. Aside from Tehran, Netbarg is also operating in Isfahan, Karaj, Mashhad, Ghazvin, Shiraz and Araak.

The company’s business model is similar to Groupon, the American company which by the end of 2015 had served 49 million customers from 500 cities around the world. Although Groupon is facing some problems in the US, Netbarg seems to be doing fine even with a fierce competition that is going on in Iran. See the chart below provided by ECM which shows the brand tracking of Netbarg and two of its competitors in Iran, Takhfifan and Goldtag.

Netbarg is a subsidiary of “Iranian Modern Business Company”. Other online ventures from the parent company are Tik8, a ticket selling platform, Chilivery, a food ordering website and Clix which is an affiliated Advertisement platform.

TechRasa spoke with Alireza and Saman Sadeghian about Netbarg, what got them into this business and their future plans.

TechRasa: You both have lived and studied abroad. What made you guys decide to come back to Iran and start your venture here, especially at the time when the harshest sanctions were imposed on the country?

SS: Firstly we didn’t want to get any investments from any company outside the country so sanctions weren’t something that we were cautious about. The things that we looked into was the market, the infrastructure and the demand for such a product or service. The business model was really interesting and Groupon was growing really rapidly and Google wanted to buy them. When Google offered to buy Groupon, there were lots of studies about this business model and it was interesting for us to understand how it works and what are the advantages of such business.

AS: It was also about the passion, me and Saman always had the passion to do something in the online business and I think it was the moment for us to see if this is the right opportunity to start with something that we wanted to do.

TechRasa: Was Netbarg your first attempt in starting an online venture?

AS: No, We had a long history of doing internet stuff together. We were designing websites back in early 2000s and then we designed for ourselves, our schools, our family companies and we started a carpet selling website for our carpet company back in 2004. I think back then it was one of the only 5 Iranian commerce websites.

At that time there was Raja for buying train tickets online. There were other websites but they were selling by cash on delivery but we were accepting online payments.

TechRasa: What happened to that online carpet selling website?

AS: I was 19, Saman was 20 when we did that. It was a family business company so they were not that supportive because we were disrupting their classic traditional business. The online sales were just a small portion of the carpet company’s sales.

We were selling maybe 2 invoices per month for the 2 years that the shop was active without any advertisements. And consider it that year the no one knew much about online business and buying online anyway.

SS: When you’re buying an iPhone you know what you’re buying. When you’re buying a carpet you have to feel the design, see colors and everything else. What was happening at the time was that people were going to shops and saw the designs and the quality. If the shop didn’t have a specific design, color or size and then they were buying that carpet online because we had the larger stock.

TechRasa: You mentioned Groupon. People are saying the Groupon business model is not working anymore. Some say the customer loyalty doesn’t work and people are looking for deals not brands. Is there a difference in Iran?

SS: The problem with Groupon wasn’t the business model. The problem was that they had to grow really fast because they couldn’t have any patents to their business model; so it was being copied quite rapidly all over the world. They wanted to have this business model and the profits of this business model for themselves so they had to expand really quickly and go to as many markets as they could.

Therefor they couldn’t focus on making a profitable business at that stage and get the market as fast as possible. So the only option for them to make some money was to go public. When you want to go public you need to build up some numbers to get a higher valuation.

The valuation was really good when became public. Because they were expanding really fast, the revenue was growing rapidly but they had a scattered business model so they operating in so many different markets, with so many different management teams doing different sort of stuff.

I did my dissertation on the advantages and the disadvantages of group buying for businesses and I interviewed a handful of businesses that ran a group like business model. They were happy.

TechRasa: You have a couple of competitors in Iran. One being Takhfifan and Goldtag. What makes Netbarg to stand out here?

AS: I think better service to everyone. Better service to the merchants, better service to the customers. From day one we had invested heavily in systematic approach to our operation so we have been very organized we had payed the merchants on time and we have given our customers a good service. It’s not an easy business model to run and since we had our systematic and rigid approach we have managed to give the best and professional service to our customers on both sides.

TechRasa: Do you think it has become easier to start a venture in Iran since 2011 when you started Netbarg? 

SS: In tech its much more difficult. The infrastructure got better, the internet penetration is much more available a lot of people know how to use online payments and how to trust different sort of payments online. Also there are lots of talented people who are interested to work in tech industry and since a lot more people are interested in this industry the competition is hard as well. Getting customer attention is much harder as well, because there’s more competition.

AS: Also the costs have got higher. Advertising is 10 times more expensive then it was 10 years ago.

TechRasa: Netbarg is not only operating in Tehran but also in 6 other cities. How is the user flow coming from those cities?
AS: Of course its much smaller than Tehran. In general I’ve seen in a lot of industries Tehran equals to every other place in the country. If you take any company’s sale it would be 50 50. It’s 50 percent Tehran and 50 percent in all the other cities combined.

TechRasa: Is your parent company—Iranian Modern Business Company—investing on any startups?

AS: We have been investing in other ideas and other ventures such as Tick8. We have invested on our own ideas which are Tick8, Chilivery and some other ideas that we have in mind. We have been studying other teams and ventures, but we have yet not found a team that we are comfortable with and we can add something to them.

TechRasa: What is the main problem with those teams? 

AS: I think the teams are not that professional in terms of maturity and running a multi million dollar business. One of the problems in Iran with investing is the legal aspects. Enforcement of the law in Iran is very difficult. Which makes partnership in Iran very difficult. In Iran we see mostly family businesses or partners that know each other for a long time doing business successfully.

We have talked to a lot of teams, negotiated and trusted with a few of them but so far we have not yet found a good match.

SS: We don’t see teams that they themselves really believe that they can do something amazing. In order for them to be successful they have to make sure they know all the details of how to become successful and have trust on theirselves until they can make it.

TechRasa: So where do you find the people with a good criteria to start something like Tick8 and Chilivery? 

AS: First of all its very difficult, you have to interview hundreds of people to get one senior manager then when you get it after 6 months you realize that maybe that person is not the best person so you have to do the process all over again. Finding senior experts especially in e-commerce is a big problem. Because we have networks in our family businesses we have a better chance to find these people.

We find the people who do not want to run their own ideas but they are capable enough to run our businesses by themselves.

TechRasa: Did you look for Iranians who lived abroad and came back? 

Actually couple of our managers in Chilivery were working outside of Iran. So it’s a positive thing to say that we brought back some of the people who left the country.

TechRasa: How big is the market that you guys though of starting Tick8, where dozens of other ticket selling websites exist. One being Miresi which is heavily advertising all over the city? How are you going to compete with them? 

AS: Our strategy is to give the most professional service to the customers at both sides, the producers and the customers. I don’t think there’s any other website which has a call centre more professional than Tick8. I understand that there are maybe 20-30 competitors but this is not something that we’re afraid of. We have faced 300 – 400 competitors before.

About, Miresi I don’t think people behind it are that much experienced in e-commerce, I guess you can see that when you see their billboards at the beginning. I don’t think that the best approach at the start for this venture is advertising on billboards.

Startup is not something that pays you back in one year. It will take courage, time and small investments and lots of analysing.

SS: The missing points we have seen in the ticketing market was the scattered market. If you have a platform that consistently has good events happening in it then you would have a flow of customers coming automatically.

TechRasa: Saman, you live in the UK, you spend a couple of months there and then come to Tehran for a couple of weeks. How has this been working for you?

SS: I had the advantage of having a cousin who is a really good match to me in terms of working together. Because it’s not easy for two people working together shoulder by shoulder. Being remote and being separated makes the makes the possibility much harder.

But the good thing has been that we’ve been cousins that trusted each other and have put all our efforts in this business and we trusted each  other. The other thing is that because I was away from day one we’ve put in the required infrastructure and also the culture in the company for me to be able to work remotely.

TechRasa: How do you see Iran’s startup scene? What are the differences of running a venture here in Iran and somewhere else? 

SS: When we started, the advantage was that the market wasn’t that competitive. Event though have seen over 300-400 other group buying businesses coming online and going offline in Iran. Maybe one per week! The advantage is that they are not serious competitors they just see the face of the business and it looks really simple.

It looks really easy but its not, people who are attempting to run such business model don’t see it as something that needs a lot of work. There are plenty of space for you to go to make mistakes and still survive. But its much harder in other countries.

TechRasa: If you want to give tips to some of the Iranians who have lost their touch with their home country, what would you tell them? 

AS: If they have experience in an industry outside Iran, I would tell them to come back and start something in the same industry. Not only in tech in all industries we need good people and good teams to come and work professionally. We have observed the brain-drain in past decades. These people have been trained by the best companies and I think its the best time for them to come back and start their own venture in the industry they have experience in.

TechRasa: Thank you.

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Alireza and Saman finished the conversation by hoping for the prosperity of the country and the growth and maturity of this industry. They have done a great job at becoming one of the pioneers in Iran’s startup scene and becoming a success story for the new generation of entrepreneurs in Iran.