A growth mindset
When Jahez International Company for Information Systems Technology (Jahez) launched its first and only funding round prior to going public, what was foremost on the agenda was projecting a prospect of boundless opportunity. As CEO Ghassab Bin Mandeel put it, the goal was to get people to believe in the Company. So paramount was this objective of boosting stakeholder confidence that raising capital was almost a secondary consideration. Rather than just invest for the sake of it, Jahez needed the institutions and individuals willing to part with their money to understand on a fundamental level why the venture was going to be a worthy investment.
During its more modest beginnings as a fresh-faced though confident entrant looking to disrupt the Kingdom’s growing e-commerce landscape, Jahez had its work cut out in finding early investors. Not many saw the potential, and the fledgling enterprise had much to do to convince VCs and to be seen by the wider investor community as a startup that not only promised significant returns but also had the capacity to leapfrog into the future.
Adapting to changes
With the arrival of the COVID-19 pandemic, Saudi consumers along with the rest of the world were becoming increasingly reliant on online food and groceries delivery services. The food aggregators market recorded rapid growth in the Kingdom at a CAGR of 53% from 2018 to 2022 to an estimated SAR 13.4 Bn in 2022, and, as an early adopter, Jahez had a head start in the race to cash in.
A budding business in the Kingdom, quick commerce (q-commerce) began to gain traction in recent years. The q-commerce market grew by about 5 times in value between 2019 and 2020 and is expected to reach SAR 3.7 Bn in 2023, with changing consumer habits, mainly driven by the measures taken as a result of the COVID-19 pandemic.
The cloud kitchen business model has gained popularity amongst restaurants as consumer preferences are shifting from dine-in towards food delivery. As the concept requires a significantly lower investment compared to setting up a restaurant with a dine-in facility, it attracts more entrepreneurs as well as existing restaurants to adopt this business model.
In what was a remarkable story of unparalleled growth, Jahez quickly became one of the biggest names in food, q-commerce, logistics and tech investment in the MENA region and, in under five years, was primed for an initial public offering (IPO) of a magnitude not seen before in the region’s e-commerce sector.
On the cusp of greatness
Already the fastest growing player by market share in the run-up to the offering, Jahez sought to go public on a hitherto unseen scale so it might fund the Company’s ambitious plans for expansion and dominate the Kingdom’s thriving online entrepreneurship arena.
With these twin objectives in mind, Jahez made history in January 2022 when it became the first homegrown, early-stage startup in the Kingdom to be listed on Nomu, the Saudi parallel equity market, in a stunning and unprecedented USD 2.4 Bn IPO. With 2,093,113 shares offered at a total SAR 1.8 Bn, the Company was the first ever to be listed on Nomu within just five years of operations.
The sprint to prosperity
The road to the IPO was not without its hurdles. From conception to execution, the decision to go public called for a few readjustments along the way. For one, Jahez had to undergo a transformative cultural shift by reorienting its startup outlook to a more mature, more establishment approach. This meant that from governance to operation structure, the Company had to instil in itself the corporate sophistications that a serious, publicly traded venture demands – in terms of reporting, IFRS standards, other finance benchmarks, etc – while staying true to its disruptive spirit.
A number of advisors were brought on board to inculcate this new line of thinking in the Company’s human capital and add more value to the business.
A compelling investment story
Though it was a steep learning curve, Jahez was committed to realising as perfect and smooth an IPO as possible. The Company took pains to lay a solid foundation for the IPO by engaging investors at an unusually early stage, making presentations even before the prospectus was submitted with early-look meetings. A well-crafted equity story was circulated among the VC community and elsewhere about the opportunity offered by this game-changing startup that promised fast-tracked delivery of the Company’s own vision as well as the Kingdom’s larger development objectives in line with the Vision 2030 strategy.
This story was in part a chronological retelling of the Company’s history and gradual diversification – from a trendy new food delivery service provider to a market leader in logistics, cloud kitchen services and lifestyle solutions – and an illustration of its growth trajectory and rapid rise in paid up share capital from SAR 1 Mn to SAR 96 Mn in the span of just five years, pre-IPO.
The issuance was aimed at funding the Company’s plans for scaling up, which were already set in motion by its various acquisitions and new ventures. The equity story communicated the potential for growth for both Jahez and its subsidiaries.
The equity story also conveyed to would-be investors how Saudi Arabia’s macroeconomic and demographic conditions indicated large growth opportunities for online food delivery, quick commerce and cloud kitchens. Major macroeconomic and demographic drivers included economic growth and a resultant rise in employment and disposable income, the overarching Vision 2030 program, a young population predisposed to embracing technology, and growing labor force participation by women.
Sealing the deal
Jahez then set off on a marathon engagement drive to broadcast its growth potential and future prospects to potential investors everywhere. Top-tier institutional investors were sought and engaged in similar fashion to main market IPOs, generating insightful feedback on valuation methodologies, structure and the equity story, which later translated to a superior share price performance.
After months of analysis, strategizing and investor interactions, followed by a three-day offering period in December 2021, on 05 January 2022, Jahez was formally listed on Nomu, in a record-breaking IPO that made headlines in the MENA region – a first for a Saudi tech Company. The innovative disruptor had to work harder than most, but with USD 2.4 Bn to show for it, suffice it to say that the hard work paid off.
Results
The Jahez IPO generated unanticipated demand from leading local, regional and international investors.
The IPO marked the first ever listing of a Saudi early-stage company, opening the doors of capital markets to other startups in the Kingdom’s growing ICT sector and providing them access to the broader investor base to enable rapid growth. It is also the first ever cornerstone investment in a Saudi IPO, encouraging financial institutions to undertake positions in future listing on both Main and Parallel Markets which will invariably advance the investment landscape.
Much of the funds raised from the IPO were redirected to an accelerated regional expansion drive targeting a larger user base and market share. The objective was to cement Jahez’s and the Kingdom’s e-commerce footprint in the Region through diversification and by opening avenues to diverse markets. Vertical expansion was also achieved through the acquisition of Marn, a business digital solutions provider in early 2023.
Enabling Vision 2030
Vision 2030 was instrumental in the entire IPO exercise. One of the key objectives of the Kingdom’s 2030 strategy is to take local industry giants to the global stage, to turn national champions into international icons. Jahez has embarked on this path to expansive international penetration by making its services available to an ever-widening customer base. Post-IPO, the Company also contributes significantly to the Kingdom’s digital transformation, by playing a leading and pathbreaking role in e-commerce, by way of digital empowerment of merchants and retailers among other efforts, paving the way for a truly digitized economy.
Jahez has also been a key enabler of Saudi Arabia’s ongoing plans to be a logistics leader in the region by investing in the enhancement of the Company’s logistical capabilities.
In terms of ESG, a fundamental pillar of Vision 2030, Jahez has adopted a clear strategy aiming to hit multiple sustainability targets. The Company is in perfect alignment with the Kingdom’s larger development objectives in this decade, already working towards a number of specified targets. Aside from contributing to job creation in a meaningful way, particularly with regard to the Kingdom’s plans for Saudization, the Company has also been exemplary where equality is concerned, accounting for one of the highest female employment ratios in all of Saudi Arabia.