Ali Naqi Shaheen

Early life and background

Shaheen was born in Okara. His father worked for the Pakistan Ordnance Factories and passed away in 2005. He grew up without a computer at home and became fascinated by computing. [1]

His father wanted him to become a doctor and thought computer science was like BPO work at the time. Shaheen says he was pushed a lot but insisted on doing what he wanted. He never wanted to join the army and preferred engineering and mathematics. [1]

Education

Shaheen went to Burn Hall in Abbottabad and attended from prep until O levels. He describes the school as strongly army-focused and disciplined. He took his A levels in Islamabad. He applied only to MIT and LUMS. [1]

He first took computer science in his A levels. He joined LUMS in 2000 as part of the batch of 2004. He describes himself as a big nerd at LUMS who did not know many people, and says he did not attend classes there. He finished the core computer science courses with the batch of 2003. [1]

Early career

Shaheen did not come from a business family and did not plan to start a business. He was one of the co-founders of the business. He had a part-time job at a company that Mentor Graphics later bought. [1]

The team used Bluetooth to build a remote metering solution. The metering product did not place in the top 10 of the competition. The team planned to sell the product to an electric meter manufacturer. The team was told that they could give back to LUMS once successful, but that money could not be given to them. [1]

An early client hired all three of the team for $2,400 per month. Someone used a credit card to get them their first Elance membership and to register their domain. Shaheen says they became one of the top providers on Elance. [1]

Their first office was a flat that also served as the workplace. They moved to Islamabad in the summer of 2003. His maternal uncle's wife gave him 18,000 rupees. About half of the team went to Confiz and half stayed with the company. [1]

Germany

Shaheen chose Germany because a hard market would mean less competition. On the first trip, in April 2007, he scheduled 200 meetings in two weeks. He says the first Germany trip produced about half a million euros of projects. [1]

He was told about OpenBC, or Open Business Club, a German LinkedIn competitor. He says he spammed everyone on OpenBC. He says the company had roughly 30 to 50 people at one point. [1]

As a Pakistani company, it could not contract directly with German clients. The company was forced to register in Germany and chose Munich. He chose Munich because the tech and media industry is concentrated there. The company changed its name when it registered the local company. Shaheen moved to Germany in 2009. [1]

The company hired a local team and local project managers because the team of the customers Shaheen closed did not speak English. The company eventually worked with Volkswagen Group and Audi. [1]

Shaheen says German law bars a person from opening a company for seven years after bankruptcy. He says Germany's online market is dominated by publishing houses such as Axel Springer, Bertelsmann and Hubert Burda Media. He says German software services follow construction law. Under that practice, the buyer has a 12-month default warranty for changes. [1]

The company lost a court case. A client took the company to court. Shaheen says the company also became really careful in how it signed up customers. [1]

Reviews business and growth

The company found a group of tech entrepreneurs who said they would set up an online reviews and ratings business. Shaheen describes the founders' thesis that e-commerce growth tracks the lack of trust online. [1]

The company became the primary product team of another business. Shaheen took charge of mergers and acquisitions. He says the company won AXA Global, Allianz Global and Spotify as clients. [1]

Margins and headcount

Shaheen says the company works with just a few customers, so its billability is really high. He says its net profit margin is above 50 percent, against 20 to 30 percent for the industry. He says the services business is largely a game of rate and billability. He describes a value chain where gross margins rise from about 15 to 20 percent to over 90 percent at the marketplace stage. [1]

The company made a policy to outsource a lot and to hire only when absolutely sure that a hire was needed. Shaheen says the company had about 60 to 65 staff at one point, and about 70 employees at one point. He says it has about 110 employees and does not want to measure itself by headcount. [1]

Shaheen says the company cannot bet on headcount-based business models. He says the services market is in a price war that will not end soon. He says the company must grow its revenue on a recurring revenue model rather than headcount. [1]

He says margins in services are getting lower because costs keep rising. He says it is getting harder to hire high-quality talent. [1]

Products

In 2018 the company first thought of a video reviews product. In 2018 mobile browsers could not capture video directly, so the idea waited. They tried the video product again in 2020 and launched it to existing clients. The video reviews product is sold as an upsell at 29 to 59 euros per month. He says the team started learning how to grow SaaS revenue. [1]

The company created a functionality it calls Bravo. The company built a product on top of Microsoft Teams and Slack as an add-on. Shaheen says the company was recognised as the rising star of the employee recognition space. He says annual recurring revenue went from 100,000 to 230,000 within a few weeks. He describes the product as like an always-on video call, except that it takes a picture instead of holding a constant call. [1]

Stock market listing

Shaheen says he has been involved on the M&A side. He proposes mergers and acquisitions to companies as part of his business approach. He says upside for merging partners can only be created on a public market. He says the company did not need capital and wanted market capitalisation. He says profits fund the products and the company does not need the money. [1]

He says the GEM board was the shortest route to a listing. He says no tech company was yet listed on the GEM board, which was launched as an intermediary step for growth companies. He says the listing is on the GEM board and so is technically not an initial public offering. He says the company floats the minimum of 5 million shares, about 15 percent of the company. [1]

He believes the company is undervalued by the market. He says the Pakistani market values listed companies on net profits rather than on products. He says they cannot participate in the IPO but can buy back their shares. He says he is the major shareholder of the company. He says he and his partner had a lot of arguments about whether to do it, with the concern that the company is undervalued. [1]

He says the company will not use the stock price as its guiding north star. He says the company will say only what it does and do what it says. He says transparency is a third principle, and he has run an AMA for several years. [1]

He says the company will not time or appease the market. He says the company will not become a venture investor even if it has more capital. He says shareholders need to trust management, which is why the company keeps its word. The company's principle is not to take clients at any cost and to do due diligence on them. [1]

He says the parent company is Pakistani and the German company acts as a distributor. He says the bottom line always stays with the Pakistani parent company. He says the Pakistani company owns everything in the structure. He says the German company acts on behalf of the Pakistani company for all contracts and payments. [1]

He says the company showed all of its books during the listing process. The company has provided its German books to the regulator as part of the listing. He says a German subsidiary would bring high German taxes, which he calls unfair. [1]

He says investors can apply through a broker such as KTrade. He says the GEM book building dates are 8 and 9 March. He says a main board listing needs SECP approval and a prospectus open for comments. He says a main board listing requires an audit committee and an HR committee. [1]

He describes the GEM board listing as the first milestone in the journey. He describes the main board as the second milestone. He says no company has gone to the main board. [1]

Views on Pakistan's technology sector

Shaheen says cost overheads rose a great deal for export-led businesses, and services businesses in particular were deeply affected. Generators and backup power were treated as a normal business cost from the start. He says IT firms were surviving rather than growing from 2013 to 2018. [1]

He predicts a tech index on the Pakistan Stock Exchange bigger than everything else combined in 30 years. He says Pakistan's young population is one of its biggest advantages. He says tech companies find listing easier than conventional firms because their revenues are clean. He says tech businesses should dominate the Pakistan Stock Exchange. [1]

He says a listed company becomes an institution that can outlast its founder. He says he sees the next ten years as his last career stretch, aiming to build a unicorn. [1]

Timeline

2000

Joined LUMS as part of the batch of 2004.[1]

2003

Moved to Islamabad.[1]

2005

His father passed away.[1]

2007

Scheduled 200 meetings in two weeks on the first trip, in April.[1]

2009

Moved to Germany.[1]

2018

The company first thought of a video reviews product.[1]

2020

The company tried the video product again and launched it to existing clients.[1]

Appearances

Frequently asked questions

References

1. Pakistan's first IT stock listing isn't really an IPO . Thought Behind Things , 2022-02-28.