• Home
  • Features & Analyses
Monday 09, January 2017 by Jessica Combes

Ride on!

In spite of investors’ general disinterest in social business, the Charicycles co-founders have continued to focus their business on giving back to the community.

Charicycles, a Dubai-based, bespoke bicycle company, was started in October 2014 by sisters and co-founders Zaina and Rania Kanaan, when Zaina wanted a bicycle but could not find what she was looking for on the market.

“I had just bought a very expensive bike and Zaina wanted something more affordable,” said Rania Kanaan, Co-Founder and Director of Operations, Charicycles. “We found an old bike, fixed it up, and customised the colours. Every time Zaina went out riding, people would ask where she bought it. That is when we realised there was an opportunity in the market for bespoke, affordable, eco-friendly bikes, that were neither new nor contributing to the waste in the environment. We reduce waste by sourcing vintage frames and upcycling them.”

According to a report in science journal Nature, global solid waste generation rates are estimated to exceed 11 million tonnes per day by 2100, which means the global population will produce three times as much waste as it does now, per day.

Upcycling differs from recycling in that instead of using something repeatedly, an old item is refurbished and made beautiful again.  The Charicycles team are able to customise their bikes to suit their clients’ needs, from the colour of the frame, the name plate, right down to the colour of the stitching used on the seat upholstery, said Zaina Kanaan, Co-Founder and Marketing Director, Charicyles.

The bicycle frames come from Japan and arrive in Dubai before being warehoused or redistributed to countries such as Afghanistan, Iraq and Iran. In 2012 it was estimated that Japan discards around seven million bicycles annually, according to municipal studies in the Shizuoka Prefecture.

“Sourcing the frames was not too difficult. Because Dubai is an import/export hub, the paperwork is very well-regulated; it’s straightforward to deal with the right suppliers. We had to go into areas you would not imagine two women would want to go, but the people involved were very nice and we were able to strike the deals we needed to do our business. Now we’re looking at working with Japanese suppliers and we have a few connections, so we will see what comes of that,” said Rania.

Social business
Charicycles is a social business, a term originally coined by Nobel Peace Prize winner, Professor Muhammad Yunus, an economist and banker from Bangladesh. In his book Creating a World without Poverty–Social Business and the Future of Capitalism, he put forward the idea that social businesses  differ from other businesses in the way profits are handled, and the purpose of creating the businesses is to help society overcome poverty and social problems.

The sisters started the business around the same time that Zaina had been volunteering in refugee camps in the MENA region, specifically on the West Bank. Every time she asked the children in the camps what they wanted as a gift, they would ask for a bicycle.

“These children are missing out on a part of their childhoods by being put in these fake, residential areas. They are missing out on freedom and mobility, and a bicycle gives them that for the few minutes that they ride it,” said Rania.

On her return to Dubai, Zaina wanted to integrate her work with the refugee camps into the business model and the sisters decided that for every five bicycles that they sell, one will be donated to a child in a refugee camp.

The donated bicycles are sourced locally from a merchant in the vicinity of the camp in an effort to help the community economically, and the bicycles are distributed on a reward basis, with the help of on-the-ground, registered charities and the children’s teachers.

“The children that excel in school are rewarded with a bicycle. Many of the children do not see a future outside of the camps; they think they will not be employed anyway, so they do not see why they should bother going to school. This incentivises them to show up to school and work hard, even with all the obstacles that they are facing, because they will get something they want at the end of it,” said Rania.

Appealing to investors
The Kanaan sisters grew up in Canada which offers a much easier business set-up environment, said Zaina, because the right resources are available for free and people facilitate mentorship and collaboration.

“Operating a business in Dubai is expensive–getting  a licence, employing people, and paying yourself a salary to self-sustain are all expensive, and Dubai is not an affordable city. Everything here is business-oriented, so if you want to work with an advisor or mentor, you need to compensate him or her in some way. For a start-up, it’s even more difficult because those are funds you’d rather not be paying,” said Zaina.

The Kanaans are currently fundraising for Charicycles, but they have found that being a social business has put them at a disadvantage. One of the biggest challenges facing social businesses, according to Rania, is that investors tend to overlook them in favour of funding tech or F&B start-ups, and a lot of great businesses are being side-lined in the process.

“These are valid businesses with a lot of potential, even if they have not shown the growth that would attract investors. When money is just thrown at fintech or ecommerce companies, it is taking away from businesses like ours that are doing well, doing good, have healthy margins and steady cash flow,” said Rania.

Social entrepreneurship is slowly emerging as its own sector in the MENA region as seen by the gradual emergence of regional incubators and efforts supporting entrepreneurs, such as the Emirates Foundation, which assists Arabian Gulf nationals, as well as Impact Hub which connects social entrepreneurs with investors.

In spite of funding challenges, Charicycles has a business model that is cash-flow friendly and allows for healthy margins that meets the day-to-day costs of running the business. All the profits are being reinvested back into the business, but sometimes it takes its toll because every day that they are not funded, is a day they have to be especially prudent about managing and allocating their funds, said Zaina.

“We honestly believe the future is in social business. A business is only sustainable if it sustains other communities. We’d like to see more attention on these social businesses and on people that are making an impact, even if they do not have the hockey stick growth that investors or VCs generally seek. Social businesses are the future and giving them a chance in the early stages is a stepping stone for other businesses to enter and grow as an industry and to impact the world in a positive way in the longer term,” Zaina said.

One of the tenets of the business is to work as locally as possible when selecting their suppliers. Even though the core team is quite small, the co-founders try to provide relevant jobs and work experience by opening the door to interns.

“Once we had an intern come over from France for a month. She was an engineer with no work experience and we wanted her to leverage her skills into the business, so she spent that month trying to find a way to use the bicycle to generate motion energy to use in some way. She wanted to see if it was possible to use the kinetic energy to charge a cell phone, but the bicycle doesn’t generate enough energy for that. But she felt her work experience was rewarding because she was actually using her skills,” said Zaina.

Last December the team added canvas bags, made of 100 per cent natural cotton, to their inventory. The bags were originally an added gift with each order placed during Christmas but upon seeing their popularity, they decided to make them a regular sale item. The bags are eco-friendly and reusable, in line with the company’s desire not to create waste, and all their printing is done by a local company, InkMASH, said Zaina.

Into the new year
The co-founders have starting doing fundraising pitches and have had very encouraging meetings in Kuwait which should enable them to break into the market;  Egypt is also an emerging market they would like to enter.

“We are also looking to expand our product line. We would like to have mountain bikes and cruiser bikes with different accessories such as cup holders or phone chargers. E-bikes are becoming popular and they are eco-friendly, and the components can be adapted to your current bike–it’s not necessary to go out and buy a ready-made e-bike,” said Rania.

Regarding their work with refugee camps, the co-founders would like to work with as many organisations as possible that have CSR initiatives that focus on displaced refugees; the camps that were meant to be temporary living spaces have now become permanent and they are relying on minimal aide. According to a statement by Amnesty International in February this year, Syrian refugees in Lebanon receive $0.70 per person, per day for food assistance, well below the United Nations (UN) poverty line of $1.90.

“There are people born in these camps and they know nothing else. Because it’s a living space that doesn’t look like it’s going anywhere anytime soon, why not try to make it a positive space for the people that are living there?” said Zaina.

The co-founders realise that having bicycles will not solve the refugees’ problems, but the health benefits; added mobility, and fun provided by the bikes may make their living situations slightly more positive.

br />In Summary:
strong>The problem:
Charicycles is an SME that falls under the growing sector of social businesses. Social businesses are generally overlooked for funding by investors who favour fintechs and F&B start-ups.

strong>Solution:
The co-founders have ensured their business model allows for good cash flow and healthy margins to grow the business organically, despite the softer economy.

strong>The result:
Business growth has been slow and steady due to all the profits being reinvested back into the business, but this has proven the business is sustainable, putting the co-founders in a position to start pitching for funding.

At the FinanceME Business Vision Awards held in April 2016 this year, Charicyles won the ‘Best Giving Back Initiative’ category.