Founders of well-funded Egyptian B2B startup Capiter fired over fraud allegations

0
5

Last September, Egyptian startup Capiter raised $33 million in Series A funding to compete in the country’s growing B2B e-commerce and retail space. Fast forward a year later, the startup laid off several employees and now the CEO and COO have been relieved of their duties after allegedly mismanaging funds.

This is what we know so far. Between June and July, several ex-employees of Egyptian startups, including Capiter, wrote about layoffs at their respective companies, though the employers never publicly appealed to them. Other companies include OPay Egypt, elmenus, ExpandCart and Brimore.

Some sources told TBEN that Capiter laid off at least 100 employees in those two months. Others described a workplace with poor management and no structure and a company that finds it difficult to get traders on its platform while at the same time running out of money. The company only had a one-month runway as of August, they said. TBEN contacted Capiter at the time, but received no response.

As a result, Capiter investors have been looking for potential buyers to incorporate the struggling company in the form of an acquisition or merger. This information was further confirmed in a local news story where Capiter’s Board reportedly said that: the founders had failed to report to the board of directors, its representatives and shareholders during an on-site personal due diligence for a potential merger. Another publication stated that the executives had refrained from appearing before the board of directors after internal disturbances and disagreements over their management method.

ALSO READ  Microsoft Surface Duo 3 may have a similar design to the Samsung Galaxy Z Fold

Before Capiter, Mahmoud was the co-founder and COO of Egypt-born and Dubai-based ride-hailing company SWVL (the company that public through a SPAC deal last year laid off 32% of the workforce in May). Together with his brother Ahmed, he launched Capiter in 2020 as an FMCG platform that allows small and medium-sized retailers to order inventory, arrange delivery and access financing to pay for goods. Some of its competitors are MaxAB and Cartona in Egypt, and in Africa, Wasoko, TradeDepot and Chari.

Capiter had 50,000 merchants and 1,000 merchants with more than 6,000 SKUs on its platform when the founders spoke to TBEN last September. In the interview, they said Capiter was on track to hit $1 billion in annual sales this year. And like many startups in Africa and worldwide, Capiter hired aggressively last year to achieve its goals.

ALSO READ  TikTok would launch live shopping in the US

However, 2022 has taken an unexpected turn for many tech startups, as they face uncertainty from rising interest rates and other factors that trickle down to venture capital. The news of layoffs, flat rounds and cutbacks from startups in various sectors – especially those that have raised a lot of money in the past 18-24 months, such as Wave, 54gene, Kuda and Marketforce – is more widespread, despite the continent having on an improved VC total by the end of the second quarter of 2022 compared to the second quarter of 2021.

B2B ecommerce platforms work with either asset-light or inventory-heavy models. The latter requires more capital and for Capiter, which uses a hybrid model, it is unclear how the company has exhausted its funds and is already looking to sell after raising millions last year from Quona Capital, MSA Capital, Shorooq Partners, Savola and others. Capiter’s investors declined to comment on the matter, but issued an email statement.

ALSO READ  Nothing Phone (1) gets new Nothing OS update with camera features, improvements

The board and shareholders have launched an internal investigation and are therefore not allowed to comment on the news or allegations circulating on social media for the time being. The Board of Directors and shareholders are also working closely with relevant stakeholders, legal and HR teams and the legal authorities to conduct an external investigation into this matter.”

Meanwhile, according to local reports, the company’s chief financial officer, Majid El Ghazouli, will act as interim CEO. Mahmoud did not respond to comment.

Update: CEO Mahmoud Nouh said in response to the allegations: “I deny the false allegations and that I have not received official notice of what is stated above [referencing the statement about his and Ahmed’s dismissal].”

This is an evolving story…