How a start-up with operations in South Africa went bankrupt just a year after raising $85 million

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In early July, things looked bright for Airlift Technologies as it prepared to raise more funds for expansion. Six days later, the startup – one of Pakistan’s most prominent – went bankrupt.

The e-commerce company collapsed in less than a week after failing to complete a financing round, underscoring how severely the global slump in tech valuations is hitting fragile startups in emerging markets.

Airlift had raised $85 million a year earlier — a record for the country — and had cut spending in an effort to attract investors as it worked toward another round. But then the title sponsor withdrew its commitment, leaving Airlift running out of capital to continue and forcing it to shut down abruptly.

“The whole team, myself included, was surprised when the round fell apart at the last minute,” co-founder Usman Gul said in an interview. “Airlift was not prepared for the shift in sentiment in the capital markets.”

Healthy growth and progress toward profitability were not enough to convince investors shy of a global economic slowdown and collapsing technology stocks. Airlift joins a slew of startups in Pakistan and neighboring India that have hit a wall as venture capitalists curb investment in the region in favor of countries and industries they consider less risky.

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Gul, 33, said one of Airlift’s mistakes was not raising more money last year when markets were more favorable. This year, investor focus has shifted from growth to earning potential, putting startups’ business models under more intense scrutiny.

As Airlift prepared for its latest fundraiser, it let a third of its employees go, reduced the round’s target size and lowered its valuation.

The company appeared to have the commitments it needed when it sent the final documents to investors on July 5. But just two days later things got worse. The lead financier delayed sending the money because he wanted more investors to transfer money with it, Gul said, without revealing the name of the lead investor.

The other investors asked for two to three months, fearing a global recession and downturn in capital markets. Less than a week after negotiations began, Airlift’s coffers had dried up and the company had no choice but to end its operations.

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“The biggest miss on our part is not prioritizing a multi-stage institutional investor,” Gul said, referring to larger anchor backers that support startups through various funding rounds. “You need that multi-stage institutional investor, someone like Accel or Sequoia, who believes in the project and can write bigger checks.”

Gul praised the support it received from its early backers, but said their relatively small size did not allow them to invest as much as Airlift needed to continue to fuel its growth. The company had pledges from previous investors First Round Capital, Indus Valley Capital, Buckley Ventures, 20VC and others for the final round before it fell apart.

Airlift helped put Pakistan in the spotlight with its record funding round that stood out during what proved to be a breakthrough year for the South Asian country’s startups – raising a record $350 million in 2021. But the pace of fundraising is has since slowed, prompting companies to curb their expansion plans.

Vitol-backed VavaCars has left Pakistan, Dubai-based Swvl Holdings has paused daily rides in the country and Uber Technologies Inc unit Careem Inc has shut down its food delivery operations. In India, the shares of Zomato Ltd. and Paytm have plummeted since their market debut last year and even the country’s most valuable startup, Byju’s, is struggling to raise more money.

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Airlift started operating vans and small buses used by office workers and students. When that business slowed down during the pandemic, the company turned to fast trading. Before its demise, the startup spent about $85 million in 18 months to set up more than 70 warehouses in Pakistan, expand in South Africa and increase visibility through marketing spend.

While working on its latest fundraising, the company had reduced its cash burn by 66% and was about three months away from operating profitability and about six to nine months from corporate-level profitability, according to Gul.

“We plan to learn from this experience,” said Gul. “Market reversals are a reality that requires better planning and preparation on our part.”


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