Careem is losing its grip on its core business
The closest I have come to buying an iPhone was when the FOMO of not being on Clubhouse (almost) got to me. I am glad that I still didn’t give in and waited until the app landed on Android.
(I still remember I was very disappointed with the overall experience. The app I had been waiting for months was just meh. I don’t remember coming across an interesting conversation there. Twitter Spaces, in fact, had become much more interesting even before Clubhouse’s launch on Android and it has only improved since then.)
It was probably the same FOMO that led Clubhouse’s investors to invest in at a $4 billion valuation. The fear of missing out on the next big social media company must have played a part in their decision of investing in the company.
The fear of missing out, or FOMO, has played a very big role in startup deals in recent years. The founders who mastered this were able to raise money fairly quickly and at relatively better terms than those who didn’t use it.
Some startups in the region raised their pre-seed or seed rounds on five (or more) different valuations (SAFE cap). Some of these deals were largely driven by FOMO among investors.
In many cases, angels wired money without even looking at the deck of the company. They used to be happy about the fact that they’ve won allocation in the round - didn’t really care about anything else.
The deals were moving at a lightning-fast speed. Sign the termsheet in X number of days or risk your seat on the cap table of the next big thing.
It was founders’ market until it wasn’t.
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A quick insight: Careem is losing its grip on its core business
After getting acquired by Uber, Careem’s focus shifted towards profitability. Just four months after the acquisition was completed, the Dubai-headquartered firm fired a third of its workforce (they had said that they were reducing the workforce due to Covid-19 which is probably true as the company's core business - ride-hailing had taken a big hit) in May 2020, shut down its bus business, and reduced or removed the subsidies for both captains and riders.
(Careem had two rounds of layoffs - the first one in January - which apparently went unreported - if I remember correctly and then in May 2020).
In spite of these efforts, Careem recorded a loss (before income taxes) of $218 million in 2020. We don’t have the rest of the company’s financial history (and records) so it is difficult to say if these measures helped the company reduce its losses. Also, this was the year when the company’s ride-hailing business was down by 80 percent due to Covid-19.
As the ride-hailing business had taken a big hit, Careem renewed its focus on the superapp plans. It launched the superapp in June 2020 to offer all its services from a single app and continued adding more categories (food, groceries, quick commerce, payments, etc.) in different markets
But the removal of subsidies for captains and riders had a huge impact on the quality of its core proposition - ride-hailing. The social media was full of customer complaints - ranging from captains canceling rides and (in some cases) not finding any cars at all to very high peak fares and the quality of cars going down.
Another big challenge for the company since its acquisition by Uber has been exodus of talent - especially senior leaders - who have either gone on to found their own companies or joined other scaleups and technology companies in the region.
All of this gave an opening to new competition in different markets of Careem which came in and lured company’s supply with zero commission and then demand with better (more affordable) fares.
InDriver came in with a disruptive model, giving users complete control of rates. The model resonated very well with the customers in price-sensitive markets like Egypt & Pakistan as the users could select their own fare for a ride and the drivers on InDriver had the option to share their offers in real-time.
Bolt caused troubles in arguable Careem’s most important market, Saudi. And Lebanon. (Careem had announced in March this year that it was suspending its operations in Lebanon permanently but the country still shows on its app).
Rocket Internet-backed Baly took over Iraq. And TaxiF won Jordan. Here’s a chart explaining the rise of Careem’s competitors across different markets of the region.
These are the numbers for June 30 to September 17, 2022.
Some of you would argue that these numbers don’t reflect the complete picture. I agree. Here’s another chart that shows ranking based on active users for the same period across some of these markets. Unfortunately, the data wasn’t available for all the markets.
The only market where Careem has the top spot is its home, UAE. It is also the market where a) it has the highest number of offerings in its super app, b) the regulations for ride-hailing companies make it somewhat difficult for new entrants to just come in and launch their services.
InDriver and Bolt are spending a lot of money on growth in these markets. The ads of InDriver follow you wherever you go, on social media, in markets like Pakistan and Egypt. Maybe this growth is not sustainable but they’ve done pretty well to remove Careem from the top spot.
The Dubai-headquartered firm is obviously fighting back. It is trying everything from reduced commission rates for captains to better fares for riders but I don’t know if it has the money to take this fight further.
What I do know as a user (and an observer) is that Careem will have to fix its ride-hailing before it becomes a superapp. I also think that out of all the superapp aspirants we keep hearing about every other week, Careem has the best shot at pulling it off.
(The silver lining in the charts above for Uber and Careem is that together, they still dominate most of the MENA markets for ride-hailing.)
Swvl’s stock breaks two-week-long losing streak
After seeing a drop of about 39 percent in a two-week long downward trend, Swvl’s stock gained 8 percent yesterday to close at $0.81.
During trading on Sep 26, Monday, Swvl’s market cap fell below $100 million (when its share price hit an all-time low of $0.70) for the first time since its debut on NASDAQ six months ago. It closed at $0.75, pushing the market cap just above $100 million.
The Cairo-born company is down almost 92 percent year-to-date, with its market cap hovering around $110 million - which is less than the money the company has raised to date.
Sandbox by Rayan
I have been meaning to share newsletter recommendations and I am starting with something that just dropped.
Rayan Dawud, a Partner at Outliers Venture Capital who was previously a part of Careem’s corporate development team, and Wamda Capital, is starting Sandbox (I love the name) to talk about ‘how technology companies are built in emerging and frontier markets.’
I am super excited about it. Subscribe here.
The open rate for the last issue was 46 percent. Termsheet gained (net) 156 subscribers since the last issue was sent out - which means 1734 people will receive this issue in their inbox. A small number of these new subscribers have come from Substack Network so that’s a promising sign.
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The post was updated with the correct logo of Careem and some details about the Lebanese market that was previously missing. The details of Kuwait were also updated as Uber does not operate there. The previous version of the app downloads chart included Uber as the top-ranked ride-hailing app there. It is top-ranked by the number of downloads for the said period but these downloads are apparently by users who are travelling outside Kuwait.