Swvl has lost over $200 million in 3 years

Good afternoon,

A few weeks ago a founder I’ve known for quite some time asked me if they should raise more money. My immediate response without even giving it a proper thought was; ‘why do you want to raise?’.

They had raised funds about six months ago and easily have two years of runway. They were pretty confident that they could raise another small round even in this environment but I advised against it.

I don’t remember the exact words but in one of my conversations with Omar Kassim, the founder of Nomod who has previously built and sold JadoPado to Noon, he told me that a lot of founders think that once they raise money, almost all their problems will go away - which is never the case.

In perhaps another conversation (a little over two years ago), when I asked him about his thoughts on raising VC early, this is what he said:

A lot of times, entrepreneurs will attempt to go out and raise capital early simply thinking this is a validation signal and I need this. But maybe it is not the right time. Maybe the business doesn’t need the capital that you’re bringing to the market. Unfortunately, a lot of times you see opportunities where if a little less capital had been applied and you would effectively spend time on things like organization, culture, and operational elements of the business, perhaps the outcome would be different.

The first thing is that you don’t have to raise capital. At the end of the day, if a business exists, you have to understand why it exists and what’s your purpose for executing that business and you need to definitively answer those questions before you go out and start looking for money. Sometimes people can be a little lazy. They don’t want to spend the time to validate the business, validate the opportunity and instead feel like I need this capital so I can build a team and product.

I am sharing all of this because I have been trying to think if the outcome of Capiter would have been different had they not raised $33 million.

What would it look like today if they had raised just $10 million? We’ll probably never know.

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A quick insight: Swvl’s loss has grown 4 times in the last three years

Swvl aims to be profitable in 2023. It has already taken different measures including job cuts, shutting down the B2C business in markets like Pakistan, and focusing more on B2B (Transportation-as-a-Service) across all its markets. There are some good early signs as now most of the company’s revenues (2022 H1) are coming from B2B segment but the overall economics still raises a lot of questions. I’ll discuss Swvl’s latest results (first six months of 2022) in an upcoming issue but today we’re going to talk about what has happened between 2019 to 2021.

Here’s a chart.

As the chart highlights, Swvl’s revenue has grown by a little over 3x but the losses have widened by 4.2x, in the last three years. In simple words, Swvl lost almost $3 for every dollar of revenue it generated in 2019, $1.73 in 2020, and $3.7 in 2021.

The Dubai-headquartered company booked $38.3 million in annual revenue in 2021. Its cost of sales(which basically includes captain costs, captain bonuses, and tolls and fines) for the same period was $48.9 million. So, the cost of sales as percentage of revenue in 2021 sits at 127 percent. In 2020, it was 152 percent. And in 2019, a whopping 272 percent.

So they’ve done fairly well to reduce the cost of sales but the net loss has continued to increase.

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What's up: Not much.

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Hustlin’: Instatus, a tool by an Egyptian indie hacker hits $100,000 ARR

There are very few good bootstrapped software businesses in the region that are building in public. Instatus is one of them.

Started by an Egyptian indie hacker, Ali Salah, in late 2019, Instatus allows anyone to create a status page for their digital products. A status page, if you don’t know, displays data (including uptime details) about system performance so the users can track it on their own without having to get in touch with customer support.

Instatus is a freemium product; offering three tiers at the moment: free, $20/month for setting up status page(s) on custom domain, $50/month for creating private status pages.

They’ve recently crossed $8,500 in monthly recurring revenue which means over $100,000 of annual run rate.

I’ve never spoken with Ali but have been following his journey on Twitter and it is great to see him come this far. According to the information he shared on Twitter last month, he has over 11,000 users with more than 300 paying customers.

After working solo for almost three years, Ali has recently hired a few people in his team to continue building Instatus. He now has one full-time engineer, one part-time engineer, and two interns as part of his team.

This is the best possible proof (for anyone in the region) that you don’t need VC or even a team to build a good profitable online business.

If you’re a bootstrapped founder from the region (who’s willing to share numbers), I’d love to write about you. Please feel free to reach out on Twitter or LinkedIn.

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Following up: Capiter

Shorooq Partners, one of Capiter’s investors issued an open letter to sort of address the situation, and to be honest, I appreciate them for taking the initiative to do that.

But.

It didn’t have any meaningful information. They’ve argued that they’re not part of the board so they are not in a position to comment on anything related to the company.

Here’s a part of the letter.

It is saddening to see the current state, not necessarily from the potential financial outcome, but more from the damaging perception and impact it could have on the region’s young yet rapidly growing startup & venture capital ecosystem.

We understand that there is much news out there with conflicting narratives on Capiter. We know that there is a lot of interest in what we have to say as shareholders in the company and this post is not about this.

Shorooq Partners is neither involved with the operation of Capiter nor has a Board member representation at the company and with this, we are not in a position to provide comments on the company’s behalf.

I was speaking to a founder from the region yesterday and they raised a very good point, “The VCs can remain silent all they want as long as the matter is private. But if it’s public, they should address it.”

I completely agree with this. As a stakeholder, you can choose not to comment but I don’t think it is the right thing to do esp.

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Shukriya,
Zubair

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The chart in the post was updated with the correct representation of some numbers, on Oct 12, 2022.