In many ways, Careem has been the posterboy for tech startups in the region, be it rapid growth trajectory, ability to raise massive investments, being the first to achieve unicorn status or the acquisition by Uber for a massive $3.1 billion.
However, events of the past one year have raised some question marks over company’s future. Starting with Uber’s shaky performance on the New York Stock Exchange, where it has lost more than 37 per cent of the initial public offering price and the epic WeWork debacle which led to reassessment of the top line-driven valuation race, many wonder for how long can Careem continue to bear losses?
Especially when its window of opportunity for fundraising has all but closed. Now concerns of profitability reign supreme but how would that come about? Dawn sat down with CEO Mudassir Sheikha to discuss how he plans to tread this path.
“The idea is to transform Careem from a vertical service which does one thing across many markets to a platform that starts simplifying lives across many things through the idea of a Super App.
“We realise that while ride-hailing was a great start and has given us the ability to expand and grow, that cannot be the only thing we do. And the vision and the aspiration always was to simplify lives of people, which is not just needed in transportation, but in so many places like getting water, buying something from a store.
“The overall idea is that through its open architecture, we can allow developers and companies to put their services on the Careem Super App and benefit from our customer engagement and also benefit from the enabling services we have built. A lot of them would require some logistic capability or payments so they can leverage our infrastructure.”
Even in its more successful iterations across East Asia (Gojek and Grab), Super App is still a new concept that is still being tested. Is it a sound bet then to enter more businesses while struggling with profitability?
“For the past six to nine months, we have been experimenting with offering multiple services on a single screen and the initial data is actually quite promising. The retention rate is higher and users actually use more services with us than they did before, so we have confidence that this will be hugely successful.”
Are you doing too many things?
“We are already doing delivery, payments and now bus [services]. The plan is to keep doing some of these things, which are somewhat closer to mobility, logistics business, but there are so many others we won’t be doing. For them, we will partner with others.”
Recently there were reports of Careem laying off over 150 people in January. Are the costs becoming too much to bear?
“Part of the Super App strategy was realising that there are some parts of Careem we’d like to grow and some we’d have to shrink. We identified that 15 per cent of colleagues are playing roles that were no longer needed. Of this, we were able to accomodate 10pc (two-thirds) but the remaining were given a kind and caring exit. It’s not a retrench but a focus towards something else.”
Keeping in view the recent exits in Oman and Turkey, would Careem be able to keep things afloat in emerging markets (smaller cities like Quetta or Sukkur) amid the profitability constraints?
“They were suspended for regulatory reasons and not that the opportunity wasn’t big enough. In Pakistan and other countries, there are places that look small compared to Karachi-Lahore-Islamabad, but if you start calculating the opportunity from a Super App lens, you don’t need a large population. Basically you tell them that I am going to be your gateway to every need, so it becomes much larger than just transportation.”
How much would the lack of digital penetration in the region affect Careem Pay’s ability to grow?
“Let’s not underestimate the vacuum and the opportunity that it creates. In such a market we don’t have to disrupt anything — which is painful — because no infrastructure currently exists. So in Pakistan, Careem Pay can become the financial account for people (who want to invest money in a safe place) and see even faster growth than some other markets. But payments is a highly regulated market, requiring licences and compliance and these are some of the areas we are working on (and have applied for one in Pakistan).”
On that note, how much does the region’s fragmentation adds to cost, especially when there is a new regulator after every few hundred kilometres?
“None of these countries are big enough on their own to justify the kind of investment, you need to show operations in many places which results in a different set of issues, regulatory or systemic such as having to open different bank accounts or integrating with a new SMS gateway. These are the ground realities and we have to live with it.
“But the one thing we do help with it is the following: Careem has created an infrastructure in 15 countries in the Middle East, including Pakistan, which includes legal entities, logistics, bank accounts, office spaces, payment and SMS gateways. Now that we have done it in 15 countries, we can create an abstraction layer on top and can tell all the companies operating here to use that (abstraction layer) rather than starting from scratch.”
Mobility has lately become a hot space with well-funded Swvl and Airlift expanding quickly in bus verticals. With Careem be able to keep pace with them?
“Their entry shows the market has been validated and we welcome it and compete with them. The opportunity is big for multiple players to survive, thrive and grow. Meanwhile, funding is less of an issue for us now, especially as our core business is becoming profitable which raises the cash that can be invested in new opportunities. However, we have a different time horizon and don’t have to burn crazy money. While it also integrates with other services we are offering.”
Published in Dawn, March 11th, 2020