- Pakistan is one of the company’s highest B2C revenue contribution and profitability markets
Swvl, the Egypt-born, Dubai-based startup that entered the Pakistani mass transit market in 2019, has announced it is suspending its intra-city services in Karachi, Lahore, Islamabad and Faisalabad starting from Friday June 3 “in light of the global economic downturn”.
Swvl Travel, which is tailored for city-to-city rides, and Swvl Business, which provides business-to-business rides, will continue to operate as normal.
The news comes just days after the company announced it was going to reduce its global headcount by approximately 32% as part of a "portfolio optimization program to enhance efficiency and reduce central costs to accelerate its path to profitability and turn cash flow positive in 2023."
It said such reductions will focus on roles which have been automated by investments in the company’s engineering and product and support functions, adding that Swvl plans to provide monetary, non-monetary and job placement support to help with the transition of certain of its employees to new roles.
In the same announcement it had pointed out this programme included focusing on the Business to Consumer (B2C) business on Egypt and Pakistan, “currently the company’s highest B2C revenue contribution and profitability markets”.
It had also said that its transport as a Service business, where its provides technology-enabled transportation, and Software as a Service business, which licenses its proprietary technology, are both growing rapidly. They have now collectively crossed more than 500 live accounts across 4 continents with more than $5m monthly revenues.
Back in March, Swvl had begun trading on the NASDAQ in the US. At the time it was reported that it was valued at $1.5 billion and touted as the first Middle Eastern company that established itself from the East to the West.
But the tide now appears to be turning.
In a statement, CEO Mostafa Kandil explained that "businesses around the world are suffering from higher costs and overall uncertainty. Declining stock markets have led to a global crisis with unforeseen consequences."
He said over the past few weeks, "Swvl has been hit like others across the globe with changes to its financial realities. While change is often unexpected, we believe that any attempt to resist it instead of adapting to it will prove futile."
"Today, with the current global economic downturn, as much as we did everything we could to put people first, we now know that we are not able to keep everyone unimpacted. We know we have to make tough decisions in order to prioritize profitability over growth to ensure that Swvl thrives once we are on the other side of this."
He said its downsizing plans include voluntary salary deductions from the top management team, reduction of current office spaces, freezing its current hiring programme, freezing travel and accommodation expenses and tying expenditures to essential business requirements.
Back in 2019, Kandil had big hopes for Pakistan and announced investing $25 million in the country.
"We have plans of mobilising half a million Pakistanis by 2023 and creating 10,000 jobs a year," he had stated then.
"We are also planning to start an incubator to fund pre-seed startups to kickstart a healthy tech ecosystem in Pakistan. Moreover, the company plans to open an offshore support and engineering office in Pakistan."
It's been a grim couple of weeks for tech startups in Pakistan.
Swvl's announcement comes amid news of other startups letting go of employees, such as Airlift and Truck It In.
This comes after Pakistan’s startup sector witnessed its best year ever in 2021, as 81 deals worth $350 million were made. This momentum also carried over to 2022. During the first quarter of 2022, startups raised a substantial $163 million, according to a Deal Flow Tracker by Invest2Innovate.
The recent spate of layoffs in the country's tech startups comes as tech companies globally take a hit. Crunchbase compiled a list of roughly 60 US tech companies, not just startups, that have recently let go of staff. These include big names like Netflix, PayPal and Robinhood.
“The public markets have been hit hard in 2022, and that’s trickled down to the private markets,” the report said, adding that “inflation concerns, rising interest rates and geopolitical issues have all contributed to a roller coaster stock market.”
“Startups – especially the ones who benefited from a pandemic boom that’s starting to cool – are starting to feel the pressure too. Valuations, particularly at the late stage, have started to dip, and startups say it’s much more difficult to raise new funding in this environment."