- The company notified raising $50mn last year to expand operations in Pakistan and Turkey
Barely over eight months after it announced raising $50 million, VavaCars – backed by Dutch energy and commodity trading company Vitol – said that it has shut down operations in Pakistan. The development on Thursday comes after the online trading platform had said it will use the funds raised to expand its operations in Turkey as well as Pakistan.
“Vava Cars is no longer operational in Pakistan,” read a notification on the company's website.
The company started its operations in 2019 in Turkey, and entered Pakistan's market from Karachi in January 2020. The company's headquarters is in the UK, but does not operate there.
From the archive: Interview with Mujahid Khan - Country Manager, Vava.Cars
In its fund-raising announcement in October 2021, the company stated that Duquesne Family Office LLC (founded by Stanley F. Druckenmiller), founding investor, Vitol, plus one other new investor participated in the round.
"In the future, VavaCars intends to expand into new markets leveraging the fuel station networks of its founding investor, Vitol," it had stated then.
The shut-down comes amid a rising trend of economic struggle for some companies in Pakistan with several startups and established businesses announcing either trimming down staff or shutting verticals.
Just recently, Airlift Technologies, the startup that in August 2021 raised a whopping $85 million in a fundraising round, slashed its global headcount by 31%, and pulled out of several markets both in and outside of Pakistan as it realigns its strategy amidst a global recession.
The Lahore-based online shopping delivery firm was originally meant to be a mass transit public transport business but amid COVID and competition from Egypt-based startup Swvl, it was forced to reimagine itself as a grocery delivery app.
Careem also suspended its food delivery business in Pakistan, as it looks to redirect efforts to its ride-hailing and delivery verticals. The company gained popularity as a ride-hailing app before expanding to become a multi-service platform. While announcing its suspension of the food delivery business, it said it will “look to restart the service again in the future when the economic condition is more favourable”.
Another startup Truck It In, set up in August 2020 to make freight movement more efficient by connecting truckers and shippers through its online platform, said it is “recalibrating its strategy” due to which some employees “will be moving on to solve other challenges”.
It did not specify how many staff members will be impacted, but did say in its statement on June 1 that it intends to provide generous severance packages and facilitate alternate employment opportunities.
The Karachi-based firm had raised $13 million in early-stage funding, the largest seed round for a logistics startup in the Middle East and North Africa (MENA) region as well as in Pakistan. The latest round took total raised capital to $17.5 million after a pre-seed funding of $4.5 million.
Hammad Amjad, SME trainer and business consultant, told Business Recorder earlier that startups in Pakistan often have a funding and growth-based business model akin to providing a subsidy to attract more consumers by either offering hefty discounts or taking on high marketing costs and “humungous” operational costs.
“This becomes the reason in the future where companies become cash strapped with a shorter runway to sustain their business.”
But he remained positive about the startup landscape in Pakistan thanks to a constantly growing consumer base.
His optimism stems from Pakistan’s startups witnessing a record-breaking 2021, as 81 deals attracted a mammoth $350 million, capping off a stellar year for the South Asian economy that faces issues of foreign-exchange inflow. The amount raised was more than 5x of that raised in 2020 i.e. $65 million.
Three of the biggest deals of 2021 were: Airlift ($85 million), Bazaar ($30 million), and Tajir ($17 million).
According to a Deal Flow Tracker by Invest2Innovate (i2i), from 2015 to 2021, Pakistani startups raised $563.5 million, out of which 62% was raised last year alone, showing the extent of the shift in funding landscape.
Similar to other emerging markets, e-commerce, fintech and logistics attracted the most funding in 2021, revealed the data.
Carrying on with its momentum from the previous year, Pakistan's startup sector remained in full swing during the first quarter of 2022, raising a substantial $163 million, according to the Deal Flow Tracker.