Jugnu, which pitched itself as a B2B ecommerce startup and announced a fund-raise of $22.5 million in March 2022, will be “pivoting towards a tech-platform play” as global and Pakistan’s economic conditions impact its business strategy.
“Given these macroeconomic realities, businesses have been forced to become more capital efficient and work towards an accelerated path to profitability,” it said in a statement earlier this week.
“This shift required Jugnu to also recalibrate and change course in its business strategy.”
It added that the shift would also result in the company moving away from its footprint of “self-managed fulfilment centres, logistics and inventory model”.
Back in 2022, the company said it connects small businesses with suppliers, and would use the funding to accelerate the development of its B2B ecommerce ecosystem and strengthen the country’s retail supply chain.
“Jugnu has focused on developing strong capabilities and moats in key markets during the last 18 months, leveraging our product-market fit to grow rapidly during this period,” Sharoon Saleem, co-founder and CEO, was quoted as saying back then.
“This round of investment will enable us to expand our team, ramp up our technological platform, expand product offerings and extend our geographical footprint.”
The Series-A round was led by Saudi Arabia’s B2B marketplace Sary, with participation from Pakistani venture capital fund Sarmayacar and Pakistani digital technology company Systems Limited.
However, nearly 17 months later, the company – which currently employs over 200 people – said its structure and team for the pivot are being finalised.
Experts Business Recorder reached out to said this could potentially result in a 20-50% reduction in the workforce. Jugnu did not give a precise figure.
“It’s premature to say what number of people will be transitioning out,” Jugnu told Business Recorder via email on Tuesday.
“The change in business strategy is purely based on the market dynamics being a lot more supportive for a digital and more scalable platform.”
The startup, which also raised $1.9 million in a seed round announced in July 2021, said it remains “bullish on Pakistan’s opportunity space”.
“Jugnu, like many other successful businesses, keeps a long-term perspective on its business strategy. We are bullish on Pakistan’s opportunity space and confident the startup ecosystem will also continue to mature.
“Organisations need to stay adaptable to be able to adjust to new realities of the market. The earlier strategy was good for times when the capital markets were supportive of asset heavy models. Earlier strategy had its advantages and disadvantages. Staying asset-light allows a lot more agility, speed and scalability,” it responded via email.
Meanwhile, in a joint statement by Jugnu’s board and shareholders shared on the company’s LinkedIn page on Tuesday, it said Jungu is not shutting down.
“Jungu is doubling down on its digital strength to fulfill the same mission,” the statement read.
“In a strategic change and keeping in view the macroeconomic realities, the company is going forward toward an asset light model that supports higher scalability and flexibility while continuing to live to its mission of lightening up neighborhoods across Pakistan.
“In the coming chapter of Jugnu, the board and the shareholders firmly stand behind the Jugnu team and its founders to continue their mission of empowering small and medium businesses in Pakistan and remain bullish on the opportunities in this space.”
The startup also said in its earlier statement this week that it has laid the rails for a digital retail economy by “brightening up” over 100,000 mohalla and kiryana stores in thousands of neighbourhoods across Pakistan.
“Unfortunately, this shift in business model will have a significant impact on some of our teams for which we are personally reaching out to organisations to help transition some of the best minds to be key enablers in their respective missions,” it added.
Startup sector losing charm
The development comes at the heels of another health tech startup MedznMore, which raised over $14 million since being founded in September 2020, saying that it shut down operations in June, but remained engaged in talks with a “few large players” for its technology and consumer-facing brand.
Experts say these are massive setbacks for Pakistan’s startup ecosystem after the spectacular shutdown of Airlift.
The progress of Pakistan’s startup landscape, which rejoiced at a record-breaking 2021, has slowly been pushed away from headlines as fundraising dropped and replaced with news of shutdowns and cut-back in operations.
During the previous quarter (April-June 2023), Pakistan startups attracted a meagre $5.2 million, a year-on-year decline of 95%. The amount is also 77.5% lower on a quarterly basis, indicating the massive volatility in Pakistan’s ability to attract investors.