One of Pakistan’s top startups — Airlift — has suddenly announced to shut its operations in the country citing “global recession and the recent downturn in capital markets”.
Reacting to the development, Dr Umar Saif, the founder of several startups and one of the country’s top innovator, said that we should learn some lessons from the closure of the q-commerce startup, which raised $110 million in funding.
In his Facebook post, he said that there are a few lessons that we can earn from its closure:
- Don’t follow global fads. Pakistan has over 900,000 grocery stores, virtually one at the corner of every street. A handful of dark stores (warehouses) are not going to change the way people buy grocery.
- Venture capital (VC) money is not a substitute for a strong business model. Airlift’s gross revenue in 2021 was over $33 million. Net margin? Less than $800,000. That’s a net margin of less than 2.5%. A grocery corner store makes at least 10 times of this margin. Subtract overheads etc and you are looking at a company selling grocery of over Rs6 Billion in a year while posting a substantial loss!
- Gross merchandise value numbers don’t mean anything. $33 million above might sound like a big number — and apparently it was for the VCs — but remember that grocery retail is over $54 billion annually in Pakistan.
- Startups need to be run by founders, not VCs. Any startup in which founders are diluted to less than 10% equity after just two rounds of funding is looking at a team that’s simply not incentivised enough to go the extra mile. Dear VCs, please stop doing this.
Bright future ahead
“Having said this, I have no doubt that entrepreneurs who could build and grow something like Airlift has a bright future ahead. Don’t be disheartened. Next time, InshAllah. May the force be with you,” he added.
Taking to Twitter, Umar Saif said that he started “Plan 9” and helped bootstrap Pakistan’s startup ecosystem long before anyone believed in startups.
“I am on to my 7th startup now,” he added.
Saif said, “Pakistan’s first unicorn will happen. There will be temporary failures, but we will make it happen. Have faith!”