Pakistan’s top performing startup, Airlift, which had raised $110 million in funding last year, made a declaration on Tuesday that it has permanently shut operations in the country after day-to-day financial struggles. The very giant couldn’t overcome the global startup funding crunch and some bad business decisions.
Prior, with the beginning of downturn, Airlift was one of the first few companies in the developing business sector to restructure business operations. Less than a year ago Airlift was flying high and had raised $85 million in a Series B funding round, the highest single round of investment raised by any startup in Pakistan. Airlift was able to achieve order-level profitability, maintain reasonable scale, and reduce financial burn by 66%. “As of July 2022, Airlift was about three months away from operating profitability and about six to nine months away from company-level profitability,” it said. The start-up ecosystem in Pakistan has been in turmoil for the last couple of months with a number of well-known companies declaring service suspensions, rollbacks and layoffs due to economic crisis.
Few Lessons that we learn out of this shutting down of air-lift are:
- One must not follow global trends. Pakistan has more than 900,000 grocery stores, almost at the corner of every other street in almost all cities of Pakistan but a handful of warehouses cannot change the way people buy in Pakistan.
- Venture capital (VC) money is not a replacement for a strong business model. Airlift’s gross revenue in 2021 was over $33 million. Net margin was less than $800,000 which is less than 2.5%. A grocery corner store makes at least 10 times of this margin. Subtract ongoing expenses of operating a business 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 amount to nothing and have no value. $33 million above could seem like a major number and apparently it was for the VCs however that grocery retail is over $54 billion yearly in Pakistan.
- Startups need to be run by founders as new companies should be controlled by pioneers, and should not completely be dependent on venture currency. Any startup in which founders are are weakened to under 10% equity after just two rounds of funding means that it is not giving enough incentives to its employees to work hard enough to achieve more than required. Dear VCs, if it’s not too much trouble, quit doing this.
Having said this we have no doubt that entrepreneurs who could build and grow something like Airlift have a bright future ahead and they can achieve more milestones in future. Don’t be disheartened or lose hope. Have faith in yourself as those who could achieve something like this earlier can do it again, InshaAllah. May the force be with you.
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Airlift’s letter confirming the shutdown and detailing it wind up by stating, “As we wind down operations and reflect on our work with Airlift, we cannot help but recognize the talent density that Airlift was able to bring together. From structuring the $85 million Series B financing and delivering on order-level profitability to launching and scaling operations across international markets, Airlift was able to achieve initial success and has had a lot to celebrate.”
