Airlift the top Pakistani startup shutting down in a move that caused shock waves in the rapidly growing, but still in its infancy, market that is thriving in South Asia. South Asian market.
The Lahore-based startup informed employees on Tuesday night that they will stop operations for good on Wednesday, as per two sources and the slides that were presented to them.
The decision comes after Airlift failed to come up with another financing round. Discussions of which were ongoing up to last week, according to one of the slides of the company that NetMag obtained. NetMag.
“Multiple” investors informed Airlift that it would take 2 months before they wire funds, Airlift told employees. “Other investors were not willing to risk making wire transfers ahead of the other investors,” the slide said.
Airlift provided a fast commerce service that was available in eight Pakistani cities that included Lahore, Karachi and Islamabad. Customers could purchase fresh food, groceries and other items of a necessity like medicines, on Airlift’s Airlift website or the app , and receive it within 30 minutes.
The concept of instant commerce has been growing globally in recent times, but they are also one of the largest capex-intensive businesses.
The company has raised $85 million in the largest Series B capital round that took place in the month of August at a price of $275 million. That’s the most expensive for any Pakistani startup. Harry Stebbings of 20VC and Josh Buckley of Buckley Ventures were the leaders of the round. Airlift was also named as the largest successful startup that has been funded in Pakistan.
Airlift attempted to raise money for a second round earlier in the year through SAFE with an estimated value of $500 million according to a source who has personal knowledge of the matter.
Version 1.0: Airlift founder Usman Gul has confirmed the news site NetMag that the company is going out of business and gave detailed details about the events that have occurred in recent months.
The company’s failure could hurt the enthusiasm of the local community. Over the last three years, many global investors, like Tiger Global, Prosus Ventures and Addition are among the investors who have supported promising companies in Pakistan which is a huge boost to confidence in the market.
“We weren’t an investor, yet I’m heartbroken for the people who will lose their jobs, and will likely be disappointed over what happened,” tweeted Kalsoom Lakhani, GP at i2i Ventures which is a venture company in Pakistan.
“I’m worried that this could reflect badly on Pakistan’s startup ecosystem in general and is unjust to the numerous startups doing quickly, and expanding their businesses without harming their fundamentals. Failure in any startup environment isn’t an uncommon; it’s just a part of the process. As long as we make an opportunity for failures, the better also allow for success that follow.”
Airlift was widely regarded as the symbol of Pakistan’s startup scene. The then prime minister of Pakistan, Imran Khan publicly praised the company when it announced its Series B financing news.
“As an early-stage technology company in Pakistan which set an undisputed precedent Airlift’s success was seen as a significant milestone in the growing technology-based ecosystem that is emerging in the markets. The ecosystem is expected to continue to flourish and that many of the most lucrative companies in the emerging markets are waiting to be established,” Gul wrote in an email to the staff on Tuesday.
Airlift promises to pay workers with severance compensation within about four-to eight weeks. Airlift will also pay dues in advance to stakeholders and suppliers.
“Teammates do not have to show up for work beyond the current day. Access is revoked by Thursday, then follow-up communication via personal email,” the startup said in a different slide that was discovered by NetMag.
This season, Airlift expanded its reach into South Africa, a move that has significantly increased the costs of its operation according to a person who is who is familiar with the situation told. In a letter to employees in May which was discovered from NetMag, Gul warned that the market had abruptly changed towards the downside in the tech sector, which reversed a majority of their gains after the bull market that lasted for 13 years.
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Airlift must be “extremely careful in how its the capital is used and controlled” and was stopping hiring new employees, Gul wrote at the time. He also said that the company’s expansion into South Africa will “remain in an infancy stage until the year 2022.”
In the note on Tuesday, Gul said Airlift was capable of achieving order-level profitability while maintaining a reasonable scale, and cut the amount of financial loss by 66 percent. “As of July20, 2022 Airlift stood about three months of operating profitability (i.e. negative cash flow from operating) and 6-9 months away from profitability at the company level (i.e. the free flow of cash),” he wrote.
It was also preparing the next round of funding after which things began to fall apart.
“With these developments during May, one our investors offered to be Airlift’s lead for the series C1 financing. We’ve had tremendous encouragement from the lead investor in opening up to investors from other companies to make the round. First Round Capital, Indus Valley Capital, Buckley Ventures, 20VC and other investors have agreed to be part of the round, with substantial cheques,” Gul wrote.
“In the beginning of the month of July Airlift was able to establish a way to complete the round. Airlift sent out documents for signatures to investors participating in the round.”
“Last week, amid rapid declines globally, a number of participants expressed uncertainty about the wire schedules and disbursements which meant that the capital requirements of the company would not be fulfilled. In the end, the round was not successful,” he added.