On the Rise and Fall of Airlift

From ecosystem darling to shuttering operations and events in between

Jul 14, 2022

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Writing to you from Karachi, this week’s ~4 minute read dives deeper in to the rise and fall of Airlift and also includes a couple of interesting announcements. Scroll to the bottom for the piece!👇🏾

The Past 3 Weeks in Startups

💰 Funding

Updated from the last newsletter, 24Seven.pk has raised $6m, not $1m in their pre-series A round led by Betatron Venture Group for their B2C and B2B offerings in the grocery and retail space. Their model is especially interesting and something I’d love to dig deeper in to for future editions.
Bykea has raised a $10m round from existing investors including Prosus and Sarmayacar among others for their super-app centred around their bike-sharing offering.

💼 Hiring

I’m looking for a paid staff writer to join the team at Notes on Pakistan and help us scale our content efforts over the next 6-8 weeks - if you’re excited about strategy, technology, and venture, read more here!

🎟️ Attending

+92 Disrupt is organising their second of three conferences this year in Islamabad after a successful conference in Lahore in late June - I had the pleasure of speaking about the role that data and storytelling plays in our ecosystem.
Brunch Capital & Leading Pakistani VC firms are partnering up to review pitch decks and give founders feedback! If you’re interested in getting connected please fill out this survey, attach your pitch deck and they will reach out.

On Airlift’s Rise and Fall

From the early days, Airlift has been leading the pack in the startup landscape in Pakistan and has broken many barriers through it’s scaling journey but two days ago announced that it was shuttering operations. Founded in March 2019 initially as a mass-transit provider going head to head with SWVL (Nasdaq: SWVL) and Careem’s bus offering at the time. Airlift found a lot of success in this model and was able to bring First Round to Pakistan to lead their Series A round of $12m.

In the face of the first COVID outbreak in March 2020, all their bus operations were shut down practically overnight with revenue falling to near zero. In response, Airlift boldly pivoted to a q-commerce model and successfully rode the wave of global interest in the model. In August 2021 Airlift closed an $85m Series B led by Harry Stebbings and Josh Buckley. Shortly after this, they announced their expansion in to South Africa.

In the beginning of 2022 there was a clear public markets correction especially in the fintech space but later across the board. This trickled down to the earlier stage and more opaque early stage world by Q2 of 2022 where we heard shouts that a global recession was coming. This was accompanied with a range of companies globally announcing downsizing efforts including Airlift who pulled out of South Africa as well as all cities in Pakistan other than Karachi, Lahore, and Islamabad.

Airlift believed that by cutting their operational costs and focusing completely on efforts to get profitable both on a product and group level, they could weather the storm. However, in order to to complete this transition, they were simultaneously seeking to raise a Series C round. As of yesterday, Wednesday 13th July 2022, Airlift has closed down having failed to execute on this proposition.

E-mail from Airlift formally announcing the shut down

According to the company’s recent statements, they faced significant challenges in closing this round despite being at it for many months and likely being highly flexible on terms. On the other side, I find that it’s likely that efforts to get burn under control were less effective than expected. Leaving South Africa and other cities in Pakistan likely had immense one time costs that cut down runway by months. As well as this, while Airlift was experimenting with other revenue streams such as ads, it is likely that these projects were at such early stages that they were far from having the requisite impact. There are many assertions that Airlift actually raised significantly less than they announced (closer to $35m) but investor updates communicate that the full value of announced rounds was raised and burned.

Airlift clearly accomplished a lot. Airlift played a large role in pushing Pakistan’s venture market to the global stage and for a long time had rave reviews both with employees and customers. Airlift clearly delivered a proposition that few believed was possible to execute and for many of these commentators this is a period of vindication. Airlift also seemingly turned my entire LinkedIn and Twitter timeline in to venture experts signing a collective chorus of I told you so. I encourage these people to show a little empathy and to keep the context in mind. With this, it is a good time to reflect, with nuance, on what this means for q-commerce as a model, founders, employees and investors.

The Model

It’s important to remember that a lot of very intelligent people have put a lot of time, money, and effort in to this model across the world. That is not to pass a judgement on whether they were right or wrong but rather to recognise that there must be some proposition that convinced them. As an operating model, quick commerce can be highly divisive, where one might argue that Pakistanis don’t want or need their groceries delivered at such a quick pace - for q-commerce operators is that the order delivery times serve as a mark of operational efficiency. In a business with such precarious margins, packing in 4 orders an hour per rider instead of 3 can be the key to profitability.

As well as this, while the core business might seem relatively vanilla - there are an exciting set of propositions that can take the business to the next level. The aforementioned ad network has large long term potential to take from the out of home ad budget. In Egypt, Breadfast has launched a number of their own brands where it is likely that they have highly improved margins. These value creation levers require serious innovation and entrepreneurial efforts beyond blitzscaling (which is a difficult task to execute in and of itself). On the whole, the market is huge and is aching for digitisation within the supply chain and at the last mile - it’s just not entirely clear that this this was the best way to do it.

Some Takeaways

In Airlift’s case they probably raised too much at too high a valuation and spent it too quickly. They focused on scaling their operations and driving growth here while delaying efforts to diversify and extend revenues through ancillary businesses.
Building real businesses is very hard, it takes a long time, a lot of effort and even then it’s really unlikely that you’ll succeed. If you’re entering the startup landscape this is inevitable. It doesn’t normally take 3 years to build a unicorn and forcing it is unlikely to work well. We should also expect that we’ll see more failures before more successes - this is simply reflective of the difficulty of building a business.
Runway is always scarcer than you project, a 10% buffer is not enough, try more like 30-40%. In the same vein, it’s easy to tell the story about how you get profitable but it’s much much harder to actually execute on this. We saw this in Airlift’s first round of layoffs which wasn’t sufficient to allow the company to survive.
Working at a startup through a hyper-growth phase remains one of the best places to get early career experience and jumpstart your career - while it might feel unstable, former employees of these companies are highly employable and I doubt they will be out of jobs for long.
For investors, big businesses will inevitably be built in Pakistan but allow your portfolio companies to take their time and grow more slowly. Getting the model right must be balanced with growth aspirations especially in markets where follow-on capital is significantly more challenging to raise.
For founders fundraising, adjust expectations. This is the same drum that’s been beaten for the past 3 months and honestly Airlift’s exit is unlikely to make the difference at the early stage but much more for Series As and beyond. 2021’s market is gone and it won’t be back for a while.

For alternative opinions, commentary and assertions check out twitter and LinkedIn but always remember to add a pinch of salt because most people don’t know anything - myself included! 🧂🧂

As always, thanks for reading! Know someone raising, building, or just curious? Give this a share! And as always, please subscribe if you’d like to hear more! If you have topics you’d like me to cover, just hit reply :)

Notes on Pakistan