Last week was a major milestone for the region; the biggest acquisition in our history and a pivotal moment for our ecosystem and its future. I had written this post prior to the transaction, as a way to share my thoughts on the impact Careem has had on our regional economies. And today, they have consummated something that is rare and that everyone should be proud of. They have officially put MENA on the map and catalyzed what we think will be a phenomenal paradigm shift across the Middle East.
A Unicorn is a billion dollar company, referred to more recently by many in the technology sphere that has now made it a common definition. Today Careem is considered a Unicorn, but in actuality it’s much more than that. The label of Unicorn does not do justice for what the company has accomplished to-date. The founders, Mudassir, Karl Magnus and Dr. Abdulla Elyas are three young, ambitious, mission-driven people that came to find themselves building what has now become a radically different company to what they set out to do at the outset.
We were one of the investors who said no to Careem’s seed round, arguing over valuation, as opposed to looking deeply into the founder’s and their goals. That was our mistake and we learned a lot from it, course correcting at the Series A. Today, we are investors in Careem and believers in what the founder’s want to accomplish for the company, the ecosystem and the economies of our fledgling countries. We have spent the past 7 years actively pushing entrepreneurship and innovation through investing in early stage startups, with the hopes of building role models, creating wealth and jobs, as well as elevating the level of knowledge and skills in our region. We try our best to add value and accelerate the growth of our companies and the ecosystem, but we are not the people running these companies. The true game-changers are those that sacrifice their livelihoods, time away from family, health, mental well-being, for years to build something truly special. Careem is that; our beacon of MENA entrepreneurship; the first to transcend borders and continents, and the first to truly catalyze the Middle East’s startup ecosystem.
I thought I’d use this post to highlight the transformational changes that Careem has done to the outcome of future entrepreneurs, venture capitalists, economies and the wider ecosystem that will be written in the history books of MENA tech for a long time to come.
Graduating new entrepreneurs that have a unique skill set
One of the most essential ingredients to any startup ecosystem is the recycling of talent. But it’s not just any talent. It’s people who have experienced scaling a $bn startup in the Middle East. These are marketeers, engineers, sales people that understand the tactics that are needed to build a massive company and are one of the main proponents of knowledge that gets transferred in any ecosystem. This talent is rare and the people that have this experience have a far different mindset today; they are more ambitious, understand what it takes to succeed and are fearless to tackle large problems. We’ve already backed two companies that have been founded/co-founded by ex-Careemers; Bulkwhiz and SWVL, and we expect this trend to only grow as more graduates of the School of Careem go off to join or start new companies. If you really think about it, Careem employees close to 4,000 people, each with a skillset that is valuable to any future startup. They are to some degree, our Paypal mafia, our catalyst for growth. The companies that these graduates go out to start or join will also inevitably have their own graduates that go off and start new companies, armed with knowledge on how to scale into massive outcomes, and increasing the chance of success for future investors and employees. This is how the cycle goes for any healthy ecosystem (Skype in Stockholm, Paypal in the US, Facebook in the US, Gojek in South East Asia etc are all examples of that).
Overcoming regulatory hurdles
Prior to Careem, regulators in every country in the Middle East did not take regional technology companies seriously. They didn’t engage with startups, and tried their best to replicate their services, realizing now that it’s not that easy. Today regulators have drastically changed their view and acceptance of technology startups, mainly due to Careem’s constant lobbying with the governments of each country. When a company makes such a drastic impact at this scale on every economy, both through job creation and GDP growth, as well as investment, governments have to take note. Today, whether you’re a fintech, healthcare or mobility company, regulators are much more engaged and excited about the future of technology in their markets. The barriers that existed before have been lifted, and the mindset of these government officials have now shifted to encouragement and engagement, making it easier for future entrepreneurs to tackle large problems with the buy-in of governments.
Mudassir, Magnus and Abdulla are role models for future founders. They are examples that you can succeed at scale and you can overcome the odds in a region that is difficult. These 3 phenomenal people have built a company of role models. The senior leadership at Careem have amassed such a wealth of experience and achieved a tremendous amount, that a lot of the early stage startups of today, look up to them for inspiration, advice and guidance. In addition, these founders have been prolific angel investors and will continue to be super angels going forward. This is a huge contribution to our ecosystem, which was lacking just a few years ago.
Bringing Regional and International investors
We have spent time talking to regional investors, international VCs, founders of global technology companies over the years, selling them on the Middle Eastern opportunity, asking them to invest, and over the past 2 years, Careem has changed those conversations from a perspective of little interest, to one that is proactive and curious. Since Careem reached unicorn status, people have taken note of the region. International powerhouses such as General Atlantic, Amazon, Accel India and others have invested in the region, and we expect that to grow in the coming years and decades as we find new entrepreneurs that follow in Careem’s footsteps.
Accessing global talent
For startup ecosystems to succeed and thrive, accessing talent is vital. Over the past decade, the Middle East had a very limited regional talent pool when it came to building a scalable technology company. Most developers and engineers in the region did not have the experience of building large teams or understand the tactics required to scale. Attracting international, highly qualified people was difficult. There were not enough role models, nor companies that have achieved enough scale to demonstrate the regional opportunity, that made talented expatriates question moving to the Middle East. With Careem scaling to the size it is today, and raising massive rounds of capital from international investors, as well as being based in Dubai (a comfortable, modern, easily accessible city with a good way of life and strong infrastructure), made people take the risk of moving to the region. And that’s what they did. Engineers, developers, sales people, strategists, managers and finance professionals, who had worked at international technology companies including Facebook, Airbnb, LinkedIn, Amazon and others are now working in the ecosystem and transferring their knowledge and experience to their junior colleagues who will inevitably transfer the same knowledge to their peers, and so on. The knowledge transfer cycle has grown significantly and will compound into the future.
Recycling capital — angels & VCs — bringing returns to the VC asset class
For venture capital funds to be successful, they have to return money back to their investors (Limited Partners or LPs). These returns come from exiting investments in startups and are essential for VCs to continue to raise further funds and support the growth of their respective ecosystems. Exits are critical, which can come in the form of selling shares to new investors or selling the company to an acquirer. Careem was backed by a syndicate of angel investors and regional VCs that, over the growth of the company, were able to sell down some of their shares. This sell down has returned many of them, multiples of their capital, and today a lot of them are re-investing back into new startups in the region. In addition, many employees at Careem have amassed wealth, which they will likely use to invest or start new companies. This virtuous cycle is essential in the early stage funding process, and so Careem has demonstrated that it can generate returns to both employees, angel investors and VCs (and therefore the LPs in those VCs), which has changed the narrative and perspective of investing in the region, while providing for the recycling of more capital into more startups with the hopes of building the next generation of future Unicorns.
Building a Middle Eastern story — building the MENA tech brand
Building a brand is a huge challenge. We have extraordinary brands like Emirates and Jumeirah that have reached global recognition over decades. Careem has built a Middle Eastern brand that has transcended continents and demographics in such a short space of time. Each market in the region has its own sensitivities and cultural differences, and so building a unified brand is tough. Careem has shown us, regional entrepreneurs and international venture capitalists and technology firms, that it can be done. Branding can be a significant competitive advantage at scale, and the Careem branding has been a powerful advantage as it competes with Uber in the market. Careem has set the standard for others to follow in the region and has proven that it can be done at scale.
Transforming payment infrastructure across the region
Cash on delivery is the main form of payment in most countries in the region and has been a significant barrier to scaling startups across the Middle East. Careem struggled in its early days to address cash management in many of its markets, but solved those problems through persistence, problem solving and showing that the company can handle $m’s in cash at scale. Today, the company is looking to introduce a payment solution for companies; leveraging its network of drivers to be the cash machines that handle cash payments and collection, and allowing for companies to plug into this payment network to access customers in the same markets that Careem is present in. This is a transformational solution to cash on delivery and, while it has not been launched yet, when this feature does get released, I think it will allow for most of our regional startups to scale much faster and have a drastic impact on the overall growth of technology adoption and startups in the Middle East.
All of the above have had massive impacts on our region for the better. Nobody could foresee these things happening the way they did; and being such a big catalyst for change. A lot of it is due to the resilience, ambition and drive of the founders and their team of amazing Careemers. When Mudassir and Magnus first set out to build this business years ago, their projections were nowhere close to what they have achieved to-date. That is a testament to their curiosity, ambition, effort and dedication. Governments, rulers, entrepreneurs and investors will be thanking them for decades to come. I for one, will never forget the time that we invested in Careem and will always look up at these founders as the real game changers for the destiny of our region and future generations to come.
In the end, no matter who is the shareholder, the founders will continue to pursue their mission of building a regional platform that enables the MENASA region to expand efficiently across this geography — an example of their resilience despite making tremendous wealth for themselves, they continue to play the long game in favor of our region.