Airlift, Pakistan’s top startup, is shutting down in a move that has sent shock waves to the nascent but fast-growing ecosystem in the South Asian market.
The Lahore-headquartered startup told employees Tuesday evening that it will be permanently ceasing operations on Wednesday, according to two sources and slides presented to them.
The move comes after Airlift unsuccessfully attempted to put together a new financing round, deliberations of which continued as recently as last week, said one of the company slides, obtained by TechCrunch.
"Multiple" investors told Airlift that it will take them over two months to wire the money, the startup told employees. "Other investors [were] unwilling to assume the risk of wiring ahead of others," the slide said.
Airlift operated a quick commerce service in eight Pakistani cities, including Lahore, Karachi and Islamabad. Users could order groceries, fresh produce and other essential items, including medicines, from the Airlift website or eponymous app and have it delivered to them in 30 minutes.
Instant commerce as a category has made inroads worldwide in recent years, but they also tend to be some of the most capex heavy businesses.
The startup raised $85 million in the country's largest Series B funding round in August at a valuation of $275 million, the highest for any Pakistani startup. Harry Stebbings of 20VC and Josh Buckley of Buckley Ventures led that round. Airlift is also the most funded startup in Pakistan.
Airlift was attempting to raise a new round earlier this year via SAFE at a $500 million valuation, according to a source with direct knowledge of the event.
Update: Airlift founder Usman Gul confirmed to TechCrunch that the startup is shutting down and provided detailed notes about the events of recent months.
The startup's demise could hurt the local ecosystem's enthusiasm. In the past three years, scores of global investors, including Tiger Global, Prosus Ventures and Addition, have backed young startups in Pakistan, giving a major vote of confidence to the market.
"We were never their investors, but I’m still sad for the people losing their jobs and who will be justifiably jaded by what just went down," tweeted Kalsoom Lakhani, GP at i2i Ventures, an early-stage focused venture firm in Pakistan.
"I'm also worried that this will reflect poorly on Pakistan’s entire startup ecosystem, which is unfair to the MANY startups building well right now, growing without compromising their biz fundamentals. Failure in any startup ecosystem isn’t anomaly; it’s inevitable. The more we leave room for failure, the more we also create room for successes in their wake."
Airlift was widely seen as the poster child of the Pakistan's startup ecosystem. Pakistan's then Prime Minister Imran Khan publicly congratulated the startup when it unveiled its Series B funding news.
"As a pioneering technology startup in Pakistan that had established a new precedent, Airlift’s success was viewed as a milestone for a burgeoning technology ecosystem in emerging markets. We believe that the ecosystem will continue to thrive and that some of the most valuable technology companies in emerging markets are still yet to be started," Gul wrote in a letter to staff Tuesday.
My heart goes out to everyone working hard in the Pakistani tech ecosystem
Airlift raised a monster Series B ($85M) & was the poster child for the burgeoning Pak startup scene
I ~really~ hope their failure is taken in context & not as a reflection on the entire ecosystem https://t.co/DbaoLu4ksz
— Ankur Nagpal 🔥🔥 (@ankurnagpal) July 12, 2022
Airlift says it will provide severance payments to employees in the next four to eight weeks and clear dues to suppliers and stakeholders.
"Teammates are not required to come to work beyond today -- access revoke will run by end-of-day Thursday, followed by communication via personal emails," the startup said in another slide, obtained by TechCrunch.
Earlier this year, Airlift began expanding to South Africa, a move that significantly increased its expenses, a person familiar with the matter said. In a note to staff in May this year, obtained by TechCrunch, Gul warned that the market conditions had suddenly taken a turn for the worse as tech stocks reversed most of the gains following a 13-year bull run.
Airlift needed to be "extremely judicious in how capital is deployed and managed" and was halting any new hires, Gul wrote at the time. He said the startup's expansion to South Africa will "remain in a nascent stage in FY 2022."
In the note Tuesday, Gul said 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 (i.e. positive cash flow from operations), and about 6-9 months from company-level profitability (i.e. Free Cash Flow)," he wrote.
It was also finalizing a new funding round when suddenly things well apart.
"With the above developments in May, one of our investors stepped up to lead Airlift’s Series C1 financing. We’ve received tremendous support from the potential lead in opening doors to other investors to put together the round. First Round Capital, Indus Valley Capital, Buckley Ventures, 20VC and other investors agreed to participate in the round with sizable checks," Gul wrote.
"In early July, Airlift had a clear path forward to close the round – the company pushed out documents for signatures to all participating investors."
"Last week, amidst rapidly deteriorating conditions in the global economy, several participants shared uncertainty in wire schedules and their disbursements – this ultimately meant that the company’s capital requirements would not be met. Ultimately, the round was unsuccessful," he added.
Airlift's letter confirming the shutdown and detailing the events of past few months: pic.twitter.com/cvmfM7xRMS
— Manish Singh (@refsrc) July 12, 2022