Funding for start ups ‘significantly low’ in MENA, says Careem

Speaking to Arabian Business, Mudassir Sheikha said funds are particularly scarce when it comes to technology start ups.

“Funding for start ups in the region remains a challenge because the region is, overall, underinvested in, by global capital,” he said

“A lot of investment that gets made in the region by outsiders or insiders is focused on more traditional sectors and a limited amount of it comes to technology start ups… if you [compare it] to the funding available for start ups in other regions, it is significantly low.”

Careem services are currently available in over 100 cities in 14 countries in MENA, Turkey and Pakistan, with potential expansion expected in at least 250 cities over the next few years. But judging by the size of the market, Sheikha said more funds should be available.

“There isn’t as much money available to start ups as there should be, because if you look at the region, it is quite significant. At least in the way we define the region, there 600 million people who live here between Morocco and Pakistan. It is 10% of the world’s population. If you look at the GDP per capita, it is 1.5x that of India or Southeast Asia…” he said.

Careem itself has raised over $500m in funding from 19 investors, including Saudi Prince Alwaleed Bin Talal’s Kingdom Holding and China’s ride-hailing firm DiDi Chuxing. Its success, alongside regional champions such as Souq.com, has prompted investors to put more funds into MENA, paving an easier path for other start ups.

“It’s not easy but it is becoming easier as we have had successes like Souq, like Careem to some extent. People are becoming more confident that these concepts can become successful with the talent, capability and infrastructure that we have,” he said.

“More and more money is becoming available now. When we started, there were three or four funds that we could go to, and all those funds were $50m maximum funds. Today, Saudi Telecom has a $500 billion fund, and most local Venture Capitalists have also raised $100bn funds. So there is a lot more activity in the ecosystem.”

Yet to make profit

While the firm is believed to be worth $1.2bn, it is yet to make a profit.

Though parts of the business are currently lucrative, the consolidated business plan needs another couple of years to breakeven, Sheikh said. But he is not worried about profitability, stating that even at its current size, it has merely scratched the surface when it comes to opportunity.

“We’re still in the investment phase, because the opportunity is quite significant even at the scale we’re at with 800,000 captains on the platform and 24 million customers… It’s decently significant and large, but even at this scale, we’re at 1% of the addressable opportunity in the region for a mobility and transportation platform. Right now, we want to figure out how we can go from 1% to 2% to 5% to 10% and a lot needs to be done for that to happen,” he said.

Some of those opportunities lie in new markets such as Sudan, where Careem is set to launch in June, as well as Iraq and Palestine, where it has just launched. Other prospects are in affordable services, where Careem is set to venture into.

“Even in the cities where we are present, our services are not yet affordable for the masses. They are premium in the way they are provided; it’s a private captain in a private car. How many people in our region can afford that service? Our view is that 2-15% of people, in the cities we’re in, can afford a Careem service. So there’s huge focus to drive affordability so that everyone in the region can afford to use Careem, regardless of their income,” he said.