For two years since it started in 2019, Airlift was enjoying a unique spot in the country’s startup spotlight. Despite the onset of an unprecedented global pandemic that pushed everyone indoors, Airlift, which was a public transport rideshare service, quickly switched gears towards quick commerce and managed to not just stay afloat but do exceptionally well. It raised $85 million in a single Series B funding round —the highest any Pakistani startup had ever raised. Everything was going well. Until it wasn’t.
Citing the global recession, Airlift announced it was shutting down operations entirely on July 12. Overnight, what some had called the ‘poster child’ for Pakistani startups became the target of speculation, accusations and ‘I-told-you-so’ tinged explanations as to what went wrong. Every Twitter feed refresh, would result in at least two new threads trying to unpack what had happened to Airlift. Was this the death of the Pakistani startup bubble, people mused. What lessons could we learn from this great ‘failure’, others asked. However, as it turns out, perhaps the lesson here is not just one for startups, but for the consumers, the investors, and the Twitter experts. Because despite it shutting down, it is imperative to remember that Airlift is not indicative of the greater startup ecosystem.
A startup by virtue differs from a regular business or entrepreneurial venture because of its very high risk/high profit model. A startup proposes an idea that is out of the box, and has never been done before, in a market that has never seen its kind of business before. A never before done idea is also one that has a moderately equal chance of teetering in the direction of either success or failure, and this is something that the venture capitalists who fund startups are okay with. Venture capitalists know that out of the ten businesses they are investing in, only two might actually be successful. But the magnitude and rate of their success will be so large and fast paced, that it will make up for the other eight unsuccessful investments.
So, was it a case of being at the wrong place at the wrong time? Legal expert Mubariz Siddiqui seems to think so. According to him, amongst other factors, the global recession played a big part as well. Last year billions of dollars were invested in quick commerce startups across the globe. “By December last year there were rumors that Airlift is closing a $300 million drop,” he told The Friday Times, adding “If they had closed that they would have had runway for the next two years.” But the global recession, which everyone knew was eventually going to come, thwarted Airlift’s chances to secure that safety net. But the important thing, he stressed, was that we cannot let Airlift define every single other startup in Pakistan.
“If Airlift was a roaring success, it does not mean that every single startup in Pakistan will be a roaring success, and if Airlift doesn’t work out, it doesn’t mean that no other startup can work out either,” he said. It makes sense, seeing as how in the startup ecosystem, no two businesses are alike, and they all have such different models and modes of operation that it isn’t fair to compare them. Since the shutting down of Airlift, business experts, like Kalsoom Lakhani, who is the CEO of a venture capitalist firm i2i Ventures, have been stressing the need to do away with the tendency to term a well-performing company as the ‘poster child’ for the entire industry.
Sarmayacar is another early-stage venture capitalist firm, which primarily invests in technology startups. Founded by Rabeel Warraich in late 2016, the firm wanted to bridge the gap between the supply and demand of venture capital in Pakistan by providing professional venture capital. Speaking to TFT, Rabeel also believed that the events leading to the closure of Airlift were not out of the ordinary and reiterated that given the high risk nature of startups, a particular start-up failing is not necessarily beyond the norm. “As long-term investors, we believe that these cycles and downturns happen,” he said.
However, he contended that this event perhaps came too early for the nascent startup ecosystem of Pakistan and added that the outcome was propelled by a kind of business model that in his opinion was not viable in Pakistan. “The coming months will filter out more sustainable business models rather than those that were riding the wave of cheap liquidity that we’ve seen over the last couple of years,” he said.
Still, the current climate does, in his view, present the ecosystem with new opportunities, as coming off a crisis tends to be a good time to invest in new opportunities. “The Airlift event specifically has emphasized that availability of capital cannot be assumed, as well as the need to pay attention to unit economics” he said, which is something that will prove to be useful for startups to consider going forward. Rabeel said that while the events were unfortunate, and while no one individual is responsible, there was a bit of careless spending which could have been managed more efficiently. “Sarmayacar looked at Airlift five times from its pre-C round all the way through to Series B, and every time passed up on it because the unit economics didn’t make sense to us.”
As with any fledgling economy and sector, there is often a trial-and-error method by which the players learn the ropes. For the viability of the entire sector, it is imperative that failures not be treated like the end of the world, especially in a sector where the chances of failure are higher than chances of success. At the same time, businesses need guidance and expertise as well. Fatima Mazhar, the Chief Operations Officer at COLABS, which is a co-working space and business community in Lahore, said that the biggest challenge to startups is the lack of mentorship and guidance within the ecosystem. This echoes what Rabeel said: startups don’t know how to make the best use of the money they have.
COLABS is attempting to change that. Originally starting out as a co-working space, COLABS has transformed into a network or a community of members that can make use of the company’s ledger of resources. It currently houses 35 startups and 50 freelancers, and regularly hosts talks and feedback sessions with business owners and experts who can provide constructive feedback. In addition, COLABS encourages members to treat their space as more than just an office space, and interact, network with and make us of the other community members present.
Currently, COLABS is in the pilot stages of launching an initiative called ‘Business Solutions’, which offers their community members access to all sorts of guidance, from payroll to marketing to legal advisories. Beebrak Gurchani, who is spearheading this initiative, told TFT that awareness is a big issue. “We want to help solve the problem of small businesses or startups not knowing how to do HR, how to do accounting, how to legally protect themselves,” he said.
While Airlift’s departure is unfortunate, the good news is that it isn’t, as everyone has been saying since it happened, indicative of the greater ecosystem. If anything, the fact that Airlift was able to do so well while it still existed indicates the presence of a genuine interest in Pakistani startups. As Mubariz says, suddenly investors are viewing Pakistan as a viable investment destination, which is great news. “Normally in Pakistan, people don’t invest in people. We invest in land and cars and other assets, but not in people,” he said, adding, “Venture capital takes a bet in people and gives them a chance.” In a way, venture capital democratizes the process of doing business, often the greatest hinderance to which is the lack of capital. But with venture capital, you just need a big crazy idea, and someone just might bet on you, not caring if you fail. And maybe that’s the culture we need to cultivate: it’s okay to fail, as long as we’re learning from our mistakes.