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Abu Dhabi, UAEThursday 20 September 2018

Careem blazes a trail for Middle East tech start-ups

The region's first unicorn eyes further expansion and autonomous vehicles for 2018

Bassel Al Nahlaoui, managing director for the Gulf for Careem. Antonie Robertson / The National
Bassel Al Nahlaoui, managing director for the Gulf for Careem. Antonie Robertson / The National

Few start-ups in the Middle East have enjoyed the meteoric rise to success experienced by Careem.

Launched in Dubai in 2012, the ride-sharing company has rapidly expanded across the region and beyond, with a presence in over 80 cities in more than 11 countries.

Its crowning moment came last December, when it became the Middle East’s first tech “unicorn”, when a US$350 million funding round led by Japan’s Ratuken and Saudi Telecom gave the company a value of $1 billion.

Given such a status, and with more than 2,500 employees (not counting its more than 500,000 drivers, or “captains” as the company calls them), can Careem really still be described as a start-up? It certainly likes to think so.

“If you look at our ambition and what our vision is for Careem in this region, we still think we’re at the very beginning of the journey, so we still feel like a start-up,” says Bassel Al Nahlaoui, Careem’s managing director for the Arabian Gulf.

“We don’t think we’re even at 1 per cent of where we want to be. Innovation is still a key ingredient for our success. So, yes we’re still a start-up and we want to be a start-up for the next few years until we start achieving some of these big ambitions.”

Careem’s origin story by now is well known. The co-founder Magnus Olsson was determined to build something meaningful after recovering from potentially life-threatening brain surgery. His business partner and fellow McKinsey consultant Mudassir Sheikha was looking to return to his tech entrepreneur roots, and wanted to create a billion-dollar company that would improve people’s lives.

After looking at various options in sectors including health care and education, the pair eventually settled upon transportation, noting the patchiness of transport infrastructure across much of the wider Middle East region.

Careem began life in Dubai in 2012 as a corporate transportation website to help businesses schedule employee transport. When the service took off, the company transformed itself into a full-blown ride sharing app, and never looked back.

Its most recent expansion includes the launch of services in Turkey last December, followed by its entry into Palestine in June.

Mr Al Nahlaoui says the company is evaluating entry into new markets but that deepening penetration across its existing footprint is its immediate priority.

“Before we want to start looking out any further we want to dig deeper into the countries we’re already in, but opening up in new cities, with the focus being particularly on Egypt, Pakistan and Turkey,” he says.

Nevertheless, Careem is mulling a possible entry in a number of new countries in 2018, with East African markets such as Kenya and Uganda under particular consideration.

“There are a few African countries that are on that shortlist we’re looking at,” says Mr Al Nahlaoui.

“Africa shares a lot of similarities with our region; wherever there’s a lack of infrastructure there’s a place for Careem to help and enable people to move around, get jobs and get empowered via increased mobiility.”

The company is eyeing mostly natural growth, but is open to making acquisitions if and when the proper opportunities arise, he says.

In July, Careem acquired a minority stake in Swvl, an Egyptian start-up founded by the former Careem executive Mostafa Kandil, which lets passengers reserve seats on buses, and pay their fares through the company’s mobile app.

“Our recent acquisition in Egypt wasn’t part of our strategy, but we saw an opportunity and acted on it,” says Mr Al Nahlaoui.

“I think there’s a lot of organic growth to come before we need to go and acquisitions. We’re still hitting a lot of white spaces in the markets we’re in.”

Since Careem’s $350m funding round last December, the company has secured funds via an equity investment from Chinese ride-sharing giant Didi Chuxing, announced in August.

The company’s success provides an inspiration for other start-ups across the region, according to Dany Farha, chief executive of Beco Capital, one of the company’s early backers.

“Careem has become the largest internet platform in the region as measured by any KPI [key performance indicator] they continue to experience triple digit growth even at this massive regional scale from Morocco all the way to Pakistan,” he says.

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“Their continued success will not only be a crucial role model for start-ups across the region to dream big but their regional scale will enable start-ups across the region to quickly scale up via the Careem platform, beyond their current mobility proposition.”

Given its healthy funding position, the company is in no hurry to go public yet.

“Honestly, it’s not on our mind,” says Mr Al Nahlaoui. “I’m sure one day we might need it but given how well funded we are today it’s nowhere close to being a priority.”

The firm's partnership with Didi gives Careem access to the Chinese giant’s artificial intelligence (AI) expertise, which it plans to tap into to maintain a competitive edge over rivals such as Uber.

“There’s a lot of learning to do in the core app that the likes of you and me will never see, in terms of dispatching algorithms, predicting demand, all these factors that enhance the experience of the app itself,” says Mr Al Nahlaoui.

“This is the main objective with the partnership with Didi to learn from what they’ve done. They’ve been very successful with it, they came in at a later point and have managed to scale and grow at a very fast pace.”

Careem’s more recent innovations include a call-masking feature, enabling users to book a car service without disclosing their phone number, which was successfully introduced in Jordan in August. The company is looking to roll out the feature in other markets.

It also plans to start trials of its autonomous pods, first announced in late-2016, early in the new year but concedes that the use of such technology may be confined initially to more developed markets such as the UAE and Saudi Arabia.

Careem has been fortunate in its first five years of operations in that it has yet to run into many of the major regulatory hurdles faced by its international competitors, as transport authorities and employment tribunals questioned their business models.

Uber’s licence to operate in London was suspended in September, with the city’s mayor Sadiq Khan saying the company had to “play by the rules” just like everyone else.

Careem’s biggest regulatory hurdle came last year, when it and Uber suspended their services in Abu Dhabi after a crackdown by the local transport regulator TransAD. Careem restored services in the capital this year, albeit with a more limited offering.

“When it comes to government relations I think we’re a little bit blessed compared with some of our competitors who are coming in from outside the region,” says Mr Al Nahlaoui.

“We’re not in a region where the transport infrastructure was built hundreds of years ago. In many markets we’re in, there is no metro, trains, or even high-quality taxis. So we’re not seen as disruptive; there’s plenty of white space, which means we are seen more as enablers.

“Our goal is to convince governments that we’re not here to steal anything, we’re here to collaborate and create more demand for what they themselves are offering.”

To that end, Careem this year began offering users the ability to book Dubai taxis via its app, heading off accusations of undermining the emirate’s own transport services.

“We will disagree with governments on some things, but I feel that with the right mindset and the right approach we can always find to collaborate in all the markets that we’re in, and see how we can support them in their objectives,” says Mr Al Nahlaoui.

He notes Careem's offering as a company goes beyond simple transport services, and extends into providing employment opportunities.

“More than 99 per cent [of our captains in Saudi Arabia] are Saudis, making us the largest private sector employer in Saudi, ahead of Aramco,” he says.

The company has created hundreds of jobs for women in the kingdom via a female-only call centre, while the country’s ministry of labour has acknowledge the role of Careem in enabling women to find work via affordable transportation.

Company profile:

Company/date started: Careem, 2012

Founder/CEO: Mudassir Sheikha, Magnus Olsson

Based: Dubai

Sector: Transport / technology

Employees: >2,500 (plus over 500,000 "captains")

Stage: E

Investors (selected): Didi Chuxing, Rakuten, Beco Capital, Saudi Telecom, Daimler, Kingdom Holding

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