Successfully launching and running a start-up is a daunting task even in the normal course of life. However, 2020 was a very difficult year for all established businesses and emerging startups alike. As Nassim Nicholas Talib says ‘Black Swan’ event of COVID19 hit the world, which shook the economies across the world at the macro level and wreaked havoc for businesses of every scale at the micro-level.
The travel, tourism & Hoteling industries were the ones who took the biggest direct hit. While other industries also felt the impact of lockdown and reduced demand owing to Pandemic including Autos, Cement, Textile (these sectors eventually recovered due to Government Support).
The impact of pandemic was also felt by cinema and shared mobility space, including uber, Careem, Swvl and AirLift.
However, someother businesses thrived during the pandemic which included I.T. ,video conferencing, online teaching, and ecommerce.
The Start-Up landscape of Pakistan was also shaken in 2020 due to pandemic, with many businesses succumbing to external pressures. Some of them, despite having a good business model could not survive as the funding and Cash flows dried up. The pandemic was the final nail in the coffin for some start-up, however, in many cases, cracks in business models had already surfaced well before COVID-19 ground the global economy to a screeching halt.
Several start-ups were unable to raise funding or find a feasible revenue model. Some faced the hard impact of lock downs and the resultant change in consumer behaviors. Others, meanwhile, allegedly mismanaged their funds or faced problems unrelated to the pandemic which led to their failure.
The overall success of a startup depends on various factors, which include more than just offering innovative business solutions for problems. A major factor for startup failures includes lack of product-market fit, while other factors include lack of technical and marketing knowledge of startup teams, lack of funding or insufficient cash generation, legal and technical problems, and lack of growth prospects and scalability, among others.
So what’s the reason behind Pakistani Startup Failures? Let’s check out the list of Pakistani startups which witnessed a downfall for various reasons in 2020 and try to understand some important lessons which can make or break any start-up. Below is the list of Pakistani Startups which succumbed to the tough spell.
BeautyHooked (BH), a Female-led Pakistani start-up successfully raised $280,000 back in 2016 through Fatima Ventures. The start-up remained in the spotlight as the driving force behind the start-up was a Cornell graduate Sahr Said. The start-up was part of PlanX, a technology accelerator and gained considerable support.
However, despite all things favourable including an untapped potential market, the startup couldn’t achieve what it aimed for. The seed funding of $280,000 it raised was meant for development of mobile app and expansion both inside and outside Pakistan. However, the startup failed to achieve any of the objectives.
The site is having a meager traffic of 700 visits per month while engagement on facebook page remained muted. The Mobile App remained non-existent despite the fact that they raised funding for the same. BH failed to capitalize on Festive Sales as its competitors ‘Ghar Par’ and ‘BaGallery’ received massive response on Eids and Wedding Seasons.
Furthermore, BeautyHooked failed to grow business outside Lahore region while failing to sustain partnerships with Lahore based Beauticians/Parlours.
Aamna Tariq, a Lahore based Beautician believes BeautyHooked (BH) was a great business idea however it failed in execution. She commented that the inability of the BH to provide significant discounts, Offering of Low Quality Beauty Products and not able to penetrate the market beyond selected Areas were some of the mistakes the Start-up made.
As per our channel check, BeautyHooked is currently looking for additional funding as company is unable to fund its overhead expenses and scale up operations. While Fatima Ventures have refused to further inject any equity as no tangible progress has been achieved after previous round of funding.
KarloCompare was a digital financial services platform with the objective to helps users discover and compare personal finance and insurance products and services. The prime idea behind the startup was to help Banks/Insurance Companies lower cost of acquisition and create transparency in their ROI on digital spends.
KarloCompare raised an undisclosed amount of funding in 2018 from TPL eVentures. Before that, the startup raised an undisclosed amount from Plant N and a seven-figure Rupee funding in 2016 from angel investors Hina Khawaja Bayat and Roger Dawood Bayat.
However, the platform couldn’t scale up despite a rising demand of digital financial products. It is widely believed that Karlo Compare was one of the few online financial services platform back in 2016-2017 and the response they were getting was also positive.
However they were unable to offer full product suite catering to different segments. Moreover, the marketing strategies of the platform remained weak as they focused on bringing Organic customers, while adoption of digital financial services required significant push from the platforms back than.
Due to weak customer base initially, they were unable to take on board renowned financial instituions with limited products on offer, while hesitancy to invest in marketing led to eventual demise.
The website of ‘KarloCompare.com.pk’ was eventually taken down in 2020, while founders take on their other persuits.
Sukoon.com.pk was launched in 2015 as Pakistan’s first online platform for providing household services with top-quality, pre-screened blue collared professionals to individuals looking for them. From home cleaning to handyman services, Sukoon instantly provided the blue collared professionals via application.
The start-up was Karachi based and was founded by Qazi Umair and Shoaib Iqbal, both former employees of Rocket Internet. Sukoon.com.pk was one of the highest valued start-up at The Nest I/O. They were able to raise significant seed round funding from Crescent Ventures, The Indus Entrepreneur (TiE) Islamabad Chapter and DotZero Ventures.
It quickly achieved fame and made a brand for itself, mainly due to a catchy name. Operations scaled up to some extent and they got some technicians on company payroll aswell along with a network of ‘independent contractors’.
However, despite massive demand and potential of the market, startup couldnt scale up. Moreover, the service quality started deteriorating and customers complained about high costs, low quality materials being provided and delayed services.
According to the founders, they were unable to arrange additional funding to scale up the operates at grand level. However, analysts believe, it was lack of control over their services and unethical behaviour of contract people (electrician, plumber) where they tried contacting the families seperatly and asked them not to contact Sukoon (bypassing the online portal), hence the margin, customers and commission was lost.
The whole busniess model was not aligned with the needs of customers and available technicians in the market. They hired Technicians on commission basis and were working as online cotnractors without controls. They spent hundreds of thousand rupees on marketing, and when the demand kicked in, their operations were not adequate enough to entertain increased orders. Overall a flawed business strategy. While Co-Founders parted their ways couple of years back, the site was taken down and the plateform remained non-existent in 2020.
In 2017, Mobilink launched ‘VEON’; an equivalent of WeChat for Pakistanis. Veon was launched as an all-purpose mobile application which allowed users to do almost everything using mobile phone like news feeds, self-serving mobile top-ups, Utility bill payments etc. Many analysts considered it as a bold move by the company to step into a niche dominated by the WhatsApp in messaging, and the banks in the payments space.
The platform had bold ambitions to make money. Their models revolved around making money from gathering a high number of users to the platform, and then sell them services as well as gain revenue through selling ads on the platform. They invested millions of rupees on Marketing and advetising.
However, it failed to gather the momentum to be the ‘Super App’ of Pakistan. As per the management,Mobile application had some initial success, with 2 million downloads. However, the management had projected higher numbers which were not achieved. The company realized that not only the initial platform of the Veon app was not strong enough, but they had also tried to do too much and add too many things in a single app. One of the struggle of Veon was that it was competing with ‘Whatsapp’ which had become a defacto chat app in pakistan and moving users from there was an uphill task.
Moreover, the company was also unable to forge effective Operational Alliances with other brands to bring in the much needed traction. Analysts believe that Veon was doing everything which any business shouldn’t be doing starting from confused marketing messaging to not able to retain customers. The userbase had no idea why they were installing the app. No Unique Selling Proposition was evident.
Eventually, within one year of its Launch, the managment realized that the Veon is not going to be a mega app any time soon. Hence, it decided to recall the whole app. The app was taken down in 2019 while last impairment for Veon was booked in 2020. This brought us to the lesson that even large corporates can fail in execution even with massive budgets.
Patari was founded in 2015 as Pakistan’s first music streaming website, dedicated to Pakistani music. Till now Patari is able to attract more than 100,000 installs on the Google Play Store and hosts a wide variety of Pakistani music from indie artists, classics, love ballads, drama OSTs, and podcasts among many more.
Patari, was a Plan9/X alumni and one of Pakistan’s most celebrated startup back in 2017. It was able to secure US$ 200,000 of seed stage funding from Sarmayacar. Its success journey was gradual and with time it ensured its presence in the music industry of Pakistan with different collaborations.
However, Patari got stuck into various controversies in 2018 when the CEO Khalid Bajwa was asked to step down following sexual harassment allegations. Following CEO resignation, Ahmer Naqvi was appointed as interim CEO, who also resigned later on after it surfaced that Khalid Bajwa was still involved in affairs of the company despite his resignation. With Naqvi, six other key members of founding team resigned in protest.
For an interim period, Sarmayacar appointed Rabeel warraich as CEO of patari. However, the governance crisis peaked when all of a sudden Patari appointed Zarlasht Faisal as CEO. Many people questioned the merit behind the appointment while some alleged that appointment is due to her father Faisal Sherjan’s influence in Patari as he had co-founded and invested in the company.
Patari was called out for nepotism, condoning harassment and trivialising hard work that its employees had put in. With recent push by the management to recoup its past prestige, Patari was able to fetch partnership in the Coke Fest 2020. However, the traction is still missing. There are roughly 5,000 monthly visits on the app/site, not enough for the survival. While users complain of bad UI/UX of the app with frequent bugs. Moreover, Patari lacks English and Hindi content where considerable market exists in the country.
Analysts believe that subscription based model for Patari led to its demise as it lacked variety of music (no english, hindi content). Hence, users are hesitant to dole out money in subscription when they have to use other Apps (Spotify, Soundcloud) for other music categories.
The final nail in the coffin was drilled for Patari when Spotify announced its launch in Pakistan last month. It is widely believed that Spotify with its Heavy Marketing Budget and global presence will eclipse all Music Streaming Apps in Pakistan in 2021.
Sabzi.pk was an online fruits and vegetables delivery startup based at LUMS Center for Entrepreneurship (LCE). Sabzi.pk came into prominence when it announced seed financing from the owners of a large Pakistani retail conglomerate. The funding round valued the start-up at whopping $7.5 million. At its peak, the start-up was growing at the rate of more than 100% per month. However, the operations were limited to Lahore region.
Sabzi.pk did test its operations in other major cities, however it couldn’t scale up. It aimed to achieve full procurement from Farmers while ensuring direct distribution to consumer doorsteps. However, the supply chain model they envisaged, failed. They were unable to take on board farmers at grand level to meet the demand. Moreover, deliveries started getting late with consumers found complaining about service quality. With the problems arising for scaling the business, the website was taken down in 2020.
‘Roomph’ mobile app was launched in late 2019 to facilitate travellers for inbound tourism. It was backed by local Hotel giant “Hashoo Group”. Roomph aimed to resolve accommodation issues of travellers across Pakistan as travellers through RoomPh could get rooms in budget. It also aimed to enable common man to rent out their home for tourists and make reasonable earning, while Roomph earn commisions on the same.
On the surface, idea looked promising. There is a vast majority of people who prefer to stay in budget hotels during travel. While there is dearth of budget hotels in Pakistan, especially in toursit areas. Even those budget hotels, who cater to this market niche are not the preferred options due to lack of quality services. This was exactly what Roomph was targeting, providing quality in budget.
However, the app couldn’t take off. With the advent of 2020, came COVID19 which paralyzed the travel industry. Hence, RoomPh couldn’t make significant stride.
However, as the economy opened in August-2020 and travel within the country resumed, RoomPH couldn’t capitalize as it was unprepared. There was a significant influx of tourists after Eid Ul Adha till December-2020. However, RoomPH never achieved the traction it aimed for. They were unable to forge partnership with hotels. Furthermore, an element of Marketing and Promotion was missing since inception. They couldn’t place their brand in from of their target audience.
As of now, RoomPH has less then 100 app installs, while monthly site visits are roughly around 100. With another round of Local Tourism going to start after Eid, the platform is still far from utilizing the influx in its favor
Yayvo was founded in 2014 by Pakistan’s logisitc giant TCS Group. Yayvo is an online ecommerce store which gained prominence after 4G internet brough revolution in the country.
At one point, Yayvo was 2nd largest online retailer in Pakistan and was targeting more than 1 billion rupee sales in a year, while the CEO of the company M.A Mannan had a vision to turn Yayvo into Alibaba of Pakistan. However, things got awry when news of Sudden rift came between Yayvo CEO M.A Mannan and TCS Group Chairman Khalid Nawaz Awan. The group Chairman wasn’t happy with the way ecommerce segment was being run. Some flawed launches (TCS Hazir) and lot of debt on the balance sheet led to eventual exit of Mannan from TCS Ecom along with many other Management cadre personals.
Yayvo lost its path with tumultuous management changes, stiff competition, and even allegations of suffering customer service quality and financial performance.
As per last news reports, Yavo was looking for investors. It was valued at $100mn back in 2019. Since then, the platform has curtailed its operations. It is no more onboarding new vendors. While Product offering has also been reduced. Data suggest that Yayvo has currently 73,000 monthly visits, down from more than a million achieved couple of years back. The slide was gradual and currently in free fall.
Jambo was Launched by Arpatech Ventures, as an e-commerce portal claiming to provide the lowest prices without compromising at the product quality. The platform hired Forrun as its delivery partner, and aimed to be walmart of Pakistan. Jambo.pk was launched during the e-Commerce frenzy of the country, primarily due to increased internet penetration witnessed after 2014. Back then Every Mom and Pop store opened Online platform and try to capitalize on rising internet user base.
With no focus on customer experience and no specific USP, Jambo.pk was unable to mark a signficant niche in ecommerce segment of the country. The site was closed in 2020.
Autogenie was an online portal launched in 2015, which offered car-maintenance services at customers’ door steps. The portal started by offering car repair and maintenance services in Lahore. The portal was able to achieve gradual popularity among the working class group. The startup was also successful in raising $100,000 funding from PakWheels.
However, despite good initial response, the platform couldn’t scale up in other cities. Moreover, they remained unable to onboard Corporate clients which could have led to stable revenue streams. Some success was achieved in initial days when its mobile application witnessed 5,000+ downloads. However, the traction is now missing.
The platform failed to invest in marketing and product push. The customers still remain unaware of any genie ready to solve their problems. The brand couldn’t widen their collaborations with Garages, auto part companies. While customers prefer to go to their years old mechanic, a habit Any genie cannot break in a blink.
During the 4G Internet Boom of Pakistan, E-commerce made inroads towards a broad swathe of products and the grocery retail industry was no exception. As mentioned earlier every Mom and Pop shop offered its products online creating a large web based presence of retail stores. Tazamart was one of them. An Arpatech Technology Ventures company, they targeted a niche market of offering fresh Fruits and Vegetables, while offering other grocery items as well. However, with muted repsonse and no Unique Service on the offering, the portal never witnessed any significant volume. Currently the Mobile applications have been taken down, while a choppy website is functional with almost no traffic.
Online retail stores in Pakistan are a long way from giving shoppers an alternative to physical stores. It isn’t all doom and gloom, but to serve as viable alternatives, online retailers must prioritise customer experience.
Other Business Failure
Following Businesses couldn’t appropriately adjust to the changing consumer needs and resultantly faced massive decline in their operations.
Launched with much pomp and Show, the nicotine pouches maker couldn’t establish itself among the masses who remain addicted to the conventional Cigarettes.
VELO is a product of British American Tobacco launched to capitalize on rising Alternative Nicotine market. As per the sources, a multi-million Rupees Budget was allocated to the push the product. In this regard, various incentives were also offered to Retail shops/Pan Khokhas to entice consumers to try the new product. VELO also launched its music show to appeal to younger generation.
However, the VELO failed to garner required sales. Consumers reported many side effects of the product including constipation, dry mouth, nervousness, headache, indigestion, and sleep disturbance.
The initial sales momentum broke up after marketing efforts were pulled back by the company based on lack of appropriate response. Analyst believe that word of mouth about side effects of the product led to its failure. While Consumers opine that appropriate alternative of Cigarette remain ‘Vapes/E-Cigrettes’.
Our sources confirm that company has no immediate plan to increase its marketing efforts as ROI remains low.
Riding on the initial Digital Payments wave, UBL Omni made a brand name among the masses which utilized the platform for quick and efficient payments. Despite prominence of easy paisa and UPaisa, UBL Omni had its presence in the digital payments market till 2019.
However, with the onset of 2020, UBL put all its focus on grappling with bad loan portfolio and remained oblivious of its side businesses. Moreover, the cross platform compatibility and lower retail penetration led UBL Omni to witness a massive decline in 2020. This happened despite a lucrative business model, and increasing market. However, lack of focus led to massive decline of fee income from Omni to UBL in 2020-2021 period.