Pakistan’s top startup Airlift shutting down following funding crunch

Airlift, Pakistan’s top startup, is shutting down, two sources familiar with the matter told TechCrunch, following its inability to raise fresh capital.

The startup told employees Tuesday evening that it will be shutting down on Wednesday, according to the sources and slides presented to them. The startup was attempting to put together a new round as recently as last week but “multiple” investors told the firm that it will take them at least two months to wire the money, said one of the slides, which was obtained by TechCrunch.

“Other investors 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, as well as sports goods from the Airlift website or app and have it delivered to them in 30 minutes.

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.

Update: Airlift founder Usman Gul confirmed the development to TechCrunch and provided with notes detailing the events of recent months.

Airlift was attempting to raise a new round via SAFE at $500 million valuation earlier this year, according to a source with direct knowledge of the event.

The startup’s demise could curtail the local ecosystem’s enthusiasm. When it raised its Series B round, Pakistan’s then Prime Minister Imran Khan publicly congratulated the startup on its progress. “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.

The startup says it will complete severance payments to employees in the next four to eight weeks and clear due payments to suppliers and stakeholders. “Teammates are not required to come to work beyond today — access revoke will run byu 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. In a note to staff in May this year, obtained by TechCrunch, Gul warned that the market conditions had suddenly taken the turn for the worse and Airlift needed to be “extremely judicious in how capital is deployed and managed” and put new hirings on freeze.

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.

“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.”

“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.