Last September, Egyptian startup Kapiter raised $33 million in Series A funding to compete in the country’s growing B2B e-commerce and retail space. Fast forward a year later, the startup has laid off several employees and now its CEO and COO have been relieved of their duties over allegations of misappropriation of funds.
Here’s what we know so far. Between June and July, several former employees of Egyptian startups, including Kapiter, wrote posts about layoffs at their respective companies, although the employers did not address them publicly. Other companies include OPay Egypt, elmenus, ExpandCart and Brimore.
Capitar laid off at least 100 employees in those two months, sources told Technology Flow. Others described the company as having a poorly managed and unstructured office and the difficulty of onboarding merchants to its platform while simultaneously running out of money. As of August, the company had just a month of runway, they said. Technology Flow reached out to Captain at the time but did not receive a response.
As a result, capital investors search for potential buyers to absorb a struggling company in the form of an acquisition or merger. This information was further confirmed in an email obtained by Technology Flow, where the board of captains – stating that Mahmoud Nouh and Ahmed Nouh had left Egypt and their current whereabouts are unknown – said the executives did not fulfill their responsibilities and duties by appearing before the board representatives. And investors should complete due diligence for a possible merger this week. A summary of that email read as follows:
Today the board of directors of the parent holding company of Capiter Egypt LLC, a Cairo-based B2B e-commerce startup, approved a resolution to remove Mahmoud and Ahmed Nouh from their positions as CEO and COO, effective immediately. Further, the board has initiated an investigation against Mahmood Nauh and Ahmed Nauh, alleging that both have misappropriated funds from the company, breached fiduciary duties and committed fraud. Mahmud and Ahmad Noah left Egypt and their current location is unknown. The move comes a week after board representatives while conducting interviews with team members in Cairo and shareholders conducting on-site due diligence for a potential merger discovered the misappropriated funds.
Prior to Capiter, Mahmoud was the co-founder and COO of Egypt-born and Dubai-based ride-hailing company SWVL (The Firm, The Gone Firm). Public by SPAC agreement Last year, it laid off 32% of its staff this May). Along with his brother Ahmed, he launched Capiter in 2020 as an FMCG platform that allows small and medium-sized retailers to order inventory, arrange delivery and access financing to pay for goods. Some of the competitors include MaxAB and Cartona in Egypt and Wasoko, Tradedepot and Chari in Africa.
When the founders spoke to Technology Flow last September, Capitar’s platform had 50,000 merchants and 1,000 sellers with more than 6,000 SKUs. In the interview, Capiter said it is on track to reach $1 billion in annual revenue this year. Like many startups in Africa and around the world, Capitar hired aggressively last year to meet its goals.
However, 2022 took an unexpected turn for many tech startups dealing with uncertainty stemming from rising interest rates and other factors that have a trickle-down effect on venture capital. News of layoffs, flat rounds and cutbacks from startups in various sectors — especially those that have raised a lot of money in the last 18-24 months, such as Wave, 54Gene, Cuda and Marketforce — is more widespread even as the continent boasts. Better VC total by the end of Q2 2022 compared to Q2 2021.
B2B e-commerce platforms operate either asset-light or inventory-heavy models. Capiter, which uses a hybrid model, needs more capital and it’s unclear how the company completed its funding and is already looking to sell after raising millions from Quona Capital, MSA Capital, Shorooq Partners, Savola and others last year. Capital’s investors declined to comment on the matter but released an emailed statement.
“The board and shareholders have launched an internal investigation, so are not at liberty to comment on the news or allegations circulating on social media at this time. The Board and stakeholders are working closely with relevant stakeholders, legal and HR teams as well as legal authorities for an external inquiry into the matter.
Meanwhile, the initial leaked board statement said Capiter’s management team — “some of whom recently resigned in protest at perceived mismanagement of the Noahs” — is trying to steady the company’s ship. Majid El Ghazouli, the company’s chief financial officer, will serve as interim CEO while “remaining leadership works to stabilize the situation and continue conversations with potential buyers interested in Capitar’s assets.” Mahmood did not respond to this.
This is an evolving story…