Posted Sep 30, 2022, 9:15 AM
This is a first for the young Egyptian entrepreneurial ecosystem, more accustomed to praise for its exponential development in recent years. One of its successful start-ups, Capiter, has been going through an unprecedented crisis since September, pitting its two co-founders against their creditors and the board of directors.
The affair broke out with the announcement at the beginning of September of the surprise eviction by the board of the two co-founders, Mahmoud and Ahmed Nouh, respectively CEO and COO. The Nouh brothers failed in “their fiduciary duties” and did not report in person to the board and shareholders “during a due diligence meeting in view of a potential merger”, investors succinctly justified in a press release.
A failed fundraiser
Negotiations with potential buyers had been underway for several months, including a Saudi company, several employees reported to “Echos”. The conditions for the failure of the talks remain unclear. Interviewed during a primetime television broadcast, Mahmoud Nouh admitted to being in Dubai, where the financial headquarters of the start-up are located while operations are carried out from Egypt, but claims to have always remained in contact with administrators.
Among the best capitalized start-ups in Egypt, Capiter had been looking for new funding for many months. Its CEO said in March that it wanted to raise an additional $75 million. A funding round in September 2021 had enabled it to land $33 million in Series A, in particular from international funds Quona Capital and MSA Capital. However, the lifting did not succeed, in a context of global investment slowdown.
A drying up of funds which financially strangled Capiter. Launched in 2020, the digital platform allows small grocery stores and supermarkets to stock up on consumer goods and electronic products, while benefiting from a delivery service and split payment solutions. “The working capital requirements for this type of business model are very high,” analyzes Aly El Shalakany, head of the Cairo Angels Syndicate Fund.
Unnecessary recruiting?
Especially since the start-up aimed to triple its turnover in 2022, at the time of nearly 500 million dollars, according to the local newspaper Al Borsa. “The founders burned their cash to support their growth ambitions,” denounces an employee who prefers not to be quoted. In particular, he mentions an inefficient strategy of subsidizing prices and unnecessary recruitment. Moreover, in May, the start-up which has more than a thousand employees, began to lay off.
At the end of the summer, the entrepreneurs find themselves unable to pay part of the wages and repay their creditors. Threats and complaints filed against them in Egypt then push them to fly hastily to Dubai, according to several employees.
Capiter’s future is very uncertain today. While the board has named an interim CEO and says it is continuing negotiations with investors, the start-up’s website is no longer available and several employees say they no longer report to work.
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