How Airlift raised $100 million, then ran out of runway
The Lahore startup began by selling bus seats, switched to 30 minute groceries during the pandemic, and announced its closure eleven months after Pakistan's biggest funding round.
Airlift began as an app for booking a seat on a bus and ended as one of the best known startup failures in Pakistan. In three years it raised more than $100 million, and on 12 July 2022 it announced that it was closing, eleven months after it said it had closed the largest funding round Pakistani tech had seen. It found customers fast by paying for them, and that kept it dependent on a new cheque every few months.
Buses by app in Lahore and Karachi
Usman Gul, who had worked at DoorDash in the United States before moving to Pakistan, founded Airlift in 2019 with Ahmed Ayub, Awaab Khaakwany, Meher Farrukh, Muhammad Owais and Zohaib Ali. The idea was a decentralised mass transit service. Airlift rented privately owned buses and vans and ran them on fixed routes, stops and times in Lahore and Karachi. Riders reserved a seat in the app, tracked the bus in real time and paid by card or in cash on boarding.
New users got five free rides. DoorDash chief executive Tony Xu was among the first angel investors. In August 2019, about five months after launch, Airlift closed a $2.2 million seed round co led by Indus Valley Capital and Fatima Gobi Ventures. In October it closed a $12 million Series A led by San Francisco’s First Round Capital, announced in early November, the largest Series A a Pakistani startup had raised, taking its total to $14.1 million.
Paying for growth
Bookings grew fast. According to figures Profit obtained, Airlift passed 10,000 bus bookings a day in October 2019 and 33,000 a day by January 2020. The growth was expensive. The Egyptian rival Swvl had entered Pakistan in July 2019, and the two companies kept raising what they paid bus owners. In January 2020 Airlift spent $1.54 million, of which $1.12 million went on buses and their upkeep. An update to investors that month said its cash would last until mid June.
The pandemic ended the question. Airlift suspended bus service in March 2020, and the core transit business stayed shelved. The company had a little over $5 million in the bank at the start of that month.
Groceries in 30 minutes
Airlift moved into groceries. On 1 July 2020 it announced $10 million in Series A1 funding led by Quiet Capital, with First Round, Fatima Gobi Ventures, Indus Valley Capital and several new funds taking part, and launched Airlift Grocer, a 45 minute delivery service for household essentials. Total funding reached $24.1 million. The promise later tightened to 30 minutes.
The model needed warehouses close to customers, and Airlift bought goods below market rates and passed the savings to shoppers. On 17 August 2021 it announced an $85 million Series B co led by Josh Buckley of Buckley Ventures and podcaster Harry Stebbings of 20VC, with Sam Altman, Biz Stone and Jeffrey Katzenberg among the individual backers. The company said the round valued it at $275 million and that it served eight Pakistani cities. Then Prime Minister Imran Khan congratulated it publicly. Sources told Profit that the cash received was nearer $30 million to $40 million across two Series B rounds, and Airlift did not share documents to settle the point.
“In many ways, Airlift raised the bar of ambition for Pakistani startups in a big way.”
Warehouses faster than demand
After the Series B, Airlift opened warehouses in days rather than weeks. Former employees said Lahore went to 23 warehouses in three months, each holding 20 to 30 million in inventory, and that the company had around 80 across Pakistan. One Islamabad warehouse cost about Rs1.7 million a month in rent and Rs1 million in electricity. A former warehouse manager asked why an area of 15,000 people needed three.
Stock control did not keep pace. Workers described glitches in automated ordering that sent thousands of kilograms of lentils to Hyderabad and thousands of Coke bottles to Lahore. Small retailers bought Airlift’s discounted goods and resold them in their own shops, which skewed the company’s demand data. Gul said pilferage ran at 1.5 to 2 percent of turnover, within industry norms, and that the company ran more than 30 cameras in each warehouse.
One marketing hire started on Rs150,000 a month, with a MacBook and a $10,000 equity option, in a country where corporate salaries average under Rs100,000. Airlift had also launched in Cape Town, Johannesburg and Pretoria. Some staff doubted the company would ever make money, but Gul said in June 2022 that Airlift was “remarkably closer to profitability”.
The round that did not close
By May 2022 the funding market had turned. Airlift announced a strategic realignment, cut 31 percent of its staff, closed South Africa and reduced its cities from eight to three. It had been trying to raise a new round by SAFE at a $500 million valuation, according to a person with direct knowledge. On 5 July it sent final documents to investors, but the lead backer delayed sending money so that other investors could come in alongside it, and others asked for two to three months to wire funds, Gul said.
On the evening of 12 July 2022 Airlift told its staff that it would cease operations the next day. In its statement the company said the global recession and the downturn in capital markets had made the shutdown inevitable, and that several investors had grown uncertain about when they could wire money. Around 300 corporate staff and thousands of warehouse and delivery workers lost their jobs. The company promised pay for July and August to employees and said it would work with suppliers on unpaid dues.
“Airlift was not prepared for the shift in sentiment in capital markets.”
Gul called not prioritising a multi stage institutional investor, able to write larger cheques, one of the company’s biggest mistakes. In late August 2022 he was at the Lahore headquarters with a few former employees, dismantling what was left, while warehouse stock was handed to creditors.
