PakWheels: The road to a $1 billion valuation

The automobiles market in Pakistan has grown exponentially over the last ten to fifteen years. Growing competition between the big three indigenous players (Suzuki, Toyota and Honda), a used imported car market with more variety than ever before and the introduction of German brands such as Audi means there is a car out there for everyone.
That growth along with increasing internet penetration created a gap for an online automobile trading portal. PakWheels.com sufficiently filled that gap and then some with other automotive related online services.
And in the process It’s gotten powerful too. It’s more like a kingmaker in the automobile industry, with big car manufacturers like Honda and Toyota conceding to the power it holds over their customers. Why, one may ask? Because, it is the first and largest forum/blog (amongst other things) on automobiles in Pakistan and people naturally come to PakWheels to discuss matters related to automobiles.
Recall the reviews that rolled out after Honda launched its much-awaited 10th Generation Honda Civic 2016. People complained about the interior of the car and welding marks on the front doors of the newly launched Civic. And where was all this talk taking place? PakWheels! It generated loads of bad publicity for Honda.

Some accused PakWheels of being biased towards Honda, others agreed and contributed to the assertions of low quality made therein. Whatever the case, Honda did subsequently accept the flaws and sought to remove them. It goes to show that PakWheels has an immense power to influence the perception of its users through its forums; evidenced by the fact that Toyota got its latest Fortuner 2017 reviewed by none other than the co-founder and Chairman of PakWheels, Suneel Sarfraz Munj. Unlike the Honda Civic review, Munj was all praises for the new Fortuner which he feels addresses most if not all of the problems in the previous model.
What initially began as a forum and a community centre for car enthusiasts back in 2003 is now the largest online classifieds portal for automobiles in Pakistan. Last year alone, the portal attracted over 25 million unique visitors to its platform which makes it one of the most visited online destination in Pakistan.
“It wasn’t a commercial venture when we started PakWheels. It was just a place where likeminded people could get together,” says Suneel Sarfraz Munj, co-founder and Chairman of PakWheels.
At a time when social networking websites like (the now defunct) Orkut and Facebook had not taken root, PakWheels served as a platform for car enthusiasts who slowly started developing a level of trust among each other. That’s when the buying and selling at PakWheels started taking place.
Sensing an opportunity, the founders officially launched it as an automobiles classifieds portal in 2005, while still retaining the forum separately.
Up until 2014, the year in which Pak eVentures (the holding company of PakWheels) received a funding of $ 3.5 million by Frontier Digital Ventures (FDV), PakWheels was funded by the very own pockets of its co-founders. Munj says that the sole reason for the forum-cum-portal’s survival and success was the lack of financial dependence the co-founders placed on the income generated from PakWheels prior to the funding.

Munj did not share the valuation but according to some online sources, PakWheels was valued at over Rs100 crore post first round of investment.
“It was the largest disclosed investment in any tech startup at that point and led to the opening of flood gate of investment for other local startups” says Munj.
FDV is a venture capital firm based out of Kuala Lampur, Malaysia, and aims to become the world leader in online classifieds businesses in the frontier markets. PakWheels Private Limited was incorporated in Singapore in 2014. Citing the example of other tech startups which have received foreign funding, such as Zameen.com and Rozee.pk, Munj says that the foreign investors’ mindset about investing in Pakistan is changing.

“Our kitchens weren’t dependent on this venture. I believe that we succeeded because it was not our primary business; a person is more likely to make hasty decisions under pressure in that case,” says Munj, while adding that a similar mistake was made by Carmudi when they entered the market.
“The head of Carmudi is a class fellow of mine and he called me, saying that we should partner up otherwise the deep pockets of Rocket Internet (a German Internet company) would devour PakWheels,” says Munj. His reply had been swift, “Rocket Internet will not pay you if you don’t earn them something. We managed to do it for nine years and we’ll continue doing it; now one can see where Carmudi is vis-a-vis PakWheels”.
Munj and Raza Saeed (co-founder and CEO PakWheels) had other businesses that supported their families. Saeed owns one of the fastest growing software houses in the country, named: Confiz Solutions. It has offices in Pakistan, USA, Estonia. It was at Confiz Solutions that PakWheels was essentially born as a classifieds’ portal.

Munj, on the other hand, has also had his share of entrepreneurial experiences. He owned a retail gift shop off the MM Alam road by the name of 18 and a franchise of Illusions, another retail shop offering gaming consoles etc. He also has a family business. Munj prioritized PakWheels in 2014 after the company raised a funding from FDV.
“I was more of an absentee landlord at PakWheels before 2014, frankly speaking; Raza was managing everything here,” says Munj, adding that he never visited the office more than once a month during those days. “Anybody who wanted my help used to come to me; I hardly ever visited the office.”
However, there hasn’t been a single day when he wasn’t at the office at nine pm since 2014 when the realization struck that he could not handle so many businesses at one time.

Now, the management likes to use the term automotives’ portal to identify itself with. It’s true that the terms automobiles and automotives are usually used interchangeably for cars and vehicles, but it’s important to understand the underlying difference to figure out how the company is positioning and branding itself.
Automobiles is generally used for cars, bikes and scooters, but literally refers to anything that has an engine (auto) and can move itself (mobilis). Automotives is used for anything related to automobiles. Thus, a clutch is not an automobile but an automotive part. The term automotive encompasses not just all the cars and passenger vehicles but also the sellers, manufacturers, marketers, designers, and even repairing stations. That’s what PakWheels want to brand itself as: a one-stop location for all your automotive wants and woes.
“It is the responsibility of every company which is funded by a foreign entity to show Pakistan differently from what is known as among the international investors, since we represent Pakistan,” says Munj.
The question that arises then is what keeps the investor motivated and happy about a company operating in a troubled market like Pakistan. Even in this area the company seems to have done well. Pakwheels has achieved the revenue targets set down by the investor by doubling its revenues every year during the past three years. So the investor is not only happy, but also willing to pour in more investment in the company. And that is what PakWheels is looking for – another round of funding in 2017.
“Whether you’re selling meat, or veggies, or cars, KPIs (Key Performance Indicators) for any business primarily boil down to revenue growth and eventually profitability,” Munj says, referring to the growth rate target set by FDV.

Sustainable growth and the trick to achieving it.

“All the tech ventures are valued at their ability or potential to earn revenue, not the revenue that they earn currently,” says Munj.
Trying to achieve a 100 per cent growth in revenue may seem an easy task when you’re being funded. But as time goes along, taking the revenue from 5 million dollars to 10 million dollars, and then doubling it to 20 million dollars the next year becomes an increasingly onerous task to execute.
There’s only one way to do it, and that is by introducing, developing, and fostering new revenue streams which are sustainable in the long run.
PakWheels has been achieving close to 100 per cent increase in revenue annually since the last three years. As for profitability, the other most important KPI besides revenue, PakWheels aims to book its first profit by 2020.
“We’re hoping to break-even in 2018, but we will definitely do it by 2020,” says Munj.
PakWheels has consistently added new products to its portfolio in a bid to create sustainable revenue streams which can help achieve the sales target, and eventually the profitability target in the future.
To help buyers make informed decisions, PakWheels launched CarSure, Pakistan’s first used car inspection service.
“CarSure is one such service which is growing very fast and is likely to take over the current highest revenue-generating stream Feature Ads, very soon,” Munj says refusing to disclose the exact percentage of feature ads in its overall revenue.
CarSure team inspects a used car on a 200+ point checklist using latest tools and technologies and provides an inspection report which is independent and free of bias. The team inspects key indicators of condition in a car, like the body paint, engine, suspension, transmission and interior etc.

Majority of the ads listed on the portal are ordinary ads which are posted for free, while Feature ads are paid for. These ads are marked as ‘Featured’ and remain in the limelight for a longer duration (how much), thus generating more leads (phone calls by potential buyers) for the advertiser.
When it comes to car selling, PakWheels.com generates majority of its revenue from classified advertising solutions offered to private sellers and used car dealers. Sellers can utilize different paid products like “Featured Ads” to highlight their vehicles throughout the platform and receive more inquiries resulting in faster sales cycle.
“We believe that it is our responsibility to reduce the information asymmetry of a buyer in this industry and that is why we have introduced services like CarSure and Price Calculator,” says Munj.
The used car Price Calculator tool is based on statistical modeling and machine learning technologies which provide the user with accurate information regarding the price of a car having a similar condition (mileage, colour etc) and model sold in the market and the highest, lowest and average price at which it has been traded in the market.
Another newly launched revenue stream is the auto parts store, which promises to provide the car owners with reliable parts and accessories for the car’s regular upkeep and maintenance.
Auto Shows
Since 2011, PakWheels has conducted six Auto Shows in Lahore and other cities of Pakistan. These auto shows are meant to cater to an even greater target market than just car enthusiasts. It is a great marketing strategy for the company. Entire families, with little children who are amused by the roaring engines of exotic sports cars attend these shows. Over a 100,000 people attended the last auto show in Karachi at the end of 2016.
PakWheels has conducted numerous awareness campaigns against one-wheeling in collaboration with the local traffic police authorities. It also has a partnership with Shaukat Khanum Memorial Cancer Hospital & Research Centre to create awareness about cancer at all its auto shows.

Future plans
“There are still so many things that need to be addressed here in Pakistan that we cannot think of expanding abroad. We must solve all automotive industry related problems for customers here in Pakistan,” says Munj when asked if the company plans to extend operations to regional countries like India and Bangladesh.
“Even today, very few people can buy a car on their own despite the existence of PakWheels classifieds, inspection and price calculator” says Munj while talking about future plans.
Globally, classified portals are moving from simple classified advertising to executing the full transaction, and in the process earning a commission which is significantly higher in value compared to the advertising fees charged in pure classifieds model. This makes online buying and selling more convenient for the users as it spares them the time and gives them peace of mind since the onus of ensuring a secure transaction lies with the portal.
The most important thing to the users of this portal is trust, and that is what the company wishes to build and develop. PakWheels’ management claims to have 80 per cent share of the online automobiles classifieds market.
“My aim is to make PakWheels a billion dollar company when valued, and the largest platform in Pakistan for anything and everything to do with automobiles,” says Munj.

With players like OLX, Zameen, Rozee, and others in the market now, the classifieds industry is becoming increasingly competitive. Add to it to the boom in the number of internet users in Pakistan, especially through mobile phones and one comes to realize how rapidly the market dynamics are changing. It has given a huge boost to the online portals’ user-base.
In hindsight, Munj believes that the television advertisement campaign ran by PakWheels in 2015 was something that the company could do without, reason being that the company does not want an advertisement war similar to what Pepsi and Coke indulge in.
“OLX has tried to erect a barrier to entry by excessively advertising on the TV since 2014; and we are trying to outsmart them by not relying on such advertisement,” says Munj, adding that the demand for what PakWheels is offering is so overwhelmingly high that word of mouth is sufficient for raising awareness about the company.