Riding high on growth, Pakistan’s mobility, commerce and payments startup Bykea has announced completing a $10 million raise from existing investors which will help the startup go through a turbulent downturn in startup investments.
Bykea’s existing investors include the Netherlands-based Prosus Ventures, MEVP, Tharros, and Pakistan’s Sarmayacar and Ithaca Capital. Bykea earlier raised a $13 million Series-B round in September, 2021, after a $5.7 million Series-A raise in April 2019, bringing the total raised by the startup to $28.7 million.
Initially set out to raise a substantial funding round (think $50 million), the fundraising momentum hit a snag after the stock market crash in the US led to investors diverting investments to safer avenues.
According to numbers seen by Profit, Bykea has grown 5.7x since the pandemic, and serves an impressive customer base of 5 million in the mobility, commerce and payments verticals. The mobility vertical of the business includes ride hailing service, commerce includes deliveries whereas under payments, Bykea offers cash collection services.
Despite its impressive growth, Bykea announced raised $10 million from existing investors, as funds across the world seek better unit economics and a clear path to profitability, minimizing any risk along the way. “Investments into consumer facing startups is falling because it requires hefty amounts to educate the consumers about the service,” says Muneeb Maayr, explaining the fall in global VC investments and the Bykea round. “In bearish markets, investors gravitate to investments which do not require such spends, for instance in B2B segments.”
Since Bykea is a consumer-focused startup, it requires hefty sums to acquire new customers, which investors are wary of right now. And Bykea is a growth stage startup, heading to Series-C fundraise.
“All the growth funds had started to pass when the stock market crashed. Growth funds are high ticket funders like Tiger Global, which can write $10-15 million checks in one go,” says Muneeb, explaining why fundraising is difficult for growth stage startups like Bykea.
The $10 million funds are consequently going to provide Bykea the runway necessary to see through the downturn peacefully, to the time that funding picks up again which is when Bykea would be raising another round, and quite possibly a very large one.
“The good news is that the existing investors believe in the business and are ready to support,” says Muneeb.
Seeking profitability in Pakistan is a pain because of macroeconomic conditions. The surge in inflation increases costs for startups and hits consumer purchasing power, directly impacting the prospects of growth, as well as profitability.
At Bykea, Muneeb tells us that they are at a point where unit economics is positive after paying for marketing and incentives but would require some time before Bykea becomes EBITDA profitable. EBITDA helps to show the operating performance of a company before accounting expenses like depreciation are taking out of operating income, and provides a clear value of the company to potential investors and buyers.
Bykea’s focus following the round would be to deploy funds in areas of capital efficiency, and divert attention towards segments of the business which bleed less money. “So the focus is going to be on the areas of expertise and where there is volume. This is not the time to be throwing money to build awareness for growth,” Muneeb tells Profit.
In its press statement, Bykea said that the company plans to use the capital to enhance and extend its leading position in mobility and fulfillment services for consumers and SMEs, including food and e-commerce deliveries, as well as leveraging its fleet for unique fintech use cases like cash on delivery (COD), cash-pickup services, or verification services.