Cheetay mulling shut down, Dastgyr, others look towards layoffs as startups go through another purge  

Facing continuing uncertainty and a serious decline in funding, a number of Pakistani startups are either planning to shut down operations or undertake massive layoffs. 

Chief among those facing the heat are delivery service startup Cheetay, B2B startup Dastgyr, the Electronic Monetary Institute (EMI) known as YAP, and fintech company Paymob. 

Of these four prominent startups Cheetay, according to a source close to the founders, is on the brink of shutting down. The rest are all downsizing significantly with some cutting up to 85% of staff members loose. 

Cheetay to shut down permanently

Cheetay is a popular startup that was co-founded by brothers Ahmad Khan and Majid Khan in 2015 as an online food delivery platform. Cheetay was essentially a competitor to FoodPanda in the food delivery space but also launched a grocery delivery arm at the beginning of the pandemic, dropshipping grocery items from physical stores to the customers. From dropshipping, it moved on to a quick commerce model, setting up dark stores to do deliveries swiftly. 

Back in April 2021, Jabberwock Ventures, the parent company of Cheetay Logistics and Swyft Delivery Solutions, reportedly secured nearly $20 million in its Series-B funding round. Moreover, market rumours suggested Cheetay Logistics raised up to $25 million in Series-B. Sources had informed Profit that the round was actually just under $20 million, raised by Jabberwock Ventures, and not Cheetay or Swyft alone. The funds were likely to be used for both startups’ operations. 

Nearly three years later, Cheetay is facing an unfortunately tough decision and is gearing up for a permanent closure. After letting go off half of its staff late last year, high ranking sources at Cheetay confirmed that the company was planning to shut down and a formal statement confirming the news is expected soon. “As a business, it doesn’t make sense anymore,” said an official at Cheetay, requesting anonymity. 

What the official says is because quick commerce has a high-burn business model and there isn’t enough demand for an immediate grocery service. Troubles would have compounded for Cheetay in the current high-inflation environment of Pakistan and global dearth of risk capital and need for sustainability in businesses. For these reasons, Airlift had announced a shutdown in June 2022 despite raising an $85 million round. 

On the other hand, the other business of being an aggregator for restaurants would easily succumb to foodpanda’s mammoth presence and warchest funded by DeliveryHero.

Cheetay had earlier shut its food delivery operations and was only operational as an aggregator for restaurants. Now, they would be shutting down all operations including the quick commerce business. 

Dastgyr in need of a helping hand

In other similar news, B2B eCommerce marketplace Dastgyr Technologies, a major competitor of Bazaar, Retailo and the already collapsed Jugnu, is also on the verge of collapse. The startup slashed its workforce of over 500 people by 50%-60%, according to an employee of the company. 

In a company-wide email seen by Profit, co-founder  Muhammad Owais Qureshi said, “Today, we have had to make a very difficult decision to reduce our team.” In a melancholic tone, Qureshi highlighted how Dastgyr, a company that resonates with “helping and supporting” is faced with a tough situation, where it is unable to help its very own team against rising costs of operations. 

According to sources, Dastgyr had already let go of almost all of its warehouse staff before the new year, however, 2024 brought misfortune upon half of the white collar workforce, as well. Qureshi, in his email quoted “global and local political and financial climate” and an “unforeseen economic crisis” as the reasons for its mass layoffs. Information gathered by Profit reveals that along with shares being bought back by the company, the co-founder’s email also included details regarding the severance package, which is to be worth two months of the employees’ salaries. 

Sources have said that the underlying fundamentals are highly unstable, leading to massive cash burn. B2B startups at their core not only stock inventory but also deliver it to neighbourhood convenience stores, just like distributors. Their marketplace is, however, discount driven in a market where there is competition from not only distributors and wholesale dealers but also other very well-funded startups. Bazaar for instance had raised $70 million in March of 2022. This ultimately results in high costs while margins are not great, leading to an unsustainable and unfundable model. 

Profit reached out to the co-founders of Dastgyr to get more details regarding the downsizing, however, all we got was radio silence from the other end. 

Dastgyr has raised over $40 million in funding since its inception. In the mid of 2022, it raised $37 million and its round was joined by Veon, the parent company of Jazz. It had earlier raised $3.5 million in seed round and $500,000 in an angel round. 

Going YAP in flames

In Pakistan’s fintech scene, a casualty on the cards could be YAP, which is an up and coming electronic money institution (EMI) that has now laid off almost the entirety of its workforce of about 50 people in Pakistan, credible sources that have worked with YAP told Profit. They say further that only two people are employed by the company in Pakistan, which is clearly not enough to build a fintech company. 

This also leaves YAP’s in-principle approval for the EMI license in the balance, which has not yet been revoked by the central bank but could reportedly be in trouble. Informed sources tell Profit that despite about two years of being granted the in-principle approval, YAP management has yet been unable to fulfil the obligation set forth by the central bank for minimum capital requirement. 

Despite the layoffs and failing to meet central bank’s requirements, YAP has not withdrawn its application for the EMI license like some of the other EMIs such as Careem and Checkout that withdrew from the race of building new generation fintech companies. 

Instead, the UAE-based company has resorted to laying off almost all staff and leaving unpaid bills. YAP has not yet responded to questions about its plans for Pakistan including reasons for layoff. 

Matters, for obvious reasons, look dire at YAP and if it has planned to withdraw from Pakistan, it would most likely be a first for a tech company from the Middle East that would have left from Pakistan so bizarrely and unceremoniously. The fintech company was planning to capitalise on the sizable chunk of payments sent to Pakistan as remittances from Middle Eastern countries where it has operations, providing overseas Pakistanis in these countries the ability to transfer remittances back to families in Pakistan. In 2023 alone, remittances from Saudi Arabia were $6.4 billion and $4.6 billion from UAE, making these countries top remittance contributors to Pakistan. YAP has operations in both Saudi Arabia and the UAE. At the same time, YAP is well-funded, having raised $41 million in July 2022. 

Rightsizing at Paymob

Lastly, just like Dastgyr, financial technology company Paymob has also belatedly realised that they scaled their workforce too fast too soon and are now aggressively rightsizing its over 90-people workforce, leaving over 35%-50% of its employees jobless. Paymob is a payments processor that provides a gateway for online payments. 

According to industry sources and former employees of the company, there was no mention or even consideration of any downsizing before December 2023, however as investment dries up, the company is forced to make some difficult decisions. Having a leaner structure is the most prominent one.

Despite being a well-funded startup, it might not be one that has made its investors too happy. The company has scaled but has still been unable to achieve sustainability and positive unit economics. The current downsizing points towards necessary cost-cutting but not an exit from the Pakistani market. 

“Ideally, the first resort should be to increase revenues and achieve profitability through sustainable means, which is what the investors also desire,” said a source that has worked with the company. “Instead, Paymob went through a rapid recruitment phase and later, quite belatedly realised that it did not need so much extra dead weight that forced them to make the current decision to cut costs at the expense of its employees.” 

Paymob has been expanding in multiple regions, the most promising markets being ones in the Middle East, especially the UAE and Oman. It is speculated that the restructuring in Pakistan is a direct consequence of the company’s shifting regional focus to the Middle East. Nevertheless, when Profit sought verification on this matter, there was no response from executive vice president Omar El Gammal.