Careem's Road to Acquisition: 5 Things to Learn from their Story

The end of an era. Careem's Chapter 2. Uber's pre-IPO buzzer shot.

Whatever you want to call it, Careem had a phenomenal ride on the way to it's acquisition. The $3.1 Billion pay-out was the biggest that the Middle East has seen till now in the tech startup arena and it is most likely going to dial up the investor interest in the region. 

There were mixed reactions when the news broke out. Ecstasy among employees and founders. Celebrations among local technocrats. Excitement and buzz in the news and among digital publishers. Skepticism among certain experts. Mourning among loyalists. Confusion among Uber-haters. It's safe to say the news stirred the pot quite a bit and it will remain a major milestone in the local startup ecosystem. 

Sure, people will point to Souq as the pioneer of that trend and while that statement might somewhat be true, the size of this deal and the fact Careem had Uber on the ropes in terms of product & local market share makes this a transaction of a different significance. To give a Marvel reference, Uber needed Careem to complete their infinity gauntlet much like Facebook needed Whatsapp and Instagram. And while Amazon dished out over half a billion dollars for Souq, it did it to establish a remote outpost in the Middle East "out of convenience".

 Ouch. I know. That's a bit harsh. I blame the Harvey Spectre in me for my "indescretion".

Questioning the acquisition itself would be na?ve, especially for me, who isn't too privy with their PnL. The top execs at Careem are no pushovers and I'm sure the business decision made sense at the time. Word on the street was that, although Careem was doing decent revenue numbers, it was also bleeding fast on expenses and costs. If they had taken a pass on this deal (Snapchat-to-Facebook style), they wouldn't have much firepower left in their belly to keep the existential threat at bay.

Also, their investors and stakeholders saw the light at the end of the tunnel and wanted to take it…before sunset arrived.

I digress.

As a big fan of Careem over the years, there is a lot to learn from the Dubai-based startup and their road to acquisition. It's a classic story of how a modest startup made it big by making the right moves at the right times and made themselves practically irresistible as an acquisition target.

1.Innovating Smartly

To avoid being stomped out of the ride-hailing race, Careem had to bring a compelling unique value proposition to the table. And not just one.

Scheduled rides. Cash payments. Careem KIDS. "Captains" not "drivers". Loyalty programs. Prepaid bundles. Careem worked on their product and differentiated themselves enough to make them stand out from their competition.

They didn't just copy Uber like a cheap "me-too" and hope for the best. They micro-disrupted the model to make it better adapt to the MENA market. That spirit of innovation was crucial for their survival.

Lesson: In a competitive market, create a clear reason why consumers should migrate to you. Better make that reason be a "better product".

2.Targeting the Pain Points left by the Competition

Often, new ventures get caught into a vortex of buzzwords and advertise that under the banner of "product innovation". Sadly, If your product isn't solving an actual problem, then your value proposition is nothing more than a novelty or dare I say, a neat magic trick.

It's like a new e-commerce company entering the market claiming their value proposition is that their tech is based on blockchain. How would the audience react? They'll be met with radio silence. Why? Because they aren't telling the consumer how that's helping them.

However, Careem's innovations were well-targeted at filling gaps left by Uber. They managed to localize the service in a way that it specifically addressed the needs of the region. From the branding ("Yalla, let's go") to their tailored service offerings, they were hitting the right chords.

Consumers needed a way to schedule their rides ahead of time to guarantee a car on their doorstep on the way to a flight, doctor appointment or interview. Careem gave them scheduled rides.

The Saudi and Pakistan market were still averse to plastic money and needed another payment mechanism. Careem gave them cash payments.

Mothers needed to get around with their infants and were rendered immobile without car seats in place. Careem got them Careem KIDS.

They solved an actual consumer problem and did it at scale.

Lesson: Solve a significant problem that exists. OR solve it better than anyone else. Don't focus efforts on things that don't need fixing.

3. Re-fuelling at the Right Times

 What Careem did well was:

(a) identify early on that they needed capital to grow and ensure their survival. There was no way they were going to bootstrap their way into unicorn land.

(b) made timely cash pit stops to keep their engine going before it ran out of gas.

This was crucial. Their fund-raising prowess kept them alive. Take a look at the consistency of the duration between their investment rounds. On average, for their first 4 rounds, they were hauling in cash every 13 months.

Of course, this is easier said than done. I mean who wouldn't want to keep cash rolling into their Scrooge vault. Careem somehow configured themselves to meticulously plan out their KPI milestones and work with desperate urgency to constantly earn investor trust. Plus, they made the right networking moves and connections.

Not only that, check out how the investment amounts grew. Every subsequent round was a (as cheesy as this might sound) Burj Khalifa to the previous one.

Lesson: Identify early what you need to survive financially. Align all your goals and company to achieve those milestones with a sense of urgency. 

4.Creating a Culture Obsessed with the Same Goal

 "Make no mistake. This is not a 9 to 5 job. We are on a mission."

These are the words that one of the founding members of Careem told to one of their early recruits (an acquaintance of mine). This mission statement was not a formality blurb prepared to fill page 3 of an employee handbook. It was hammered into the very fiber of the culture. 

Their dreams of becoming a unicorn was resonated throughout their ranks. Top talent took pay-cuts to join their company. I talked to some of their their unit managers back in the day and they would talk so zealously about their job that you would think they were hypnotized. Their HR was relentless (some would use the word "ruthless").

Of course, I'm not claiming they had a "Disneyland" culture. The Glassdoor reviews are mixed at best (aren't they always?) and the point is, Careem managed to chase their goals because they found a way to have key players in the company whole-heartedly subscribe to the vision and put that on priority over everything else, sometimes even their personal lives.

Careem didn't earn it's place through mere luck. It took hard work and sacrifice.

Lesson: Chart out an ambitious dream for the company and get everyone to buy into it. Make it their north star. Align the entire company (especially rewards, incentives, bonuses, stocks) towards that goal.

5.Keeping Stakeholders Close & Happy

 There are three key stakeholders that factored into Careem's success:

1. Driver Base (supply)
2. Employees
3. Governments of markets they operated in

Careem knew early on that if they were to migrate (or "steal") a driver base from Uber, they needed to have a good story. They adopted the "Respect" and "Humane treatment" mantra (something Uber notoriously didn't do well with at the time) and managed to ensure a constant stream of driver supply.

They came up with the "Captain" monicker, were the first ones to introduce passenger ratings in an effort to give drivers a voice and spent a lot of effort in training (which I feel didn't translate that well when you talk about the Pakistani market but that's a story for another time).

This is not to say that Careem were angelic to drivers. Sure, there are sad anecdotes, policy controversies and harsh rules that would indicate otherwise. However, despite all that, Careem still managed to gravitate drivers consistently towards themselves.

Careem also managed to grab onto the right talent at the right time. They compiled bright minds from global multinationals and some of the best schools. Their outsourcing strategy (engineering base in Pakistan) was also a smart economical move. Of course, they needed point 3 to afford all this human capital.

Finally, winning government support was also a key asset. Initially, they struggled in Dubai when their drivers were randomly slapped fines in rush hours (Uber faced this too). They knew they couldn't afford Uber's bravado to go cowboy against the establishment, so they planned to play "nice". Playing nice meant also meant giving governments some of the proceeds, but that was a necessary "tax" for them to stay in the "good books". This way they had one less wall to break down.

Lesson: Know very well who your key stakeholders are and what makes your product click. Do whatever it takes to invest in them, keep them close and make them happy.

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Careem might be out to start another chapter but for those still writing Page 1, it might be worth taking a few note from their inspiring story.