[HN Gopher] What brought down Airlift, Pakistan's first would-be...
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What brought down Airlift, Pakistan's first would-be unicorn
Author : mooreds
Score : 77 points
Date : 2022-09-18 12:43 UTC (10 hours ago)
(HTM) web link (restofworld.org)
(TXT) w3m dump (restofworld.org)
| xani_ wrote:
| > "In many ways, Airlift raised the bar of ambition for Pakistani
| startups in a big way. Our teams at Airlift redefined the
| standard of execution, strategy, building a world-class culture,
| developing a cutting-edge product, raising sizable fundraising
| rounds."
|
| Are they _literally_ bragging about burning money in style ?
|
| If what article was describing is correct about their operation
|
| > In his recent conversation with Rest of World in August, Gul
| remained firm that the company's failures were not the company's
| fault. "Airlift's demise was ultimately the result of an
| unsuccessful fundraise amidst a global recession -- while there
| are broad critiques on things like operations and supply chain,
| the reality is that Airlift had particularly strong operation and
| financial metrics, something that was reflected in our quarterly
| shareholder updates."
|
| That's either investor lie or he's in denial
| bArray wrote:
| > Are they literally bragging about burning money in style ?
|
| Yeah, not something I would be saying after a failed company.
| You would say something that shows you reflected on this and
| realized your mistake.
|
| > That's either investor lie or he's in denial
|
| An obvious lie... That should be a red flag for future
| investors.
|
| Why would investors pull out of a good investment? He's either
| spending money at a rate that doesn't translate to growth or
| he's in denial.
|
| > [..] there are broad critiques on things like operations and
| supply chain [..]
|
| I wouldn't cast these issues 'broad', they were very real and
| important show-stoppers. I would be surprised if there was
| actually supply chain issues for food, considering so many
| other shops in Pakistan clearly have figured it out. Probably
| the biggest issue was 'operations', i.e. spending money like
| it's going out of fashion.
| xani_ wrote:
| Yeah the article pretty much pointed out that they weren't
| spending enough attention on making sure everything works
| efficiently. Like the fact relatively long expiry product
| like bottles of Coke still managed to expire (that kind of
| beverages normally last months to years) looks like some
| massively bad planning.
| baybal2 wrote:
| warinukraine wrote:
| > When asked about the $85 million that Airlift burned through in
| less than a year, Gul insisted that these were the wrong
| questions to ask. Instead, he defended, the right questions were:
| "What enabled Airlift to raise $100 million-plus in three years?
|
| Giving money to people who think the goal is to raise money -
| this is how it ends.
|
| The positive way to look at this is that clueless investors lost
| their money. That's capitalism working as intended.
|
| Anyway found the key quote
|
| > "Everyone [in management] was new, they were these youngsters
| who just stayed in their offices," a lead warehouse manager told
| Rest of World. "Senior management was never in the warehouses and
| they just sat inside and did their meetings on Zoom, not
| bothering to check the issues in the warehouses, leaving the
| burden entirely on the live operations team."
| suoduandao2 wrote:
| No idea why this comment was flagged. It seems a commonsense
| take.
| shagie wrote:
| While this comment looks ok, there could be some system
| effect going on. A quick perusal of the comment history with
| "showdead" set to yes (its in your profile settings) provides
| a different view - especially when one goes all the way to
| the first comment left.
| warinukraine wrote:
| bgun wrote:
| Because it's a low-effort shallow dismissal that basically
| just cherry-picked some quotes from the article and says,
| "this."
| kcplate wrote:
| >Giving money to people who think the goal is to raise money -
| this is how it ends.
|
| This is exactly the message I pulled from this article. The
| mission needs to be the product or service you are offering,
| the pitch to raise capital is to help you get there. This
| seemed to be the exact opposite...raising capital was the
| mission, the product and service was the means used to get
| there.
| PKop wrote:
| >The company had a clear sense of mission -- their goal wasn't
| transport or groceries, but to have an "impact" on the country
|
| Yea that sounds real clear
| ManuelKiessling wrote:
| Well, they crashed hard, so there is your ,,impact"...
| sremani wrote:
| Deep in the article the Investors names are revealed. You can
| find who they are.
|
| Investing $85 million and valuing a company $275 million in an
| economy of $275 billion. I cannot comprehend what the VCs were
| thinking, but if some who is seasoned in VC-land could chime,
| that would be helpful.
| rwmj wrote:
| Did they only sell to Pakistan? If they did or could have sold
| into other markets then the size of the Pakistan economy
| doesn't seem that relevant.
| tptacek wrote:
| Aa the article says, they planned to expand globally, and
| actually did expand into South Africa.
| sremani wrote:
| For an astute investor it matters even if global expansion is
| on cards in the future.
| rwmj wrote:
| I'm not a VC so I don't really know, but it seems that a
| valuation of 0.1% of the size of the economy of Pakistan
| isn't that relevant _if_ the company could have sold into
| even just India or Arab countries, and would be completely
| irrelevant if they could eventually expand worldwide.
| sremani wrote:
| There are no natural advantages for Pakistani firm over
| other when it comes to global expansion. On top of it,
| this is a start-up with almost all operations in
| Pakistan. I am not VC either, but even I know that you
| have to size the market before making a valuation.
|
| If these investors baked in the international expansion
| in valuation, they got what they deserved.
| Someone wrote:
| I'm not seasoned in VC-land, but the fraction of income spent
| on food eaten at home is much higher in Pakistan than in rich
| western countries. It was almost half in 2012, versus about 7%
| in the USA (https://tribune.com.pk/story/744223/pakistanis-
| spend-nearly-...)
|
| With that, I think the math could be somewhat right, or at
| least made to look right. Let's assume 30% spent on food, with
| this company eventually taking 10% of that. That's 8 billion in
| revenues. With a 1% profit margin (profit margins are thin in
| this market), that would bring in 80 million a year in profits.
| That would easily be enough to value the company at 275
| million.
|
| If you do the math more carefully, you likely will find
| dragons, though. Pakistani with low incomes will have more time
| than money, so they would never become your customers. So, that
| initial 30% will be lower, likely a lot.
|
| Also, it's questionable whether the company would be able to
| grab that market without more investments.
|
| In the end it may have boiled down to "VCs have lots of money
| and no other places to use it than gambles like these".
| mlazos wrote:
| I knew some people who worked there, and one thing that was a red
| flag for me was just how much kool-aid everyone who joined on
| LinkedIn seemed to be drinking. It was like a Silicon Valley
| trope where people would write we're gonna change the world! And
| then I looked up what the company did .. and I'm like logistics?
| Okay .. but basically I know startups are supposed to have
| charisma and all but it just seemed like too much. I'm trying not
| to become jaded and negative but I feel sadly that this is part
| of the rite of passage for software engineers, you join a hyper
| charismatic team and see hyper growth for a year or two, ride the
| high and then it falls apart and you have to figure out what you
| want to do next and how to avoid this the next time.
| ido wrote:
| I was surprised to read the supposedly generous base salary was
| just $920 per month - I was under the impression tech salaries in
| India are rivaling (and sometimes exceeding) those of Western
| Europe - is Pakistan that far behind Indian salaries, or is there
| some other explanation?
| willwinger wrote:
| Salary in India is a wide spectrum. At the top end of the
| talent pool, it is indeed reaching West European levels. I know
| because I managed a team that was in Spain and India.
|
| However now I run my second startup (bootstrapped) where I
| hire, train and generate value from candidates who are at the
| other end of the spectrum with monthly salaries much lower than
| what is quoted in the article.
|
| It is a very wide spectrum for tech salaries here in India.
| AJ1998 wrote:
| I can't say anything about India but yeah that's about right
| for Pakistan. I graduated last year and started working there
| for a Fintech startup as an ML engineer and my salary was half
| that. It was considered pretty good for someone who was fresh
| out of university.
|
| For reference I am now in Portugal and my salary is 1400EUR
| before taxes. I know it's not a lot but it is much better than
| it was there.
| inglor_cz wrote:
| How about cost of living. How much did you pay for rent in PK
| vs. PT?
|
| (I am asking out of genuine curiosity. Rent or mortgage is
| usually the heaviest burden in the West.)
| pythonbase wrote:
| Out of context but how did you move from Pk to Portugal? Job
| or freelance visa?
| warinukraine wrote:
| bergenty wrote:
| You can make way, way more than that in India but it's kind of
| a huge range.
| TotoHorner wrote:
| this guy wasn't a dev. He was in marketing.
| ido wrote:
| Wouldn't "creative manager" (I don't know what it means but
| it sounds high-up) have salary within the same order of
| magnitude?
| bergenty wrote:
| Yes but marketing, generally considered a low barrier to
| entry, arguable low skill position.
| alephnerd wrote:
| For white collar roles, salaries tend to be significantly lower
| in Pakistan compared to India. A good rule of thumb I use is
| comparing competitive civil service starting salaries, as the
| civil service remains the most popular option in most of Asia
| due to its stability and privileges, thus putting pressure on
| white collar salaries in the rest of the labor market. The
| starting salary for Pakistan Administrative Service (BPS-17) is
| around $4,000 a year, but the starting salary for the Indian
| Administrative Service (Pay Level 10) is around $8,500. A
| better comparison for white collar salaries in India would be
| ASEAN, China 10 years ago, or Ukraine before the war.
|
| Also, salaries in the Indian tech industry are bimodal - you'll
| have mass outsourcing companies paying horrible wages
| ($3,000/year) because outsourcing/BPO was a race to the bottom,
| and then you'll have product oriented companies or the Indian
| teams of US companies paying around $10-20k starting with mid
| career potentially reaching $30-50k. Like everything else, you
| got to pay for talent. Most HN commentators complaining about
| outsourcing quality are probably working with the former type
| of companies instead of the latter.
| ido wrote:
| Interesting! I have a friend who moved from Germany to work
| in India and he said devs in Bangalore earn more than in
| Berlin (where senior devs definitely earn higher than
| $30-50k). It sounded like they were paying more like $70-90k.
| govg wrote:
| That is definitely the case for devs with 4+ years of
| experience at major firms and the biggest startups.
| Especially so if you include all the stock grants.
| AdrianB1 wrote:
| My company has branches in all these countries and we also have
| contracts with IT companies in India; here is what I see:
|
| - Western Europe is a very wide spectrum, where Germany, The
| Netherlands and UK are a lot higher than Spain, Italy or even
| France. It can be more than double at some levels.
|
| - employees in India are a lot cheaper than Western Europe, but
| contractors of the same quality can be extremely expensive -
| there is a price cartel, the actual people get 1/4 to 1/3 of
| what is charged for their work
|
| - qualified people in India cost about the same as Eastern
| Europe, not Western Europe. One thing to consider is that
| salaries in Madrid are barely higher than Bucharest, while the
| cost of living is also higher, the quality of life can be
| better in Bucharest sometimes. I have many colleagues that
| moved from Madrid or Barcelona to UK or Germany as soon as they
| got the occasion.
|
| - salaries for my colleagues in Pakistan are lower than
| colleagues in India, but it depends a lot on position (job type
| and level) and city, so I cannot calculate a number for the
| difference between the countries
| webmobdev wrote:
| Another one in India seems to be on this trajectory too:
|
| Byju's has no answer for its growing list of missing deadlines -
| https://techcrunch.com/2022/09/07/byjus-blackstone-oxshott-s...
|
| Byju's losses swell to Rs 4,588 crore in delayed FY21 results -
| https://economictimes.indiatimes.com/tech/startups/byjus-rea...
|
| Byju's 2020-21 financials show it's a house of cards. Record
| losses, declining revenue in key markets and questionable
| accounting practices paint a grim picture of India's largest
| edtech company. -
| https://www.themorningcontext.com/internet/byjus-2020-21-fin...
| maxpert wrote:
| He and his round lead Atif Awan have been part of fraud rumors.
| According to their slide deck back in 2021 they were supposed to
| be profitable by end of 2021. Once you look at the numbers being
| quoted in the deck and avg Pakistani house hold, they don't add
| up. So Gul can do all glorifications that he might want, it
| doesn't change the fact that there have been some shaddy
| practices involved in the a whole group of people associated to
| this company.
| hef19898 wrote:
| >> "It was very easy to get new subscriptions online and get into
| contracts with a company. Like there was little to no control,"
| one former employee, who worked in the product department at the
| Lahore headquarters, told Rest of World. "We had a lot of power
| to make decisions -- like, I made a deal for $100,000 and all I
| had to do was send an email to management," the employee said.
|
| And this is why compliance is such an important thing in
| companies, everyone being able to source whatever they want is
| guaranteed disaster.
|
| The rest so reads like a bucket list of how not to run logistics
| and supply chains. All done by people in management who had no
| place on those domains to begin with.
|
| Warehouses set up in days? Sure, cool if you are able to do so.
| If you are not, you setting up your ops up for failure. Bad
| inventory control, ignoring shelf life? Failing at the core of
| what eCommerce is about. No inventory strategy, warehouse network
| planning? Sure way to never ever be profitable.
|
| It reads like Airlift was moving fast down the pre-inflation path
| of VC funded, not sustainable growth to dump the whole thing on
| clueless retail investors through an IPO or SPAC. I expect more
| stories like this to emerge in the next months.
|
| Edit:
|
| >> "We developed one of the most sophisticated remote
| surveillance networks with 30+ cameras in each warehouse that
| operated 24 hours/day." -> According to the aeticle Gul, the
| airlift founder, said that.
|
| This is not how you monitor pilferage. You do it by recording
| inventory movements, orders and deviations. CCTV can them help
| find the perpetrators of theft, if there is any. Heck, ops wise
| these people had no idea what they did..
|
| Edit 2: Typos
| CoastalCoder wrote:
| If there's still time, the parent post would be more readable
| with the typos fixed.
| ChrisMarshallNY wrote:
| _> meanwhile, the company's operations staff, responsible for
| executing the ambitions of Airlift's amateur leadership, were
| allegedly neck-deep in chaos_
|
| That's the money quote, right there.
|
| It's not unusual in many companies, for this kind of disconnect
| to happen. I suspect that, for some reason (maybe cultural -I
| don't know Pakistan well enough), there was almost no margin for
| error. Many US companies can hit this, and survive, as they seem
| to be able to "get their shit together."
|
| The burning money thing is always painful for me, but I was
| raised in a _very_ frugal environment. The company that I worked
| for, never borrowed money, and made every penny scream for mercy.
|
| This is sad, as I would love to see some of these companies do
| well.
| Emanation wrote:
| Truly an Agile operation.
| [deleted]
| stareatgoats wrote:
| I'm a soccer fan, the game is such a fine mix of skill
| (individual and collective) and luck, it is reminiscent of life
| itself.
|
| I'm rarely a fan of commentators however, who more often than not
| and after the fact will point out how inevitable it was that one
| team won and the other one lost. The winning team was "more
| effective at defense", had "a brilliant striker", and what have
| you and so on. Still the winning goal might have been caused by a
| penalty after an attacker pretended to be tripped, a lucky shot
| from afar deflected off a defender, or the goalkeeper had sun in
| the eyes.
|
| Rarely does a commentator admit that the win was luck. Or the
| that the loss was unlucky. Just saying.
| lofatdairy wrote:
| >At least five former employees who spoke to Rest of World say
| that this rapid expansion came at a hefty cost and was not
| executed properly -- ultimately contributing to the company's
| unraveling.
|
| >Inside these warehouses, there was a lack of essential business
| acumen, strategy, and vigilance in the way inventory was managed
|
| >often had to navigate sudden inventory surges caused by
| automated systems
|
| This seems to be a pretty familiar story in the pandemic startup
| scene. You have a completely new market born overnight (either
| COVID testing, med equipment, delivery, etc) with essentially a
| captive consumer base. Founders and management usually realize
| that the pandemic won't last forever, and try to prepare to
| pivot, but do this by over-investing in existing revenue streams,
| trying to capitalize on this once-in-a-lifetime (hopefully)
| golden goose. Unfortunately they don't have the experience to
| realize this stretches infrastructure too thin and breaks down
| communication chains, and what results in messes like these. A
| manual, 15 min fix for a bug that occurs once few days is
| allowable when you're at a small scale, but you can't 20x that
| infrastructure overnight because you'll now be spending several
| hours troubleshooting and have no time left to build any
| solution. While founders don't necessarily need to know _how_
| much duct tape holds their company together, you can at least
| assume a lower bound and give your engineers and managers time to
| improve things and build out.
|
| Combine this with onboarding new employees, who haven't been
| fully trained, haven't become swayed by your charismatic founder,
| and are disgruntled by the dubious infrastructure and what
| happened at Airlift is a pretty familiar case study.
|
| >In a blog post, Gul highlighted a quote from Walton's biography:
| "It was the lowest point of my life. I felt sick to my stomach
| ... I had built the best variety store in the whole region and
| worked hard in the community. I had done everything right and now
| I was being kicked out of town."
|
| It sounds to me as though Gul wasn't a malicious person or even
| particularly unsavvy (at least with regards to charming his team
| and investors), but the early success caused an overestimation of
| him and his company's ability and this miscalculation spiraled
| all the way down the chain of command. Doing "everything right"
| is completely different depending on when you're in a boom time
| and when your market is disappearing.
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