Founders of well-funded Egyptian B2B startup Capiter fired following fraud allegations • TechCrunch

Final September, Egyptian startup Capiter raised $33 million in Series A funding to compete within the nation’s rising B2B e-commerce and retail house. Quick-forward a yr later, the startup has laid off a number of workers and now its CEO and COO have been relieved from their duties after allegedly mismanaging funds.

Right here’s what we all know to this point. Between June to July, a number of ex-employees of Egyptian startups, together with Capiter, wrote posts about layoffs at their respective corporations regardless that the employers by no means addressed them publicly. Different corporations embody OPay Egypt, elmenus, ExpandCart and Brimore.

Some sources informed TechCrunch that Capiter had laid off not less than 100 employees in these two months. Others described a office with poor administration and no construction and an organization discovering it exhausting to onboard retailers to its platform whereas operating out of cash concurrently. The corporate had solely a month runway as of August, they stated. TechCrunch reached out to Capiter on the time however acquired no response. 

In consequence, Capiter traders have been trying to find potential consumers to soak up the struggling firm within the type of an acquisition or merger. This info was additional corroborated in an electronic mail obtained by TechCrunch, the place Capiter’s Board — citing that Mahmoud Nouh and Ahmed Nouh had left Egypt with their present location unknown — stated the executives didn’t fulfill their obligations and duties by showing earlier than representatives of the Board and traders to finish due diligence for a potential merger this week. An excerpt of that electronic mail learn as follows:

At the moment the Board of administrators of the dad or mum holding firm of Capiter Egypt LLC, a Cairo-based B2B e-commerce startup, authorised a movement to take away Mahmoud and Ahmed Nouh from their positions as CEO and COO, efficient instantly. Additional, the Board has commenced an investigation towards Mahmoud Nouh and Ahmed Nouh, alleging that the 2 have embezzled funds from the corporate, breached fiduiciary duties, and doubtlessly dedicated fraud. Mahmoud and Ahmed Nouh have left Egypt, and their present location is unknown. This motion follows every week by which representatives of the Board and shareholders conducting on-site due diligence for a possible merger found misappropriated funds whereas conducting interviews with workforce members in Cairo.

Earlier than Capiter, Mahmoud was the co-founder and COO of Egypt-born and Dubai-based ride-hailing firm SWVL (the corporate, which went public via a SPAC deal final yr, laid off 32% of its employees this Might). Along with his brother Ahmed, he launched Capiter in 2020 as an FMCG platform that permits small and medium-sized retailers to order stock, prepare supply and entry financing to pay for items. A few of its opponents embody MaxAB and Cartona in Egypt, and in Africa, Wasoko, TradeDepot and Chari. 

Capiter had 50,000 retailers and 1,000 sellers with greater than 6,000 SKUs on its platform when the founders spoke to TechCrunch final September. Within the interview, they stated Capiter was on its method to reaching an annualized income of $1 billion this yr. And like many startups in Africa and globally, Capiter employed aggressively final yr to satisfy its targets. 

Nonetheless, 2022 has taken an surprising flip for a lot of tech startups as they cope with uncertainty arising from rising rates of interest and different elements which have a trickle-down impact on enterprise capital. Information of layoffs, flat rounds and cutbacks from startups in varied sectors — particularly people who raised some huge cash throughout the previous 18-24 months, akin to 54gene, Kuda, and Marketforce — have been extra widespread regardless of the continent boasting a greater VC whole by the top of Q2 2022 than Q2 2021. 

B2B e-commerce platforms function both asset-light or inventory-heavy fashions. The latter requires extra capital and for Capiter, which employs a hybrid mannequin, it’s unclear how the corporate is already trying to promote after elevating tens of millions from Quona Capital, MSA Capital, Shorooq Companions, Savola and others final yr. Capiter’s traders declined to touch upon the matter however as a substitute issued an electronic mail assertion. “The Board and shareholders have initiated an inside investigation and due to this fact will not be at liberty to touch upon the information or allegations circulating the social media in the intervening time. The Board and shareholders are additionally working intently with related stakeholders, authorized and HR groups in addition to the authorized authorities for an exterior investigation on this matter.”

In the meantime, the preliminary leaked board’s assertion stated Capiter’s administration workforce — “a few of whom had lately resigned in protest of what they felt was mismanagement by the Nouhs” — try to regular the corporate’s ship. The corporate’s chief monetary officer Majid El Ghazouli will act as interim CEO “as remaining management works to stabilize the state of affairs and proceed conversations with potential acquirers, who stay within the Capiter asset.” Mahmoud didn’t reply to remark.