Last September, Egyptian startup Capiter raised $33 million in Series A funding to compete in the country’s growing B2B e-commerce and retail space. Fast-forward a year later, the startup has laid off multiple employees and now its CEO and COO have been relieved from their duties after allegedly mismanaging funds.
Here’s what we know so far. Between June to July, several ex-employees of Egyptian startups, including Capiter, wrote posts about layoffs at their respective companies even though the employers never addressed them publicly. Other companies include OPay Egypt, elmenus, ExpandCart and Brimore.
Some sources told TechCrunch that Capiter had laid off at least 100 staff in those two months. Others described a workplace with poor management and no structure and a company finding it hard to onboard merchants to its platform while running out of money simultaneously. The company had only a month runway as of August, they said. TechCrunch reached out to Capiter at the time but received no response.
As a result, Capiter investors have been searching for potential buyers to absorb the struggling company in the form of an acquisition or merger. This information was further corroborated in an email obtained by TechCrunch, where Capiter’s Board — citing that Mahmoud Nouh and Ahmed Nouh had left Egypt with their current location unknown — said the executives didn’t fulfill their obligations and duties by appearing before representatives of the Board and investors to complete due diligence for a possible merger this week. An excerpt of that email read as follows:
Today the Board of directors of the parent holding company of Capiter Egypt LLC, a Cairo-based B2B e-commerce startup, approved a motion to remove Mahmoud and Ahmed Nouh from their positions as CEO and COO, effective immediately. Further, the Board has commenced an investigation against Mahmoud Nouh and Ahmed Nouh, alleging that the two have embezzled funds from the company, breached fiduiciary duties, and potentially committed fraud. Mahmoud and Ahmed Nouh have left Egypt, and their current location is unknown. This action follows a week in which representatives of the Board and shareholders conducting on-site due diligence for a potential merger discovered misappropriated funds while conducting interviews with team members in Cairo.
Before Capiter, Mahmoud was the co-founder and COO of Egypt-born and Dubai-based ride-hailing company SWVL (the company, which went public via a SPAC deal last year, laid off 32% of its staff this May). With his brother Ahmed, he launched Capiter in 2020 as an FMCG platform that allows small and medium-sized retailers to order inventory, arrange delivery and access financing to pay for goods. Some of its competitors include MaxAB and Cartona in Egypt, and in Africa, Wasoko, TradeDepot and Chari.
Capiter had 50,000 merchants and 1,000 sellers with more than 6,000 SKUs on its platform when the founders spoke to TechCrunch last September. In the interview, they said Capiter was on its way to reaching an annualized revenue of $1 billion this year. And like many startups in Africa and globally, Capiter hired aggressively last year to meet its targets.
However, 2022 has taken an unexpected turn for many tech startups as they deal with uncertainty arising from increasing interest rates and other factors that have a trickle-down effect on venture capital. News of layoffs, flat rounds and cutbacks from startups in various sectors — especially those that raised a lot of money within the past 18-24 months, such as 54gene, Kuda, and Marketforce — have been more widespread despite the continent boasting a better VC total by the end of Q2 2022 than Q2 2021.
B2B e-commerce platforms operate either asset-light or inventory-heavy models. The latter requires more capital and for Capiter, which employs a hybrid model, it’s unclear how the company is already looking to sell after raising millions from Quona Capital, MSA Capital, Shorooq Partners, Savola and others last year. Capiter’s investors declined to comment on the matter but instead issued an email statement. “The Board and shareholders have initiated an internal investigation and therefore are not at liberty to comment on the news or allegations circulating the social media for the time being. The Board and shareholders are also working closely with relevant stakeholders, legal and HR teams as well as the legal authorities for an external investigation on this matter.”
Meanwhile, the initial leaked board’s statement said Capiter’s management team — “some of whom had recently resigned in protest of what they felt was mismanagement by the Nouhs” — are attempting to steady the company’s ship. The company’s chief financial officer Majid El Ghazouli will act as interim CEO “as remaining leadership works to stabilize the situation and continue conversations with potential acquirers, who remain interested in the Capiter asset.” Mahmoud didn’t respond to comment.