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

·3-min read

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 a local news report where Capiter’s Board allegedly said that the founders had not been reporting to the board, its representatives and shareholders during on-site in-person due diligence for a potential merger. Another publication stated the executives had refrained from appearing before the board of directors after internal disturbances and disagreements over their management method.

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 Wave, 54gene, Kuda, and Marketforce — have been more widespread despite the continent boasting a better VC total by the end of Q2 2022 compared to 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 has exhausted its funds and 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 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, according to local reports, the company’s chief financial officer Majid El Ghazouli will act as interim CEO. Mahmoud didn’t respond to comment.

Update: CEO Mahmoud Nouh, in response to the allegations, said, “I deny the false allegations and that I haven’t received any official notice of what’s above [referencing the statement about his and Ahmed’s dismissal].”

This is a developing story...