The mobility or transportation space is big business in Africa, and with its deep pockets Egyptian startup – SWVL, is positioned to take maximum advantage.
GetFundedAfrica observes a yawning gap in the form of the infrastructure deficit in Africa (According to the AfDB’s African Economic Outlook 2018, the annual infrastructure deficit in Africa stood at an estimated at $108 billion). While this withholds development in certain quarters, it represents a colossal opportunity for entrepreneurs/business owners willing to provide services to aid in overcoming the challenges created by the deficit.
The Start-up founded in 2017 by CEO Mostafa Kandil, Ahmed Sabbah and Mahmoud Nouh — enables users to book fixed rate affordable rides on its network of vans and buses through its app.
The valuation was calculated from a disclosure published in a financial report released by Vostok New Ventures. In the report, Vostok says it invested $16-million in the round for a 10.2% stake in the startup.
SWVL, which operates in Pakistan, Egypt and Kenya and plans to expand to Nigeria may likely launch in Johannesburg as well.
Also in 2019, the startup launched a new long-distance service called SWVL Travel in Nairobi. This development occurred after terminating operations of its ride hailing-service in the city in November, as compliance with an order from Kenyan transport regulator NTSA.
According to US business intelligence platform Crunchbase, SWVL has to date raised $80.5-million across its disclosed deals. It’s likely that this funding will be used to expand to more markets and launch new products.
A strong indication is in comments attributed to Vostok New Ventures, a Swedish venture capital (VC) fund an investor in the company. “We believe the overall target of $1-billion in GMV (gross merchandise value) by 2023 is achievable and that Egypt alone could become worth at least $500-million and, if successful in Lahore & Karachi(Pakistan), Nairobi(Kenya), Lagos(Nigeria) and Johannesburg(South Africa), this upside obviously multiplies,” the investor wrote in a financial report last year.
The startup together with Ford, inked a strategic partnership deal that will see it use Ford Transit mini-buses as the preferred vehicle of choice on SWVL’s routes
In its financial report for the second quarter and the first six months of 2019, Vostok New Ventures said it remained optimistic about the performance of a company whose June deal was likely the biggest for a tech startup (a software company no older than seven years) in Africa so far this year.
Part of the attraction was the company’s previous ability to raise financing, that had evidently fuelled its rapid growth and expansion.
In November 2018 the startup raised “tens of millions” referenced by Forbes as an “exceptionally oversubscribed” round.
This also followed an $8-million deal announced in April 2019, which was reported one of the top 10 disclosed deals by an African startups for 2018.
US business publication Bloomberg reported in an article that Kandil said the startup plans to enter “two or three more” African cities by the end of the year. Kandil told the publication that Lagos would most likely be its next market.
Vostok in its latest financial report stated: “We have studied this opportunity for a few years but only invested now as SWVL has proven that there is real demand and that the economics work”.
GetFundedAfrica identifies a window of opportunity as the total addressable market in emerging markets is estimated at about $150-billion according to financial reports.
“Looking at SWVL’s cohorts and bus lines in Cairo where bus utilisation is over 60% you see a clear path to gross margins close to 30% over time, higher than taxi hailing at roughly 20%, likely warranting also higher multiples for this type of business,” the financial reports stated.
This investor referred to the startup’s CEO Kandil as an entrepreneur of “very high quality”. “Previously at Rocket and Careem, Mostafa Kandil has built a team that executes well and at high speed.
“In fact, I believe that Mostafa may be the first Arab tech entrepreneur that builds a global product. All the other successes coming out of the Arab world have been either built by foreigners or have been solely focused on the local region,” it said.
Profile of Investor
According to its website, Vostok New Ventures Ltd (Vostok New Ventures) is an investment company with the business concept of using experience, expertise and a widespread network to identify and invest in assets with considerable potential for value appreciation, with a focus on companies with network effects.
Its investments were initially conducted in the oil, gas and mining industries, but is today focused on Internet and consumer focused sectors in Russia and other markets.
Bloomberg describes Vostok as an investment company focusing on investments in consumer products, online marketplace, and businesses with network effects, adding that the company invests in emerging markets worldwide. Investments in emerging markets include Property Finder (Middle East/ North Africa), Booksy (South Africa) Wuzzuf (Egypt) Naseeb Networks (Pakistan) Jobnet (Myanmar).