20VC: The $3.1BN Meeting That Led to an Uber Acquisition, The Battle With Uber; How to Outcompete When You Have 10x Less Cash & The Marketing Campaigns That Led to Pakistan MDs Fleeing and Elon Musk Fanboying with Mudassir Sheikha, CEO @ Careem

23:15This money comes from his personal bank account. Maybe a few months later we're still at the same board. The documents are still not done. I call them again. Another half a million dollar without anything signed, without anything in place and he sends it again from his personal bank account just to sort of bridge us to getting the documents done. So Karim has been a labor of love from a lot of people in the There's so many stories like this area where people have come to when we least expected them and supported us to get where we are today. As Peter Amir, a co -star who was at Bakker before, and he said, was there ever a time when he thought that the company would die?

23:49And if so, which is the most poignant one? I think after maybe Series A, I didn't think that the company would die. There was just a belief that we're on to something and it's going to be around. Towards the end of the process with Uber, And it was a contentious process where there were some investors that wanted to sell and there were others that didn't want to sell and It ended up creating a big divide in the board that made things quite challenging and and at that time we felt that we were sort of left holding the bag Everyone is sort of looking out for what they want and there is a risk that we are going to destroy everything that we have built for the last eight years So that was quite stressful because we were sort of at the finish line but we'll just start able to get everyone to cross it with us.

24:32That's really, really hard. How do you manage a board effectively? And what do you know now that you wish you'd known when you started Kareem on board and invest a management? One of the things that, of course, after the whole thing got done, I affected on what we could have done differently. And board management was one where we could have done a much better job. We were just so busy running the business, Harry, that we didn't spend a lot of time with our board, other than maybe a few people here and there. So we could have been more proactive in building relationships, building trust that would have then created currency that could have helped us at those moments.

25:06But then one concrete learning for me was let's have a chairman of the board that can help manage the rest of the board. Because it takes time and if we can get someone that is well respected by everyone that has got the time and the ability to help us manage the board, getting someone like that in peace and making sure that we spend a lot of time with that person and with that person Managed the board could have been could be quite helpful. We tried doing that towards the very end after we Reflected on it, but but then it was a bit too late and it wasn't that three You mentioned the acquisition and the discussion internally there I want to take a slight step back and obviously I spoke to many people I want to start with the acquisition process and your first meeting with Dara I had I had to ask this Take me to the first meeting with Dara.

25:51Where was it? How did it go down? The first meeting was surprisingly positive. It was a meeting that happened in Riyadh on the first FII. And Dara had just joined or was going to join. And Dara just showed so much respect. He mentioned his links to the region. He asked questions, why are we doing it? What are we doing it? What is our vision? Through a lot of respect and was just a refreshingly positive interaction from someone that was heading a company whose name was a four -letter word at the end, there were people at the end that were not wear black because that color was black. So it was a very different relationship that we had with them before the deal happened.

26:29I mean fascinating to hear the contrast. How did the deal go down? I'd love to hear behind the scenes. They reach out and say, hey, we want to partner with you. How did that look? So at some point they, I guess, had decided that they were going to consolidate in markets where it made sense. That's where the China thing had happened. They had done something in Russia and Middle East was in that list as well. So they reached out to us. We had some discussions with them, but nothing made sense. And then when we were about to start our second last funding round, we were in San Francisco meeting investors and then our CFS had decided that maybe we should go and check on Uber as well, see what they're up to.

27:05And it was just a catch up meeting that ended up restarting the process. And of course, there are many reasons to do the deal, but there were also very crucial reasons not to do it. The thing that really made it happen at the end was Darah saying that you guys can continue your pushing your purpose, keep your culture, keep your org. I'm just going to replace your shareholders and become a better shareholder. And that's really what felt to us like this was the best of all worlds. Our shareholders get an exit. Our colleagues do well. The region gets an exit, which it needs for the ecosystem to start running forward.

27:38At the same time, the purpose of Kareem, which has been so sort of special for us, stays the culture stays and we continue to build and hopefully build in much bigger and lasting institution from the region. How did joining change your ability to spend when you think about the fruality you have before? Did joining give you an elastic budget? The timing was pretty strange, Harry. I think a few months after it closed the deal, COVID happened and as you expected our business was down 90%, and we had to do a massive end -counter reduction and there was a lot of focus all of a sudden on profitability and becoming efficient.

28:12The whole environment changed dramatically, which also now that you look back, accelerated the start of the delivery businesses and build out of the Super app, which is what we launched in June 2020 at the height of the pandemic. And today to come to the buy, we have 20 plus services all the way from ride hailing to food delivery, to grocery delivery, to home cleaning, to laundry, to payments. So a lot of the effort went into building things that were needed at that time versus the right healing business that was less relevant in that environment. What were the reasons not to do the deal? Cream is quite a special Harry and I don't say it because I was one of the people who started cream but I've been at startups before.

28:52I've been part of founding team before and these things generally start for relatively material things. right? People want to become rich. People want to do something that people will look up to and inspire others. But cream got lucky in the sense that cream's start was a result of madness's near death experience and the desire to build something big and more importantly build something meaningful. That's a gift that keeps giving. And as a result of which the purpose of cream came about, the passion for that purpose came about. And we felt that it would be a shame to lose such a unique and special start to a competitor who is most likely going to merge it and the green brand and the green purpose and the green culture will disappear.

29:38It felt like a huge loss. And I remember talking to the night before the deal, of course, I have to tell some of our leaders that this deal is happening. And one of the leaders I spoke to about the deal, his exact words to me was, this is the worst amount of money that I'm going to make. How can you do it? And there are many people at cream who were not happy that we did this thing. Even though so many of them had really, really well -prepared for the engine, but they were just not happy that this could mean the end of something special that could have been and should have been the Google or Amazon type of institution from this region over time.

30:11Do you think it did cut you off at the knees and prevent you being the Google or Amazon from the region? Not at all. Uber and Darah have been incredible. I think they have supported our vision. They have funded the vision. And as you've probably heard, we have done a spin -out. thanks to their help with some regional investors on board now that is restarting the entrepreneur journey to build that lasting institution from the region. What is your relationship like with Dhar today? It's great. I look up to him. I respect him a lot and I hope some of that is mutual. When you sell you go through a period of reflection.

30:43When you reflect, is there anything that you would have done very differently? Do you have any regrets? I get that was one from Amir at Kota. Any regrets from the journey? I wish we could have done more for our captains as a part of the exit process. You know, Karim was built by these captains and we're close to many of them. And if I look at them today, they're still doing what they were doing 10 years ago. And that saddens me a little bit. So many people at Karim have done quite well. They've grown and they've progressed in life as a result of these last 10 years. But the captains, which were the foundations of Karim, which were the ones that taught us how to build this business, and many cases are still where they were 10 years ago.

31:21So I wish we had done something for captains that would have benefited them from the transaction as well. Does it get easier over time? Everyone says, oh, it doesn't get easier. Does it get easier? For me and for us, it's not gotten easier, but the problems that you're solving are different. You're not on the street driving as a captain or speaking to captains and recruiting captains and supporting captains, but you try to figure out what are the structural things that we need to do to build a lasting institution, right? What kind of performance management system makes sense for Kareem and its ambition?

31:52What kind of couple allocation process makes sense? What markets should we go after? How should we go after those markets? What should we do organically and organically? And many of these things are not straightforward, at least for many of us in the region. We haven't had those kind of big successes that have happened in other parts of the world. So we're still learning and evolving in this new phase of Kareem. It's been he learning and evolving. It's always tough to balance being an amazing CEO with being a parent and a father and a great husband I heard that you once told your wife that you would be focusing on work only sleeping four hours per day from one to five While she took care of the kids is that true and how did that discussion go down?

32:31I've said a lot of stupid things to my wife for the last 11 years This was probably one of them. She's been incredibly understanding and then not just understanding She's been very, very supportive. You know, I've been working so hard at Kareem for the last 11 years and before that, it begins yet before that, at all the places that the only friends I have are the people that I work with. Since I don't stay in touch or don't have the time to stay in touch with others, I lose that connection over time. So when we started Kareem and we've never started any services at Kareem, she's actually been the cheerleader for those services.

33:00When we start the right -earning business, she was part of the forum. She was spreading the word about those services to her friends. When you started payment service, you did the same, when you started Google Rish was doing the same. So, you've actually been an early market here of many of our services and that's been incredible and that's been great to see. I'm parenting. What do you know now that you wish you'd known before you had your first child? Yeah, it's hard. You realize every minute is an opportunity for you to teach them something because they will do so many different things and some they will do right and some they will do wrong.

33:32And if you're not there, you're missing an opportunity to show them the right way. So it feels like a lot of hard work if you want to do it well. How do you do that while also being a rock star CEO? What advice would you have for me? I work intensely like you. I want to be a good father. How do I do both? You know, marry well 80 % of the problem is just finding the right person to marry and then as much as possible Become intentional about parenting. Okay. What is your responsibility? What is the other person going to do? So sub -ah my wife She was very clear with me that there are two or three things that you like me to focus on with respect to kids.

34:06Financial education was one of them and there were a couple of other things that she delegated to me. So then over the weekends I put some things in place for me to start coaching them on those topics. Yeah, having a discussion on what's important, what she will do, what she will do, and then try her best to do what you need to do. And that's not easy either. But final, really personal one, I promise. Money does matter and people like to pretend it doesn't. Relationships to wealth are quite important. How do you think about your relationship to money today and how does it change over time? Two or three things that come to mind.

34:39One, my lifestyle hasn't changed too much. I'm still living in the same house that we lived before. I'm largely driving similar cars, travel similarly and so on and so forth. So we haven't done too many changes in our life. So we don't think that money should change our lifestyle too much because we want to make sure that our kids get the right upbringing Which gives them enough hardship that makes them Resilient over time. So that's one. It's also a huge source of responsibility Harriet we live in a region where of course, you know, you can live in the body and it's very different But as soon as you step in a country like Pakistan or Egypt or Lebanon You do see a lot of suffering around you and and you feel like somehow for some reason you were chosen to be given wealth.

35:22It's not something that you deserve or you have it for yourself. You need to somehow step up to the responsibility that this brings. So that's something else that we feel quite responsible for in some shape of form. It's being responsible for the wealth. Can I be blunt and ask how many millionaires were made from Korean sales, be heave to the Korean mafia? So I'm not drawing, I think in dollar terms, there were 75 millionaires. In the round terms, there were 300 plus. So it was it was good exit for for many colleagues at Kareem. So when we think about that What are the biggest bottlenecks to those 75 millionaires in dollar terms creating the Kareem mafia that we want to see?

36:00What will prevent them that we need to overcome together? It's a great question and I think one thing that you Hopefully find in many of them and many others that didn't Cross that number is a huge desire to do something for their countries or for the region Because in the last eight, 10 years of Karim, the purpose of Karim and the passion that the purpose in vote was so central to our daily existence. Once I was visiting Lahore, the team in Lahore did not let me enter the office until I read the manifesto that was outside the office. And that manifesto was all about, I'm going to create jobs, I'm going to look after these captains, I'm going to make sure they are in a respectable living, I'm going to look after them.

36:40And these kind of things manifested in different ways in different markets. So I feel and I hope that a lot of them are doing the next creams for the right reasons and they will build them in the right way. Now what is stopping them from being successful, you know, talent continues to be a challenge in the region is becoming a little bit easier to attract talent to startups, but it's not universal across the region. Like in a place like Egypt, Pakistan is starting to become difficult once again. Capital again, it's available in some places, not available in others. So that's a challenge for some.

37:09And one of the biggest challenges that I find still in the region is the fragmentation of the region. The region is not small. There are 500 billion people that live between Morocco and Pakistan. But it's made up of a lot of small countries, a lot of small markets. And you can create an incredibly large platform for the region. But to cover the region is extremely complex. The region operates in a way that if you, let's say, were take this to the US, you start a business in California, you can only serve customers in California. And if you want to take this business to New York, need to register a legal entity, and you need to get licensees, you need to get payment systems, you need to get SMS systems.

37:46You have to redo the whole thing to go to New York. Then if you want to go to Florida, you have to redo the whole thing. Now just imagine how much entrepreneurship will happen in the US, the US was so difficult to target as a market. And this is how the region operates today. It's extremely, extremely fragmented, which ends up creating small pockets of opportunities, and makes it difficult for us to create incredibly large platforms. So that's a problem that we have to solve in some shape or form and through the Super app, we're trying to create an abstraction layer where people can build their business on our Super app and the Super app since it operates in all the different markets, we have built down the line infrastructure, they can benefit from the abstraction layer that we have created.

38:22And the last problem, and this is something that startups won't run into for the first decade of their existence, but they will run into it maybe later and hopefully by that we have solved it. The reason has had a lot of great starts, we tend to do quite well sometimes in starting something and taking it someplace, but we have not been as good as other parts of the world in putting lasting foundations and making our successes sustain after the first successes, either things get acquired or the founder leaves or there's something that happens and then all of a sudden the full potential and the full thing doesn't come to life.

38:57This is something that I feel we He has a regionally to learn how do you put the right foundations, how do you put the right governance, how do you put the right maturity in organizations that will allow them to continue for decades and build something truly large in lasting. What about also local markets? Like when you look at the reliance on Nasdaq, we have this with Latin America as well, where you know, blending in New Bank is the only one that's gone to Nasdaq efficiently. What are you going to do? IPO on Pakistan's local stock exchange? Yeah. You can see a line of sight to that problem being solved, I think, in Dubai, in Abu Dhabi, in Saudi.

39:31There are local and regional exchanges that are open for business. So some IPOs have happened already and in Shalom, all will happen. So I feel that over time, that problem will no longer be a big issue. You mentioned the Super app quite a few times. Super apps have been tried and tested many times. Other than in Asia, they have always failed. Why have they always failed? different reasons are for different ones that have not done well. But I think the last few that have been attempted have been built in an environment of capital abundance. They have been built in a way that has made it difficult for them to be profitable and sustainable while they're growing.

40:07I'll give you a basic example. In many of the business that we operate, the monthly retention of customers tends to be in the 60 to 70 % range. And that's actually been considered okay and even good in some cases. Now, if you have a monthly retention of 60 -70 % and if you want to keep growing, what does that mean? Next month, the first thing you've got to do is you've got to acquire enough customers to fill the first 30 % of the customers that have left. And then any customer that you acquire on top of it, you need to then acquire them so that you can keep on growing. And that's incredibly expensive.

40:38and to keep doing that as you grow, it becomes more and more expensive with scale, means that you need to have high margins to support that acquisition spend. And when you have high margins, those high margins end up creating vulnerabilities. They end up creating frustration from the marketplace stakeholders. So I actually feel that many of these businesses, including our business, have accepted things that should not have been okay. So one of the things that we're trying to do as we start chapter three is how do we build Kareem Supra differently? no longer accept these levels of engagement. Let's make sure that if you acquire a customer, that customer is going to stay with us for a long period of time.

41:14And that customer is going to do a lot of things on the cream platform. They should live their life on the cream platform. And if you can do that successfully, then you can operate at margins that are sustainable for all the stakeholders that you're serving. We'll do it differently. And I would love to have another conversation you in five years when you've done it. And we've shown that this can be done and this has been done. Now I want to move into a quick fact because I can talk to you all day. So I say a short statement and then you give me your immediate thoughts. Does that sound okay? Sure.

41:41So you can have dinner with one person that are alive. Who is it and why do you choose them? So for me, that would be a profit moment. I can definitely get stronger in my faith. And if you look at profits in general, it's just amazing to see the kind of impact they've had for hundreds of years. And if you just take a secular view on things, there's a lot that we can learn from it. And how do we build organizations successfully that'll stand at test of time? What was the first luxury that you spent money on when you made it when the acquisition happened? I think a few months after the acquisition we did some interior is in our house So we've changed some furniture change some lights.

42:15I wasn't a big deal But it was probably the first thing that we did oh Jesus sometimes I miss American guests They're like I bought a layer jet and you were like I got some new lights Good I'm glad that you know the interiors were upgraded. What do you know to be true that others do not agree with? One thing that we have believed for some time is that if you can dream something, there's a good chance that you can get there. There is a spiral of manifestation that gets unleashed when you believe something big can be done. You start thinking differently, you start attracting other people who get inspired by that dream, and then magically it starts to come together.

42:54What have you changed your mind on in the last 12 months? Like many people remote working is a topic that we are still learning and evolving on. In 2020, we thought this is going to absolutely work and we don't need to come to the office anymore. We now believe that with the way that we collaborate and with the state of technology that is available to us, there is still a lot of value in bringing people to the office and working together. This topic will probably evolve again as technology gets better, people and old habits change. But at the moment, I'm starting to lean towards getting people to the office a little bit more than what we believed in 12 months ago I actually made it five days a week for everyone in this in our companies and actually it's so much better And if they don't like it, that's fine.

43:37That's not for them. They don't need to join our company Tell me what three traits would you most want your children to adopt? Integrity is foundational and then beyond that shooting for the moon which is ambitious and then perseverance to give up. What did your wife say when the U -back position deal came through? don't remember now but she probably said something along the lines of hopefully we'll see you more often now. Okay final one, Kareem in 10 years, we do this in 2033. Where's Kareem then? So Kareem should be a household name in the region all the way from Morocco to Pakistan. The service should be used by everyone in the region on a daily basis.

44:14Their quality of life is radically better as a result of Kareem and as a result of all the friction that we've taken away from the daily life, people are doing more meaningful things than figuring out how to get water and transport to live their daily life. I was just saying I had so many great things, Magnus gave me the best stories. I'm sorry for slightly diverting away from the topics mentioned, but I love this, so thank you so much for joining me and it's been fantastic. It's a pleasure to finally meet you, Harry. It really is such an incredible story. I want to say a huge thank you to Moodis here for being so fantastic on the show there.

44:47If you want to see more from us, you can watch the full episode on YouTube by searching for 2020, we'd love to see you there. But before we leave you today, this episode is brought to you by Tegas, the GoToResearch destination for bold investing. Tegas Curace, expert insights, analysis and financial data, to give you powerful perspective for your investment decisions, with lining fast access to over 60 ,000 transcripts across 20 ,000 companies, you'll discover a wealth of unique insights to fuel your fundamental research, gain perspectives, synthesize information, and even model outcomes all on TIGAS.

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