The founders of Capiter, a well-funded Egyptian start-up, have been fired following allegations of fraud

The founders of Capiter, a well-funded Egyptian start-up, have been fired following allegations of fraud

Last September, Egyptian startup Capiter raised $33 million in Series A funding to compete in the country’s growing e-commerce and B2B retail space. A year later, the startup laid off several employees and now its CEO and COO have been relieved of their duties after allegedly mismanaging the funds.

Here’s what we know so far. Between June and July, several ex-employees of Egyptian startups, including Capiter, wrote about the layoffs at their respective companies, even though employers never addressed them publicly. Other companies include OPay Egypt, elmenus, ExpandCart and Brimore.

Some sources told TechCrunch that Capiter laid off at least 100 employees in those two months. Others described a workplace with poor management and no structure and a company struggling to onboard traders to its platform while simultaneously running out of money. The company only had one month of track in August, they said. TechCrunch contacted Capiter at the time but received no response.

As a result, Capiter investors sought out potential buyers to absorb the struggling company in the form of an acquisition or merger. This information was corroborated in a local report where the board of directors of Capiter reportedly stated that the founders had failed to report to the board of directors, its representatives and to the shareholders during the in-person due diligence on site for a possible merger. Another one publication said the executives had refrained from appearing before the board after internal unrest and disagreements over their management style.

Prior to Capiter, Mahmoud was the co-founder and COO of Egyptian-born, Dubai-based ridesharing company SWVL (the company, which became public through a SPAC agreement last year, laid off 32% of its staff last May). Together with his brother Ahmed, he launched Capiter in 2020 as an FMCG platform that allows small and medium retailers to order inventory, arrange delivery and access finance 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 over 6,000 SKUs on its platform when the founders spoke to TechCrunch last September. In the interview, they said Capiter is on track to hit $1 billion in annualized revenue this year. And like many startups in Africa and around the world, Capiter has been hiring aggressively over the past year to achieve its goals.

However, 2022 has taken an unexpected turn for many tech startups as they face uncertainty from rising interest rates and other factors that have a ripple effect on venture capital. News of layoffs, flat rounds, and cutbacks from startups in various industries — especially those that have raised big money in the past 18-24 months, such as Wave, 54gene, Kuda, and Marketforce — has been more widespread. despite the continent benefiting from a better venture capital total by the end of Q2 2022 compared to Q2 2021.

B2B e-commerce platforms use resource-constrained or inventory-heavy models. The latter requires more capital and for Capiter, which uses a hybrid model, it is 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 investors declined to comment on the matter but released a statement via email.

The board and shareholders have opened an internal investigation and are therefore not free to comment on any news or allegations circulating on social media at this time. The board and shareholders are also working closely with relevant stakeholders, legal and HR teams as well as legal authorities for an external investigation into this matter.

Meanwhile, according to local reports, the company’s chief financial officer, Majid El Ghazouli, will act as interim CEO. Mahmoud did not respond to the comment.

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

This is a developing story…

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