Dubai: Dubai-based delivery app Fetchr, considered by many to be one of the Middle East’s most promising start-ups, expects to close its Series B funding in the next two months, according to Idriss Al Rifai, co-founder and chief executive, speaking in an interview with Gulf News on Tuesday.
Whilst declining to specify an amount, in June 2015 Fetchr received the largest ever Series A funding in the Middle East, at $11 million.
“We are expecting to close our next round in Q1, although you never know until the money is in the bank, and even then things can go wrong,” Al Rifai said.
“We want to be the next desert unicorn,” added Joy Ajlouny, fellow co-founder and creative director, referring to the localised version of a technology start-up valued at $1 billion.
Founded in 2012, the logistics company is aimed at tackling the issue of physical addresses, a big challenge for e-commerce companies in developing countries.
This is done through GPS tracking on the customer’s phone, increasing both the accuracy and speed of delivery, in a part of the world where having something delivered can be a frustrating experience.
A marriage of mutual frustration
“I came from the e-commerce side, whilst Idriss came from the logistics side,” said Ajlouny.
“Nowadays, logistics is e-commerce and e-commerce is logistics. We met at the right place at the right time, and we both had something in common: we struggled to get things delivered in the Middle East. I was used to America where every location has an address.”
After a chance meeting in Silicon Valley, the pair partnered and managed to raise their first round of funding from New Enterprise Associates, the largest venture capital (VC) firm in the world, and an outfit notoriously shy of investments in the Middle East.
Since its inception four years ago, Fetchr has grown to over 1,000 employees across the UAE, Bahrain, Saudi Arabia, and Egpyt.
“We never thought we’d get the number one VC in the world to invest in us. But they saw not just a regional solution, but a global one. They don’t have addresses in Brazil, or China, or Russia for example,” said Ajlouny, who is Palestinian-American.
“Half the world’s population has no address,” she added.
Immediate gratification
In the developed world, most online transactions are completed at the laptop. In many other places, however, purchases are completed at the door, with cash on delivery.
“If someone hasn’t paid for something, every day you delay a delivery is another day the customer has to change their mind.”
According to Al Rifai, Fetchr does two things differently.
“Firstly, the faster you can get a product in to a customer’s hands, the lower the return rate, and the better the customer experience will be,” said Al Rifai. “We are competing with traditional retail in this sense for immediate gratification.”
“The second is the issue of no addresses. Uber and Careem don’t ask you where you live. It’s crazy that the delivery sector is still working on a traditional address system. It doesn’t make sense,” continued Al Rifai.
Fetchr Now rolls out across the region, but hits bump in Saudi
Since starting the company, Al Rifai and Ajlouny have also launched Fetchr Now. The service allows people to courier goods of any size between locations, such as a laptop from their apartment to their office, or plane tickets from home to the airport, something that has actually happened, according to Al Rifai.
“There is definitely a need for people wanting to send things to each other immediately, point-to-point on your smartphone,” he said.
“There’s nothing like it in the UAE,” added Ajlouny.
Fetchr Now has rolled out to Dubai, with Egypt next in line, according to Al Rifai.
“We expect to introduce it in Egypt this month.”
Saudi Arabia has been a tougher market to introduce the concept in, however, with the company running in to regulatory issues.
“We need to fine tune some of the agreements with the minsters in the kingdom before we are able to operate there,” said Al Rifai.
According to the chief executive, the government there is worried about people sending illegal items to each other.
Despite the challenges to introducing Fetchr Now, the original delivery app has been thriving in Saudi Arabia, with the start-up opening offices in Riyadh, Jeddah, and Dammam, and the service available in 37 cities across the country.
Delivery app’s fortune tied closely to rise of e-commerce
When asked about how closely tied the delivery app’s success is to the rise of e-commerce in the region, Al Rifai responded that the former was very closely linked to the latter.
“It’s purely tied to the success of e-commerce. It’s in our DNA.”
Fortunately for the pair, e-commerce is growing. Most analysts expect 40 to 50 per cent compound annual growth rate (CAGR) over the next five years.
The biggest news concerning e-commerce in this region in recent months was the announcement of Noon.com, a heavily-backed online shopping site.
“For Noon, it’s a big shoe to fill. It takes time to grow, and time to get clients. Majid Al Futtaim is building an e-commerce sit, as is the Al Tayer Group,” said Ajlouny.
“[Noon.com] has a lot backing, but there are others already in this space who have a lot of backing too.”
For Al Rifai, it’s good for the industry as a whole.
“It’s nice to see people investing billions in e-commerce, because then people understand it’s the next big thing. With that said, I think Noon underestimate how difficult it will be to break this market, although there is always the chance for them to have second-mover advantage,” he said.
What they both agreed on however, was that as a deliver app perfectly poised to capitalise on a growing e-commerce sector, it was good for Fetchr.
Fetchr not feeling the heat
And what about competition? Neither Ajlouny nor Al Rifai seemed at all concerned about what3words, a British-created app that serves as a universal addressing system. The technology, which assigns three-word addresses to every space on the entire planet, secured $8.5 million Series B funding in July 2015, with $2.94 million from regional logistics company Aramex.
“It’s like speaking a language no one understands,” exclaimed Ajlouny. “Unless everyone speaks the same language, you can’t communicate! It needs to be universal to be effective.”
“The competition is good for us, but we’re not concerned at all,” added Al Rifai.
Fetchr’s delivery completion rates
97 per cent in UAE and Bahrain
92 per cent in Egypt and Saudi Arabia
Ajlouny speaks out against restrictive environment for start-ups in the region
“There is a misperception that people have, that it is better for start-ups in this region because there are no taxes”, said Ajlouny, co-founder and creative director of Fetchr, in an interview with Gulf News.
“But guess what,” she added “entrepreneurs don’t make money for the first five years! So start-ups in America don’t need to pay taxes anyway!”
“The big difference, however, is that in the States I can start a company in my Mum’s garage, and pay $200 for a licence online.”
Here, she said, she is required to pay $25,000 for a licence whether you make money or lose money, then taxed on every delivery, and required to pay $1,300 every time they hire someone, and obligated to pay to send them home when they fire them.
“All of that is taxing me before I make a single dollar. It’s harder for me to make money here than it is in the States. The regulations are choking the money out of entrepreneurs here.”
Ajlouny insisted these regulations must be changed.
Al Rifai agrees on the point about recruitment: “in the start-up world, there’s a lot of hiring and firing. To have to pay every time you bring someone on board and every time you lose someone, is really hard.”
