Uber and Careem are in the headlines for the rumored talks between the two regarding a merger, or an acquisition of Careem’s assets by Uber.
That’s quite an interesting piece of news in of itself, and has the potential to change the ride hailing, entrepreneurial and technology ecosystems in the Middle East. I am not as interested in the rumor itself, but I am genuinely curious as to why these two companies would consider a merger or an acquisition, and the implications of said deal, were it to happen.
First, let’s spell out what the rumor is. Uber is reportedly in talks to buy Careem’s entire business, but the numbers are ranging from $1 billion to nearly $2.5 billion. Talks, reportedly, have been ongoing for over a year, and we are just hearing these news now.
An outright acquisition begs the question: Would Uber absorb Careem’s operations into its own?
Or will Uber let the Careem brand run?
Were Uber to absorb Careem under its wing, what would Uber gain in return?
The case for Uber seems to revolve around the Uber’s CEO, Dara Khosrowshahi, and his promise to turn profits for the company in 2018, before a stated initial public offering (IPO), sometime in 2019. Khosrowshahi made turning a profit one of his key priorities, as Uber has not turned a profit in its nine-year existence. Ever. Uber’s strategy has alway been to aggressively go into a market, undercut the competition from regular cabs with incredibly low prices, and once the ecosystem has become favorable to Uber, control the prices from there. But that hasn’t actually panned out in most markets. In the Middle East, Uber faced tough competition from a nimble and innovative rival named Careem, that rode the technology wave and grew to 14 countries in 6 years. By buying Careem and eliminating Uber’s key Competitor in a massively growing market, Uber stands to earn a much bigger piece of the pie in the Middle East.
Acquiring Careem removes one variable in Uber’s pricing algorithm: competitor pricing. It allows Uber to control the rates from the consumer end, and gives it control over the driver (or “partner”) network as well, where a large sum of money still goes. Uber needs to do all it can to shore up its income statement, and to look for profitability wherever it might find it to bolster its finances before the 2019 IPO. Being in control of its pricing is one way to achieve said goal. Uber could use the larger footprint that comes its way as a result of the Careem acquisition to take advantage of the economies of scale, and work better to build a more profitable (or less loss making) business in the Middle East.
However, the stated goals and recent actions point to different set of priorities unfolding. It would seem contradictory for Uber to acquire Careem while it had only a few months ago sold its own businesses in China and Russia to cut its losses. Uber has, also, exited the self-driving truck business, to focus on more revenue-generating lines of business. The question, then, is, how to align these actions with the acquisition rumor.
The answer to me is in an alternative scenario where Uber is planning an exit, or a winding down of operations in the Middle East to, once again, focus on more revenue generating initiatives. In this scenario, Uber acquires Careem, and let’s Careem handle all of Uber’s business, and Uber pulls its own brand and personnel out of the region.
Uber could be pulling off a double play of acquiring a well-oiled machine that has been scandal-free throughout its entire existence, and using the goodwill Careem has built to expand in the region. Careem has built up a friendlier brand overall, using “Captain” as opposed to Uber’s “Driver”, for instance. Even the name Careem implies generosity in Arabic, a virtue priced very highly in the Middle East.
This scenario begs a different question, how much does it cost Uber to do business in the Middle East, for a $1-$2.5 billion acquisition to make sense?
It’s hard to tell. Careem, at its last funding round, was valued at $1.2 billion, nearly half the top end of the rumored range. Why would Uber consider a 100% premium over the price that investors valued the Careem at? In business terms, usually a premium has to do with either “synergies” or growth. In growth terms, the acquisition would make some sense. Careem does control a sizable chunk of the market, but Careem has never turned a profit either, paying a 100% premium simply doesn’t sound like a particularly savvy business move. Uber would grow by acquiring Careem’s share of the market, but it will still cost it a lot of money to operate that share. The other answer, “synergies,” makes more sense. Uber could be acquiring access to Careem’s network, support, and hoard of cash, and offloading its own operations onto that infrastructure. Thus, allowing Uber to pull its own operations from the market, and save cash before the all important 2019 IPO.
The parallel to this rumored acquisition is Amazon’s acquisition of Souq in 2017 for $580. Amazon spent over half a billion dollars to buy its way into a market that it didn’t previously operate in, and provided Souq with the support and infrastructure of one of the world’s most successful companies. While the differences end at the fact that Uber already operates in most of the markets where Careem operates, from a strategic goals point of view, Uber might be on the precipice of pulling the brand out of the MENA region, but retaining the operations under the Careem brand.
Once again, Uber could be taking advantage of economies of scale to service its customers and Careem’s, and pulling its own brand out of the market. Reducing staff, consolidating data centers and so on, could save some serious cash, but the question remains: do the savings make up for the $2.5 billion price tag? That’s hard to tell, and only those with access to the right financial data can make a more informed assessment.
I am ultimately skeptical on this acquisition. It remains to be seen how this rumor develops. However, this acquisition seems to be facing some headwinds already. The authorities in Egypt are considering whether such an acquisition would be an anti-competitive move. We have to wait and see how the Dubai authorities react to the news, if it happens. Uber and Careem must know, as the only two players in the market, government officials trying to impress their superiors and make some headlines are bound to throw words at the ride hailing companies, call the acquisition anti-competitive and attempt to stop it. That’s a headache no one really needs to deal with, but if the price tag is $2.5 billion, maybe Mudassir Sheikha is willing to deal with the headache to turn himself into a billionaire. How much do a few Ibuprofens cost anyway?
Reading and writing instead of going to parties, mostly.
3,550 words@meleegy @meleegz Guestbook
Uber and Careem are in the headlines for the rumored talks between the two regarding a merger, or an acquisition of Careem’s assets by Uber.
The rise of Instabug, CrowdAnalyzer, and other startups solving very specific technology problems, offers an insight into the development of the technology scene in the Middle East. This rise ushers in a new normal in the region: startups rising to provide services and products far beyond the basic needs of people.
Only a short few years ago, the startups that received all the hype were startups offering food services like Yummamia or Mumm, or providing delivery of groceries like Goodsmart. While these companies still receive the majority of the hype, startups like Instabug, CrowdAnalyzer, Elmenus are competing for attention and dollars on the merits of providing technical solutions to enterprise problems.
Instabug has received $2.1 million over four rounds to provide mobile applications with a better tool to make crash reporting better. Besides not being a core consumer need, it's a niche technology need.
Similarly, CrowdAnalyzer offers a way for businesses in the Middle East to analyze customer sentiment in Arabic by developing a technology that can understand different Arabic dialects and analyzing whether it's negative, positive or neutral. It raised $1.1 million in July, 2018 to further develop its technology, and expand its market presence.
This trend shows that we are entering a new phase in the growth of the startup ecosystem in the Middle East. Growing from basic needs, to enterprise technologies shows the continued maturation of the ecosystem. Potential founders now have a stronger incentive to pursue braver (or crazier) ideas as the investor market seems more receptive to these ideas, and seems more willing to throw money behind bolder ideas.
The question is, will the same dynamic transfer to the buyer market? Thinking of consumer companies like Fresh or Al Arabi, will they invest in consumer sentiment analysis, instead of relying on the hunches of a few people who work in marketing or who have climbed up in the chain in customer service. Yes, these companies do hire market research firms like Ipsos or Nielsen to conduct market research. However, that market research tends to rely on smaller sample sizes (40 people is the typical number), as it is more qualitative than quantitative. That market research would be quite nicely complemented with a data-driven approach to customer sentiment analysis. Further, the benefit of using something like CrowdAnalyzer, which analyzes social media posts, gives far more insight to companies, as these social media posts tend to be far less polished than interviews with a research analyst coming from one of the established firms.
Potential founders who are debating wheter to focus on technology problems that are harder to solve and sell, but generally make higher margins, need not worry. The investors realize that the pie now must be smaller, but as the enterprise market matures, the money will come, and the investments made will return multiples. Instabug has been quite for a while, but it now boasts some of the strongest names in the App Store as its clients. CrowdAnalyzer is expanding rapidly, hiring at all levels of the organization to expand its footprint. Additionally, Elmenus raised $1.5 million to go beyond a simple menu website and app, and offer ordering, payment and reservation platform for users and restaurants. Investors clearly see the larger some of money will be coming from the enterprises in the near future and they are betting on a handful of companies to deliver competitive technology solutions, and provide them with the 10x returns.
Having just read a great article on the Business Insider, I feel like I need to speak about my own ambitions in the arena of virtue.
The article discusses the 13 virtues that Ben Franklin outlined as the virtues he wanted to work on and improve. I don't have a list of virtues, per se, but I have a list of habits that I would like to develop and maintain. However, after reading the article, I think maybe I should add some true virtues to the mix.
Something that I have been wanting to do on a daily basis, is the simple act of writing down my goals for the day, every day. This may seem as very simple and trivial, but I find that orienting yourself throughout the day with some goals is a really excellent way to be more productive.
Another habit, is what I am doing now, writing more. I don't aspire to be a writer full-time, but I find that writing teaches us the importance of clarity of thought, which almost always translates into clarity of prose. Training my mind for the clarity needed on the daily job grind is a worthy goal in my view, and something that will come in handy whether I am writing or doing something else unrelated. Clarity is the goal here.
Lastly, a habit that I intend to really develop in 2018 is what I will call organized persistence. I often find myself juggling multiple tasks that all seem to take way longer than any of them should, and I believe that's a combination of a distracted mind, and a lack of pure persistence. I want to develop a methodology that allows me to be persistent about my goals and tasks, and be organized in that persistence so that I end up finishing my tasks in a reasonable timeframe. Duration is not the only goal, however, but quality as well. Jumping from task to task ends up in the quality of the products deteriorating, and organized persistence will help me raise the quality of what I work on, as well as lower the time it takes me to finish what I am working on.
Read Ben Franklin's tips, for a look at virtues that one should develop. For my short and sweet habits, I think 3 is way more than enough.
As someone who has had quite a few (and almost too many) interviews lately, I have a few observations about work, corporations, and life that I have to share. Some of this is pure and shameless complaining, and some is just an honest reflection on how far out of touch with reality corporate culture has gone.
One of the many themes that come across during interviews is the idea of the superstar. Companies now truly expect everyone walking through the door to be a superstar. You should have figured out how to do this job even before you hit the apply button. For some roles, I understand that you may want someone who's ready to go. However, for the vast majority of roles, the person who's applying is hoping to move up, learn something new, take on some extra responsibility, and develop as a person. Pointing out to them, and expressing dismay, that their previous experience doesn't reflect their ability to fulfill the full responsibilities of the role is just pure ridicule.
Another pain point I have with large corporations is the asymmetry of commitments. Most companies are perfectly willing to ask you to make commitments, push targets on you, or impose entirely arbitrary timelines, and in return make very few commitments themselves. Partly because of the often complex liability and responsibility structures, such an attitude overwhelms and frustrates those on the other side. Many times in my experience, there doesn't appear to be a clear decision maker. The intricacies of hiring aren't always clear to those on the receiving end, and they often get confused by who is asking the questions, who is sending the emails and who is making calls.
Lastly, there is a prevailing idea at most corporations, that truly stifles career mobility: the fact that since you are now doing A, you should continue doing A. I have faced this a few times, when I have applied for roles that aren't similar to the role I currently occupy. I always get the question: Are you sure you want to do B, after doing A for a year? This baffles me. It baffles me that the idea of change appears incomprehensible to others. One isn't born for a certain career. Most skills are transferable. You could always learn something new, and the idea of doing the same thing forever really doesn't apply unless you're a doctor. My mom was a physician for 35 years, and even she will claim that while most cases are somewhat similar, all of them were still unique. I witnessed this first hand, as she and her team would sit for 15 minutes before every surgery, walk through their plan, and almost always change a thing or two based on the patient.
I have way more to say about this, and I think I would like to write a bit more about the mental models that anchor people to certain judgements about career, hiring and firing.
Whatever content this experiment is going to house is a topic that has been on my mind recently. The truth of the matter is, I don't have such deep expertise in one area of work that I could devote an entire blog to. My day job as a Business Analyst does not yet merit its own blog, even though it is rather interesting. This blog, then, will cater to a different need and a higher urge.
As many of you, on daily basis, I read a variety of blogs, I encounter concepts and ideas I am familiar with either through formal education or interest and inquisition. But, as a mere reader, I never consider these ideas in depth, but only in passing. This blog aims to correct and offer a space for me to consider in depth some ideas I find interesting to a 25-year-old (at the time of writing) aspiring successful entrepreneur. I am just starting on a journey to build a solar energy company, and spread the gospel of clean energy in Egypt and the Middle East.
This blog will be a vehicle for me to consider ideas - in business, in life, in morality - that I find compelling and merit discussion. However, this blog will have some overarching themes. One of the themes that you will find common between many of the coming posts, is organization building. I am interested in what would it take to build an organizations that attracts quality caliber, and inspires them to do great work.
Another theme is that will come across in this blog, the prevalence and role of technology in our lives. It is a well-beaten horse, I know, but in the energy world it still takes a back seat to economics. Further, as a West-educated Middle Eastern, I hopefully have something to add from those two perspectives.
Every once in a while, I take a look at what I would like to read for the next 2-3 months. I find that timeline much more digestible than yearly lists of reads. I discover new and great books all the time, and having the flexibility to priorities and change the order of books I will read is very important to me.
At the start of 2018, I sat down and considered the books that I would like to read during the first months of the year. There are 2 short books that I have already finished, which is great, and there a few that I am either working on or have yet to start.
A booked that overlapped between 2017 and 2018 is Essays by Ralph Waldo Emerson. It's a collection of essays and speeches by Emerson that outline and dive deeper in his philosophy on a lot of topics, ranging from gifts to the significance of academia, and the then-new era of Americanism. It is a difficult, but worthy read.
In 2018 so far, I started and finished two of Harry Frankfurt's great books, namely On Bullshit and On Truth. The first discusses in depth what the differences are between bullshit and lying, and how to distinguish the two. Frankfurt also discusses the importance of being able to identify and separate the two.
On Truth, is an antidote to On Bullshit, offering a succinct discussion of what is truth, and what it serves in our day to day lives. Further, Frankfurt highlights the value of truth to our well-being and the well-functioning of society.
In the vein of On's is Timothy Snyder's On Tyranny, a great short book that identifies twenty lessons from the twentieth century that represent key takeaways from his observations as a historian. I have just started the book, so I will write a longer blurb once I finish. However, having only read two chapters, I can still say that the book is particularly relevant for 2018, as this year appears to be rife with attempts at tyranny all over the world, and in particular in the United States.
Lastly, a book that takes me in a different direction is Power: A Radical View, by Steven Lukes. Lukes is interested in the theory of power, and how power is represented, applied and considered in politics. It is a heavily theoretical book, but still easily digestible.
With those, I think my 2018 is off to a great start in the reading realm. I have many books still to be read on my Kindle, and an ever-expanding list on my Amazon account.
One of my new year resolutions, I actually prefer to call them goals, is to write more. I believe that creativity and good ideas are inherent in all of us. We just have to get out enough of the crap in our heads for the good ideas to shine. So, to generate some good ideas, I am going to be writing a lot, to get rid of the layers of rubbish ideas and thoughts in the hopes that good ideas and thoughts will find the air to breathe.
Another reason why I will be writing is to get some good practice in formulating arguments, thoughts and ideas. I am a fairly well-spoken individual, but I haven't been writing since my college days. Writing, like any other skill, needs constant exercise and practice. Applying myself to writing everyday will result in a) a solid record of writing and analysis that I can look back on and reflect; b) a prepared and ready mind to write when the time comes for me to write something truly good, I will have had hopefully years of practice.
So, there it is. I will be using Standard Notes' lovely Listed feature to publish a daily blog, the content of which will be the focus of the next post.