The $3.1 Billion Exit: Careem vs. Uber

[00:00:00] $3.1 billion. That's what Uber paid for a company built from Dubai. Everyone said it couldn't happen from here, but it started with something much, much smaller. A man who almost died, asking himself what his life was actually for.

[00:00:20] "For me, the journey was, I was happily consulting away, as a consultant in the region, enjoying myself. I had been in the Middle East now, it's been 11 years, so I've been here since 2006 and really enjoyed what I was doing. But my life took a bit of a turn. I had a, brain bleeding out of nowhere. And, very long story short, I survived, which was great. But it really gave me an opportunity to reflect on life and, you know, what's life? Why are you here, and what's your purpose and why are we all running around? And what are we gonna do with the time we have here? And, while I was very happy at McKinsey, I realized that my, this is not my ultimate purpose. I need to do something really, meaningful and big. So I quit and went looking for that purpose."

[00:01:12] A near-death experience, a decision to find meaning a consultant who walked away from the safe path. His future co-founder came from a different starting point, but arrived at the same conclusion. Mudassir Sheikha grew up middle-class in Pakistan.

[00:01:32] He'd seen what the region lacked, and after years building a career in the US, he felt the responsibility to come back.

[00:01:40] "So I grew up in a middle-class family in Pakistan, you can't take water for granted. You can't take electricity for granted. But as soon as I went to the US. You just see a different way of living. When I graduated from college, you know, I had a sense of responsibility towards the region. I've seen the, the hardship. There is some giving back that that should happen."

[00:02:00] Two founders, one given a second chance at life. One, wanting to give back to a region he loved. Neither had built a company before. Neither had the playbook, neither knew what was coming. That outcome wasn't luck. It was designed. And in the next 30 minutes I'm going to show you exactly how they did it and why it's more replicable than anyone's told you before.

[00:02:24] I'm Adel, and this is Exit Builders. Before we go further, I wanted to be honest with you about why I'm making this. I've spent over 20 years in the region startup ecosystem. I've seen brilliant founders build amazing things. But then struggle when it came time to exit. Not because they lack talent, but because no one taught them how to build with acquirability in mind.

[00:02:53] Careem changed that conversation, not because they got lucky, because they understood something most found miss.

[00:03:02] "This purpose of Careem, remember that we talked about in chapter one? Simplify the lives of people in Berlin, also an organization that inspires. We are extremely early in this purpose. Mm. There are 500 million people that live between Morocco and Pakistan."

[00:03:15] Not the valuation, not the exit, the purpose simplifying lives, building something that inspires the billion-dollar outcome, followed from that clarity, not the other way around.

[00:03:31] The startup world loves to celebrate unicorns. We just love it. They'll point to Careem and say, dream big enough. And you can do it too. That framing gets it backwards.

[00:03:43] "The thing we were looking for back in 2012 was we wanted to build something and we knew it had to be meaningful and it had to be big."

[00:03:53] "There was also a need to create inspiration. There was also a need to create confidence and self-belief that these big things can also be done. From here."

[00:04:01] From here, I want you to sit with that phrase. Big things can also be done from here, not despite being here, not even though we're here from here. As an advantage, this wasn't about copying Silicon Valley, it was about proving that emerging markets could build world-class companies on their own terms.

[00:04:31] "And, when the deal had happened, I think our monthly active users was 5 million. So the 500 million people, we are only simplifying the lives of 5 million on a monthly basis. Wow. Which means that there is at least a hundred x more people that we should be helping."

[00:04:46] 5 million users, 500 million potential. They were 1% of the way there. The exit wasn't the end. It was a strategic move to unlock the next chapter. Unicorn status is an outcome. Driven by market timing, funding cycles, factors outside your control. Equability is a design choice, driven by how you build, how you position, how you operate, completely in your control, and in emerging markets. That design choice is actually easier to execute than in Silicon Valley.

[00:05:30] If you are building in MENA, in Africa, in Southeast Asia or even in Latin America, you've heard the doubts your market is too small, too fragmented, too risky. I'm going to show you why that thinking is exactly backwards. What looks like a disadvantage in the unicorn lottery becomes an advantage when you are building strategically.

[00:05:59] Careem understood this from day one while Uber optimized for global scale, Careem optimized for local depth.

[00:06:08] "Being a consultant in the region. In my prior life, I traveled a lot everywhere. I had this one guy that I had met once. So you call him and you're like, "Naushad, are you free? I'm in Doha airport" and he's like, "oh, I'm busy, but I'll send my brother, I'll send my cousin." If you're lucky, you get to your destination, it's probably an important meeting. So you have to be on time. You have no idea about locations. You have to haggle on the price. You get the little handwritten receipt that you don't even know what it says 'cause it's in Arabic. So the whole experience was, you know, quite choppy, to say the least, right?"

[00:06:36] One year in four cities already, they diagnosed the core problem. An entire industry that hadn't caught up to technology. Global players saw emerging market chaos, too messy. Careem saw opportunity to capture it. They identified three types of gaps. These same gaps exist in every emerging market. The specifics change, the categories don't. You don't need to solve gaps across 22 countries. You need to solve them in your city, your vertical better than anyone else. That's equability and it's learnable. A cultural gap is the disconnect between how a company thinks things should work versus how they actually need to work.

[00:07:30] "Force ourselves to go live and do the first trip at six weeks, even if it meant that we were processing the entire trip manually. So the first version of Careem was essentially a very simple booking form. So when you put in your pickup address and your drop of address and your timing, what actually happened on the backend was that we got an email with your booking, and that email went to a phone that had a very loud ringtone. We manually sent an SMS to the customer. You know your Careem is on the way. We basically had to call these captains one by one, and mind you, back then we had no technology in the cars, so we had to manually, guide the captains over the phone. From a customer experience, it looked relatively professional, but in the kitchen it was, a complete zoo."

[00:08:11] A complete zoo. This is how a $3 billion company started.

[00:08:18] "If you think of it, we are basically a value added aggregator of, cars in the Middle East, which means that we don't have our own cars and drivers. We basically are a operations and technology layer on top of existing providers. What that basically means is when a booking comes, we find the most eligible driver for that booking, and we dispatch the booking to that driver. Now, it doesn't mean that we wash our hands of the booking, and then you deal directly with the driver. Not at all. We take full responsibility of the delivery of the service, and we give you the customer service as well."

[00:08:50] We take full responsibility. They didn't own the cars, but they owned the customer relationship, the quality, the trust. When Careem launched, over 85% of transactions in the region happened in cash. Most Western companies saw this as a problem to solve.

[00:09:12] "Look, we didn't know anything about the transportation business, and what we learned. We learned from Captain Nasir and many people like him. Is he okay? Okay. Back then, a captain or a driver was not necessarily considered on an equal basis that on the passenger sitting in the back. In our view, captains are as important as pilots in a plane. They care for us and make sure we reach our destination safely."

[00:09:38] They learned from Captain Nasir from the people doing the work. That humility is the foundation of bridging cultural gaps.

[00:09:47] "From Sweden. My first idea was that, of course we go Ikea, they have cheap furniture. And you were like, what do you mean buying new furniture? Of course we're not gonna buy new furniture. Yeah. And then I think we, we found this place somehow. There was just a culture that we wanna set in place, which was going to be frugal. We're gonna do a business that has low margins and just wanted to set the right tone from the beginning."

[00:10:07] Used furniture. For a company worth $3 billion, Careem thrived on 20 to $30 million in early capital, competitors burned through over a hundred million dollars. What cultural assumptions is your industry making about your market that don't actually fit? Leave your comments in the comments section below.

[00:10:34] Gap two, infrastructure. An infrastructure gap is when basic systems that developed markets take for granted simply don't exist. Google Maps was unreliable across the MENA region. Addresses didn't exist. Global companies waited. However, Careem built their own.

[00:11:00] "So putting pressure on their tech systems designed to handle thousands of customers, were now supporting millions. As the service gained traction across the region, small cracks became major events. We ran our entire call center from Dubai Media sitting on the 28th floor. One day we get this little notice slipped under the door saying that there will be a electricity outage planned by the building because they were running through some maintenance. No electricity means no servers, so we will. Have a proper downtime of not serving our customers and captains. What can we do? And then someone just said like, should we borrow electricity from one of the plugs by the lift, where actually it's a emergency? And even if the light kind of goes off in the building, that switch might work."

[00:11:43] "We ran down, we bought every extension cord we could find, and we essentially moved all our call center systems into the hallway or through extension cords connected to where the elevators were. To be honest, we were successful and we only had a downtime of five minutes. None of the customers or captains knew that we were going through this crazy shit in the office, but I think this was the start of being bold. What actually meant in one of the values."

[00:12:07] Five minutes of downtime, running extension cords through hallways, not just resourcefulness, the mindset that builds companies worth acquiring.

[00:12:18] "So if you go to many of the cities and countries that we've gone to, and these include. Places like Pakistan, Iraq, Palestine, Sudan, we've had to build a lot of the basic infrastructure that you need to operate a service like ours, which includes, we've had to build our own location database, our own maps, our own payment systems, our own messaging systems, our own call centers, and a lot of that infrastructure that we have built in the process of building a right healing business. Now can be leveraged and can be the building blocks of other services."

[00:12:48] Their own maps, their own payment systems, their own call centers.

[00:12:55] "From twenty eighteen nineteen, I think, we developed a tool called a Macken. This tool was to add locations to our database. The team really took it to the next level. We thought, we will start going to every community in Dubai. And start mapping these villas, these you know, HTLs, which is like your high-density locations and improve and offer a very personalized experience for our customers. The team on the ground actually went community by community, added close to 60,000 new locations in Dubai in like less than two to three months. And we started offering, showing up these to our customers on the app. The, the experience was phenomenal. Customers loved it. They were shocked also at times how they knows which villa and best part, the matching the car came at the right location. Right, and then what was the, the task ahead of us was how do we scale this? Right? This is where, again, teams showed great intent. We used, our own resources to kind of scale this to other markets. And, till date we have close to. Half a million locations, which Careem has added, where we actually promote these locations over the third party or Google locations, which helps us save a lot of cost as well."

[00:14:17] Half a million locations mapped by hand. When the infrastructure gap is wide enough filling it becomes your competitive advantage. The lesson isn't about maps; it's about identifying the infrastructure gap that global players won't solve. Or they're not willing to invest the time and effort and solving it yourself.

[00:14:42] What's the infrastructure gap in your market? The thing everyone complains about, but no one's solving it. Institutional gaps. The fragmentation of laws, regulations, and systems across markets. Most founders see regulations as obstacles to fight. Careem saw them differently.

[00:15:03] "Many companies feel that unless they're disrupting something, they're not really like a cool company.

[00:15:08] Definitely not a cool tech company. Not worthy of becoming a unicorn. But our view at Careem is really that if you look at this region, which by the way is an amazing region, 700 million people, average age is 25, super well connected. It's like, it's like a gold mine, but there is so much pent up demand for great services. So you don't actually really have to go and disrupt much. There isn't much legacy infrastructure or much legacy businesses that are. It really in the way or at the receiving end of being disrupted. So we really see ourselves as an enabler in the region. We are enabling use cases that previously weren't possible."

[00:15:42] Enabling, not disrupting. That mindset shift changed everything.

[00:15:48] "Just a couple hours into trying to get a laptop and an email, one of my colleagues said, Hey, there's a meeting with the RTA, this is, this is your future role, so you should join me. The topic was, you guys are operating under no law right now, and, this is not gonna happen in Dubai. And I'm like, oh, man, what did I just join?"

[00:16:07] You are operating under Nolo. Welcome to Pioneering in Emerging Markets.

[00:16:14] "This guy basically told me, look, you'll be shut down. 10 of our captains, were taken by the police. An hour later, five more, four more. When we were standing in court at, at the Islam HAI Court, the gentleman from the, from the transport authority kept talking about garage laws. The honorable judge paused the hearing and said they're doing flying taxis in the us And here you are standing in, in my court and talking about carriage laws. Go and work with these people. Then go and meet, lawmakers together and go create a new law."

[00:16:49] The judge got it. Work with these innovators, create something new. Careem's response was adaptive and Jordan. Yellow taxis and Aman Marhaba taxi. Global players optimize for uniformity. Emerging market winners optimize for depth. Three gaps. Three layers of competitive protection. None required. Uber's capital. It required insight, a playbook, learnable. If you are watching this and thinking about your own gaps, I want to hear about them. Drop a comment. What's the one gap killing your growth right now? Is it cultural infrastructure or institution? I read every single one of them.

[00:17:37] Saudi Arabia, where everything came together. Before June, 2018, women couldn't legally drive, but 80% of Careem's customers were women. So Careem built features like call masking emergency buttons, women-staffed call centers. When the ban was lifted, 10,000 applications from women wanting to become captains.

[00:18:05] "A few minutes ago, a royal decree has been issued in Saudi Arabia. Giving women the right to drive. When the decree came out in 2017, we are talking about Saudi, where everybody I know was dreaming about that day and then suddenly was there. There was such a hunger and such an eagerness to just jump on it. So I think it took us about half an hour saying that we create X many capina jobs. In Saudi, the decree was out at nine. At 10 30, the tweet was out with a ready-made video, which was so powerful and so genuine. it was even shown in the Royal Court. It went completely viral."

[00:18:44] Shown in the Royal Court. You can't manufacture that with marketing budgets. For years, Careem owned their markets city by city, and then the global giant arrived.

[00:18:58] In 2013, Uber entered Dubai to understand how unlikely survivor seemed.

[00:19:04] "Well when I was about to sell my company and wanted to Careem, people told me, Abdullah, you are going to sell your company. That's good, but why do you want to join Careem at the same time? You're joining Careem as a co-founder, and you are actually jumping on a very small company, which Careem was at that time. I'm talking about, a time which is roughly 15 months ago where Careem indeed was, was small. And there was this other company, against which Careem was competing, which was kind of big."

[00:19:41] A very slow. Death. That was the consensus.

[00:19:47] "There was definitely sort of a freakout."

[00:19:50] "A holy shit moment. They were like, holy shit. You know, Uber clearly had an app. It was quite well developed. They had technology. They also had a lot of money already in the bank, and they were basically out there to kill us. I remember being on the calls with captains. These captains were telling me that they're offering me so much money. That I also need to look after my family."

[00:20:09] Investors panicking, captains being poached. Everyone assumed it was over. Everyone except the founders.

[00:20:18] "To say we had to hit the ground. Running is kind of an understatement, right?"

[00:20:21] "And not know if we were gonna survive or exist at all."

[00:20:24] "They would call all our captains, tell them to stop working with us explicitly by name."

[00:20:29] "It was the bad boy of tech that was entering our market."

[00:20:32] "Our investors were freaking out, and I think the only one that did not freak out was Mudassir."

[00:20:38] "Magnus and I said, let's time out. Let's see how we are gonna compete and overcome this challenge."

[00:20:43] "We realized that we were not gonna beat them at tech, but we could definitely beat them on the emotional side of things. Because we were from the market."

[00:20:51] We were from the market. The key insight, they didn't try to out Uber. Uber. They asked, where can we win that? They can't. The answer, the emotional side, the relationships, the cultural depth. Uber's playbook worked in most markets, Southeast Asia. They merged with Grab China, sold to Didi, but the Middle East was different. Remember Abdullah? He was told that Careem would die a slow death 15 months later in Saudi Arabia alone. Careem had grown 50 times. Uber had more capital, but Careem had more depth. You can't outspend the giant but you can out know them.

[00:21:46] By 2018, Careem had 16 million customers. Uber had spent hundreds of millions and still couldn't match Careem death. The founders face the question, most startup advice never prepares you for. What does winning actually look like? They realized the opportunity wasn't just Careem focused on Careem it was the entire region expand into it.

[00:22:15] The ecosystem that needed proof, that big exits were possible.

[00:22:21] "And that can continue to inspire in the region."

[00:22:23] "What changed our mind was actually a discussion that we had with one of our investors that if you continue to hang on to Careem and not do this deal, you're actually going to be selfish because this deal with Uber for Careem would be an incredible validation of the ecosystem in this region."

[00:22:42] Selfish, that word reframed everything. The exit wasn't giving up, it was unlocking.

[00:22:53] "So for us, this deal, while I think the world thinks that it's, it's a big deal for us, it's chapter two. It's not an end of a story. It's not an end of a book. It is really. Turning page from chapter one to chapter two. So for us, this means that, we have a, a very strong partner and a backer, in Uber, that will help us further pursue our, our purpose, which still remains exactly the same, to simplify and improve the lives of people in the region."

[00:23:30] March, 2019. Uber acquires Careem for $3.1 billion.

[00:23:36] "So of course, a couple years ago now, the souq.com Amazon buyout, that was only for around $650 million. I mean, this dwarfs that significantly, as you know. And I think that that's going to, to really drive the conversation in the coming years, not just about regional investment."

[00:23:51] Five times larger than the previous deal.

[00:23:56] "I'm very excited. I feel that this will put, the region even more on the map. You know, when we have gone over the years to seek money outside, you still have to pitch the region pretty hard. It's not, a given for, for international investors to invest here. So, you know, with the souk thing happening with the, that happened, property finder happened, big investment, and now us I think the world is going to pay a bit more attention. So this is great. And the second thing that happened is. Some of our amazing investors and partners over the years will get some liquidity. and, you know, we all hope that will come right back into the, into the ecosystem. There are exits in the region. Yes. Yes, exactly. So we'll come right back into the ecosystem, and even excite even more LPs and investors that man, you can actually invest not just for doing good."

[00:24:53] Of course, the world is gonna pay a bit more attention. The flywheel spins.

[00:24:59] "Public recognition, of course, feels good, but at the same time, this is really just an external signal."

[00:25:05] "Looking back, it feels big, but in that moment it actually didn't feel so big to us."

[00:25:11] "When you're inside the company, you know all the things that are breaking or on the verge of breaking, and so you can see this external sort of recognition with a little bit of amusement."

[00:25:24] "We definitely celebrated it. We felt good about it."

[00:25:26] "I went around telling everyone, called my parents saying, 'Guys, we're a billion dollar company. We're a unicorn."

[00:25:32] "And we sat more or less in a circular. Yes. And we had some balloons and we had a cake. Yeah. And that was sort of like, okay, billion dollars, have some cake. And then, like, you know, it goes back to work. We are like always looking at the next challenge and the next frontier."

[00:25:47] Have some cake, then get back to work. Come on. I expected more than that.

[00:25:52] "We have also heard from the Uber CEO, Dara Khosrowshahi, in an email to staff that CNBC has in terms of the overall structure, in the decision to keep Careem as an independent brand and to keep Uber operating in the region. He said, after careful consideration, we decided that this framework has the advantage of letting us build new products and try new ideas across not just one, but two strong brands."

[00:26:17] Two strong brands. Uber didn't buy Careem shut it down. They bought Irreplaceability. Perfect example of Equability in action. When I started studying Careem's journey, I expected brilliant strategy and perfect execution. What I found was messier, more human, more encouraging. Used furniture manual, SMS messages, extension cords, borrowed from elevator outlets. Two founders who didn't have the playbook, so they wrote their own, not a unicorn story, an entrepreneurship story.

[00:27:00] The question isn't whether you can build a $3 billion company. The question is, can you build something so irreplaceable? That the right acquirer can't afford to ignore you. Careem proved it's possible from here.

[00:27:17] "I remember this was late at night. I think 10:00 PM or even a bit later, I called a Careem to the office in Dubai. A captain picked me up and on my way to my home, you know, we had a conversation and at the end, the captain said. I'm really grateful for what you and Careem has done for me because of my earnings with Careem. I've been able to send my kids through school. I've been able to do this for my family, this for my family. And he said there are tens of thousands of families in Pakistan that you have enabled to do things as a result of doing Careem. That's powerful. You know, when you see that impact day to day in every ride that makes you feel you're onto something, important and also makes you feel responsible that, if I have the ability or if we have the ability to make this kind of impact, why should I not keep doing it? You know?"

[00:28:23] Tens of thousands of families' lives changed.

[00:28:28] "For all the blessings that have happened. We feel a sense of responsibility to keep going. And in Shalla, build an Amazon or Google type of institution from this region because we believe that if we can build one, then there's a lot of value that we can create and overcome a lot of the shortcomings of our region, right? Whether these are political economic systems, not fragmentation in some of our countries, the fragmentation and so on and so forth."

[00:28:53] Your exit can be this too, not just a transaction, a statement.

[00:28:59] That's it for episode one, the Careem Blueprint. Thank you for tuning in next month, a Kuwaiti entrepreneur who bought a tiny startup, a food delivery startup for a few thousand dollars, and then after 10 years, he sold it for hundred $70 million to a German company.

[00:29:20] Talabat, some of you already know them. We'll be talking about the first Movers Advantage. Different playbook, same principles. If you're serious about building something, acquire.

[00:29:32] Hit subscribe one episode every month for 12 months. After that, we'll see. I'm Adel.

[00:29:41] This is Exit Builders Build something they have to buy.