Dubious
RETIRED MOD
- Joined
- Jul 22, 2012
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Osman Husain
4 hours ago
To say that ridesharing and taxi startups are doing well in Asia would be a massive understatement. GrabTaxi, the undisputed leader in Southeast Asia, has achieved unicorn status despite only being in operation for a little over three years. With over 3.8 million mobile app users and 75,000 taxis on the streets, the startup has well and truly arrived. In China, local startup Didi Kuaidi is estimated to churn out approximately 3 million rides every single day. There’s a similar battle in India, where Uber, Ola, and TaxiForSure are locked in a dead heat against each other.
Venture capital firms haven’t been afraid in backing these on-demand transport startups to the hilt either. Uber is valued at US$50 billion, despite rumors of bleeding losses and negative cash flow. GrabTaxi secured US$250 million in series D funding late last year to continue its aggressive expansion plans. And, in India, Uber seems to be determined to improve its image and swat away competition by announcing plans to invest US$1 billion in the country.
Investors are clamoring to back these startups while the general public happily try out new ways of getting around.
Getting ripped off
It’s easy to credit the traction witnessed by ridesharing startups to a wider view of the efficiency and efficacy of the sharing economy. While this is precisely what made Uber so disruptive in Western markets, Asia is a totally different beast altogether. GrabTaxi and Didi Kuaidi do not depend on the peer-to-peer model for their supply of cars; instead they tap into existing cab drivers and convince them to use their app to find customers.
Obviously, this requires massive amounts of fieldwork as well as monetary incentives for cabbies, but it’s clear the efforts are paying off. Part of the reason local startups have been able to beat Uber at its own game has been their willingness to get their hands dirty and lock in supply. Uber’s reluctance to localize its model hasn’t helped either.
It’s also fair to say taxi services in most of Asia are unreliable, inefficient, and borderline risky. Metered cabs are few and far between, with drivers preferring to set pre-determined, often exorbitant rates instead. Cars are usually not maintained very well, and the experience can be fraught with risk, especially for women and disorientated tourists.
That’s a big part of the reason why Anthony Tan, GrabTaxi’s founder and CEO, chose to build an on-demand taxi app. “We started GrabTaxi because the taxi system in Malaysia was a mess. Drivers weren’t making enough money and hated their jobs. Women couldn’t go around safely. We needed to do something about it,” he explained to Tech in Asia earlier this year.
GrabTaxi is now expanding fast across the region. It’s not hard to see why people need it. First, consumers were aware that startups like GrabTaxi would only accept drivers into their database after strict background and verification checks. They felt safe and comfortable. Drivers understood they would be tracked through GPS and therefore forced to be on their best behavior.
Second, rates were pre-determined and set by the company, and not based on the individual whims of the driver. Consumers had choice in payment options, with both cash and credit cards accepted. Most importantly, however, startups harnessed the power of the internet to break down barriers to information. They created direct links between demand and supply, and provided a monitoring system which, although Orwellian, ensured complete transparency. The model worked.
Pakistan rolls in
All this talk of on-demand transport in Asia usually centers on markets like China, India, Indonesia, or Singapore.
Pakistan, however, is not on the map.
That’s despite Pakistan being a large market, with a population touching on 200 million, approximately 35 million of whom reside in the urban centers of Karachi, Lahore, and Rawalpindi/Islamabad. GDP per capita in the fiscal year 2014-15 was estimated to be US$1,513, not too far behind India’s US$1,630. While credit card usage remains very low, that’s not too different from other countries in Asia, and startups have managed to work their way around by accepting cash payments.
There’s considerable room for improvement in Pakistan’s high-speed internet infrastructure, but there’s enough growth and users to suggest tech startups can be disruptive. The telecommunications regulatory authority counts 13.5 million 3G/4G users across the country, out of a total of 114 million mobile connections. Not bad, considering high-speed mobile internet services were only launched towards the latter half of 2014.
With 70 percent of the population still under 30 years of age, there’s enough reason to suggest mobile internet usage will continue to rise and there will be enough early adopters willing to try out new services.
Pakistani consumers have disposable cash, smartphones, access to the web, and an apparent willingness to follow trends. Why aren’t ridesharing and taxi app startups proving themselves to be more effective with a formula that’s tried and tested in the region?
“Pakistan is a peculiar market,” says Adam Ghaznavi, general manager at Careem, a new transport startup which launched in the country a few months ago. “We’re essentially developing the market as demand for taxis isn’t as high as it is in other countries. There’s less emphasis on using cabs for getting around.”
Ghaznavi is in a unique position of explaining developments in this industry. He was previously employed as the country manager for Pakistan at EasyTaxi, a Rocket Internet-backed taxi app that quietly wrapped up operations last year. However, he is seemingly confident of success in his latest role.
“We’re different from other aggregator startups in the sense that our core focus is on user experience. There are strict standards and guidelines we have to adhere to, in order to make sure that the experience is at par with our services in the Middle East,” explains Ghaznavi.
Careem, a Dubai-headquartered startup, serves 14 cities across the Middle East and raised US$10 million in funding late last year. One of its co-founders, Mudassir Sheikha, has Pakistani roots, which may explain the decision to enter the country.
Ghaznavi goes on to explain that the failure of EasyTaxi in Pakistan should not be construed as an indication that the country is not open to web-connected ride services. He says some key decisions were made without the support of the local team and investors needed to show more patience and willingness to stay in the country for the long haul. “We were ahead of our time, and while traction was building, we needed more support to prove ourselves,” he explains.
Ghaznavi’s view is echoed by Ahmed Khan, former managing director at Rocket Internet, and the person who was tasked with establishing all the ventures in Pakistan. “They insisted on doing things in a particular manner, such as booking rides exclusively through the app. We tried to explain to them that the market wasn’t ready for this, but to no avail,” he says.
Grassroots growth
Careem’s strategy towards building the market, raising awareness, and locking in cab supply is reminiscent of GrabTaxi’s approach in Malaysia when it was first starting out. Ghaznavi says the startup refers to cab drivers in its roster as “captains” and offers them a range of monetary and medical benefits to sign up. While the majority of drivers in Pakistan do not belong to any formal sector, Careem requires they undertake strict background and verification checks to ensure safety and security for the app’s users.
“Despite the unstructured nature of the taxi industry, there’s still a semblance of a laissez-faire model,” he explains. “Drivers also look out for each other’s’ interests, and operate as part of a loose union. We usually try to get the head of the union onboard with us to encourage others to follow suit.”
After accepting drivers into the Careem database, the team will also undertake random, surprise “driving tests” to ensure the cabbies know their way around the city and are reliable and courteous to the user. Fares for the ride are pre-determined by the startup, and can be paid in cash. However, to ensure transparency and avoid money being pilfered, drivers will hand over receipts outlining the length of the journey and exact charges.
Despite only running for three months in the country, Ghaznavi says drivers are fast adapting to this new model. They’re provided smartphones and are trained on how to use them. Careem is reportedly fulfilling “several hundred rides per week”, which may not seem like much, but is impressive considering there’s been negligible marketing so far. They’ve relied on word-of-mouth and encouraging friends and family to give the service a try.
The feedback Ghaznavi has received from customers has also been encouraging. “We’re starting to understand consumers aren’t particularly fussed about traveling in expensive models. What they want is a reliable, courteous driver who knows his way around the city, as well as a decent, clean, and presentable car,” he says.
Stuck in traffic
Savaree, the only homegrown ridesharing and cab app startup in Pakistan, is well known in tech circles in the country. Initially built for a civic hackathon, Savaree has been running for a little over 18 months, and was incubated both at i2i and Plan9, Pakistan’s oldest startup accelerators.
“We started off purely as a ridesharing service, targeting college students and working women,” says Qasim Zafar, former co-founder of Savaree. “However we changed our model after receiving a lot of inquiries for cabs. That’s when we understood market needs.”
Zafar, who left the startup a couple of months back citing differences in exit strategy, says he sees immense potential in Pakistan. “There’s a much higher quality of service, standardization of fares, flexibility in payment methods, no haggling with cab drivers or unpleasantness,” he explains.
For cab drivers, too, there are sufficient incentives to join, mostly in terms of time saved. “Taxis just roam the streets looking for customers. Lots of fuel is spent by drivers simply in search of the next ride. An aggregator service reduces this inefficiency and helps a cab driver in locating a customer closest to him,” says Zafar.
However, Savaree, which started in Lahore, has so far been unable to scale the service to other cities, barring a small presence in Islamabad. No transport startup has managed to introduce services in Karachi, Pakistan’s largest city with over 23 million residents.
Late last year, Savaree told Tech in Asia it was looking for quick roll-out in cities across Pakistan, before expanding to Dubai, Malaysia, and Indonesia. This seems to be on the back-burner for now.
Zafar reveals that while there was interest from investors in Savaree, the team wasn’t able to negotiate a fair deal. Further, his co-founders weren’t interested in selling the startup outright, and wanted to maintain a large equity percentage. Without funding, Savaree wasn’t able to scale at the rate he would have liked. “We were doing approximately twenty rides a day, which isn’t bad, but I would have liked to grow faster,” he explains. “Nevertheless, there’s big potential in the future, and it’s definitely an interesting market to be in.”
Madeeha Hassan, the current CEO of Savaree, declined to be interviewed. However, she stated the company has plans, which will be made public at a later stage.
Trust is hard (and expensive)
Almost everyone interviewed by Tech in Asia for this article outlined similar bottlenecks hampering the growth of the ecosystem. “The idea is still very new and people are not sure how [a ridesharing service] works, or what its benefits are,” says Saad Hamid, local tech commentator and communications lead at i2i. “To change perception you need a big marketing budget and startups aren’t exactly flush with cash to run advertising campaigns.”
The lack of access to capital is a common issue. Consumers in Pakistan are still hesitant to transact online. There’s an inherent fear of being duped and losing money. Businesses point to the burgeoning online community as a market they need to tap, but understand that their core budgets cannot be spent primarily on digital channels.
If consumers see billboards, television adverts, or even hear radio campaigns, they’re much more likely to trust an online service. But startups are bootstrapped, and cannot even think about running a TV ad campaign.
Hamid believes startups can also do more to educate consumers and position themselves better. Despite barriers, there are workarounds for the willing. “So far the few startups playing in this space in Pakistan have a very bad marketing strategy. They don’t know what to communicate to the user and how to get them on board. Benefits of brand recognition are enormous,” he explains.
“We’re spending a lot of money in training drivers, locking in supply, operational overheads, and promotions. It’s difficult to do expensive, offline marketing to build trust,” says Ghaznavi.
Zafar believes investors have to take a long-term view if they ultimately wish to be successful. He echoes the belief that consumers in Pakistan are more likely to trust a service if they see a billboard or hear about it on the radio. It’s not enough simply to build an app and hope people will download and use it.
Culture and technology adoption
“There are certain psychological and social barriers associated with sharing cars in Pakistan. They’re considered status symbols and people don’t want that to change. Making money by driving others around is considered demeaning, and frowned upon,” says Zafar.
This could partly explain why Savaree wasn’t able to get people to open their cars for ridesharing, forcing the startup to turn to taxis. Zafar reveals that in its early days, the team noticed there was enough demand for ridesharing along specific routes, but not enough drivers open to the idea of others hitching rides. It would require a big perception change to fix the problem.
Technology adoption rates are also an issue. Despite the fact that Pakistan is considered to be a mobile-first industry, with lots of consumers accessing the internet through smartphones, they’re still lagging behind when it comes to using apps for their day-to-day activities. Mobile payments are almost non-existent, with regulatory hurdles preventing any growth in the fintech sector. The preference for calling a helpline and booking a ride through an operator still exists. While startups can adapt and add offline support such as a phone hotline, this means added costs, as well as a greater turnaround time. User experience is affected, which could prevent repeat customers.
The tuk-tuk problem
The overwhelming majority of Pakistanis use auto-rickshaws (tuk-tuks) to get around. While cheap, these vehicles are stuffy, rickety, and offer little protection from the elements. They’re also a safety hazard, as their diminutive size means even small accidents could prove to be fatal.
However, they’re also the reason why on-demand ride startups are finding it difficult to compete.
“It’s very difficult to compete with rickshaws as they’re a low-cost substitute and plentiful in supply,” says Ghaznavi. “Most people who are willing to pay for taxis already have cars, while those who want the comfort balk at spending the cash.”
Ghaznavi believes the government can do more to help startups in this space. “A bit of subsidy would go a long way in helping us build traction,” he says. While that’s a fanciful thought, the government’s recent imposition of a 16 percent service tax on startups is an overwhelmingly bad idea, and one which will further restrict growth. Auto-rickshaws do not operate in a registered, regulatory environment, and therefore will largely escape this imposition. Unfortunately, startups will not, and the tax will ultimately impact their bottom line. It would be prudent for authorities to announce a tax waiver to encourage more entrepreneurs to dive in. Otherwise we’re looking at a huge barrier to entry.
Given the fact that the first target market for transport startups is working professionals, it would help if large corporations did more to support them. Currently, Ghaznavi says, efforts to sign up corporate clients have been futile. They’re not interested in working with firms they perceive to be small players.
“Awareness is our key problem. If we get big brands, or the government on board, then people will look at us as a reliable, trustworthy service. A little bit of help in pushing the message will go a long way,” explains Ghaznavi.
Zafar is of the view that Pakistan needs more entrepreneurs willing to hustle and do the dirty work if this ecosystem is to grow. “One thing lacking is execution. There are very few people willing to do the dirty work by getting on the road, speaking to cab drivers, and educating them of the benefits of an app.”
Tellingly, startups are almost always judged on the basis of execution and not just the idea they’re bringing to the table. Sure, there’s a problem you want to solve, and the solution you propose would theoretically work. But what sort of impact are you really making if you’re not reaching the right people or expanding fast enough?
The taxi industry in Southeast Asia was similarly broken and in dire need of disruption. However, that wasn’t enough. It took painstaking efforts by the most successful entrepreneurs to really prove themselves and their idea. Startups in Pakistan will have to make similar, concerted efforts for acquiring and retaining users if they wish to make it big. While the investment climate isn’t great, it doesn’t mean it’s impossible to raise money.
Nevertheless, everyone we talked to on this topic agreed on one thing: it’s just a matter of time before taxi startups really make it big.
Pakistan doesn’t want to be left behind in the Uber revolution
4 hours ago
To say that ridesharing and taxi startups are doing well in Asia would be a massive understatement. GrabTaxi, the undisputed leader in Southeast Asia, has achieved unicorn status despite only being in operation for a little over three years. With over 3.8 million mobile app users and 75,000 taxis on the streets, the startup has well and truly arrived. In China, local startup Didi Kuaidi is estimated to churn out approximately 3 million rides every single day. There’s a similar battle in India, where Uber, Ola, and TaxiForSure are locked in a dead heat against each other.
Venture capital firms haven’t been afraid in backing these on-demand transport startups to the hilt either. Uber is valued at US$50 billion, despite rumors of bleeding losses and negative cash flow. GrabTaxi secured US$250 million in series D funding late last year to continue its aggressive expansion plans. And, in India, Uber seems to be determined to improve its image and swat away competition by announcing plans to invest US$1 billion in the country.
Investors are clamoring to back these startups while the general public happily try out new ways of getting around.
Getting ripped off
It’s easy to credit the traction witnessed by ridesharing startups to a wider view of the efficiency and efficacy of the sharing economy. While this is precisely what made Uber so disruptive in Western markets, Asia is a totally different beast altogether. GrabTaxi and Didi Kuaidi do not depend on the peer-to-peer model for their supply of cars; instead they tap into existing cab drivers and convince them to use their app to find customers.
Obviously, this requires massive amounts of fieldwork as well as monetary incentives for cabbies, but it’s clear the efforts are paying off. Part of the reason local startups have been able to beat Uber at its own game has been their willingness to get their hands dirty and lock in supply. Uber’s reluctance to localize its model hasn’t helped either.
It’s also fair to say taxi services in most of Asia are unreliable, inefficient, and borderline risky. Metered cabs are few and far between, with drivers preferring to set pre-determined, often exorbitant rates instead. Cars are usually not maintained very well, and the experience can be fraught with risk, especially for women and disorientated tourists.
That’s a big part of the reason why Anthony Tan, GrabTaxi’s founder and CEO, chose to build an on-demand taxi app. “We started GrabTaxi because the taxi system in Malaysia was a mess. Drivers weren’t making enough money and hated their jobs. Women couldn’t go around safely. We needed to do something about it,” he explained to Tech in Asia earlier this year.
GrabTaxi is now expanding fast across the region. It’s not hard to see why people need it. First, consumers were aware that startups like GrabTaxi would only accept drivers into their database after strict background and verification checks. They felt safe and comfortable. Drivers understood they would be tracked through GPS and therefore forced to be on their best behavior.
Second, rates were pre-determined and set by the company, and not based on the individual whims of the driver. Consumers had choice in payment options, with both cash and credit cards accepted. Most importantly, however, startups harnessed the power of the internet to break down barriers to information. They created direct links between demand and supply, and provided a monitoring system which, although Orwellian, ensured complete transparency. The model worked.
Pakistan rolls in
All this talk of on-demand transport in Asia usually centers on markets like China, India, Indonesia, or Singapore.
Pakistan, however, is not on the map.
That’s despite Pakistan being a large market, with a population touching on 200 million, approximately 35 million of whom reside in the urban centers of Karachi, Lahore, and Rawalpindi/Islamabad. GDP per capita in the fiscal year 2014-15 was estimated to be US$1,513, not too far behind India’s US$1,630. While credit card usage remains very low, that’s not too different from other countries in Asia, and startups have managed to work their way around by accepting cash payments.
There’s considerable room for improvement in Pakistan’s high-speed internet infrastructure, but there’s enough growth and users to suggest tech startups can be disruptive. The telecommunications regulatory authority counts 13.5 million 3G/4G users across the country, out of a total of 114 million mobile connections. Not bad, considering high-speed mobile internet services were only launched towards the latter half of 2014.
With 70 percent of the population still under 30 years of age, there’s enough reason to suggest mobile internet usage will continue to rise and there will be enough early adopters willing to try out new services.
Pakistani consumers have disposable cash, smartphones, access to the web, and an apparent willingness to follow trends. Why aren’t ridesharing and taxi app startups proving themselves to be more effective with a formula that’s tried and tested in the region?
“Pakistan is a peculiar market,” says Adam Ghaznavi, general manager at Careem, a new transport startup which launched in the country a few months ago. “We’re essentially developing the market as demand for taxis isn’t as high as it is in other countries. There’s less emphasis on using cabs for getting around.”
Ghaznavi is in a unique position of explaining developments in this industry. He was previously employed as the country manager for Pakistan at EasyTaxi, a Rocket Internet-backed taxi app that quietly wrapped up operations last year. However, he is seemingly confident of success in his latest role.
“We’re different from other aggregator startups in the sense that our core focus is on user experience. There are strict standards and guidelines we have to adhere to, in order to make sure that the experience is at par with our services in the Middle East,” explains Ghaznavi.
Careem, a Dubai-headquartered startup, serves 14 cities across the Middle East and raised US$10 million in funding late last year. One of its co-founders, Mudassir Sheikha, has Pakistani roots, which may explain the decision to enter the country.
Ghaznavi goes on to explain that the failure of EasyTaxi in Pakistan should not be construed as an indication that the country is not open to web-connected ride services. He says some key decisions were made without the support of the local team and investors needed to show more patience and willingness to stay in the country for the long haul. “We were ahead of our time, and while traction was building, we needed more support to prove ourselves,” he explains.
Ghaznavi’s view is echoed by Ahmed Khan, former managing director at Rocket Internet, and the person who was tasked with establishing all the ventures in Pakistan. “They insisted on doing things in a particular manner, such as booking rides exclusively through the app. We tried to explain to them that the market wasn’t ready for this, but to no avail,” he says.
Grassroots growth
Careem’s strategy towards building the market, raising awareness, and locking in cab supply is reminiscent of GrabTaxi’s approach in Malaysia when it was first starting out. Ghaznavi says the startup refers to cab drivers in its roster as “captains” and offers them a range of monetary and medical benefits to sign up. While the majority of drivers in Pakistan do not belong to any formal sector, Careem requires they undertake strict background and verification checks to ensure safety and security for the app’s users.
“Despite the unstructured nature of the taxi industry, there’s still a semblance of a laissez-faire model,” he explains. “Drivers also look out for each other’s’ interests, and operate as part of a loose union. We usually try to get the head of the union onboard with us to encourage others to follow suit.”
After accepting drivers into the Careem database, the team will also undertake random, surprise “driving tests” to ensure the cabbies know their way around the city and are reliable and courteous to the user. Fares for the ride are pre-determined by the startup, and can be paid in cash. However, to ensure transparency and avoid money being pilfered, drivers will hand over receipts outlining the length of the journey and exact charges.
Despite only running for three months in the country, Ghaznavi says drivers are fast adapting to this new model. They’re provided smartphones and are trained on how to use them. Careem is reportedly fulfilling “several hundred rides per week”, which may not seem like much, but is impressive considering there’s been negligible marketing so far. They’ve relied on word-of-mouth and encouraging friends and family to give the service a try.
The feedback Ghaznavi has received from customers has also been encouraging. “We’re starting to understand consumers aren’t particularly fussed about traveling in expensive models. What they want is a reliable, courteous driver who knows his way around the city, as well as a decent, clean, and presentable car,” he says.
Stuck in traffic
Savaree, the only homegrown ridesharing and cab app startup in Pakistan, is well known in tech circles in the country. Initially built for a civic hackathon, Savaree has been running for a little over 18 months, and was incubated both at i2i and Plan9, Pakistan’s oldest startup accelerators.
“We started off purely as a ridesharing service, targeting college students and working women,” says Qasim Zafar, former co-founder of Savaree. “However we changed our model after receiving a lot of inquiries for cabs. That’s when we understood market needs.”
Zafar, who left the startup a couple of months back citing differences in exit strategy, says he sees immense potential in Pakistan. “There’s a much higher quality of service, standardization of fares, flexibility in payment methods, no haggling with cab drivers or unpleasantness,” he explains.
For cab drivers, too, there are sufficient incentives to join, mostly in terms of time saved. “Taxis just roam the streets looking for customers. Lots of fuel is spent by drivers simply in search of the next ride. An aggregator service reduces this inefficiency and helps a cab driver in locating a customer closest to him,” says Zafar.
However, Savaree, which started in Lahore, has so far been unable to scale the service to other cities, barring a small presence in Islamabad. No transport startup has managed to introduce services in Karachi, Pakistan’s largest city with over 23 million residents.
Late last year, Savaree told Tech in Asia it was looking for quick roll-out in cities across Pakistan, before expanding to Dubai, Malaysia, and Indonesia. This seems to be on the back-burner for now.
Zafar reveals that while there was interest from investors in Savaree, the team wasn’t able to negotiate a fair deal. Further, his co-founders weren’t interested in selling the startup outright, and wanted to maintain a large equity percentage. Without funding, Savaree wasn’t able to scale at the rate he would have liked. “We were doing approximately twenty rides a day, which isn’t bad, but I would have liked to grow faster,” he explains. “Nevertheless, there’s big potential in the future, and it’s definitely an interesting market to be in.”
Madeeha Hassan, the current CEO of Savaree, declined to be interviewed. However, she stated the company has plans, which will be made public at a later stage.
Trust is hard (and expensive)
Almost everyone interviewed by Tech in Asia for this article outlined similar bottlenecks hampering the growth of the ecosystem. “The idea is still very new and people are not sure how [a ridesharing service] works, or what its benefits are,” says Saad Hamid, local tech commentator and communications lead at i2i. “To change perception you need a big marketing budget and startups aren’t exactly flush with cash to run advertising campaigns.”
The lack of access to capital is a common issue. Consumers in Pakistan are still hesitant to transact online. There’s an inherent fear of being duped and losing money. Businesses point to the burgeoning online community as a market they need to tap, but understand that their core budgets cannot be spent primarily on digital channels.
If consumers see billboards, television adverts, or even hear radio campaigns, they’re much more likely to trust an online service. But startups are bootstrapped, and cannot even think about running a TV ad campaign.
Hamid believes startups can also do more to educate consumers and position themselves better. Despite barriers, there are workarounds for the willing. “So far the few startups playing in this space in Pakistan have a very bad marketing strategy. They don’t know what to communicate to the user and how to get them on board. Benefits of brand recognition are enormous,” he explains.
“We’re spending a lot of money in training drivers, locking in supply, operational overheads, and promotions. It’s difficult to do expensive, offline marketing to build trust,” says Ghaznavi.
Zafar believes investors have to take a long-term view if they ultimately wish to be successful. He echoes the belief that consumers in Pakistan are more likely to trust a service if they see a billboard or hear about it on the radio. It’s not enough simply to build an app and hope people will download and use it.
Culture and technology adoption
“There are certain psychological and social barriers associated with sharing cars in Pakistan. They’re considered status symbols and people don’t want that to change. Making money by driving others around is considered demeaning, and frowned upon,” says Zafar.
This could partly explain why Savaree wasn’t able to get people to open their cars for ridesharing, forcing the startup to turn to taxis. Zafar reveals that in its early days, the team noticed there was enough demand for ridesharing along specific routes, but not enough drivers open to the idea of others hitching rides. It would require a big perception change to fix the problem.
Technology adoption rates are also an issue. Despite the fact that Pakistan is considered to be a mobile-first industry, with lots of consumers accessing the internet through smartphones, they’re still lagging behind when it comes to using apps for their day-to-day activities. Mobile payments are almost non-existent, with regulatory hurdles preventing any growth in the fintech sector. The preference for calling a helpline and booking a ride through an operator still exists. While startups can adapt and add offline support such as a phone hotline, this means added costs, as well as a greater turnaround time. User experience is affected, which could prevent repeat customers.
The tuk-tuk problem
The overwhelming majority of Pakistanis use auto-rickshaws (tuk-tuks) to get around. While cheap, these vehicles are stuffy, rickety, and offer little protection from the elements. They’re also a safety hazard, as their diminutive size means even small accidents could prove to be fatal.
However, they’re also the reason why on-demand ride startups are finding it difficult to compete.
“It’s very difficult to compete with rickshaws as they’re a low-cost substitute and plentiful in supply,” says Ghaznavi. “Most people who are willing to pay for taxis already have cars, while those who want the comfort balk at spending the cash.”
Ghaznavi believes the government can do more to help startups in this space. “A bit of subsidy would go a long way in helping us build traction,” he says. While that’s a fanciful thought, the government’s recent imposition of a 16 percent service tax on startups is an overwhelmingly bad idea, and one which will further restrict growth. Auto-rickshaws do not operate in a registered, regulatory environment, and therefore will largely escape this imposition. Unfortunately, startups will not, and the tax will ultimately impact their bottom line. It would be prudent for authorities to announce a tax waiver to encourage more entrepreneurs to dive in. Otherwise we’re looking at a huge barrier to entry.
Given the fact that the first target market for transport startups is working professionals, it would help if large corporations did more to support them. Currently, Ghaznavi says, efforts to sign up corporate clients have been futile. They’re not interested in working with firms they perceive to be small players.
“Awareness is our key problem. If we get big brands, or the government on board, then people will look at us as a reliable, trustworthy service. A little bit of help in pushing the message will go a long way,” explains Ghaznavi.
Zafar is of the view that Pakistan needs more entrepreneurs willing to hustle and do the dirty work if this ecosystem is to grow. “One thing lacking is execution. There are very few people willing to do the dirty work by getting on the road, speaking to cab drivers, and educating them of the benefits of an app.”
Tellingly, startups are almost always judged on the basis of execution and not just the idea they’re bringing to the table. Sure, there’s a problem you want to solve, and the solution you propose would theoretically work. But what sort of impact are you really making if you’re not reaching the right people or expanding fast enough?
The taxi industry in Southeast Asia was similarly broken and in dire need of disruption. However, that wasn’t enough. It took painstaking efforts by the most successful entrepreneurs to really prove themselves and their idea. Startups in Pakistan will have to make similar, concerted efforts for acquiring and retaining users if they wish to make it big. While the investment climate isn’t great, it doesn’t mean it’s impossible to raise money.
Nevertheless, everyone we talked to on this topic agreed on one thing: it’s just a matter of time before taxi startups really make it big.
Pakistan doesn’t want to be left behind in the Uber revolution
Last edited:
