The founders of the highly-priced Egyptian B2B start-up Capiter dismissed following allegations of fraud

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In September of last year, Egyptian startup Capiter raised $33 million in Series A financing to compete in Egypt’s expanding B2B e-commerce and the retail market. One calendar year and, even more recently, the company has laid off several employees, and its COO and CEO were relieved of their positions due to allegations of mismanagement of funds.

We’ve got the facts to date. From June to July, several former employees of Egyptian companies, including Capiter posted posts on the sackings they received at their respective firms even though their employers did not speak to them in public. Other businesses are OPay Egypt, elmenus, ExpandCart and Brimore.

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According to some sources, TechCrunch that Capiter was laying off at most 100 staff during the two months. Some employees described a workplace that had inadequate management and no structure and a company that was finding it difficult to bring merchants on board its platform and having to pay for its services simultaneously. The company was running on one month of runway left in August, according to the report. TechCrunch called Capiter in August, but got no response.

This has led to Capiter investors are looking for buyers who could take over the struggling business through merger or acquisition. The information was further confirmed by a local newspaper report in which Capiter’s Board claimed that the founders have not reported to the members of the board and shareholders on the spot during in-person due diligence in relation to a possible merger. Another report reported that the executive team were not present in front of the directors’ board following internal conflicts and disagreements regarding their management style.

Prior to Capiter, Mahmoud was the co-founder and CEO of the Dubai-based, born in Egypt and based in Dubai. SWVL (the company that went public through the SPAC deal in May of last year was able to lay down 32% of their workforce this month). Along with his brother Ahmed Mahmoud, he created Capiter in 2020 , an FMCG platform which allows medium and small retailers to purchase inventory, schedule delivery and obtain financing to purchase items. Its main competitors are MaxAB as well as Cartona in Egypt as well as across Africa, Wasoko, TradeDepot and Chari.

Capiter was home to 50,000 merchants and 1,000 sellers who had greater than 6,000 items listed on its platform at the time that its founders spoke with TechCrunch in September. In their interview, they claimed that Capiter was on the path to achieving the annual revenues of one billion in the next year. As with many other startups across Africa as well as around the world, Capiter hired aggressively last year to reach its goals.

But 2022 has taken a jarring direction for many startups in the tech sector in the face of the uncertainty that comes from rising rates of interest as well as other factors which have a knock-on impact for venture capital. There are reports of layoffs, reductions in rounds, and other cuts from startups across a variety of sectors — particularly those that raised lots of money in the last 18-24 months, like the Wave, 54gene, Kuda, and Marketforce — are more prevalent despite Europe boasting the highest VC number in the second quarter of 2022 when compared with the second quarter of 2021.

B2B E-commerce platforms use with either inventory-heavy or asset-light models. The latter require more capital, and for Capiter that employs the mix of both, it’s not known whether the company has exhausted its resources and is contemplating selling after securing millions of dollars from Quona Capital, MSA Capital, Shorooq Partners, Savola and others in the last year. Capiter’s investors have declined to comment regarding the issue but did release an email with a statement.

“The Board and shareholders have launched an internal investigation. They are not able to discuss the latest news or claims circulating social media at the moment for the moment. They are Board together with shareholders is working closely with stakeholders, the legal and HR teams, as well as authorities in the legal field to initiate an external investigation into the matter.”

According local reports the head of finance Majid El Ghazouli will serve in the interim role of CEO. Mahmoud did not respond to requests for comment.

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