Pathao, the ride-hailing giant form Bangladesh and one of the fastest growing tech startups in Asia, cut more than 50 percent of its workforce in the last two days as it struggles to raise funds amid waning popularity for its services.
According to several sources, nearly 300 mid to top level employees, including the Head of Pathao Food and Ride Core Service, were terminated. Senior executives from Chattogram and Sylhet were also forced to step down, according to the internal sources.
Company insiders shared that the layoff was due to investors backing out from the upcoming investment round, leaving it with only a few months’ worth of funds to run the company. Just last month, it was published that, Pathao is trying to raise 50 – 60 million USD from new investors.
Pathao, which started with motorcycle taxi service in Dhaka, had a flying start. Within a couple of years of its inception, it received an undisclosed amount from GO-JEK, a popular ride-sharing company in Indonesia. Soon, Alter Global and Openspace Ventures joined in and came up with solutions to overcome infrastructural problems in Bangladesh. It also has investment from Osiris Group and Battery Road Digital Holdings.
Hussain Elius, co-founder of the ride sharing startup have been listed in prestigious ‘Forbes 30 under 30’ list in April, 2019. Pathao has raised over $12.8 million from four rounds of funding and is valued at over $100 million, according to Forbes website.
At one point last year, its ride number went past 100,000 a day in three cities, namely Dhaka, Chattogram and Sylhet. However, its popularity started to wane after Uber launched its motorcycle service in Dhaka. Pathao’s daily ride number came down to about 20,000, said a senior executive, who was also forced to resign. Insiders are blaming Non-compliance as a serious issue within the company which has largely caused its popularity to decline.
Pathao Limited, which runs its service in Bangladesh as a foreign entity, has so far served four crore trips or orders and its app was downloaded 50 lakh times, according to its official website. It opened its venture in Nepal last year. The downsizing of the workforce comes at a time when the government was about to issue a licence for the ride-hailing companies operating in the country.
Industry analysts and investors assume that the investors backed out due to these regulatory reforms and, more importantly, due to global uncertainty on the ride-hailing revenue model as a whole.
Despite uncertainty about the upcoming rounds, Pathao spent an obscene amount on marketing, including more than Tk 1.5 crore to be a sponsor of the Bangladesh Premier League (BPL) T20 tournament, said an ex-employee, who left the company a few months back. It also spent Tk 2 crore to insure its drivers who bought motorcycles from TVS.
However, the ride sharing giant said that it was entering “the next phase of evolution as the largest on-demand platform in Bangladesh” and their “new comprehensive strategy” will “strengthen the core businesses with an increased focus on efficiency”. Accordingly, they are planning to introduce changes across all major business lines, leading to significant organisational restructuring and cost optimisations.