The founders of well-funded Egyptian B2B startup Capiter were fired after allegations of fraud

Last September, Egyptian startup Capiter raised $33 million in Series A funding to compete in the country’s growing B2B e-commerce and retail spaces. Fast forward a year later, the startup has laid off multiple employees and now its CEO and COO have been relieved of their duties after alleged mismanagement of funds.

Here’s what we know so far. Between June and July, several former employees of Egyptian startups, incl Chapter, wrote posts about layoffs at their respective companies, although the employers never addressed them publicly. Other companies include OPay Egypt, elmenus, ExpandCart and Brimore.

Some sources told TechCrunch that Capiter cut at least 100 jobs in those two months. Others describe a workplace with poor management and a lack of structure, and a company that finds it difficult to onboard traders to its platform while running out of money. The company had only one monthly runway as of August, they said. TechCrunch reached out to Capiter at the time, but did not hear back.

As a result, Capiter investors are looking for potential buyers to absorb the struggling company in the form of an acquisition or merger. This information was further confirmed in a local news report where the Capiter board is said to have said this the founders failed to report to the board, its representatives and shareholders during the site investigation of a potential merger. Another publication said the executives had refrained from appearing before the board of directors following internal turmoil and disagreements over their management method.

Prior to Capiter, Mahmoud was co-founder and COO of Egypt-born and Dubai-based shipping company SWVL (the company that publicly through a SPAC deal last year, laid off 32% of its staff this May). With his brother Ahmed, he launched Capiter in 2020 as a FMCG platform that allows small and medium-sized retailers to order inventory, arrange delivery and access financing to pay for goods. Some of its competitors include MaxAB and Cartona in Egypt, and in Africa Wasoko, TradeDepot and Chari.

Capiter had 50,000 merchants and 1,000 sellers with more than 6,000 SKUs on its platform when the founders spoke to TechCrunch last September. In the interview, they said Capiter is on track to hit $1 billion in annual revenue this year. And like many startups in Africa and globally, Capiter hired aggressively last year to meet its goals.

However, 2022 has taken an unexpected turn for many tech startups as they deal with uncertainty stemming from rising interest rates and other factors that have a trickle-down effect on venture capital. News of layoffs, cap rounds and layoffs from startups in various sectors – especially those that have raised a lot of money in the last 18-24 months, such as Wave, 54 gen, Whereand Market power — were more widespread, although the continent boasts better overall VC by the end of Q2 2022 compared to Q2 2021.

B2B e-commerce platforms work with either asset-light or inventory-heavy models. The latter requires more capital, and for Capiter, which uses a hybrid model, it’s unclear how the company ran out of funds and is already looking to sell after raising millions from Quona Capital, MSA Capital, Shorooq Partners, Savola and others last year. Capiter Investors declined to comment on the matter but issued a statement via email.

The board and shareholders have launched an internal investigation and are therefore not at liberty to comment on the news or allegations circulating on social media at this time. The Board and shareholders are also working closely with relevant stakeholders, legal and human resources teams, as well as external investigative legal authorities on this matter.

Meanwhile, according to local reports, the company’s chief financial officer, Majid El Ghazouli, will act as interim CEO. Mahmoud did not respond for comment.

Update: CEO Mahmoud Nuh, responding to the allegations, said: “I deny the false allegations and that I have not received official notice of the above [referencing the statement about his and Ahmed’s dismissal].”

This is a developing story…

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