Recently, Omar Kassim, an influential figure in the venture capital field in the Middle East, published a rumor on Twitter, disclosed the shut down of the Middle East e-commerce platform, Awok. It stated that Awok.com which had just raised funds for more than a year, had gone bankrupt this summer:
Awok, an eCommerce platform headquartered in Dubai, actually reported a few months ago that sellers and suppliers were owed a large amount of money and their bosses ran away. We also got feedback from some friends who had been fooled by Awok before, but after this bankruptcy, this will not happen again.
Omar pointed out that Awok’s website can no longer be accessed normally, some links have errors, and social media has not been updated in May. At the same time, there have also been many posts from employees about wage arrears.
Rising stars of 2019
Awok was founded in 2013 by Ulugbek Yuldashev (known as Bek) from Kyrgyzstan. In the early stage, it focused on the 3C category, mainly covering the two markets of Saudi Arabia and the UAE. It aimed at the two major customer groups of migrant workers and housewives and took advantage of the low cost of Chinese goods. Awok adopted a “low price” strategy, positioned itself as a cheap e-commerce platform, as well as built and operated its own logistics team.
According to reports from relevant media, Awok once had a monthly life of tens of millions, and “for a long period of time, the financial status and profitability can be maintained in a good state.”
Awok just announced in April last year that it had received 30 million US dollars in financing. StonePine ACE Partners and Al Faisaliah Ventures, a local investment institution in the Middle East, jointly led the investment, and the US investment institution Endeavor Catalyst also participated in the investment. At that time, Awok, which focuses on cross-border Chinese goods, declared that it would use this investment to enter the Saudi market and improve user experience. It also announced long-term expansion prospects for Pakistan and other markets.
The Fall of 2020
Omar Kassim posted several tweets pointing out that although Awok plans to build a Middle East version of Wish, and until last year’s financing, it has been maintained and developed by the seller’s account. Although this model may have been feasible before, in a highly competitive environment, high customer acquisition costs, low customer unit prices, and self-operated logistics costs have greatly raised the challenges of Awok’s operations.
At the same time, the 30 million yuan raised did not arrive immediately but was paid in stages. Obviously, investors have a complete lack of understanding of the current situation of e-commerce in the Middle East. The founders accepted such financing terms out of frustration.
Omar believes that one of the reasons for the failure of Awok is trying to grow quickly in an area where there is not much real growth capital.
Awok’s statement just released on its homepage cited the current global instability as the reason for the closure. The statement said that the company had no choice but to permanently shut down the platform. This statement is actually quite disappointing, but it also shows the company’s helplessness to some extent.
2020 is a mixed blessing for the Middle East eCommerce industry. The impact of the pandemic and the surge in consumer demand for online shopping, as well as a large number of orders, have also brought great pressure to logistics eCommerce companies in the Middle East. Coupled with the head effects brought by the COVID-19, consumption tax hikes, and other factors, many cross-border e-commerce companies in the Middle East are experiencing a tough period.
Tough time for everyone
According to multiple Awok employees, the company has been in crisis since early 2020. These employees have not been paid since January, and most of the employees have left the company in March and have not received related compensation.
At the same time, there are suppliers who have suffered. The orders of customers who have been paid have not made any new progress or even been canceled. Many suppliers have not received the payment. According to a friend who is familiar with long-term eCommerce sellers in the Middle East, Awok owes at least several suppliers tens of millions of dirhams (1 dirham = 0.27 US dollars), and many more sellers estimate that it is difficult to recover the arrears.
Judging from the feedback from some employees, they attribute the failure to the company’s leadership. Said that the company did not manage the raised funds well, made some wrong decisions, and took too many unnecessary risks. And it eventually led to the company’s bankruptcy.
Regarding this, we think Omar’s version may be more accurate. This model is difficult to sustain in the current environment regardless of whether financing is sufficient.
Awok is a representative of the Middle East e-commerce and its ecology that have encountered difficulties recently. Several companies with much higher financing amounts are also facing a similar situation. The logistics company Fetchr, which was on the brink of bankruptcy last year, has carried out a large-scale strategic transformation of the entire company through a new team.
On September 1, it was confirmed that it had received 15 million US dollars in financing and successfully turned the situation around. However, although we are more optimistic about the new Fetchr led by professional leaders, Fetchr is completely different compared to previous entrepreneurs.
The failure of Awok also brings a warning to entrepreneurs that the amount of financing cannot be equated with the success of startups. In the related financing report to be jointly released by Momentum Works, the investment quotas in various regions in the first half of 2020 did not fall sharply compared with the same period in 2019. On the contrary, investment quotas in certain industries have the advantage of continuous expansion.
For most companies, getting money is not necessarily a difficult task. The difficult thing is how to use the funds to survive adversity and seize opportunities to accumulate experience to prepare for a new world in the future.
Thanks for reading The Low Down (TLD), the blog by the team at Momentum Works. Got a different perspective or have a burning opinion to share? Let us know at [email protected]