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How A Startup From The Middle East Is Beating Uber, And Its Lofty Ambition For The Future

 

Most entrepreneurs say they seek to change the world, by which they usually mean that they want to provide a good or a service that people need, making lives easier or better.

A handful of CEOs that I have interviewed have a goal that seems higher, better and more demanding. They talk about building an institution, one that will continue to make lasting changes over time and that will have a profound influence on a whole region or industry.

Mudassir Sheikha, a Stanford graduate, former McKinsey consultant and co-founder of Careem, the Uber of the Middle East, said that’s what he wants for his company.

“This region of 700m people has unfortunately struggled to produce lasting corporate institutions,” said Sheikha in an interview conducted by email and phone. He said that’s why he wanted to create Dubai-based Careem.

He listed three indicators that would signal to him that Careem has become an institution:

• “We impact the lives of the majority of people, 50+%, in the region

• We get rated as the #1 employer for people from the region (both locally and those studying abroad)

• Our alums take on leadership roles at other companies/institutions in the region.”

The interviews I’ve done with CEOs over the years suggest that companies that become institutions have deep missions — missions that are at the least egalitarian and are often altruistic. The companies fulfill them consistently, even against their own short-term interests.

Only time with tell with Careem — and first, it has to win a major fight with Uber, its much better-funded U.S. competitor. Sheikah said there is room for both in the market, but a company that aspires to be an institution probably needs to be the winner.

 

Uber looks like a juggernaut in the United States (it currently has a valuation of more than $50 billion), but it’s not the king of all its markets by a long shot. And it has stumbled in the past.

In the Middle East, Careem, founded in 2012, is beating it, for now. Careem, which announced a $60 million funding round led by Dubai-based Abraaj Group last November, is in 27 cities. Uber is in 10 – but it announced late last year that it was investing $250 million in the region, and that Egypt had become its fastest growing market.

 

It can’t be easy to face down Uber, but Careem co-founder Mudassir Sheikha sounded pretty calm about it. Careem has 40,000 drivers, which it calls captains, and more than two million registered users.

“Uber has been following us in the local innovation,” he said, pointing, for instance, to a recent move Careem made in the market for Saudi women: allowing them to schedule a month’s rides at a time.

What Careem has going for it is fierce pride.

“We are the fastest tech startup in the region, almost entirely funded by regional investors (who have accumulated decent wealth), and have demonstrated that home-grown startups can compete successfully with some of the most aggressive global competitors. This is new for this ecosystem, and as a result, there is a growing interest in investing in and supporting local startups,” Sheikha said.

According to Wamda, Careem’s investors include Arzan Venture Capital, Al Tayyar, STC Ventures, BECO Capital, Impulse (a subsidiary of Kuwait Investment Authority), Lumia Capital and Wamda Capital as the other investors, with Al Tayyar the largest institutional investor. “We were Al Tayyar’s first investment in tech, but after their success with Careem, they made new investments in www.wadi.com and www.tajawal.com,” Sheikha said.

Both Careem’s co-founders were thinking of legacy when they founded Careem: Sheikha’s co-founder, Magnus Osson, had a brain surgery in 2011, which led him to think about what he was going to leave behind, he has said. Both were former McKinskey consultants. The third co-founder is Abdullah Elyas, who leads the company in the important Saudi Arabian market.

Employees, along with founders, own about half of Careem. “Everyone at Careem, including all call center staff, has stock options in Careem,” said Sheikha. “We are all partners in this venture and are benefitting directly from Careem’s success. While this may be an established model in the Silicon Valley, it is relatively new to the Middle East, and we have had to work hard to educate all relevant stakeholders on it. We even opened a secondary offer to staff to make them realize the value of their equity.”

Drivers for the company typically make 30% or so more than taxi drivers, Sheikha said. In the UAE, a full-time Careem driver makes 1,200-1,500 a month. Sheikha is from Pakistan, the son of a rice trader and a housewife: “They were embarrassed their son had become a taxi driver (yes, I had to do some trips in the early days) but have since found grace in recent successes,” he said lightly. 

In the short term, Careem is doing well. But what turns a short-term success into a long-term institution? The organizations we most often call institutions are hospitals and universities, which have at their core two elements: service to humanity and the search for the truth.

It’s much more rare for a company to be an institution. The clearest example I know isVanguard Group, the world’s largest mutual fund company. Most people own Vanguard funds without realizing that the founder of the company, Jack Bogle, set up the firm as a shareholder-owned structure — essentially a nonprofit mutual fund.

Bogle eschewed a lot of personal wealth with that decision: He did just fine, as he would say himself, but otherwise would have built wealth on the order of Bill Gates or Mark Zuckerburg. What, he wanted, instead, was to build something lasting.

“An institution that is built to serve one’s fellow human beings should have the best chance to survive for the maximum possible time. By creating our truly mutual, shareholder-owned structure, mergers are not necessary, and hostile takeovers not possible,” said Bogle by email last year. “By focusing on index funds and other funds with relatively predictable returns, we minimize the risk of out-sized declines (and out-sized gains) we effectively guarantee our shareholders their fair share of whatever returns our financial markets provide. In the long run, the winning strategy.”

 

The paradox is that the only way to build something lasting is to be humble enough to acknowledge that nothing lasts, which is why Bogle keeps a copy of Ozymandius by his desk. Sheikha talked a little bit about this, too, and the importance of not allowing yourself to be finished: “Unless success remains a moving target, it feels very shallow.”

Here is Ozymandius:

I met a traveller from an antique land,

Who said—“Two vast and trunkless legs of stone

Stand in the desert. . . . Near them, on the sand,

Half sunk a shattered visage lies, whose frown,

And wrinkled lip, and sneer of cold command,

 

Tell that its sculptor well those passions read

Which yet survive, stamped on these lifeless things,

 

The hand that mocked them, and the heart that fed;

And on the pedestal, these words appear:

My name is Ozymandias, King of Kings;

Look on my Works, ye Mighty, and despair!

Nothing beside remains. Round the decay

Of that colossal Wreck, boundless and bare

The lone and level sands stretch far away.”

 

Follow me on twitter at @editoremacb.

Origional Article appeared on http://www.forbes.com/

 

 

 

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