Hytch, a Nigerian ride-hailing startup that launched to the public in May this year to help people share rides and move faster and cheaper, will no longer provide car-pooling services. According to a source who works closely with the startup, the company has aborted its ambitious mission of scaling the highly-fragmented in-city car-pooling transportation sector, and now wants to help small businesses fulfil their orders nationwide and, soon, internationally.
In May when the company launched to the public, it only took 3 days and 0 marketing budget to acquire 600 users. Like a proud parent, its co-founder and CEO, Laolu Onifade, took to Twitter and said they were taking their user number to 2,000 by the end of the second quarter. But that didn’t happen. Instead, the company pivoted into a business-to-business (B2B) on-demand delivery startup due to a lack of funding.
When TechCabal spoke to Onifade in April, the CEO believed that his team had the skills and drive to build the product and a business model that would work. But the rallying question ending the conversation was: Did they have the money to match their ambition? Onifade answered then that they had raised a family-and-friends round and were currently raising pre-seed.
Hytch’s inability to secure funding could be attributed to the economic downturn or investors just not being keen on the sustainability of the business. TechCabal reached out to Onifade, but he said he’s not ready to comment on the development now.
Before Hytch, about 3–4 local startups had tried to digitise vehicle-pooling but failed. A popular example is GoMyWay, a ride-hailing startup that could be said to have pioneered the local effort of digitising car-pooling. It shut down because it couldn’t raise money: it was burning cash to accelerate growth while making little to no money. By the time it was ready to prioritise revenue, its investors had pulled out.
Hytch didn’t have monetisation challenges because it was already charging a fee on every trip a driver completed from the moment it launched. “We are already making money. We charge 15% on every ride and, since launch, we’ve recorded an average of 25 rides daily,” Onifade told TechCabal in April. Still, the company couldn’t raise funds.
To stay in business, it decided to pivot, a clear demonstration of the thick skin and perseverance needed in building startups.
Ride-hailing is a capital-intensive venture, so building in this sector requires a lot of cash to scale. We have seen how quickly it takes startups to fail without venture funding in this sector. For example, American ride-hailing giant, Uber, raised a total of $25.2 billion over 33 rounds before it IPOed in 2019; Estonian Bolt recently raised $607 million in a Series F round; and even French BlaBlaCar, which is primarily doing the same thing as Hytch, has raised more than $443 million in venture capital since its founding in 2006 (its recent funding of $115 million came in April last year). Locally, Treepz, a bus-hailing startup, has raised a total of $3.1 million and has expanded into Ghana and Uganda by acquiring similar startups in these countries, thanks to funding.
Still, opportunities abound for Hytch in its new endeavour. There are still many challenges yet to be addressed in the Nigerian e-commerce industry: chief among them is logistics. With bad road networks, logistics in Nigeria is a nightmare, and whoever eventually finds a way to build around these infrastructural deficits will win big. That’s where on-demand delivery services come into play. On-demand companies are taking the responsibility of dealing with last-mile fulfilment off e-commerce companies’ hands. And this market is growing fast. Over the past 2 years, a couple of local and global brands have launched in Nigeria.
According to our source, Hytch wants to prevent small businesses from bleeding the little profit they make and has already started with some brands.
The old concern still remains: Will investors be keen to back this new mission? We can’t say for sure. But, unlike car-pooling, the precedents of on-demand logistics are favourable. For instance, the Lagos-based delivery service, Kwik, raised $2 million in a Series A round in March. In April alone, Rise.NG secured a $150k pre-seed, and Shapshap got a seed extension from GreenTec Capital Partner. Nigerian food on-demand service Jise raised $100k pre-seed, and Chowdeck got into Y Combinator.
All of these show that Hytch, if the skills and drive its CEO spoke about 4 months ago are still alive, might just be able to pull this one off to scale.