> When asked about the $85 million that Airlift burned through in less than a year, Gul insisted that these were the wrong questions to ask. Instead, he defended, the right questions were: “What enabled Airlift to raise $100 million-plus in three years?
Giving money to people who think the goal is to raise money - this is how it ends.
The positive way to look at this is that clueless investors lost their money. That's capitalism working as intended.
Anyway found the key quote
> “Everyone [in management] was new, they were these youngsters who just stayed in their offices,” a lead warehouse manager told Rest of World. “Senior management was never in the warehouses and they just sat inside and did their meetings on Zoom, not bothering to check the issues in the warehouses, leaving the burden entirely on the live operations team.”
While this comment looks ok, there could be some system effect going on. A quick perusal of the comment history with "showdead" set to yes (its in your profile settings) provides a different view - especially when one goes all the way to the first comment left.
>Giving money to people who think the goal is to raise money - this is how it ends.
This is exactly the message I pulled from this article. The mission needs to be the product or service you are offering, the pitch to raise capital is to help you get there. This seemed to be the exact opposite…raising capital was the mission, the product and service was the means used to get there.
I was surprised to read the supposedly generous base salary was just $920 per month - I was under the impression tech salaries in India are rivaling (and sometimes exceeding) those of Western Europe - is Pakistan that far behind Indian salaries, or is there some other explanation?
I can't say anything about India but yeah that's about right for Pakistan. I graduated last year and started working there for a Fintech startup as an ML engineer and my salary was half that. It was considered pretty good for someone who was fresh out of university.
For reference I am now in Portugal and my salary is 1400EUR before taxes. I know it's not a lot but it is much better than it was there.
I think I’m spending around 1/5 of my monthly salary on rent here? I think I’d have been spending almost the same amount of my salary percentage wise back in Pakistan as well, possibly more. But I can’t say for sure as I was living with my parents back then.
Also for reference I’m living in a pretty cheap city in Portugal so rent is definitely cheaper here and in Pakistan I used to live in the capital so rent was a lot more expensive compared to other places in Pakistan.
Salary in India is a wide spectrum. At the top end of the talent pool, it is indeed reaching West European levels. I know because I managed a team that was in Spain and India.
However now I run my second startup (bootstrapped) where I hire, train and generate value from candidates who are at the other end of the spectrum with monthly salaries much lower than what is quoted in the article.
It is a very wide spectrum for tech salaries here in India.
For white collar roles, salaries tend to be significantly lower in Pakistan compared to India. A good rule of thumb I use is comparing competitive civil service starting salaries, as the civil service remains the most popular option in most of Asia due to its stability and privileges, thus putting pressure on white collar salaries in the rest of the labor market. The starting salary for Pakistan Administrative Service (BPS-17) is around $4,000 a year, but the starting salary for the Indian Administrative Service (Pay Level 10) is around $8,500. A better comparison for white collar salaries in India would be ASEAN, China 10 years ago, or Ukraine before the war.
Also, salaries in the Indian tech industry are bimodal - you’ll have mass outsourcing companies paying horrible wages ($3,000/year) because outsourcing/BPO was a race to the bottom, and then you’ll have product oriented companies or the Indian teams of US companies paying around $10-20k starting with mid career potentially reaching $30-50k. Like everything else, you got to pay for talent. Most HN commentators complaining about outsourcing quality are probably working with the former type of companies instead of the latter.
Interesting! I have a friend who moved from Germany to work in India and he said devs in Bangalore earn more than in Berlin (where senior devs definitely earn higher than $30-50k). It sounded like they were paying more like $70-90k.
That is definitely the case for devs with 4+ years of experience at major firms and the biggest startups. Especially so if you include all the stock grants.
My company has branches in all these countries and we also have contracts with IT companies in India; here is what I see:
- Western Europe is a very wide spectrum, where Germany, The Netherlands and UK are a lot higher than Spain, Italy or even France. It can be more than double at some levels.
- employees in India are a lot cheaper than Western Europe, but contractors of the same quality can be extremely expensive - there is a price cartel, the actual people get 1/4 to 1/3 of what is charged for their work
- qualified people in India cost about the same as Eastern Europe, not Western Europe. One thing to consider is that salaries in Madrid are barely higher than Bucharest, while the cost of living is also higher, the quality of life can be better in Bucharest sometimes. I have many colleagues that moved from Madrid or Barcelona to UK or Germany as soon as they got the occasion.
- salaries for my colleagues in Pakistan are lower than colleagues in India, but it depends a lot on position (job type and level) and city, so I cannot calculate a number for the difference between the countries
> “In many ways, Airlift raised the bar of ambition for Pakistani startups in a big way. Our teams at Airlift redefined the standard of execution, strategy, building a world-class culture, developing a cutting-edge product, raising sizable fundraising rounds.”
Are they literally bragging about burning money in style ?
If what article was describing is correct about their operation
> In his recent conversation with Rest of World in August, Gul remained firm that the company’s failures were not the company’s fault. “Airlift’s demise was ultimately the result of an unsuccessful fundraise amidst a global recession — while there are broad critiques on things like operations and supply chain, the reality is that Airlift had particularly strong operation and financial metrics, something that was reflected in our quarterly shareholder updates.”
> Are they literally bragging about burning money in style ?
Yeah, not something I would be saying after a failed company. You would say something that shows you reflected on this and realized your mistake.
> That's either investor lie or he's in denial
An obvious lie... That should be a red flag for future investors.
Why would investors pull out of a good investment? He's either spending money at a rate that doesn't translate to growth or he's in denial.
> [..] there are broad critiques on things like operations and supply chain [..]
I wouldn't cast these issues 'broad', they were very real and important show-stoppers. I would be surprised if there was actually supply chain issues for food, considering so many other shops in Pakistan clearly have figured it out. Probably the biggest issue was 'operations', i.e. spending money like it's going out of fashion.
Yeah the article pretty much pointed out that they weren't spending enough attention on making sure everything works efficiently. Like the fact relatively long expiry product like bottles of Coke still managed to expire (that kind of beverages normally last months to years) looks like some massively bad planning.
That will set a very bad precedent. It was a miracle Pakistan's funding ecosystem got so far. India has n-times bigger IT industry, but is not n-times bigger on funding.
Deep in the article the Investors names are revealed. You can find who they are.
Investing $85 million and valuing a company $275 million in an economy of $275 billion. I cannot comprehend what the VCs were thinking, but if some who is seasoned in VC-land could chime, that would be helpful.
I'm not a VC so I don't really know, but it seems that a valuation of 0.1% of the size of the economy of Pakistan isn't that relevant if the company could have sold into even just India or Arab countries, and would be completely irrelevant if they could eventually expand worldwide.
There are no natural advantages for Pakistani firm over other when it comes to global expansion. On top of it, this is a start-up with almost all operations in Pakistan. I am not VC either, but even I know that you have to size the market before making a valuation.
If these investors baked in the international expansion in valuation, they got what they deserved.
I’m not seasoned in VC-land, but the fraction of income spent on food eaten at home is much higher in Pakistan than in rich western countries. It was almost half in 2012, versus about 7% in the USA (https://tribune.com.pk/story/744223/pakistanis-spend-nearly-...)
With that, I think the math could be somewhat right, or at least made to look right. Let’s assume 30% spent on food, with this company eventually taking 10% of that. That’s 8 billion in revenues. With a 1% profit margin (profit margins are thin in this market), that would bring in 80 million a year in profits. That would easily be enough to value the company at 275 million.
If you do the math more carefully, you likely will find dragons, though. Pakistani with low incomes will have more time than money, so they would never become your customers. So, that initial 30% will be lower, likely a lot.
Also, it’s questionable whether the company would be able to grab that market without more investments.
In the end it may have boiled down to “VCs have lots of money and no other places to use it than gambles like these”.
He and his round lead Atif Awan have been part of fraud rumors. According to their slide deck back in 2021 they were supposed to be profitable by end of 2021. Once you look at the numbers being quoted in the deck and avg Pakistani house hold, they don’t add up. So Gul can do all glorifications that he might want, it doesn’t change the fact that there have been some shaddy practices involved in the a whole group of people associated to this company.
>> “It was very easy to get new subscriptions online and get into contracts with a company. Like there was little to no control,” one former employee, who worked in the product department at the Lahore headquarters, told Rest of World. “We had a lot of power to make decisions — like, I made a deal for $100,000 and all I had to do was send an email to management,” the employee said.
And this is why compliance is such an important thing in companies, everyone being able to source whatever they want is guaranteed disaster.
The rest so reads like a bucket list of how not to run logistics and supply chains. All done by people in management who had no place on those domains to begin with.
Warehouses set up in days? Sure, cool if you are able to do so. If you are not, you setting up your ops up for failure. Bad inventory control, ignoring shelf life? Failing at the core of what eCommerce is about. No inventory strategy, warehouse network planning? Sure way to never ever be profitable.
It reads like Airlift was moving fast down the pre-inflation path of VC funded, not sustainable growth to dump the whole thing on clueless retail investors through an IPO or SPAC. I expect more stories like this to emerge in the next months.
Edit:
>> “We developed one of the most sophisticated remote surveillance networks with 30+ cameras in each warehouse that operated 24 hours/day.” -> According to the aeticle Gul, the airlift founder, said that.
This is not how you monitor pilferage. You do it by recording inventory movements, orders and deviations. CCTV can them help find the perpetrators of theft, if there is any. Heck, ops wise these people had no idea what they did..
I'm a soccer fan, the game is such a fine mix of skill (individual and collective) and luck, it is reminiscent of life itself.
I'm rarely a fan of commentators however, who more often than not and after the fact will point out how inevitable it was that one team won and the other one lost. The winning team was "more effective at defense", had "a brilliant striker", and what have you and so on. Still the winning goal might have been caused by a penalty after an attacker pretended to be tripped, a lucky shot from afar deflected off a defender, or the goalkeeper had sun in the eyes.
Rarely does a commentator admit that the win was luck. Or the that the loss was unlucky. Just saying.
Byju’s 2020-21 financials show it’s a house of cards. Record losses, declining revenue in key markets and questionable accounting practices paint a grim picture of India’s largest edtech company. - https://www.themorningcontext.com/internet/byjus-2020-21-fin...
> meanwhile, the company’s operations staff, responsible for executing the ambitions of Airlift’s amateur leadership, were allegedly neck-deep in chaos
That's the money quote, right there.
It's not unusual in many companies, for this kind of disconnect to happen. I suspect that, for some reason (maybe cultural -I don't know Pakistan well enough), there was almost no margin for error. Many US companies can hit this, and survive, as they seem to be able to "get their shit together."
The burning money thing is always painful for me, but I was raised in a very frugal environment. The company that I worked for, never borrowed money, and made every penny scream for mercy.
This is sad, as I would love to see some of these companies do well.
>At least five former employees who spoke to Rest of World say that this rapid expansion came at a hefty cost and was not executed properly — ultimately contributing to the company’s unraveling.
>Inside these warehouses, there was a lack of essential business acumen, strategy, and vigilance in the way inventory was managed
>often had to navigate sudden inventory surges caused by automated systems
This seems to be a pretty familiar story in the pandemic startup scene. You have a completely new market born overnight (either COVID testing, med equipment, delivery, etc) with essentially a captive consumer base. Founders and management usually realize that the pandemic won't last forever, and try to prepare to pivot, but do this by over-investing in existing revenue streams, trying to capitalize on this once-in-a-lifetime (hopefully) golden goose. Unfortunately they don't have the experience to realize this stretches infrastructure too thin and breaks down communication chains, and what results in messes like these. A manual, 15 min fix for a bug that occurs once few days is allowable when you're at a small scale, but you can't 20x that infrastructure overnight because you'll now be spending several hours troubleshooting and have no time left to build any solution. While founders don't necessarily need to know _how_ much duct tape holds their company together, you can at least assume a lower bound and give your engineers and managers time to improve things and build out.
Combine this with onboarding new employees, who haven't been fully trained, haven't become swayed by your charismatic founder, and are disgruntled by the dubious infrastructure and what happened at Airlift is a pretty familiar case study.
>In a blog post, Gul highlighted a quote from Walton’s biography: “It was the lowest point of my life. I felt sick to my stomach … I had built the best variety store in the whole region and worked hard in the community. I had done everything right and now I was being kicked out of town.”
It sounds to me as though Gul wasn't a malicious person or even particularly unsavvy (at least with regards to charming his team and investors), but the early success caused an overestimation of him and his company's ability and this miscalculation spiraled all the way down the chain of command. Doing "everything right" is completely different depending on when you're in a boom time and when your market is disappearing.
I knew some people who worked there, and one thing that was a red flag for me was just how much kool-aid everyone who joined on LinkedIn seemed to be drinking. It was like a Silicon Valley trope where people would write we’re gonna change the world! And then I looked up what the company did .. and I’m like logistics? Okay .. but basically I know startups are supposed to have charisma and all but it just seemed like too much. I’m trying not to become jaded and negative but I feel sadly that this is part of the rite of passage for software engineers, you join a hyper charismatic team and see hyper growth for a year or two, ride the high and then it falls apart and you have to figure out what you want to do next and how to avoid this the next time.
47 comments
[ 2.6 ms ] story [ 88.3 ms ] threadGiving money to people who think the goal is to raise money - this is how it ends.
The positive way to look at this is that clueless investors lost their money. That's capitalism working as intended.
Anyway found the key quote
> “Everyone [in management] was new, they were these youngsters who just stayed in their offices,” a lead warehouse manager told Rest of World. “Senior management was never in the warehouses and they just sat inside and did their meetings on Zoom, not bothering to check the issues in the warehouses, leaving the burden entirely on the live operations team.”
This is exactly the message I pulled from this article. The mission needs to be the product or service you are offering, the pitch to raise capital is to help you get there. This seemed to be the exact opposite…raising capital was the mission, the product and service was the means used to get there.
For reference I am now in Portugal and my salary is 1400EUR before taxes. I know it's not a lot but it is much better than it was there.
(I am asking out of genuine curiosity. Rent or mortgage is usually the heaviest burden in the West.)
Also for reference I’m living in a pretty cheap city in Portugal so rent is definitely cheaper here and in Pakistan I used to live in the capital so rent was a lot more expensive compared to other places in Pakistan.
However now I run my second startup (bootstrapped) where I hire, train and generate value from candidates who are at the other end of the spectrum with monthly salaries much lower than what is quoted in the article.
It is a very wide spectrum for tech salaries here in India.
Also, salaries in the Indian tech industry are bimodal - you’ll have mass outsourcing companies paying horrible wages ($3,000/year) because outsourcing/BPO was a race to the bottom, and then you’ll have product oriented companies or the Indian teams of US companies paying around $10-20k starting with mid career potentially reaching $30-50k. Like everything else, you got to pay for talent. Most HN commentators complaining about outsourcing quality are probably working with the former type of companies instead of the latter.
- Western Europe is a very wide spectrum, where Germany, The Netherlands and UK are a lot higher than Spain, Italy or even France. It can be more than double at some levels.
- employees in India are a lot cheaper than Western Europe, but contractors of the same quality can be extremely expensive - there is a price cartel, the actual people get 1/4 to 1/3 of what is charged for their work
- qualified people in India cost about the same as Eastern Europe, not Western Europe. One thing to consider is that salaries in Madrid are barely higher than Bucharest, while the cost of living is also higher, the quality of life can be better in Bucharest sometimes. I have many colleagues that moved from Madrid or Barcelona to UK or Germany as soon as they got the occasion.
- salaries for my colleagues in Pakistan are lower than colleagues in India, but it depends a lot on position (job type and level) and city, so I cannot calculate a number for the difference between the countries
Are they literally bragging about burning money in style ?
If what article was describing is correct about their operation
> In his recent conversation with Rest of World in August, Gul remained firm that the company’s failures were not the company’s fault. “Airlift’s demise was ultimately the result of an unsuccessful fundraise amidst a global recession — while there are broad critiques on things like operations and supply chain, the reality is that Airlift had particularly strong operation and financial metrics, something that was reflected in our quarterly shareholder updates.”
That's either investor lie or he's in denial
Yeah, not something I would be saying after a failed company. You would say something that shows you reflected on this and realized your mistake.
> That's either investor lie or he's in denial
An obvious lie... That should be a red flag for future investors.
Why would investors pull out of a good investment? He's either spending money at a rate that doesn't translate to growth or he's in denial.
> [..] there are broad critiques on things like operations and supply chain [..]
I wouldn't cast these issues 'broad', they were very real and important show-stoppers. I would be surprised if there was actually supply chain issues for food, considering so many other shops in Pakistan clearly have figured it out. Probably the biggest issue was 'operations', i.e. spending money like it's going out of fashion.
That will set a very bad precedent. It was a miracle Pakistan's funding ecosystem got so far. India has n-times bigger IT industry, but is not n-times bigger on funding.
Investing $85 million and valuing a company $275 million in an economy of $275 billion. I cannot comprehend what the VCs were thinking, but if some who is seasoned in VC-land could chime, that would be helpful.
If these investors baked in the international expansion in valuation, they got what they deserved.
With that, I think the math could be somewhat right, or at least made to look right. Let’s assume 30% spent on food, with this company eventually taking 10% of that. That’s 8 billion in revenues. With a 1% profit margin (profit margins are thin in this market), that would bring in 80 million a year in profits. That would easily be enough to value the company at 275 million.
If you do the math more carefully, you likely will find dragons, though. Pakistani with low incomes will have more time than money, so they would never become your customers. So, that initial 30% will be lower, likely a lot.
Also, it’s questionable whether the company would be able to grab that market without more investments.
In the end it may have boiled down to “VCs have lots of money and no other places to use it than gambles like these”.
And this is why compliance is such an important thing in companies, everyone being able to source whatever they want is guaranteed disaster.
The rest so reads like a bucket list of how not to run logistics and supply chains. All done by people in management who had no place on those domains to begin with.
Warehouses set up in days? Sure, cool if you are able to do so. If you are not, you setting up your ops up for failure. Bad inventory control, ignoring shelf life? Failing at the core of what eCommerce is about. No inventory strategy, warehouse network planning? Sure way to never ever be profitable.
It reads like Airlift was moving fast down the pre-inflation path of VC funded, not sustainable growth to dump the whole thing on clueless retail investors through an IPO or SPAC. I expect more stories like this to emerge in the next months.
Edit:
>> “We developed one of the most sophisticated remote surveillance networks with 30+ cameras in each warehouse that operated 24 hours/day.” -> According to the aeticle Gul, the airlift founder, said that.
This is not how you monitor pilferage. You do it by recording inventory movements, orders and deviations. CCTV can them help find the perpetrators of theft, if there is any. Heck, ops wise these people had no idea what they did..
Edit 2: Typos
I'm rarely a fan of commentators however, who more often than not and after the fact will point out how inevitable it was that one team won and the other one lost. The winning team was "more effective at defense", had "a brilliant striker", and what have you and so on. Still the winning goal might have been caused by a penalty after an attacker pretended to be tripped, a lucky shot from afar deflected off a defender, or the goalkeeper had sun in the eyes.
Rarely does a commentator admit that the win was luck. Or the that the loss was unlucky. Just saying.
Yea that sounds real clear
Byju’s has no answer for its growing list of missing deadlines - https://techcrunch.com/2022/09/07/byjus-blackstone-oxshott-s...
Byju’s losses swell to Rs 4,588 crore in delayed FY21 results - https://economictimes.indiatimes.com/tech/startups/byjus-rea...
Byju’s 2020-21 financials show it’s a house of cards. Record losses, declining revenue in key markets and questionable accounting practices paint a grim picture of India’s largest edtech company. - https://www.themorningcontext.com/internet/byjus-2020-21-fin...
That's the money quote, right there.
It's not unusual in many companies, for this kind of disconnect to happen. I suspect that, for some reason (maybe cultural -I don't know Pakistan well enough), there was almost no margin for error. Many US companies can hit this, and survive, as they seem to be able to "get their shit together."
The burning money thing is always painful for me, but I was raised in a very frugal environment. The company that I worked for, never borrowed money, and made every penny scream for mercy.
This is sad, as I would love to see some of these companies do well.
>Inside these warehouses, there was a lack of essential business acumen, strategy, and vigilance in the way inventory was managed
>often had to navigate sudden inventory surges caused by automated systems
This seems to be a pretty familiar story in the pandemic startup scene. You have a completely new market born overnight (either COVID testing, med equipment, delivery, etc) with essentially a captive consumer base. Founders and management usually realize that the pandemic won't last forever, and try to prepare to pivot, but do this by over-investing in existing revenue streams, trying to capitalize on this once-in-a-lifetime (hopefully) golden goose. Unfortunately they don't have the experience to realize this stretches infrastructure too thin and breaks down communication chains, and what results in messes like these. A manual, 15 min fix for a bug that occurs once few days is allowable when you're at a small scale, but you can't 20x that infrastructure overnight because you'll now be spending several hours troubleshooting and have no time left to build any solution. While founders don't necessarily need to know _how_ much duct tape holds their company together, you can at least assume a lower bound and give your engineers and managers time to improve things and build out.
Combine this with onboarding new employees, who haven't been fully trained, haven't become swayed by your charismatic founder, and are disgruntled by the dubious infrastructure and what happened at Airlift is a pretty familiar case study.
>In a blog post, Gul highlighted a quote from Walton’s biography: “It was the lowest point of my life. I felt sick to my stomach … I had built the best variety store in the whole region and worked hard in the community. I had done everything right and now I was being kicked out of town.”
It sounds to me as though Gul wasn't a malicious person or even particularly unsavvy (at least with regards to charming his team and investors), but the early success caused an overestimation of him and his company's ability and this miscalculation spiraled all the way down the chain of command. Doing "everything right" is completely different depending on when you're in a boom time and when your market is disappearing.