Pathao, a GOJEK-backed transportation startup from Bangladesh, has undertaken a major cost-cutting and restructuring exercise after its plans to close its $50 million Series B round came up short, a top executive with the company told DEALSTREETASIA.
The ride-sharing firm retrenched nearly 300 mid-to top-level employees over the past few weeks.
Without divulging details, Pathao said it has postponed the final close of its Series B and will aim to raise a smaller amount instead. It did not specify a deadline for raising the same.
Pardeep Grewal, chief operating officer of Pathao, said: “I think the appetite for investing in ride-sharing-heavy models has been changing over the course of the years… Our new approach for accelerated profitability will be one that will play well to potential investors.”
Grewal said that existing investors GOJEK, Openspace Ventures and Battery Road Digital Holdings had all topped up in the latest round. Openspace and GOJEK confirmed the investment to DealStreetAsia.
All three investors had joined Pathao’s $10 million pre-Series B round in April last year.
Pathao added that while retrenchments did take place, the 300 figure reported by local publications was inflated. The company said it has retained staff in its engineering and product teams, but cut down on customer care and contract employees.
“A restructuring event is always difficult. It’s difficult for the team and it’s difficult for us. But we’re confident that our new business model will usher in new innovation and progress,” said Hussein Elius, CEO of Pathao.
Pathao further claimed that it is streamlining to ensure ‘long term sustainability’ of its business, and added that it continues to run all three of its verticals in ride-hailing, food delivery and e-commerce/courier services in Bangladesh.
“The restructuring will create an improvement in our fixed costs. We have been optimising on variable costs for several months, and we are a more resilient company than before. It can be hard to raise money in a market like Bangladesh, so it’s important that we are responsible with investors’ capital,” said Grewal.
Pathao or “send it” in Bangla was founded in 2015 by Hussain Elius, Fahim Saleh and Shifat Adnan. The company started as a courier service for e-commerce merchants in Bangladesh, before branching out into other verticals like food delivery and ride-hailing.
Pathao counts Uber and Shohoz, a Golden Gate Ventures-backed local startup, among its competitors.
“The Bangladeshi tech ecosystem is still new and still unproven. And even as a pioneer in that space, there are still a lot of questions about the market,” said Grewal.
He added that most investors tend to have an India-only mandate when it comes to investing in South Asia. Bangladesh, as a result, remains poorly understood by foreign investors, many of whom have yet to “green light” the country as a destination for capital.