Covid-19 threw up all sorts of challenges to businesses last year – from restaurants that couldn’t open their doors to manufacturers struggling to source parts.
For Udrive’s founder Hasib Khan, the biggest challenge was one of funding. The car-sharing start-up, which was operating a fleet of more than 570 vehicles, was in the midst of its Series A round when the pandemic struck.
“We had millions of dollars committed,” he says. “We had signed commitments and it all blew up because of Covid. So we were stood there with nothing.”
Not only had it lost funding, but its revenue also dried up as movement restrictions imposed to stop the spread of Covid-19 kept its fleet of vehicles off the road.
The company acted quickly. Managing director Nicholas Watson had begun to realise the potential scale of the problem in late January last year after listening to a macroeconomics podcast spelling out potential scenarios.
Having worked at an events business whose failure to act decisively in the wake of the global financial crisis led to its undoing, Mr Watson flagged the importance of swift action to Mr Khan.
“If revenue starts dropping, because revenue always drops faster than costs, then [we needed to] be prepared to either fund the deficit or start making some very hard decisions quickly,” Mr Watson says.
Making people redundant was difficult, especially for a start-up, but with no immediate sources of capital, it was faced with no other choice.
“Because people are going to want a company to go back to,” Mr Watson says.
As soon as the first of the 12-hour sterilisation periods began in late March, Udrive sent force majeure letters to suppliers explaining the company may not be able to meet some of its payments on time.
Plans to scale back its fleet by handing vehicles back to suppliers were also hampered once a 24-hour sterilisation period was introduced in Dubai, meaning drivers could not go out to collect cars.
“We started losing contact with some of the cars after about seven days because the batteries started dying. We assumed where the cars were after seven days, they would be there two months later when we could get back to them. And they were all there,” Mr Watson says.
Revenue was brought back to life one car at a time, with the dust cleaned off vehicles, batteries jump-started and tyres re-inflated.
Udrive also had to balance the need to get cars back on the road to earn money with returning unwanted vehicles to suppliers. The company initially cut its fleet by almost two-thirds to 200 and it took about six weeks to get them all back on the road.
“By mid-June we were at 75 cars and by mid-July we were at full capacity of what was left after the handbacks,” Mr Watson says.
Yet Udrive has proved to be just as resilient as its founder Mr Khan, who was born in Afghanistan but whose family fled to Germany when he was still a baby. He grew up in Hamburg, where his father operated a food business. There, Mr Khan began trading cars at the age of 16.
“I bought cars for €500-€1,000 and sold them again for €200-€300 profit.”
He then started a showroom under the wing of the family business, but by the age of 20 he returned to Afghanistan with a desire to run his own business.
Mr Khan quickly managed to build a company delivering food to army bases across the country, which eventually morphed into a transportation business employing 400 people and led to him opening an office in Dubai in 2011. Three years later, he began a car rental company in the emirate, but after quickly letting out his entire fleet, he started thinking about ways to digitise and improve the model, leading to the birth of Udrive in 2016.
The key difference between Udrive and traditional car rental services is the technology. Cars are fitted with an Internet of Things device that can remotely open, lock, monitor and disable car use. Udrive initially used technology from Germany but replaced this with its own system in 2019.
The kit allows the company to offer short-term car rental services without the need to take a hefty deposit from customers, as traditional car rental companies often do. Users provide their Emirates ID, driving licence and credit card details, and cars can be hired per kilometre, by the hour, or through an all-in daily Dh99 rate that includes fuel, insurance and parking. A subscription service is also in the pipeline.
Demand bounced back strongly after last year’s disruptions, leading the company to introduce another 75 cars in September. Even now, Udrive’s ‘demand problem’ is that it exceeds supply, with utilisation rates higher than in the pre-Covid era, Mr Watson says.
“This is why we’re really positive about 2021 – as long as there are no more lockdowns or anything – that we’ll be able to put another 200 cars on the road and not think twice about it, which is what we’re planning over the next couple of months.”
The business is also much leaner than it was. It employs about 40 staff, down from 85 at the beginning of last year. It spent precious capital last year on development, automating manual processes for collecting Salik and speeding fines, which also reduced the likelihood of non-payment. It is also currently working on route visualisation to create algorithms to more efficiently cater to demand.
Udrive also recommenced fundraising. It secured $2.5m in a Seed+ round last year and in January, the company raised $1.3 million from Eureeca – the Dubai-based equity crowdfunding platform. It achieved its target within 48 hours, with the equity offered part of a wider $5m funding round valuing the company at $15m. This is about half of its pre-Covid valuation, as revenue is also lower.
“The difference is we have substantial value behind it. We are way more profitable on our unit economics now than we were pre-Covid,” says Mr Watson. He also expects revenue to ramp up substantially as more cars are reintroduced in the coming months.
The funding is also being used to expand including a push into Saudi Arabia and Turkey and to broaden the platform’s offer.
“We operate our own fleet right now but in the future, very soon this year, we are taking other people’s cars, putting them on the platform and taking a percentage of their revenue. And after that, we start taking your car, putting it on the platform, you rent it and you make money – like Airbnb,” Mr Watson says.
Q&A with Hasib Khan, founder and chief executive, Udrive
What other successful start-up do you wish you’d started?
An on-demand grocery platform is something that I really like because it is including transportation, mobility [and] food – everything that I did [previously]. That was something I would have really liked to do because [it is] something I could have boosted a lot more because of my experience. I had to pay a lot for learnings that I had in business.
What new skills have you learned since starting the business?
Growing a business in a way you can replace yourself. And I learned this over the course of getting to know Nic. We decided in the very beginning to say any business we would work on together, we would build in a way that we could scale the teams, scale the business but also outgrow ourselves with the business.
If you could do it all differently what would you change?
I would have on-boarded Nic much earlier into the business than in [July] 2019.
Where do you see the business in five years?
We are going to be a platform that will have lots of mobility options on demand. And we’re going to be all over the region. And potentially outside the region.