Hytch, a Nigerian ride-hailing startup that went public in May this year to help people share rides and move faster and cheaper, has announced that it will no longer offer car-pooling services. According to a source close to the startup, the company has abandoned its ambitious mission of scaling the highly fragmented in-city car-pooling transportation sector to assist small businesses in fulfilling their orders nationwide and, soon, internationally.
When the company went public in May, it only took three days and no marketing budget to acquire 600 users. Like a proud parent, its co-founder and CEO, Laolu Onifade, took to Twitter to announce that it would reach 2,000 users by the end of the second quarter. But that did not occur.
Due to a lack of funding, the company shifted into a business-to-business (B2B) on-demand delivery startup.
When TechCabal spoke with Onifade in April, the CEO was confident that his team possessed the necessary skills and drive to create a viable product and business model. But the conversation ended with a rallying question: Did they have the money to match their ambition? Onifade responded that they had raised a round of family and friends and were now raising pre-seed.
The inability of Hytch to secure funding could be attributed to the economic downturn or investors simply not being interested in the business’s long-term viability.
Before Hytch, about 3-4 local startups attempted but failed to digitize vehicle pooling. GoMyWay, a ride-hailing startup that could be said to have pioneered the local effort to digitize car-pooling, is one popular example. It shut down due to a lack of funds: it burned cash to accelerate growth while making little to no money. Investors had left by the time it was ready to prioritize revenue.
Hytch didn’t face any monetization issues because it charged a fee on every trip a driver completed from the start. Onifade told TechCabal in April that Hytch was already profitable as it charged 15% on every ride and had recorded an average of 25 rides per day since launch. Nonetheless, the company was unable to raise funds.
It decided to pivot to stay in business, demonstrating the thick skin and perseverance required in building startups.
Because ride-hailing is a capital-intensive venture, building in this sector requires a significant investment to scale. We’ve seen how quickly startups fail in this sector without venture funding. For example, before its IPO in 2019, American ride-hailing giant Uber raised $25.2 billion in 33 rounds. Estonian Bolt recently raised $607 million in a Series F round. And even French BlaBlaCar, which primarily does the same thing as Hytch, has raised more than $443 million in venture capital since its founding in 2006 (its most recent funding of $115 million came in April last year). Locally, Treepz, a bus-hailing startup, has raised $3.1 million and expanded into Ghana and Uganda by acquiring similar startups.
Nonetheless, opportunities abound for Hytch in its new venture. Many challenges remain in the Nigerian e-commerce industry, the most significant of which is logistics. Logistics in Nigeria is a nightmare due to poor road networks; whoever can figure out how to build around these infrastructure gaps will win big. On-demand delivery services come into play here. On-demand companies are taking over the responsibility of last-mile fulfillment from e-commerce companies. And this market is rapidly expanding as several local and international brands have launched in Nigeria in the last two years.
