What Happened To Airlift & Why Did It Fail?

Airlift, a Pakistani quick commerce startup, aimed to revolutionize grocery delivery with 30-minute services. Founded in 2019, it quickly became the most-funded startup in Pakistan, raising $85 million. Despite its rapid rise, operational challenges and a funding crunch led to its shutdown in 2022.

What Was Airlift?

Airlift's main product was a quick commerce service offering 30-minute deliveries for groceries, fresh produce, and medicines. Its unique value proposition lay in its unprecedented speed and convenience in Pakistan. Notable achievements include raising $85 million in the largest Series B funding round in the country's history and expanding operations to South Africa.

What Happened to Airlift?

The story of Airlift is a compelling tale of rapid growth and sudden collapse, marked by several key phases:

• Founding and Early Success: Airlift was established in 2019, initially as a mass transit service before pivoting to instant grocery delivery in early 2020 due to the Covid-19 pandemic. The company quickly gained traction, boasting a 30-50% monthly growth rate shortly after raising Series A funding.
• Innovative Business Model: Leveraging a network of warehouses, Airlift promised 30-minute delivery times for groceries and other essentials. The company secured goods at below-market rates and passed the savings on to customers, attracting a young, dynamic workforce with modern work culture and generous benefits.
• Rapid Expansion and Funding: Airlift raised $85 million in the largest funding round in Pakistan's history, reaching a valuation of $275 million. The startup expanded aggressively, opening multiple warehouses and launching operations in South Africa, but the rapid growth came at a significant cost and was poorly executed.
• Leadership Decisions and Market Conditions: Despite achieving order-level profitability and reducing financial burn, Airlift's leadership decided to cease operations after failing to secure new funding. The global economic downturn and investor reluctance to commit funds ahead of others exacerbated the situation.
• Final Decline and Closure: Airlift informed employees of its shutdown after a failed funding round. The company was close to operating profitability but could not overcome the uncertainty in investor disbursements. Plans were made to provide severance payments and clear dues to suppliers and stakeholders.

When Did Airlift Shut Down?

Airlift announced its permanent shutdown on July 12, 2022, and ceased operations the following day, July 13, 2022. The decision came after the company failed to secure new funding amidst a global economic downturn, despite achieving order-level profitability and reducing financial burn.

Why Did Airlift Shut Down?

1. Funding Crunch:

   Airlift's inability to secure a new round of funding was a critical factor in its downfall. Investors were hesitant to commit funds ahead of others, causing delays and uncertainty. This hesitation was exacerbated by rapidly deteriorating global economic conditions, which led to a collapse in the funding round.

2. Operational Inefficiencies:

   The company faced significant issues with inventory mismanagement, pricing inefficiencies, and fraud. Automated systems caused sudden inventory surges, leading to wasteful shipments and expired products. Additionally, pilferage in warehouses and retailer manipulation further strained the company's resources.

3. Growth-at-all-Costs Model:

   Airlift's rapid and unsustainable expansion of warehouses and operations without proper execution led to operational chaos. The divide between corporate offices and warehouse operations resulted in a lack of essential business acumen and strategy, ultimately contributing to the company's failure.

4. Global Economic Downturn:

   The global recession and a dramatic 27% drop in venture funding due to rising interest rates and a capital market crunch severely impacted Airlift. Macroeconomic instability in Pakistan, including severe inflation and political instability, further compounded the challenges faced by the startup.

5. Unrealistic Goals:

   Airlift's path to profitability was based on unrealistic targets and comparisons to giants like Amazon. The company's ambitious goals were not aligned with the on-ground realities, leading to a disconnect between expectations and actual performance.

Lessons Learned from Airlift's Failure

• Prudent Financial Management: Ensure sustainable growth by balancing expansion with financial prudence to avoid cash flow crises.
• Effective Inventory Control: Implement robust inventory management systems to prevent waste and inefficiencies.
• Realistic Goal Setting: Set achievable targets based on market realities rather than overly ambitious comparisons.
• Adaptability to Market Conditions: Stay agile and responsive to economic shifts and investor sentiment.
• Operational Cohesion: Foster strong communication and strategy alignment between corporate and operational teams.
• Investor Relations: Build and maintain strong relationships with investors to secure timely funding.
• Fraud Prevention: Establish stringent measures to detect and prevent fraud within the supply chain.
• Local Market Understanding: Develop a deep understanding of local market dynamics and customer needs.

We Shut Down Startups

Airlift's story is a stark reminder of how quickly a promising startup can face insurmountable challenges. If your startup is facing similar hurdles, Sunset can help you navigate the complex process of winding down.

Sunset takes care of all the legal, tax, and operational burdens, allowing you to avoid penalties and reduce liabilities. Book a demo today to see how we can help you move on to your next venture seamlessly.