Uber is about to get a run for its money as one of its strongest rivals in the Middle East region has picked up some serious backers.
In its latest round of funding, Careem, a ride hailing service from the Middle East and South Asian region has raised another $150 million, closing a $500 million Series E round that was confirmed back in December when it unveiled the first $350 million portion of funding.
Mudassir Sheikha, Careem’s co-founder and CEO, confirmed that the company is now valued at over $1 billion following the new funding.
A third party source has informed that Careem’s valuation is at $1.2 billion now.
The latest tranche was led by Saudi Arabia-based Kingdom Holding Company, which backed Lyft, Twitter and Snap before they went public. German multinational automotive financing and mobility services provider, Daimler, and Centure Capitals like DCM Ventures and Coatue Management also took part in the funding sessions as well. Investment from the latter two marks the first time that Careem has attracted backers from Silicon Valley.
A representative from KHC has joined the Careem Board of Directors.
Daimler has already acquired three ride hailing services in Europe. Since Mercedes Benz is a part of Daimler, Careem could end up using its technology which is set to be introduced in the next generation of cars. The German automaker is working with Uber on driverless cars and plans to launch them within five years. It’s possible Daimler might use Careem as one more channel to market its technology.
Overall, the $500 million investment is being led by Rakuten, which made a major part of the initial $350 million investment.
The latest round of funding shows the growth opportunity for regional transportation services.
Potential in Transportation Services
Investors believe there is a huge potential in the market. Sheikha and Magnus Olsson, MD Careem, estimate that Uber and Careem only account for about one percent of all transportation services in the region.
“When it comes to ride hailing, Uber is the primary competitor, but between us we’re serving just one percent of the opportunity, so the biggest challenge is just growing.”
Careem currently faces numerous challenges in its growth. The region where it operates currently suffers from supply constraints. In simple terms, people don’t own as many cars in the regions where Careem operates when compared to other parts of the world.
Another issue that Careem faces in emerging markets is that payment methods are limited as most people don’t have credit cards and/or their debit cards don’t support online transactions. Careem has had to adjust accordingly and introduce its own virtual wallet system.
The regional ride hailing service has introduced a network of people in cities who act as collection managers, taking funds and paying the drivers. Cash results in more ‘leakage’ but the company hopes its virtual wallet will result in passengers and drivers getting more comfortable with the system.
Careem currently has 250,000 captains (drivers) and 10 million registered users. The service is available in 80 cities from 13 countries in the region. Revenues and trips are growing by 20 to 25 percent each month which shows its rapid growth.