The Saudis are hungry for big-spending startups, and Riyadh has the capital to back aggressive growth. That’s the signal the kingdom sent out over the weekend with Saudi Telecom Co’s (STC) $100 million investment in Careem, Uber’s would-be rival in the Muslim World. It was part of a larger $350 million deal led by Japanese e-commerce giant Rakuten.
Telecom will take a 10 percent stake in the company, making Careem the Arab world’s second newly crowned unicorn this year.
Careem has grown steadily over the last two years from its homestead in Dubai to the Persian Gulf and North Africa. They bought Pakistani carpooling startup Savaree back in March to expand operations in Lahore, Karachi, and Islamabad.
The money is the first part of a planned $500 million investment round according to Reuters, who also reported Credit Suisse had advised the raise. Careem raised a $60 million Series C financing round back in November 2015 led by the Abraaj Group. Saudi Telecom previously invested $1.7 million via its STC Ventures arm in the company’s September 2013 seed round.
There is huge interest in ride-hailing services in Saudi Arabia because, controversially, it is illegal for women to drive. As a result, they make up some 80 percent of the customer base for Uber’s Saudi operations. Careem has previously said that it sees an average rate of 30% growth month to month, though they haven’t been specific about their Saudi numbers.
— Careem (@careem) December 19, 2016
Careem previously covered only 20 cities, but has expanded to 48 over the last six months moving into Saudi cities like Ar-Rass, Qassim, Aseer, and Jazan. Still, they face stiff competition from Uber.
The potential to sustain the economy and its controversial law was likely only part of the reason the Saudi Arabian Public Investment Fund saw fit to invest $3.5 billion in Uber earlier in 2016. Many assumed that besides Saudi Arabia, a lot of that money would go toward challenging Careem in the Arab World and neighboring non-Arab Muslim countries. A significant $1 billion of it reportedly was designated to do battle with Ola in India.
As most startups do, Careem claimed they were on the edge of profitability just this past September. But they and Uber were hampered in August by a ridesharing crackdown in Abu Dhabi, one of seven emirates in the UAE along with Dubai. Dubai did not follow suit with the crackdown on ridesharing services.
With the valuation ,they become the second UAE startup this year, following Souq, to achieve a unicorn valuation of $1 billion.
Mohammed Darwish Al Qamzi, general manager of the Centre for Regulation of Transport by Hire Cars, told Reuters in September service would be permitted again once a new registration scheme was put into place.