Uber's Acquisition of Careem: Why It's an Unfortunate Deal for Customers

Despite being the worst kept secret of all time, everyone still jumped about Uber’s recent acquisition of Careem. Even in conversation at the weekend races, we eagerly shared our opinions and forecasted outcomes.

Firstly, congratulations to the Careem founders, Mudassir and Magnus. Like most entrepreneurs, I’m sure their journey wasn’t an easy one. I always think of start-ups like babies; it’s all diapers, vomiting and special care. At the start, you can’t even leave them alone for a week.

The backstory (in case you somehow missed it): Careem, the seven-year-old Dubai-based start-up was bought by the “ride-hailing giant” for approx. $3.1 billion, marking the first unicorn exit in the MENA region. Uber will acquire all mobility, payments and delivery. Careem will become a wholly owned subsidiary of Uber, and will continue to operate independently under the leadership of Mudassir.

My thoughts:

Bad news for the consumers

Despite being awesome for all involved with the company, it really is an unfortunate deal for the customer. No competition means an effective monopoly on ride hailing has already developed in an early developing sharing economy. This means there’s no incentive for the two entities to out-do each other, and will lead to poorer pricing for us, the clients.

Inspirational news for entrepreneurs

The region is a success story richer. With a large, entrepreneurial ecosystem in Dubai, perhaps this will inspire entrepreneurs to “think bigger.” Even home grown start-ups are capable of rivalling larger global brands. More people will be encouraged to leave their 9-5 to “start-up.”

Forget Silicon Valley 

Historically, the Middle East hasn’t been known as a venture capital hotspot. But “Deals with a size like this make a statement… they allow people who were worried about the risk of regional investing to feel more confident,” says Wamda Chairman and Careem Investor Fadi Ghandour. It’s put the Middle East on the map, and it’s good marketing for brand Dubai as a start-up capital city.

The “Paypal Effect”

As all 4000 of the Careem employees had stock in Careem, the deals resulted in hundreds of new millionaires; 275 people received one million dhs or more for their shares. This creation of wealth could result in what we saw happen with Paypal in the Middle East. After the digital platform was sold to Ebay, former employees (such as Elon Musk from Tesla, Reid Hofman from LinkedIn and YouTube founders, Steve Chen, Chad Hurley and Jawed Karim) all went on to found their companies and become very successful.

So, what’s next?

Uber ATG (Advanced Technology Group) has been hiring talented PhD grads and are working to achieve self-driving technology which I think is half the reason why they pushed for this acquisition; Careem never had the talent pool or the capital to pursue this daunting task.

By acquiring Careem, Uber will have a big enough platform to reach their proposed valuation of $120b dollars when they proceed to announce their hotly anticipated IPO on the New York Stock Exchange.

But it won’t be without challenges. Only one such company has stood the test of time following a massive expansion: Amazon.

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