Just weeks ahead of its highly anticipated IPO, Uber announced a $ 3.1 billion deal to acquire one of its largest rivals in the Middle East, Careem.
While Careem will remain an independent brand, Uber will acquire key insights and technology that the company has developed over the past seven years. Founder and CEO Sheikha Mudassir says that the need carved out by Careem would be hard for a Western company to easily overcome.
In an interview with Business Insider in February, sheikha explained that certain things that Western companies take for granted – like ubiquitous credit cards or even Google Maps – don't always exist in the countries where Careem operates.
"We did not have to build mapping infrastructure, we had to build our own places database because Google was not complete," Sheikha said.
"The neighborhood we have actually built into our cities and mapped every building, every villa, and every shopping mall in order to provide an accurate location for pickups and dropoffs."
Careem has mapped 45,000 miles of road in its bid to compete on a global stage
Cash is still king in the Middle East, but simply accepting hard currency in exchange for rides is more complicated than it might seem.
"Cash might seem like a simple option in the app, but it allows it to scale a lot of work," Sheikha explained.
The company assigns credit limits to captains (its term for drivers on the platform) based on their driving history on the platform. Those limits decide how much cash one driver can collect before having to deposit the company's cut. Careem's algorithm can then prioritize credit card trips to the accounting work out for commissions.
Drivers can also arrange a move to move cash, in a move that could foreshadow Careem's plans to enter the payments and remittances space, and huge industry in the region.
Given Careem's experience pioneering ride-hailing in the region, it makes sense why Uber would like to buy out the competition rather than try to compete.
"For a global player to come in and start providing service to the top 2% to 3% of the population is not difficult, they're used to the convenience," Sheikha said. "But as soon as you start going down the masses, you need a lot of tailoring."
For example, "it took Uber almost 2 years to realize that very few people in this region have a credit card," he said. "That's a very basic thing. It's 1
Uber, for it's part, seemed to recognize that as well. In an email to Uber employees late Wednesday, CEO Dara Khosrowshahi said Sheikha and his co-founder are "first-class entrepreneurs" with a truly extraordinary product.
"time, by integrating parts of our networks, we can operate more efficiently, achieve even lower wait times, expand new products like high-capacity vehicles and payments, and quicken the already remarkable pace of innovation in the region" said of the acquisition.
"It's a great day for the Middle East, for the region's thriving tech sector, for Careem, and for Uber."