Last year, when funding was still plentiful and startups were expanding rapidly, Capital was a real competitor in the Egyptian B2B e-commerce and retail space. It even raised $33 million in Series A funding. But with the current economic crisis, companies are feeling the pinch, especially startups, and Capiter is no exception to that. However, things are more complicated for the company, whose founders are now facing fraud allegations.
Earlier this year, multiple Egyptian startups laid off employees, a trend that has been seen all around the world as companies struggle to remain profitable. Among the companies was Capiter, which reportedly laid off around 100 employees between June and July.
But Capiter stands out because of what seems to be going on behind the scenes. According to to TechCrunch, sources spoke of the company’s poor management and lack of structure. They also mentioned that the company found it hard to onboard merchants, which led to financial issues. And by August, the company only had around a month of runway.
The financial troubles prompt investors to search for buyers, hoping to save the company through a merger or acquisition.
However, the board of directors has also found fault with Mahmoud and Ahmed Nouh, evidenced by their removal via a motion on September 6th. The statement released by the board references the founders’ inability to fulfill fiduciary duties and mentions them not reporting to the board and shareholders during meetings involving potential mergers.
Making matters more serious are reports that the brothers are not in Egypt, which has some claiming they fled with company funds. While there is nothing to support the claims, Capiter’s investors responded to inquiries via email, which mentioned internal and external investigations.
“The Board and shareholders have initiated an internal investigation and therefore are not at liberty to comment on the news or allegations circulating the social media for the time being. The Board and shareholders are also working closely with relevant stakeholders, legal and HR teams as well as the legal authorities for an external investigation on this matter.”
In response to the allegations, CEO Mahmoud Nouh, denied the false accusations. He went on to say that he had not received any official notice regarding the dismissal of him and his brother, continuing on to say that he was still the CEO of the company.
Additionally, Mahmoud said that most of the funding raised last year was spent on operations, with him having the records to prove it. Moreover, he claims that both he and his brother attended board meetings virtually from Dubai.
As for the company’s struggles, he blames most of it on the challenges presented by the war in Ukraine and the economic crisis faced by many startups.
The two sides of the story do not match up, which is especially clear since the report from the board of directors spoke of appointing an interim CEO, Majid El Ghazouli.
Perhaps things will become clear as the story develops and investigations shed light on what really happened behind closed doors. In the meantime, Capiter stands as yet another casualty of the current economic conditions, which have left many startups struggling to stay afloat, much less flourish .
Spencer Hulse is a news desk editor at Grit Daily News. He covers startups, affiliate, viral, and marketing news.