BusCaro raises $2m to tackle tricky mobility sector

Venture capital is starting to trickle back into Pakistan. In the latest round, Mobility startup BusCaro raised $2 million last week, bringing its total funding to $3.5m.

The round was led by UAE-based Daman Investments, with participation from US/Saudi Cartography Capital, New York’s Epic Angest, UK’s Wahed Ventures, the Aga Khan Development Network’s Accelerate Prosperity, and a mix of angel investors.

BusCaro, which offers shared commute services, was born in late 2022 — a time that could not have been less propitious for mobility startups. The world was emerging from the pandemic, the Russia-Ukraine war had triggered a global crisis, Pakistan was reeling from floods, and the local mobility sector was collapsing. Airlift and Swvl had folded, and Uber had exited Pakistan. What was once the hottest space had suddenly become a no-go zone.

That’s when Maha Shehzad, former general manager of Swvl, launched BusCaro — putting its first bus on the road just a day after Swvl shut down.

The journey since then has been anything but smooth. Ms Shehzad says she received over 400 rejections before securing the game-changing $160,000 in the first year of operations that set the fledgling startup on its current growth path. Today, BusCaro claims to process more than 900,000 monthly bookings and is on track to hit $8.6m in annual revenue by December. But scaling up has brought its own financial headaches.

The financing conundrum

“Equity financing is the least of my problems — and that’s true for most founders,” says Ms Shehzad. “Working capital is the main bottleneck.”

BusCaro operates an asset-light, tech-first model: it doesn’t own vehicles, operates out of co-working space Collabs, and has no land or collateral to borrow against. Its topline is too large to qualify as a small or medium enterprise, and even if it did, the Rs5m lending cap would be far too little. As a result, BusCaro is forced to turn towards venture for day-to-day financing.

“Startups raise equity to fuel high-octane growth. It’s ridiculous that we need to raise it for working capital,” Ms Shehzad says. Despite being fully incorporated, with a strong credit history, a portfolio of formal clients willing to provide guarantees, and credit lines from major fuel companies such as Total and Parco, BusCaro still struggles to raise financing against its invoices, underscoring the challenges faced by the tech-based private sector.

Getting the model right

So what is BusCaro doing differently, where others with deeper pockets failed?

The steep hike in petroleum prices, the economic downturn, and the drying up of global financing made it impossible to sustain business models like Airlift and Swvl’s, which prized growth over profitability by subsidising services. When the economic tides turned worldwide, venture capitalists were no longer handing out blank cheques for costly customer acquisition; instead, they required startups to prioritise early breakeven over just chasing revenue growth.

However, according to BusCaro, it secured positive unit economics from the outset — in simple terms, each ride cost less to provide than the revenue earned from fares. And while its fares are correlated to fuel prices, a shared commute remains cheaper than a solo ride.

Unlike its predecessors, BusCaro has not subsidised its per-seat fare. This balance was achieved by driving aggregation across two verticals: business-to-business (B2B) and business-to-business-to-consumer (B2B2C).

On the B2B side, BusCaro partners with institutions. Sometimes, employers subsidise a percentage of the commute cost as an employee perk; in other cases, BusCaro provides the option of shared transport if enough employees aggregate demand.

For B2B2C, it works with facilitators like housing societies or co-working spaces to pool commuters at pick-up points. This approach slashes customer acquisition costs and creates positive unit economics. With 80 clients onboard, about 60pc of BusCaro’s business comes from B2B, and 40pc from B2B2C, including its parent-facing app.

That app has also opened up a niche market: school commutes. A couple of decades ago, school vans were everywhere; today, parents are left scrambling for reliable options. BusCaro’s app enables parents and schools to track rides in real-time, with manual check-in and check-out options for minors. It’s a problem, Ms Shehzad believes, that has significant potential — not just in Pakistan, but across the GCC, especially for working mothers.

Startup burn

Not that BusCaro is profitable. Currently, it burns about $15,000 a month, with a -2.8 per cent EBITDA [Earnings Before Interest, Taxes, Depreciation, and Amortisation] — almost entirely due to additional tech spend. With Ms Shehzad mentioning the 36pc interest rate BusCaro has faced, the debt financing alone would add up to a hefty expense, pushing the bottom line deeper into the red — a problem that eventually led its previous cohort to their exit.

But demand is outpacing supply. “My pipeline is 5x to 6x more than what I can fulfil right now,” Ms Shehzad claims. And the logic seems simple: shared commute outside of public transport will always be the cheapest way to move people. However, for the bottom line to come out of the red, the company will need a topline growth of 28pc.

From non-air-conditioned 80-seater buses to air-conditioned Corollas, BusCaro offers options across price points, with an average blended fare of Rs130 per ride — more economical than most alternatives. It currently operates in Karachi, Lahore, Islamabad, and nearby cities.

Safety has also been a differentiator, BusCaro claims. With nearly 19m bookings since its inception, BusCaro claims zero reported harassment cases. The nature of shared rides, where 70pc of passengers are women and children, inherently lowers the risk, although the company also vets its drivers.

While speaking to Brackly News, Ms Shehzad has a simple piece of advice for startups struggling to raise capital: don’t get caught up in FOMO. “A few years ago, everyone was rushing into fintech. Now it’s AI. Instead, solve the boring problems on the ground — and do it while staying unit positive.”