A year after raising $22.5 million, Jugnu shuts down its core operations.

Web DeskJuly 16, 2023
A year after raising $22.5 million, Jugnu shuts down its core operations.

Jugnu, a prominent member in Pakistan’s startup ecosystem that operates in the B2B e-commerce supply chain, has decided to shut down its core business operations.

“To ensure that Jugnu continues to live its mission of empowering small and medium businesses, Jugnu will pivot toward a tech-platform play by leveraging the expansive tech and data suite to enable commerce and financial inclusion, among other enhancements,” according to a statement sent to ProPakistani by Jugnu’s Team.

It was also stated that Jugnu will depart from its current footprint of self-managed fulfillment centers, logistics, and inventory. It stated that Jugnu has enabled 100,000+ small and medium shops over the past few years, but new global macroeconomic realities have forced Jugnu to become more capital efficient and move toward profitability, which would need a recalibration of Jugnu’s business plan.

“Unfortunately, this shift in business model will have a significant impact on some of our teams, which is why we are personally reaching out to organizations to help transition some of the best minds to be key enablers in their respective missions,” the statement continued.

“An investor has pulled the plug,” says the man behind the curtain. Sharoon Saleem and Yasir Suleman Memon, two former Unilever executives and co-founders of retail automation platform Salesflo, established oJugnu in 2019. Its goal was to digitize, empower, and expand small and medium-sized shops by giving them more control over their inventory and cash flow.

But from Jugnu, and that’s the main reason they’re closing down,” said a former Business Development Executive of Jugnu in an interview with ProPakistani. He also stated that E-commerce FMCG companies cannot profit due to low margins on products with high expenses.

It raised $25.7 million in total over three fundraising rounds, the most recent of which was a $22.5 million Series in March 2022 from MENA-based eCommerce marketplace Sary, Sarmayacar, and Systems Limited. It had already connected with 30,000 retailers in Islamabad, Rawalpindi, and Lahore, with plans to expand into additional cities.

According to insiders, the corporation was incurring 10-15% losses in inventory management alone due to internal pilferage, whereas companies such as Unilever manage to keep their losses around 0.2 percent at various distributions. Furthermore, the senior management used to throw a lot of parties and was also riddled with corruption, charging the corporation three times the actual cost for various activities and splitting it among themselves.

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Mismanagement was so widespread that third-grade items were purchased in order to procure at market prices. In one case, 25,000 bags of milk were obtained with only one day until expiry and were even delivered to a store, despite the fact that at least two weeks to a month of expiry time is required to efficiently distribute the commodities at this scale.

It was later discovered that it was obtained at even lower than wholesale pricing when the business owner noticed and withheld payment. If the company is notified ahead of time, the items nearing expiry might be replaced, but no such procedures were followed. Logistics and route planning were also significantly botched

Despite the large investment round completed last year, the company was apparently overdue on payments to its logistics partners, including a leading logistics startup to which it had to pay Rs. 7.5 million all at once, and that was only for a few months.

“The toxic work environment and unprofessional behavior of senior management could only result in this outcome,” Haroon Javed, a lawyer, explained.

He stated that it was a terrific initiative, and they were all really thrilled about it, but despite the co-founders’ best intentions, a culture of office politics and preferred behavior prevailed. According to him, persons with banking knowledge were employed in logistics management and then educated by the executives who were supposed to report to him.

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He stated that the founders should be commended for being able to take it this far despite such losses and an environment in which critical positions were being promoted to people with literally no B2B experience except on the basis of personal references, and a number of very loyal employees, including the former logistics management, left Jugnu as a result of this environment.

Have any lessons been learned?

Jugnu, which was launched just before the Covid-19 outbreak, was exactly the kind of answer people were looking for at the time, and its founders already had a good understanding and network of distribution and stores through their previous firm. The same was true for Salesflo, which launched concurrently with the launch of 3G services in the country, drastically lowering the cost of operations via smartphones.

 

It is the third big supply chain startup in the country to fail after raising millions of dollars in capital, following Airlift and MedznMore, and does not include companies that never reached the funding stage.

Some firms can also be found squandering VC funds on marketing in order to achieve insane growth in gross revenue in order to raise the next round. This reliance on external investment at the expense of refining its own operational management is a formula for failure.

It tells all about the startup community’s need for rethinking in order to better equip its founders and senior management to gain a hold on ground realities, which has been discovered to be the primary cause of these failures, at least in the case of The extent of theft and mismanagement can only go unnoticed if the founders are either not paying attention or have blind spots for those involved.

 

 

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