Sabi, a Lagos-based B2B e-commerce startup that provides digital commerce infrastructure to Africa’s informal economy, has raised $38 million in Series B funding at a valuation of $300 million.
This indicates revived investor interest in a B2B e-commerce market that is going through some reckoning.
CommerzVentures, a specialist fintech investor based in Frankfurt, and AfriVentures, a growth-stage investor based in Stockholm with an emphasis on Africa Norrsken22, U.S.-based growth-stage funds Early-stage investors from around Africa, including Fluent Ventures and Proof Venture Capital According to the sources speaking, CRE Venture Capital and Janngo Capital are two of the investors participating in this round.
Wasoko, which is the most capitalized B2B e-commerce platform out of the bunch, noted that it had 50,000 active merchants while processing over $300 million in GMV. It is important to note that Wasoko’s GMV numbers have increased since then.
Wasoko raised $125 million at a $625 million valuation in March of last year and seems to be doing well despite industry-wide contractions. The company raised the money at a valuation of $625 million.
Read also: Tunisian e-commerce startup Drest secures $336k to fund expansion
What Africa’s Retail Market comprises is about
The majority of Africa’s one trillion dollar retail market is made up of the continent’s informal trading sector. Over the past couple of years, a number of new businesses have emerged with the goal of connecting smaller shops to larger wholesalers and manufacturers through the use of digital platforms, such as apps, and a network of distribution and logistics services. This innovation has been warmly received by the industry, which is largely fragmented.
These B2B e-commerce firms had a good run throughout the most of 2021 and into the early part of 2022. They were successful in raising millions of dollars from local and global investors, and the majority of them put that money towards growth strategies such as offering early merchants discounts and incentives on a variety of products. However, proposals of this nature invariably result in a race to the bottom. Some B2B e-commerce businesses are reevaluating their growth strategies in light of rising global interest rates because they are no longer able to access free money. At the same time, they are cutting costs and withdrawing from certain areas.
Well, not Sabi. People who are familiar with the company’s activities claim that the startup, which has operations in Nigeria, Kenya, and South Africa, is not displaying any indications of hardship and is producing mind-boggling growth rates for a startup that has only been in business for two years and a half at this point.
Late in the year 2021, representatives from Sabi named Anu Adasolum and Ademola Adesina informed TechCrunch that the company had over 175,000 merchants using its network and was achieving a $200 million annualised gross merchandise volume run rate. According to three persons who are acquainted with the startup’s financials, these numbers have multiplied many times over to more than 300,000 merchants and over a billion dollars in annualised gross merchandise volume (GMV).
Sabi’s business model
One thing that should be brought up is how Sabi’s business model and the customers that it caters to make it possible for the company to amass a greater quantity of items.
Wasoko, MaxAB, Alerzo, and TradeDepot are all examples of full-scale asset-heavy platforms. These companies own and lease facilities in their distribution chain, ranging from warehouse to logistics, and their operations span the whole supply chain. Some online markets, such as Chari, Cartona, and Omnibiz, use asset-light models, meaning that they outsource their storage and logistics operations to a third party. Hybrid models are used by other online marketplaces, such as MarketForce and JABU.
Whether they have a lot of assets or a few, these platforms communicate with wholesalers, manufacturers, and distributors (or become one themselves), but their primary focus is on retailers, who are also sometimes termed merchants. Sabi, on the other hand, is an asset-light model that complements the intermediates in the B2B e-commerce retail chain. These intermediaries include wholesalers, retailers, wholesalers, and retailers (whom the startup refers to collectively as merchants). Sabi complements these intermediaries in the B2B e-commerce retail chain. It does this by meeting the many players in this value chain through multiple channels, such as offline agents, call centres, merchant partners, and supplier centres (which provide access to various tools, such as inventory management, sales, tracking, digital invoices, and analytics).
Sabi’s growth model and its approach of “focusing on the fundamentals and ensuring sound unit economics and profitability before pursuing expansion” differentiates it from other startups in the sector and has allowed it to maintain a sustainable trajectory, even in challenging market conditions, according to a statement sent by the company’s executives to TechCrunch via email.
The fundamental sources of revenue for Sabi have not changed; the company continues to earn a finance margin on credit-related transactions it originates and capture a take rate of between 5% and 6% (depending on the category) from marketplace transactions. According to three persons who are familiar with the company’s financials, the startup has facilitated more than $100 million on behalf of local microfinance banks and fintech lenders. This fact most likely explains why the fintech-focused venture capital firm CommerzVentures invested in the company.
According to the sources, Sabi is already processing 15,000 orders each month and has seen month-on-month growth of around 20%. That is one-tenth of Wasoko’s monthly orders from March of the previous year; but, a higher GMV (assuming Wasoko’s isn’t up to $1 billion yet) could suggest that Sabi records higher average order values largely from wholesalers, rather than retailers. As a result of this, the business, which has already funded more than $60 million (including a previously unknown $15 million Series A last year), is developing new goods and features to target its agents and last-mile merchants. Sabi may give these ideas some thought as a way to accommodate other income models and concentrate more on the B2B payments value chain.
According to two people familiar with the company’s plans, the category-agnostic startup intends to expand into other markets, including Tanzania and Malawi (via an acquisition), the Democratic Republic of the Congo (DRC), and Francophone West Africa. The company’s merchants deal with FMCG goods as well as products in agriculture, electronics, and chemicals.
