The coronavirus pandemic seems to be turning the eyes of investors on the African startup ecosystem towards ecommerce. Barely weeks after Egypt’s B2B ecommerce startup Fatura closed more than $1 million in seed funding round, Nigeria-based B2B e-commerce marketplace for consumer goods in Africa, TradeDepot, has raised US$10 million in a pre-Series B funding round. However, the startup is making a new foray into fintech with the funding, further raising questions as to whether purely ecommerce ventures in Africa can survive without adding a touch of financial services to their offerings.
“We are excited to strengthen our team and welcome on board some incredible strategic investors and partners, as we double down on our mission to digitize and simplify retail distribution for the continent. Africa’s offline retail market is estimated at $1 trillion, and this new investment allows us to capture an even greater segment of that market,” said Onyekachi Izukanne, in a statement. “We will continue to use data to drive efficiencies and provide an easier stock acquisition service for our [over] 40,000 retailers, driving down costs for them by negotiating even better deals with our global manufacturing partners, whilst simultaneously providing a better, faster route to market for our suppliers.”
Here Is What You Need To Know
- This round of funding was co-led by Partech, which had previously invested $3 million in TradeDepot in 2018, signalling the confidence of the investor in the startup’s future. Also participating in the latest round are International Finance Corp., Women Entrepreneurs Finance Initiative and the Chinese VC MSA Capital.
- With the new investment, TradeDepot would expand into a suite of financial services and credit lending products for its retailers. TradeDepot said although many of its customers lack good credit rating, it has also devised alternative ways of scoring credit based on the data it has from its existing trading relationships.
- The new funding would also empower TradeDepot to offer mentorship opportunities and link retailers on its platform to global markets.
Why The Investors Invested
First off, investors’ confidence in TradeDepot ‘s latest funding round signals the performance of its previous $3 million round in 2018 led by Partech, one of Africa’s leading VC investors who also joined in this round. Therefore getting other investors to believe in the startup’s new future seems a little hill to climb, especially as the startup is also adding fintech services to its bouquet, a bait investors are willing to taste especially as the road to profitability in ecommerce in Africa is still a bit foggy.
““TradeDepot is a rising star in the African internet landscape, helping digitize a substantial underserved informal retail segment, which is the pillar of economic growth in Africa. The founders’ vision to build a digital platform that improves the unit economics of serving the mass market is one we feel privileged to support,” said Wale Ayeni, the head of Africa Venture Capital investment at the IFC.
Again, also interesting is the fact that Women Entrepreneurs Finance Initiative (We-Fi), an initiative meant to provide women entrepreneurs with access to debt, equity, venture capital, insurance, joined in this round, even though none of TradeDepot’s founders is female.
“Women play a pivotal role in driving economies across Africa, but lack of access to capital, limited market linkages, cultural norms and other challenges often prevent them from achieving the success they want,” saiid Hanh Nam Nguyen, who represents the We-Fi initiative with the IFC. “We-Fi financing will incentivize TradeDepot to build stronger women-led small and medium enterprises (SME) retailer and distributor networks, which will support them to become drivers of economic growth in their communities.”
However, it should be noted that since We-Fi is a collaborative partnership among 14 governments, eight multilateral development banks (MDBs), and other public and private sector stakeholders, hosted by the World Bank Group, it makes more sense to explain that We-Fi’s participation in this round was influenced by the participation of the International Finance Cooperation (IFC), the investment arm of the World Bank Group.
The startup said women account for over 75% of the retailers on the its platform.
On his own, Tidjane Dème, general partner at Partech, said the VC firm was proud to continue its partnership with TradeDepot as they continue their work to transform the huge informal markets that are present in Africa.
“The founders have a wealth of experience that puts them in a great position to execute on their vision, and their approach and results to-date are why we are so excited by the extraordinary entrepreneurs harnessing the power of technology to address issues across the continent,” he said.
A Look At What The Startup Does
First launched in 2016 by the Nigerian trio of Onyekachi Izukanne, Michael Ukpong and Ruke Awaritefe, TradeDepot connects international brands to small businesses in Africa
Retailers order and pay for goods using TradeDepot’s mobile apps (Android and Whatsapp), USSD or a toll-free number and have them delivered directly to their stores via the company’s fleet of vans and tricycles.
They can also order stock and manage their inventory online, with a number of ways to pay, including digital payments and cash. TradeDepot’s business depends on making a range of household supplies like milk, soap, and detergent more accessible and affordable for the street-side vendors and small shops that provide goods and services for hundreds of communities in cities like Lagos — where the company is headquartered.
For consumer goods brands, TradeDepot enables direct-to-retail distribution in the massive informal sector in some of Africa’s busiest cities. TradeDepot also provides a CRM and data management system that enables suppliers to plan and monitor their sales routes in real time, as well as gain invaluable insights into trade and retail data.
TradeDepot said, in a statement, that it has built up a network of 40,000 small businesses in Nigeria and connects them to local distributors of global consumer brands like Nestlé, Unilever, GB Foods and Danone.
The company said that a new store comes online to use its services every three minutes and that the company receives an order from retailers every four seconds, on average.
Co-founders Onyekachi Izukanne, Michael Ukpong and Ruke Awaritefe have worked together on 3 startups over the last 15 years. They co-founded SocketWorks, an IFC-funded EdTech startup, and prior to TradeDepot, founded C2G Consulting — a technology consulting business — and grew it to become one of the leading SAP consulting houses in West Africa with over $40m earned in revenues.
Michael and Kachi both have degrees in Electronic Engineering and a software development background, while Ruke has a degree in Economics & Statistics and a background in data science.
Charles Rapulu Udoh
Charles Rapulu Udoh is a Lagos-based lawyer who has advised startups across Africa on issues such as startup funding (Venture Capital, Debt financing, private equity, angel investing etc), taxation, strategies, etc. He also has special focus on the protection of business or brands’ intellectual property rights ( such as trademark, patent or design) across Africa and other foreign jurisdictions.
He is well versed on issues of ESG (sustainability), media and entertainment law, corporate finance and governance.
He is also an award-winning writer