The Africa SMME Tech Report

Issue No. 9. Africa-Middle East small business tech news for 8 July 2021. This edition features MarketForce, TradeDepot, Lydia, Kitopi, PayHippo, MatchCraft, and more...

MarketForce Co-founders Tesh Mbaabu and Mesongo Sibuti.

MarketForce Raises $2 Million

A Kenyan B2B marketplace startup backed by the legendary American accelerator YCombinator has just announced a significant funding event.

Nairobi-based MarketForce announced Thursday that it has raised a $2 million Series A round, bringing its lifetime funding to $2.5 million. The company plans to use the funds to focus on building up its RejaReja marketplace and to take its concept to the Nigerian market.

MarketForce was co-founded in 2018 by CEO Tesh Mbaabu and CTO Mesongo Sibuti. RejaReja is the company’s flagship project. It’s a marketplace allowing informal shops to source, order, and pay for inventory at any time via interactive SMS and mobile app. RejaReja then delivers the goods within hours.

This is a breakthrough service for small, informal merchants, known as“dukas” in Kenya. It saves them the time and money that would be consumed by closing up shop and going out and search for stock. 

“Our goal is to create income growth opportunities for a million retailers and independent sales agents across Africa within the next five years.” — MarketForce CEO Tesh Mbaabu

The company describes this platform as “The operating system for retail distribution.” One of its new investors, Rebel Fund, describes MarketForce as “‘Salesforce' for retail distribution in Africa.”

Participating in the round, in addition to Rebel Fund, are V8 Capital, Future Africa, Greenhouse Capital, Launch Africa, and Remapped Ventures. The company adds that a “couple of strategic angel investors” also joined the round. Y Combinator and existing investor P1 Ventures also participated in the round that MarketForce says was oversubscribed. 

A big part of MarketForce’s mission is to make it easier for merchants to go cashless, or at least reduce their dependence on cash. Here is how MarketForce outlines its challenge.

“In sub-Saharan Africa, approximately 90% of household retail transactions are in cash, and delivered through a network of about 100 million MSMEs, with 42 million in Nigeria alone. Retail payments on the continent are expected to top $2.1 trillion by 2025, and MarketForce aims to digitize a large portion of these offline transactions.” 

Mbaabu outlines a pretty big ambition for MarketForce, and one that certainly requires expansion beyond Kenya.

“The combination of our technology with the offline distribution network that we are building is essential to creating maximum output and impact in African retail distribution,” said Mbaabu. “Our goal is to create income growth opportunities for a million retailers and independent sales agents across Africa within the next five years.” 

Building on Digiduka Acquisition

Last month we reported that MarketForce had acquired a rival platform, Digiduka, which is a platform that enables small merchants to accept digital payments, pay bills online, access credit, and earn money through reselling arrangements for services like airtime, electricity tokens, and bill payments.

This acquisition helped thin out the competitive field. If it hadn’t acquired the company it would have to adapt its solution set to compete with what Digiduka offers. Now, the acquisition adds capabilities that further MarketForce’s mission of creating a cash-free future for informal merchants.

Digiduka’s wallet, significantly, allows retailers to collect mobile money and bank payments via mobile app, WhatsApp bot, or USSD shortcode. This eliminates high mobile money transaction fees, which reduces barriers preventing merchants and end-users from reducing their use of cash.

MarketForce now includes all of these capabilities in its merchant offering.

Here’s what Mbaabu said then about the Digiduka acquisition in a company blog post.

“Our teams share a vision and values, to a large extent. Therefore, acquiring Digiduka instead of competing with them just makes sense. It’s all about two solid teams coming together to create a massive impact in African retail. This is a case where one plus one is equal to five.”

Digiduka was in the first class of the international “startup generator” Antler’s Nairobi startup programme in 2020.

So who will MarketForce compete with as it enters Nigeria?

One company on a similar mission is TradeDepot, a B2B eCommerce platform that distributes consumer goods to more than 40,000 Nigerian micro-retailers.

According to Apps Africa, the company was founded in 2016. And last year it raised a $10 million pre-Series B round, which brought its cumulative fundraising total to $13 million.

TradeDepot provides distribution for consumer goods manufacturers like Unilever and Nestle through a string of depots in Nigeria. It also provides micro-loans to retailers, through partnerships with financial institutions.

Lidya Raises $8.3 Million to Support Expansion and Growth

We recently wrote about PayHippo an early-stage Nigerian startup that has raised $1 million to offer fast micro-finance to Nigerian small businesses. We noted that it was taking on Lidya, a company founded in 2016 by Nigerian Tunde Kehinde and Pole Ercin Eksin. The founders are both veterans of African eCommerce unicorn Jumia.

Eksin has recently left the company and Kehinde is now Lidya’s sole CEO.

Lidya positions itself as an SMME lender in “fast-growing” economies. In addition to Nigeria, Lydia operates in the US, Poland, Portugal, and the Czech Republic. Lydia began making small loans to Czech and Polish SMEs last year.

Lidya offers loans as low as 150 USD and promises a five-minute setup process and a loan decision within 24 hours.

Now the company has announced its own fresh funding round, an $8.3 million Series B round, designed to help Lydia further scale up its lending operations. To date, the company has raised $16.5 million.

Leading the investment is Alitheia Capital, via its uMunthu Fund. Notably, this fund is designed “to provide risk capital to commercially viable businesses that offer financial solutions to the emerging consumer markets in Nigeria, South Africa, and Ghana.”

Other investors that participated include Bamboo Capital Partners, Accion Venture Lab, and Flourish Ventures.

Our biggest question about Lydia is whether it is raising enough capital to truly tackle the SME lending gap on a global level. To us, $16.5 million feels like a fraction of what Lidya will need to be successful and expand further.

Lidya reports disbursing more than $3 million to SMEs in the two Eastern European countries.

To date, the company has disbursed over 25,000 loans in the two markets and claims to have more than a 90% customer repeat rate. 

Co-founder Kehinde said the following when TechCrunch when asked why Lydia chose to expand outside of Africa.

“We wanted to build a global business from day one given the size of the problem where there is a $3 trillion credit gap. We challenged ourselves not to limit ourselves to one market and went through some data before expanding to Europe.”

Regarding the question of sufficient capital, TechCrunch reports that Lydia is currently using equity funds to supports its loan book. Normally companies use debt to finance their lending. Kehinde told TechCrunch the reason for this practice was to prove the company’s algorithms worked and that it could recover its capital before turning to debt to support its lending. The company now plans to transition to using debt.

Digital Marketing Platform MatchCraft Productizes its APIs

The international digital marketing platform MatchCraft has taken its suite of APIs and “productized” them into a new solution called “Powered by”.

This new tool enables technology companies to plug in the technology behind MatchCraft’s adVantage search marketing platform and begin selling and running campaigns right away.

“Offering tech providers access to MatchCraft’s battle-tested local ad technology opens up new opportunities for both MatchCraft and our industry. ‘Powered by’ enables platforms to expand revenue streams into channels that may otherwise be unattainable,” said MatchCraft CEO Sandy Lohr.

MatchCraft is based in the United States but operates globally. One of its key customers is Trudon, the South African directory publisher and digital marketing agency.

Can Kitopi Take on the World?

In just three years Kitopi has gone from an idea to a unicorn. The UAE-based cloud kitchen company, which provides kitchen space and supporting technology to delivery-only restaurants, just raised a $415 million Series C round, giving it a reported valuation in excess of $1 billion.

One of the major uses for the fresh capital will be an expansion into Southeast Asia, a region that, along with MENA, has been very receptive to the ghost kitchen concept.

The raise was anticipated. It was larger than earlier public reports suggested but in line with what we heard in recent weeks. The main investor is SoftBank, the Japanese conglomerate famous for turning $20 million into $60 billion via Alibaba. And for turning $2 billion into a smoldering heap via WeWork.

Joining SoftBank in this round are Chimera, DisruptAD, B. Riley, Dogus Group, Next Play Capital, and Nordstar.

“What this shows is not only a great commitment to our company but to the industry and the Middle East region,” said Kitopi Co-founder and CEO Mohamad Ballout, in a blog post announcing the investment. “Softbank and our other esteemed investors recognized the value of Kitopi’s platform to the F&B industry, and how we’re truly revolutionizing the way people access food.”

This is reportedly SoftBank’s first investment in a MENA-based company.

This is an excerpt from a 6th July subscriber-only post.

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PayHippo Differentiates with Speed

A Nigerian startup called PayHippo has raised a $1 million pre-seed round to help it build out an SMME microlending business. The product launched in January 2020.

A growing number of companies are addressing the micro-lending space in Africa. Most are attacking the issue in individual countries or regions within the continent.

The addressable market for SMMe small loans in Africa is so vast that it will be a while before the space is saturated. However, many markets, Nigeria among them, already have multiple active competitors. And each is looking for an edge to differentiate their offering.

For its part, PayHippo looks to stand out by promising a lending decision in three hours or less.

According to a article posted Friday by PayHippo co-founder and CEO Zach Bijesse, before this new round the company got by on funding from friends, family, and “notable Nigerian angel investors.” It also cites funding from Aidi Ventures, a firm that aggregates angel funding for early-stage African startups.

The list of pre-seed round investors includes regional investors Ventures Platform, Future Africa, Launch Africa, Sherpa Ventures, and DFS Lab. Also participating are international investors Hustle Fund (which says it invests in “hilariously early” startups and, oddly, has its own hustle porn merch store), and Mercy Corps Ventures.

This is an excerpt from a 5th July subscriber-only post.

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Africa Home to 3 of World’s Top 10 ‘Unbanked’ Nations

We found this chart on LinkedIn (credit to Jason Butcher) that lists the top “unbanked” markets worldwide. Three of the top 10 and five of the top 20 unbanked markets are in Africa.

This is a helpful reminder of the opportunity that fintech (and DeFi) faces in Africa and around the world to help those with no checking or savings accounts gain full access to the financial system.

We found and recreated the full list, which you can access via the button below.

View the Full List

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