The Africa SMME Tech Report
Issue No. 18. Africa-Middle East local and small business tech news for 4 November 2021. This issue features Breadfast, Eden Life, Datafree, Moya, Taskmoby, and more...
Keywords: online grocery, delivery apps, logistics, Egypt
Breadfast Series A Showcases AME Grocery Delivery Opportunity
Around the world, the online grocery delivery space is white hot. And in some places, perhaps overheating.
In Europe’s major cities, for example, dark stores and delivery apps with names like Gorillas, Zapp, Jiffy, Flink, and Dija have engaged in an escalating war for which app can offer the fastest delivery times on a pack of cigarettes or a bag of crisps.
The space’s hyper-competitiveness has apparently taken a toll. In a few cases, once high-flying companies put themselves on the block at lower than projected valuations.
Gorillas, for example, was poised to take an investment from DoorDash. However, those talks soon fell apart when, according to Bloomberg, DoorDash failed to convince Berlin-based Gorillas to slow its roll and shore up its European operations before jumping across the pond to the United States.
At the time the DoorDash-Gorillas deal was on the table, terms were reportedly based on a US$2.5 billion valuation. Certainly unicorn worthy, but well short of the US$6 billion valuation Gorillas was seeking. It will be interesting to see how Gorillas fares without the reportedly much-needed infusion of capital DoorDash represented.
A definitional pause. A dark store is a warehouse (or a string of micro-warehouses to enable hyper-fast delivery), not open to the public, that a delivery service uses to fulfill orders on its grocery delivery platform. It sits in contrast to the aggregator model, where an app (think U.S.-based Instacart) sends its shoppers around to existing stores to buy goods off the shelves and deliver them to customers.
The former model is asset-heavy, but offers greater control over the entire value chain. The latter model is asset-light, but leaves the app somewhat at the mercy of a supply chain they cannot control.
All this leads us to Breadfast, a Cairo-based grocery delivery service that follows the asset-heavy model. According to TechCrunch, the company has just raised a US$26 million Series A round in order to dominate the online grocery market in Egypt, and beyond. The company has its sights on Sub-Saharan Africa once it consolidates its position in Egypt.
The grocery delivery market is already worth about US$1 trillion across Africa and the Middle East.
The list of investors begins with co-leaders Vostok New Ventures and Endure Capital. Among Sweden-based Vostok’s investments are Delivery Hero (past debt investment), Bangladesh ride-hailing service Shohoz, online food delivery service Hungry Panda, online booking platform Booksy, and others.
U.S. based Endure does not publicly share its portfolio companies.
Also participating are the JAM Fund, YC Continuity Fund, an unnamed Saudi-based fund, Shorooq Partners, 4DX Ventures, and the logistics company Flexport.
Breadfast, founded in 2017, has raised about US$30 million to date.
Perhaps another signal came out this week that the Middle East is primed for an inflection point in investor interest in the dark store/online grocery space.
Appetito, an Egyptian dark store startup launched in 2020 has just raised a US$2 million pre-Series A round. This round was led by another U.S. based VC, Jedar Capital, that focuses on early stage investments in MENA and Asia.
Appetito’s model is similar to Breadfast’s. It operates dark stores and delivers a range of private label products serving Cairo, Giza, and Alexandria with both next day and pre-scheduled deliveries.
Breadfast offers a combination of FMCG from major brands and its own private label products.
All in on ‘Asset-Heavy’ Option
So what’s Breadfast’s plan? The company wants to be a regional leader in grocery delivery. And it has committed to the warehouse model. And the company says with pride that it committed to that model well before Gorillas and its oddly-named brethren came popped up across Europe.
As reported by TechCrunch, Breadfast has achieved the following:
It currently serves 170,000 Egyptian households with more than 2,500 inventory items.
Breadfast reports having a 65% customer retention rate month-on-month; and that its revenue grew 4x from 2019 to 2020.
The company expects to deliver 6 million orders in Egypt over the next year.
Breadfast will use some of its new investment to launch in eight cities in Egypt, as well as investing in technology and growing its team. The company now employs 1,500 people, including drivers.
The company expects to operate as many as 50 dark stores (micro-fulfillment centers) within the next few months.
Fueling Breadfast’s growth — and confidence in its business model — is Egypt’s fast growing young, urban population that is increasingly willing to pay for speed and convenience.
The question we have is whether Breadfast will attract the same level of competition as it expands as its European peers have. If so, that could lead to a destructive race for who can offer the shortest delivery time.
So far at least, investors do not seem to share these concerns, as the $28 million just invested in Breadfast and Appetito would attest.
We will cover the emerging Africa-Middle East dark store space in greater depth in an upcoming “closer look” post. This topic will also be addressed at BigFive Digital’s upcoming 2022 events in Dubai and Cape Town.
Keywords: on-demand, home services, Nigeria
Eden Life Using $1.4M Seed to ‘10x the Quality of Life’
In October we ran a long post exclusively for our paid subscribers that focused on SweepSouth’s expansion plans in Africa. And we used it as a jumping-off point to discuss the state of the on-demand home services market in Africa.
One of the points we made, still true in our view, is that this sector hasn’t caught fire with investors to the degree that others have. In the wake of that report, we learned that Lagos-based Eden Life raised a US$1.4 million seed round to scale up its solution that aims to help Nigerian consumers “live an easy life”.
Eden does this by providing on-demand laundry service, home-delivered meals, and home cleaning services, via a subscription model.
The seed round is the first publicly disclosed round for the company, which was founded in 2019 by Nadayar Enegesi, Prosper Otemuyiwa, and Silm Momoh.
Leading the seed round was London-based LocalGlobe. This early-stage investor isn’t new to Africa. LocalGlobe also lists Kenyan logistics-tech startups LORI and Nairobi-based financial-inclusions fintech M-KOPA among its investments.
Also participating were Samurai Incubate, Future Africa, Village Global, Rising Tide Africa, and Enza Capital.
Enegesi, who serves as Eden’s CEO, said this in a blog post about how the company will deploy the funds.
This round of funding helps us go further and faster on our key projects to:
Train our staff – not just the core gardener team – to become customer success champions.
Set up a world-class service facility that will sharpen our operations, and help us work more effectively and secure better service partners.
Build out a more robust engineering team to make your app experience better.
The road to a 10x quality of life for everyone on the continent is long, but we’ll do all the hard work so that you can live the soft life.
In our recent post examing the continent’s on-demand home services space, we made the following point about why the two-sided marketplace model is so difficult, and why investors may be less willing to invest in this sector than in say, fintech or eCommerce.
Regardless of the revenue model, these platforms will struggle without a good balance of consumers and service providers. Without enough of both, the consumer experience is likely to be poor. This often leads to heavy marketing investments to find both buyers and sellers.
So it’s probably not a coincidence that most of Africa’s first several tech unicorns are fintechs rather than on-demand home services platforms.
When we spoke recently with Ezana Raswork, Founder of Ethiopian home services platform Taskmoby.
Taskmoby was one of the recipients of the Google for Startups Black Founders Fund in Africa.
Raswork said that employment is the angle that works best in raising money. In particular development money. His platform offers gig-work opportunities for underemployed skilled tradespeople in Ethiopia. This likely played a role in Google’s decision to invest.
“Taskmoby is actually quite a mission-driven business. If you look at talk to anybody on the team, the first thing they'll tell you is we're giving jobs to young people,” Ezana told us.
“So that the mission side of it actually becomes the main driver…And what we have found is that development partners are easier to talk to around this. And I think that the impact investors probably will be there.”
Perhaps Google’s investment combined with EdenLife’s seed round are signals that more investor support for on-demand home services platforms is in the near term offing.
Keywords: messaging, super apps, payments, fintech, South Africa
Can Moya Break WhatsApp’s South African Dominance?
It’s a tall order. According to an October article in TechCentral, WhatsApp has an estimated 25 million daily active users in South Africa. Moya, according to Datafree CEO Gour Lentell, has about 6.5 million monthly active users, with ambitions to reach 23 million by 2023.
Datafree does have an edge, however. Using operator reverse-billing technology and a cloud-based technology platform, Datafree is able to allow users to chat for free. So even if every byte of data has been consumed for the month, Moya users can still chat away.
Lentell’s ambition is to use this data-free model to morph Moya into a super app, a la China’s WeChat. Part of his logic is that South Africans on average download no more than five apps onto their phones. So an app that rolls several common features into one has a better chance of being one of those five.
“The all-in-one app makes perfect sense for Africa,” Lentell told TechCentral. “People won’t install lots of apps, so the super-app model is appropriate. And if you make it ‘datafree’, so much the better.”
Moya has also used its data-free platform to push content services to its users, including job postings, religious material, and books.
To further Moya’s super app ambitions, in July Datafree rolled out MoyaPayD as a “full-blown” mobile wallet within the Moya app.
With the new wallet, for example, users can buy groceries free of fees at Shoprite Group stores. It’s also free to receive up to five money transfers per day. A 1% transaction fee kicks in after the fifth transaction. Each MoyaPayD user also gets a unique QR code so they can receive payments directly on their mobiles into their e-wallets.
Lentell also sees Moya as an instrument for helping the underbanked free themselves from reliance on cash.
Matchcraft is a global martech company powering local search, social, and display campaigns. Matchcraft’s latest offering, “Powered By”, is an API solution giving third-party platforms access to the technology behind its flagship AdVantage platform.
Episode 25: Mike Smits, CFO, Ukheshe
Episode 25 of the BIG5D Podcast features a conversation with Mike Smits, who is co-founder and CFO of Ukheshe, a South African fintech that operates largely in the background of Africa’s financial services ecosystem.
Episode 24: Ezana Raswork, CEO, Taskmoby
Episode 24 of the BIG5D Podcast features Ezana Raswork, founder and CEO of Africa 118, an East African local search platform, and of Taskmoby, an on-demand home services marketplace platform based in Ethiopia.
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