Nigeria’s informal trade sector, worth over $ 244 billion, includes over 40 million micro, small and medium enterprises.
Most of these businesses were operating offline until a few years ago, when startups introduced digitization by providing infrastructure and a range of e-commerce and financial services.
One-year-old Sabi, a spin-off of Rensource, an African energy company that offers power as a service to customers, is the latest startup to raise funds to serve the informal sector. The company confirmed to TechCrunch that it had raised a $ 6 million funding round led by pan-African venture capital firm CRE Ventures.
Sabi’s funding round comes a year after the close of a $ 2 million funding round from CRE Ventures, Jaango Capital, Atlantica Ventures and Waarde Capital.
Ademola Adesina and Anu Adasolum have been at the head of Rensource since the company was created in 2015; Adesina as Founder and CEO and Adasolum, COO.
By providing electricity to these small and medium-sized businesses, the Rensource team began to look at the other issues faced by these SMEs and find ways to add value beyond the provision of electricity. energy.
With the pandemic shutting down Rensource’s business, the team had time to develop this concept which became Sabi in October 2020.
Adasolum leads Sabi’s efforts as founder and CEO following the diversifies in March, while Adesina holds a role of co-founder and director.
Sabi is an attempt to platform the informal sector and African trade through various online and offline channels. This means that Sabi tries to complete the intermediaries (above all distributors) into the B2B e-commerce retail chain rather than replacing them, a model familiar with other leading B2B e-commerce retail startups such as Sokowatch, MaxAB TradeDepot, and Twiga.
“We’re not trying to be, you know, a technology-based digital distributor. We are not trying to disintermediate a market full of hyper-specialization where one of the defining characteristics of the informal sector is that all these intermediaries and agents play a very narrow role, ”Adesina told TechCrunch.
“We think that specialization is important for the sector to function correctly – whether it is the aggregation, the realization of a sale, the particularly good knowledge of the customer, all these intermediaries play a key role. And the way we treat them is that we give them a set of tools and an infrastructure on which they can run their business to make it more efficient. “
Sabi meets the needs of manufacturers, distributors, wholesalers and retailers and class all them as merchants.
The company operates a light asset model and does not own vehicles, warehouses or merchandise. But it provides visibility into these assets throughout the value chain on the demand and supply side and controls on a single platform.
Running this model frees Sabi from the constraints that a typical B2B e-commerce retail platform may face when acting as a distributor for manufacturers to retailers.
For example, asset-heavy rigs cannot move goods from two different vendors in the same truck or use the same vendors when distributing merchandise from different vendors to retailers. At the other hand, Sabi has no such constraints, while other platforms attempt to standardize operations around picking goods, Sabi is focusing on the monitoring of withdrawals.
“We focus our processes, policies and oversight on understanding the different types of users and how the third parties we work with serve them,” said CEO Adasolum.
“As a result, each buyer’s net experience is different and it works more for their particular type of business.. So I’m not going to go to a company that is used to work in a particular way and change it, but instead offer several other channels that they are more comfortable with through our platform. “
These channels include offline agents, call centers, merchant partners, supplier centers, and mobile apps. Each stakeholder can access tools around inventory management, sales, monitoring, digital invoices, analyzes on the platform.
“We start with what makes them comfortable, not with what we think is the best, ”added the CEO.
Merchants on Sabi deal with goods and FMCG products in other industries such as agriculture, electronics and chemicals. The category-independent platform is home to more than 175,000 merchants who have completed B2B transactions totaling over $ 200 million in annualized GMV execution rate. And more than 10,000 agents serve these traders on Sabi’s network.
Sabi makes money by taking transaction fees when traders make a sale in the market. The company also earns a margin to provide them with financing.
Adesina said in Q1 2022, Sabi plans to roll out a subscription model where agents will pay a monthly fee to access a reseller model..
Sabi’s pipeline also provides manufacturers with data-driven visibility and insight and direct engagement throughout the value chain.
With an average growth of 40% over one month in Nigeria, Sabi intends to replicate its rapid growth in other African countries in Kenya and South Africa.
The company opened a store in Kenya last month and only made a few hires in South Africa, intending to start next year. Another round of funding, a Series A, could close in time to fuel business expansion in both countries, said Adesina.
Pardon Makumbe, co-founder and managing partner of CRE Venture Capital, in a statement highlighting why his company doubled its investment in less than a year, said, “Sabi’s online and offline approach to serving businesses informal, combined with the quality of its platform and service provider curation, has clearly took root in Nigeria. The company is on track to be one of Africa’s fastest growing companies in 2021 and shows no signs of slowing down. “
Sabi’s growth, Besides at the request of the market, comes from the course of its founders. Prior to Sabi and Rensource, CEO Adasolum worked at Jumia, where she was in charge of offline sales for some African countries: Nigeria, Ghana and Kenya.
She has also performed business operations and merchant acquisition roles for the African e-commerce giant. Adesina also has extensive experience working with multinationals such as the Capricorn Investment Group, the Rockefeller Foundation and JP Morgan.
Adesina is confident that the digitization of offline processes for B2B e-commerce will continue despite questions about why so many players exist in the space. And he believes As more and more startups enter the market, more venture capital will follow.
Sabi’s monthly GMV figures are one of the reasons the co-founder has this belief. Right now, the company claims to be on the cusp of processing around $ 12 million GMV per month..
While Jumia, Africa’s largest e-commerce player, records this volume on average after five years in business, it took Sabi less than a year to achieve this feat which can be attributed to the size of the market. informal retail of the country’s B2B e-commerce. .
“The kind of data we’re seeing now in terms of like real-time visibility to know if people like that product or that product, this stuff goes accumulate and grow up exponentially over the next few years, ”said the co-founder.
“Then I think that in the same way that we saw in China in the late 90s the kind of hyper-digitization of what was a very informal economy, I see that this is happening more quickly in Africa than most people do think so. I think it’s something that people don’t realize how quick it will happen.