Informal retail is king in Africa, with hundreds of billions of dollars of consumer goods sold through its channels yearly. Yet its industry remains highly fragmented as shop owners and kiosks still have issues around access to capital and getting goods regularly and on time from suppliers and distributors.
B2B retail and e-commerce platforms have primarily tried to fix these inefficient supply chains over the last couple of years and have received substantial investor backing since the pandemic.
It has been a hot sector for investors, and today’s news shows they aren’t slowing down in backing these startups just yet as Sokowatch, one of the major players in the space, announced that it has raised $125 million in Series B funding. The investment — which values the company at $625 million, as TC has learned — coincides with its rebrand to Wasoko.
In 2015, founder and CEO Daniel Yu launched Sokowatch in Kenya as an asset-light platform and a marketplace for distributing fast-moving consumer goods from suppliers to retailers. He told TC that this model wasn’t efficient because Sokowatch couldn’t guarantee that the goods were delivered to the customer when they made orders.
“We realized that to deliver the quality of service these shops deserved, we needed to get more involved,” said the CEO. “In managing the operations directly ourselves … we went from an asset-light backend distribution software platform to this market-facing platform that was out there delivering goods directly to shops themselves.”
At this point, Sokowatch was full-scale asset-heavy, owning and leasing facilities in its distribution chain from warehousing to logistics. And what started in Kenya soon scaled into neighboring East African markets Tanzania, Rwanda and Uganda in 2018.
But while the company was due for a rebrand, Yu said it was still figuring out operations in this new integrated model. However, the recent entry into Ivory Coast and Senegal somewhat forced its hand. Yu believes Sokowatch is now ready for a rebrand as it enters its next growth phase — moving from an East African player to a pan-African one.
“Sokowatch started as this kind of backend brand. We wanted a brand that could be more front and center for the African retailer and easily pronounced across all markets while reflecting our East African roots. So that’s why we’ve rebranded now to Wasoko, meaning ‘people of the market,’” he said.
Wasoko allows retailers from Kenya, Tanzania, Rwanda, Uganda, Ivory Coast and Senegal to order products from suppliers via SMS or its mobile app for same-day delivery to their stores and shops via a network of logistics drivers.
The company also offers a buy now, pay later option for retailers who need working capital to order more goods. Buy now, pay later offerings are the latest trend for B2B retail and e-commerce companies. They see it as a sticky option in an otherwise volatile space where retailers aren’t committed to one player, given non-differential offerings.
To provide working capital to these retailers, the likes of TradeDepot and MarketForce raised impressive rounds with significant debt components. But Wasoko chose not to go down that route; instead, it is financing its BNPL option from its balance sheet.
“We do buy now, pay later to our merchants and it’s a significant part of our business. But we’ve been able to do that on our own without raising any kind of separate debt facilities. But we’re looking at debt financing options,” Yu said.
Still on competition and market play, MarketForce, an asset-light platform, is present in Kenya, Nigeria, Uganda, Tanzania and Rwanda. TradeDepot, on the other hand, operates an asset-heavy model across Nigeria, Ghana and South Africa. What they have in common is a presence in Nigeria, arguably the largest market for informal retail in Africa.
“Our choice to expand to the Francophone West African markets, I think, reflects the strong growth that those countries have exhibited in the region overall. If you look at the past 10 years, both Senegal and Cote d’Ivoire have experienced solid year-on-year GDP growth,” said Yu when asked why Sokowatch has expanded into other West African markets other than Nigeria.
“Whereas you look at a market like Nigeria, the reality is that growth has been volatile and in some years, in fact, negative. And on top of that, you have a lot of challenges in Nigeria’s macro-environment when it comes to the economy, currency and regulations.”
Informal retail across any African market is an untapped opportunity that gives any first-mover a ridiculous advantage. And though no B2B retail e-commerce player has a monopoly on the Nigerian market, it’s more saturated than other markets based on the numerous players vying to digitize the country’s informal supply chain — from Sabi to Omnibiz and Alerzo. Therefore, less competitive markets like Ivory Coast and Senegal present an enormous opportunity for Wasoko.
“Any market that we look at is going to have a huge amount of demand for our services. And of course, the supply chains in these other markets are even less organized, less established, and therefore more fragmented with more inefficiencies,” Yu said.
“We see an opportunity to take our model to be truly effective across Africa and expect that we’ll be able to leverage on our existing experience in our playbook for successfully launching and scaling our services now in six countries across the continent.”
Since launching in 2016, Wasoko has delivered 2.5 million orders to more than 50,000 active retail customers in its network. The company said its revenue has grown over 500% in the past year and 1,000% since 2019. TC also learned that the African B2B e-commerce platform is processing $300 million in ARR/GMV across more than 150,000 monthly orders.
Wasoko’s 800 employees are shareholders of the company through its universal employee equity policy. The round of funding is good news for both employees and early backers who took a bet on Wasoko years ago as new investors Tiger Global and Avenir Growth Capital lead its Series B round (the pair also co-led Flutterwave’s Series C investment last March).
“It was strategic. We’ve shared investors with Flutterwave since the early days; 4DX Ventures, for example, was an early investor in both Flutterwave and us,” Yu said when asked about the similarities between his and Flutterwave’s round.
“When it came to raising this round, I think being able to follow in their footsteps by working with these great global investors who had seen the great return that Flutterwave had brought them, I think helped smooth path for us as we reached the stage in our growth as well.”
For Tiger Global, this is the 10th deal and first outside fintech since re-entering Africa’s tech market in 2021. Wasoko is also its second e-commerce investment on the continent after leading Takealot’s $100 million in 2014 (Wasoko is B2B e-commerce, while Takealot is B2C). It’s the third African investment for Avenir Growth Capital following its checks in Flutterwave and Carry1st.
Wasoko’s round, which is coming two years after it closed a $14 million Series A, also welcomed participation from VNV Global; Binny Bansal, co-founder of Flipkart; and Sujeet Kumar, co-founder of Udaan; Quona Capital; 4DX Ventures; and JAM Fund.
Kumar joins Wasoko’s board of directors bringing in years of experience from running Udaan, the largest B2B retail e-commerce company globally.
The new investment, the second-largest non-fintech round in Africa after Andela and largest in the B2B retail e-commerce space, will allow Wasoko further drive geographic expansion and product growth across the continent.
Though it has stayed away from Nigeria this long, the seven-year-old company said it is exploring expansion into the West African nation as well as Southern Africa while consolidating its position across its six current markets.
It will also make hires and expand its product offerings to point-of-sale merchant systems, bill payments and social commerce, verticals it might build in-house or back and acquire companies that provide such services.
