Informal retailing is a leader in Africa, selling hundreds of billions of dollars worth of consumer goods every year. However, the industry remains highly fragmented as shop and kiosk owners continue to have difficulty accessing capital and getting regular and timely merchandise from suppliers and distributors.
B2B retail and e-commerce platforms have been primarily trying to fix these inefficient supply chains in recent years and have received significant investor support since the pandemic.
This has been a hot industry for investors, and today’s news suggests that they are not slowing down the growth of these startups just yet, as Sokovatch, one of the biggest players in the field, has announced a $125 million Series B funding round. was raised. The investment, which gaming-updates has learned values the company at $625 million, coincides with Vasco’s rebranding.
In 2015, founder and CEO Daniel Yu launched Sokovatch in Kenya as an asset lighting platform and marketplace for delivering fast-growing consumer products from suppliers to retailers. They told gaming-updates that this model is inefficient because Sokovac cannot guarantee that the goods will be delivered to the customer when he places an order.
“We realized that we needed to be more involved in providing a quality experience for these stores,” the CEO said. “With direct self-management of operations… we have moved from a software-based distribution platform with a small amount of assets to this market-oriented platform that delivers goods directly to the store.”
At that time, Sokovatch had complete, integrated, owned and leased premises throughout the distribution chain, from warehousing to logistics. And what started in Kenya spread to the neighboring East African markets of Tanzania, Rwanda and Uganda in 2018. While the company had to go through a rebrand, Yu said it was still exploring the business in this new integrated model.
However, the recent entry into the Ivory Coast and Senegal market has forced the company to act to some extent. Yu believes that Sokovach is now ready for a rebrand as it enters its next phase of development from an East African player to a Pan-African player.
“Sokovatch started out as one of those backend brands. We needed a brand that was more relevant to the African retailer and that could be easily pronounced in all markets while still reflecting our East African roots. So now our name has been changed to Vasoko, which means market people, he said.
With VASCO, retailers in Kenya, Tanzania, Rwanda, Uganda, Ivory Coast and Senegal can order goods from suppliers via SMS or mobile app for same-day delivery to their stores and stores through a network of logistics drivers. The company also offers a “Buy Now, Pay Later” option for retailers who need working capital to order more items.
“Buy now, pay later” offers are the latest trend for B2B retailers and e-commerce businesses. They see it as a difficult choice in a volatile space where retailers aren’t tied to one player given the undifferentiated offering. To provide these retailers with working capital, companies like TradeDepot and MarketForce have run impressive rounds with a significant debt component. But Vasoko chose not to follow that path; Instead, he funds his BNPL options from his balance sheet.
“We buy now, pay our sellers later, and this is an important part of our business. But we were able to do it on our own, without any separate lines of credit. But we are considering options for debt financing,” said Yu.
In terms of competition, Marketforce, an asset-facilitating platform, is also present in Uganda, Tanzania and Rwanda. On the other hand, TradeDepot uses a multi-asset model in Nigeria, Ghana and South Africa. They have a presence in Nigeria which is arguably the largest informal retail market in Africa.
“Our choice to enter the French-speaking markets of West Africa, I think, are the countries that have shown strong growth in the region. If you look at the last 10 years, Senegal and the Ivory Coast are showing solid annual GDP growth,” Yu said, explaining why Sokovac has not expanded to other West African countries other than Nigeria.
“When you look at a market like Nigeria, the reality is that growth has been erratic and even negative in some years. Also, you have a lot of problems in Nigeria’s macro environment when it comes to the economy, currency and regulation.”
Informal retailing is an untapped opportunity in any African market that gives any first mover a ludicrous advantage. And while no B2B e-commerce player has a monopoly on the Nigerian market, it seems to be more saturated than other markets due to the number of players on it, from Sabi to Omnibiz to Alerzo. Markets with less competition, such as Côte d’Ivoire and Senegal, offer huge opportunities for Vasco.
“In any market we look at, there will be a huge demand for our services. And, of course, supply chains in these other markets are less organized, less established, and therefore more fragmented and inefficient,” Yu said. “We see an opportunity to use our model to be truly effective in Africa and look forward to using our experience in our strategy to successfully launch and scale our services across six countries on the continent.”
Since its launch in 2016, Vasco has served 2.5 million orders from more than 50,000 active retail customers in its network. The company said its revenue is up more than 500% in the last year and 1,000% since 2019. gaming-updates has learned that the African B2B e-commerce platform is processing more than 150,000 monthly orders worth $300 million in ARR/GMV.
Vasco’s 800 employees are shareholders of the company in accordance with its Universal Share Policy. The funding round is good news for both workers and early lenders who bet on Vasco a few years ago when new investors Tiger Global and Avenir Growth Capital led a new Series B round (the pair founded Flutterwave last March). .
“It was strategic. We have been sharing investors with Flutterwave since its inception; for example, 4DX Ventures was one of the early investors in both Flutterwave and us,” Yu said when asked about the similarities between them and Flutterwave rounds.
“When it came to this round, I think it helped us to follow in their footsteps by partnering with these top global investors who have seen the amazing returns Flutterwave has brought to them as well as our growth.”
For Tiger Global, this is the 10th and first transaction outside of fintech since entering the African tech market in 2021. Vasco is also the continent’s second e-commerce investment after Techlot led $100 million in 2014 (Vasco is B2B e-commerce and Takealot is B2C).
This is Avenir Growth Capital’s third African investment after controlling Flutterwave and Carry1st.
The Vasco round, due to take place two years after the $14 million A Series, also welcomed VNV Global’s participation; Binny Bansal, co-founder of Flipkart; and Sujit Kumar, co-founder of Udaan; Kona Capital; 4DI companies; and the JAM Foundation.
Kumar, who has years of experience running Udaan, the world’s largest B2B retail e-commerce company, has joined the board of directors of Vasco.
The new investment, the second largest non-financial technology round in Africa after Andela and the largest in B2B retail e-commerce, will allow Vasco to continue its geographic expansion and product development across the continent.
Despite being out of Nigeria for so long, the seven-year-old company said it hopes to expand into West Africa and South Africa while strengthening its presence in six existing markets. It will also hire employees and expand its product offering through sales systems, bill payment and social commerce, vertical markets that it can internalize or reverse, and acquire companies that offer such services.