TradeDepot Raises $ 110 Million from IFC and Novastar to Extend BNPL Service to Merchants Across Africa – TechCrunch
Startups digitizing e-commerce and B2B retailing in Africa continue to grab headlines after the pandemic paved the way for widespread disruption in retail and offline commerce.
Trade deposit, a Nigeria-US-based company that connects consumer goods brands to thousands of retailers and helps with distribution, has raised $ 110 million in a new round of equity and debt financing as ‘She is looking to attract more retail stores and expand her shopping now, later paying for service across the continent.
While TradeDepot has not commented on the share of equity to debt, data in the company’s SEC file puts the share of equity at nearly $ 42 million..
The Series B funding comes nearly eighteen months after raising $ 10 million co-led by Partech Africa and the International Finance Corporation (IFC).
IFC led the round this time while Novastar, Sahel Capital, CDC Group, Effort Catalyst and existing investors, Partech and MSA Capital participated. Debt financing was run by Arcadia Funds, a lender specializing in p2p and market loans and insurance-related securities.
As part of this cycle, Wale Ayeni, Head of Africa Venture Capital Investment for IFC and Brian Odhiambo, West Africa Director of Novastar Ventures, will join the Board of Directors of TradeDepot.
TradeDepot operates a B2B marketplace that connects small stores, kiosks, retailers with wholesalers of global consumer brands that have access to food, beverage and personal care products. The company owns its warehouses and fleets of drivers for distribution.
Last year, the company had over 40,000 merchants on its platform; now, it serves more than 100,000 traders, according to CEO Onyekachi Izukanne. During the call with the CEO, he also mentioned that TradeDepot had increased its GMV by 5 during this period.
Over the past five years, TradeDepot’s main work has focused on building the supply chain with technology and integrating retailers one at a time. The company now offers a complete range of products for on-board people, by deploying digital portfolios and financial services, in particular credit or BNPL offers.
BNPL offer is integrated within the company’s ShopTopUp platform, where retailers can access a line of credit for all consumer goods on the app.
Nevertheless, only Like any B2B e-commerce platform offering BNPL services, TradeDepot does not provide cash advances to these merchants. Instead, it sends the products directly to them while they pay in installments. The redemption value is almost 5% per month.
“The traders are able to double or triple what they normally to buy only because of this access. We think that these integrated financial services will be a key part of this narrative: the supply chain on the one hand, and everything related to the financial services to run these businesses on the other, âsaid the CEO. “We think they go together. And the last year and a half have been defined by we focus on bringing more of these integrated finance products to market. “
In 2020, when the five-year-old company announced its intention to offer credit, it built rating models using equity to fund lending to retailers off its balance sheets. The company says its BNPL model has resulted in a 200% increase in transaction volumes for retail store owners.
It is at the back of the track of loans to these retailers (by examining their purchase history, previous repayment performance and other related data points to predict their creditworthiness) for 18 months as TradeDepot sets up a debt structure to be executed on a large scale.
A vast majority of small and medium enterprises in Nigeria and across Africa are offline. These companies generate $ 1 trillion in sales annually and contribute $ 2.6 trillion to the continent’s nominal GDP.
These numbers are catching the attention of a growing cohort of startups who see the opportunity to provide digital infrastructure and fund a fragmented distribution network along the value chain. And while the jury is still out on whether retailers can effectively using and evolving with online methods, leading players such as Capiter, Sokowatch, Alerzo, MarketForce, Sabi and Omnibiz, continue to expand in key African markets.
“The informal sector is an important and critical part of the African economy, accounting for around 80% of jobs in the region,” said Makhtar Diop, Managing Director of IFC, in a statement. “We are excited working with TradeDepot to leverage technology to help small businesses across the continent, especially the many female-led retailers, access the resources they need to grow and scale.
TradeDepot Series B round is the largest for all B2B e-commerce platforms in Africa right now, both in equity and debt. The company was one of the first players in the sector and started distributing milk to small retailers in Lagos, Nigeria..
Izukanne believes that the emergence of new startups targeting the market at different touch points, inserting convenience and innovative pricing has made it easier for investors to see the opportunity of the digitalization of offline retail.
âFour or five years ago, if you were talking to an investor, it took a lot of education to convince them why this was an opportunity and why they should join us,â said the CEO who founded the business with Michael. Ukpong and Ruke Awaritefe.
“I think what we are seeing is that the market is now aware of this opportunity. You have more parties, especially many serious people coming in and trying to help build this. There are a lot of iterations involved in understanding which models work. And more parts you find hacking that kind of speeds up innovation in space, so it’s super useful.
TradeDepot is active in 12 cities in Nigeria, Ghana and South Africa (Accra, Johannesburg and ten cities in Nigeria). Izukanne said that with the new funding, TradeDepot would double its business in these three countries and increase its footprint across Nigeria, trying to capture more than the 5 million SMEs it sees as its target market. Debt financing will support the delivery of the BNPL service to these retailers.