Pat is the host of the Enthusiast podcast where he interviews founders of some of the most exciting emerging markets startups. Pat and I sat down with Abhi CEO Omair Ansari a few weeks ago to learn about the founding story of Abhi. Check out the full episode in the link below!

Listen to the Full Episode

On top of the podcast episode we also put together a full-length breakdown of Abhi’s business model and market opportunity below. Check it out!

[Disclosure: I’m an angel investor in Abhi so I definitely have a favorable view of everything they are doing.]

Abhi Overview

Financial services is one of the largest and most important industries globally. While many financial institutions are decades (and even hundreds) of years old, in recent years the industry has been undergoing a technological renaissance thanks to the rise of the fintech industry. Globally the fintech industry is now worth over $179 billion and there are over 30,000 fintech startups operating today. 

While every country has a financial services industry, there are stark differences in the depth and sophistication of the industry between countries. In fact, more advanced economies have far more sophisticated and deep financial markets than do emerging economies. This stark gap has inspired numerous entrepreneurs in emerging markets to launch fintech businesses. One of the most exciting global fintech companies today is Pakistani startup Abhi (disclosure: I'm an investor in the company).

Abhi is a fintech company that financially empowers business and employees by providing a suite of lending products including Earned Wage Access, Invoice Factoring and Payroll Solutions.

Since its founding in 2021 Abhi has:

• Raised $42+ million in debt and equity financing

• Achieved a valuation of $90 million

• Launched in Pakistan, Bangladesh and the UAE

• Has over 450+ businesses using its platform 

• Has over 800,000 employees active on its platform

• Became the first company in the MENAP region to issue Islamic Bonds via a $7.1 million Sukuk Issuance

Product

In a little over two years Abhi has built a comprehensive suite of lending products for businesses and employees. Abhi initially launched as a salary advance or “early wage access” platform. Abhi’s product suite includes:

• Abhisalary: Abhi’s early wage access product for employees to advance their salary

• Abhipayroll: A payroll management portal for employers as well as a payroll financing product 

• Abhifactoring: A factoring solution for businesses looking to borrow against their future receivables

• Abhipay: A suite of payment tools to enable businesses to accept and manage online payments

• Abhicod Financing: A partnership with one of Pakistan’s biggest logistics companies BlueEx to enable cash-on-delivery financing

Across emerging markets consumers struggle to access credit. In response a common workaround has emerged where employees ask their employers for salary advances. Often these salary advances are used to cover unexpected emergency expenses or to put downpayments on school fees, rents or for expensive items such as cars. 

Typically this entire workflow is manual and inefficient. Over the last few years a number of startups have been founded globally who aim to digitize this manual process and make the management of salary advances a seamless process for both the employee and employer. Some of the most successful companies in this category include Payactive, DailyPay and Wagestream. 

Abhisalary is a mobile app that enables employees to advance their accrued salary with no questions asked at any time. Employees receive a transfer for their accrued salary within 30 seconds and are charged a fixed fee of 100 Pakistani Rupees (about $0.35) per transfer. On the backend Abhi reconciles the flow of funds with the employer.

While Abhi started as an early wage access platform after deploying with its first few customers it immediately realized that lack of access to credit was not just a problem for the employees. Access to business credit is exceedingly hard to come by in most emerging markets and makes it hard to operate and grow a business. In fact, Pakistan has the second lowest credit-to-GDP ratio in the region of 15%. 

This led Abhi to launch a range of lending products for businesses in Pakistan including Abhifactoring, Abhicod financing and Abhi’s payroll financing solution. These products all offer different kinds of working capital to businesses depending on their operating structure and needs. 

Finally, Abhi launched Abhipay in partnership with Payriff offering a suite of tools to businesses to easily accept online payments. Inserting itself into the flow of funds has a strategic benefit to Abhi because it offers it a richer dataset to use to underwrite a business with, as well as an additional source of revenue. 

Market

Lack of access to credit for consumers and businesses is one of the most significant bottlenecks to accelerating economic growth in emerging markets. Given Pakistan is the fifth largest country in the world, the domestic credit-to-GDP ratio of about 15% is extremely low compared to its neighbors. Only Nigeria (with a population of 215 million) has a similarly low rate of 12.9%. In contrast the US has a ratio of 216% and the United Kingdom has a ratio of 130%.

Raising the credit-to-GDP ratio will have transformative effects for Pakistan’s economy and is an enormous multibillion dollar opportunity. For consumers the first and easiest method for access to credit typically in advanced economies are credit cards. However Pakistan’s domestic credit card market is extremely underdeveloped and of the 48 million payment cards in circulation only 1.9 million of them are credit cards. The room for growth here is enormous, however this isn’t the problem that Abhi is dedicated to solving (at the moment at least). 

In fact Pakistan has one of the lowest rates of household debt in the world at just 2.8% of GDP. In contrast, Indonesia - the world’s largest Muslim country - sits at 16.2% and India at 35.6%. The lack of access to debt seriously hamstrings consumer spending in Pakistan. Increasing access to credit for consumers is an enormous opportunity for Pakistan’s economy.

Competition

In Pakistan Abhi faces several indirect competitors that compete with different elements of its product offering and some more direct competitors in its third market, the UAE. These competitors include AdalFi, EduFi, Neem Finance, Beehive and existing banks. 

AdalFi is a Pakistani fintech that offers a range of software and data products to banks in Pakistan that enable them to quickly and efficiently underwrite consumers and SMEs for loans. Today it works with 14 banks in Pakistan and enables them to underwrite consumers for credit cards and salary advances and underwrite businesses for term loans and credit lines. AdalFi doesn’t lend directly to consumers or businesses off its balance sheet and instead empowers banks with the tools to lend more effectively. These partnerships equip banks with the technology to compete directly with Abhi to lend to these segments. 

EduFi is a Pakistani fintech offering a “study now pay later” product to parents and students. This is a first of its kind product in the Pakistani market and is focused on one of the most significant areas of consumer spending in Pakistan. EduFi lends to students while offering schools the opportunity to receive their tuition revenues upfront for the year, improving their cashflows.

Beehive is a UAE-based fintech startup that offers a range of lending products to SMEs in the UAE. These products include working capital financing, term finance, revenue-based financing and more. Beehive was founded in 2014 and this year saw e& Enterprise purchase a majority 63.3% stake in the company for $23.6 million. 

Invoice Bazaar is another UAE-based fintech that offers a suite of supply chain financing solutions for restaurants, ecommerce sellers and more. The company was founded in 2016, raised $6.1 million of financing and was recently acquired by Triterras (OTCMKTS: TRIRF) for $8 million. 

Growth Opportunities

In the last two years Abhi has built a robust platform for lending to businesses and consumers and managed to launch in three countries in the region. Aside from signing more businesses and consumers up for their platform, Abhi has two additional possible growth paths ahead of it:

1. Regional expansion

2. Expanding its suite of consumer lending products

Abhi has already kicked off its regional expansion with its launch in the UAE as well as via its Bangladesh subsidiary Mitro. Across the region credit access is still a massive unsolved problem and the technology stack Abhi has built in Pakistan can easily be exported to new markets. Launching in a new market requires complying with local regulation and typically finding sources of local debt capital to fuel further growth. Two potential markets to expand to in the region for Abhi are Saudi Arabia and Iraq. 

The Kingdom of Saudi Arabia through its Vision 2030 program has set an ambitious goal of becoming the main fintech hub for the MENAP region. So far, there are early signs of progress towards this goal. The number of fintech startups in the country has grown from 51 in 2021 to 200+ this year with a goal of 525 by 2030. With a GDP of $833 billion and a population of 32 million (with 63% under the age of 30) the Kingdom is a large and attractive expansion market. The Kingdom is also home to over 2.6 million Pakistanis. The linkages between Pakistan and the Kingdom go back decades and are an exciting sales vector to enter the country. The Kingdom is also home to  over 6 million migrant workers, many of whom work in blue-collar jobs where a salary advance product is an appealing proposition. 

Iraq is another appealing potential expansion market for Abhi. The country’s $207B GDP and 43 million people would significantly expand Abhi’s addressable market. Similarly Iraq also has a low rate of credit to the private sector (as a percentage of GDP) of 11.3%. This leaves ample room to grow business lending as well as consumer lending. 

Aside from launching in new geographies Abhi can also launch new consumer lending products. The opportunities in consumer lending are vast and include mortgages, car loans, education loans and more. Thanks to its early wage access product Abhi has a rich and unique dataset that most banks don’t have access to – salary history. Over time Abhi will have a better view into an employee’s finances than any third-party lender. Abhi can use this data to offer consumers its own lending products or to partner with other lenders (such as EduFi) to offer their products on the Abhi platform. 

Overall Abhi has built a leading position in Pakistan as a source of business and consumer lending. The opportunity in Pakistan alone is a multi-billion dollar opportunity. Abhi has also built a suite of products to meet the needs of consumers and businesses. However, the company’s technology stack and lending approach can be easily repurposed and launched into new markets in the region as it scales. Similarly, the company has only scratched the surface of consumer lending. Abhi’s growth path will be a barometer for fintech in the region more broadly. 

Globally real estate has been a slow adopter of new technology compared to most other industries. However despite this slow adoption the proptech category has given birth to success stories such as Zillow, PropertyGuru, QuintoAndar, Redfin, Lianjia and many others. However, the proptech revolution has so far been heavily concentrated in a few geographies. The global proptech industry, which was worth $18.2 Billion in 2022, has remained dominated by the US (59% share), Europe (27.2% share) and Asia (3.5% share). In the Middle East and North Africa (MENA) region, where real estate is one of the largest and fastest-growing non-oil industries, the impact and adoption of proptech has been relatively lower. 

One company that has led the charge for proptech in the region is Dubai-based real estate listing platform Property Finder. The company operates a number of real estate listing platforms across the MENA region. It uses a one-stop shop model where brokers list properties on the platform and users can access all the residential and commercial property information they need from one place, along with real estate news, home advice and a range of buying and selling guides. 

Property Finder was founded in 2005 by Michael Lahyani and Renan Bourdeau and is backed by the likes of General Atlantic, VNV Global and Pegasus Capital. 

Since its founding PropertyFinder has:

• Raised $142 million in funding

• Launched in the UAE, Egypt, Turkey, Qatar, Bahrain, Saudi Arabia and Morocco

• Achieved a valuation of $500 Million

• Receives 6+ million monthly visits on its platform

• Generates an estimated $50+ million in revenue annually

Product 

Property Finder was originally founded as Al Bab World after its founders identified a gap in the region's property advertising space. The company started off as a property print magazine that generated leads for real estate agencies. 

Today Property Finder operates real estate listing platforms across the MENA region, available in both English and Arabic. Its product suite has expanded and includes a rich and comprehensive set of products for use by all participants in the retail industry. Its products include: 

• Real Estate Listings: A seamless digital platform connecting buyers, sellers, renters and landlords together in each of its markets

• Mortgage Finder: An end-to-end mortgage advisory service for residential and commercial real estate helping buyers navigate the complex process of securing a mortgage in the UAE

• Property Finder Hub: A suite of tools for real estate agents to grow their business including a CRM, advertising and data tools.

Property Finder monetizes its tremendous reach via a monthly flat subscription fee charged to real estate brokers, while remaining free for end-customers to browse. This monthly fee is charged to real estate agents in exchange for being able to list properties on the platform and access the suite of tools the platform offers. 

Market 

In the Gulf Cooperation Council (GCC), the wealthiest part of the MENA region the real estate industry is booming. There are currently over $1.36 trillion in real estate projects planned or underway in the GCC. The Kingdom of Saudi Arabia accounted for 64.5% of this total with the UAE in second with 21.6% of the total. However, when it comes to innovation in the sector the UAE has established an early lead with over 55% of the 200 proptech startups in the MENA region located there. Dubai is the most active real estate market in the UAE and saw nearly 100,000 real estate transactions in 2022 with a total sales value of $72 billion. 

Competition

Despite proptech’s slower adoption so far in the MENA region, Property Finder faces several notable competitors today including Bayut, Huspy, Aqarmap and Aqar.

Bayut is a Dubai-based real estate listings portal for buying, selling and renting residential and commercial properties. Bayut was founded in 2008 by Imran Khan and Zeeshan Khan. Users can browse through apartments, villas, offices, shops and all other kinds of real estate in UAE, and also make well-informed decisions through information and expert advice provided by Bayut. The portal also offers features such as real estate search trends, live market prices and archives of buildings with over 15,000 images and floorplans. Bayut’s parent organization is Dubizzle  (formerly known as Emerging Markets Property Group). Dubizzle closed a $150 Million funding round in 2020 that valued the company at over $1 Billion. Impressively Dubizzle has a portfolio of 10 real estate brands in the region with a collective monthly userbase of 217 million. 

Huspy is a Dubai-based proptech company founded in 2020 by Jad Antoun and Khalid Ashmawy and has raised over $47 million in funding to date. Unlike Property Finder, Huspy was founded with the explicit goal of streamlining the mortgage and closing process for buying a new home. While Huspy does have over 600 properties listed for sale on its platform, unlike Property Finder it isn’t as focused on solving the discovery problem in real estate. However with Property Finder’s entry into the mortgage category with its Mortgage Finder product the companies are now competing directly. However, Huspy is live in the UAE and Spain today and likely to continue to expand regionally and globally in the years to come.

qarmap is a real estate marketplace that allows users to buy, sell, and search for apartments and houses. The platform currently hosts over 240,000+ listings for sale & rent, which include properties, apartments, villas and compounds. It also provides useful insights into the housing market, through price and exhibit guides, market research, property valuations and expert advice on buying. It also enables purchase of ready-for-delivery homes through mortgage financing for up to 15 years. The company was founded by Amad Almasodi in 2011 and has raised $1.1 million to date. It generates more than 200,000 leads every month, and has more than 2.5 million users across Egypt, Saudi and UAE registered in its database. In 2020, it helped sell more than 12,000 properties worth more than $700 Million.

Aqar offers an online real estate listing services and a platform for agents and sellers to interact with tenants and purchasers. The company was founded in 2014 by Moosa Al-Rasheedi, Yousef Al Rasheedi and is headquartered in Riyadh, Saudi Arabia. The company's platform enables users to search for listings in categories like lands, villas, buildings, apartments, farms and other real estate. It lets property owners create listings by providing necessary information such as location, pictures, area, and prices. The platform has over 1.5 million listings in 21 different categories, and has attracted over 50 million visitors to date. 

Growth Opportunities

Property Finder has pursued a diverse range of growth strategies over the years. Since its founding the company has steadily been expanding geographically by acquiring regional players such as eSimsar in Saudi Arabia, JRD Group and Home Value in UAE, Property World in Bahrain, and Selektimmo in Morocco. By 2020, Property Finder reached profitability in the UAE, Bahrain, and Qatar - which it considers its core markets - and has done significant brand building in newer markets of Saudi Arabia, Egypt, Morocco and Turkey. 

Aside from further geographic expansion Property Finder has two possible growth paths ahead of it: 

1. Deepen its fintech offerings

2. Enter the home services segment 

Property Finder’s initial foray into the fintech segment via its Mortgage Finder product has been a timely expansion given the rapid rise of Huspy in the UAE. Finding a mortgage is deeply painful in the Middle East and Mortgage Finder can help ease the initial discovery process for securing a mortgage. There is a lot more whitespace in fintech for Property Finder to explore. It can potentially enter the home insurance segment and commercial mortgage industry for starters.

Aside from fintech a promising expansion for Property Finder is entering the home services category. The average home requires thousands of dollars of maintenance spending across its lifetime and finding providers to fix plumbing issues, paint rooms and fix leaks is a fragmented, slow and frustrating process. The region’s leading Super App Careem has been testing a somewhat similar expansion. In addition to ridesharing and food delivery the Careem app now offers home cleaning and laundry services direct to your doorstep. Property Finder can potentially partner with local providers and build a similar product suite for this segment to generate leads and drive sales as it has for real estate agents. A major advantage of entering the home services segment is that it enables Property Finder to build longer-term relationships with its clients and increase their lifetime value. 

Overall Property Finder has established itself as one of the leading proptech brands in the Middle East. Its regional presence, millions of monthly visitors and deep pool of listings position it well for further growth in the years to come. As the property market heats up in the GCC in particular, Property Finder is positioned perfectly to grow in its core listings business. However, further expansion in fintech or into new segments like home services can help the company unlock even more growth. The company has helped pioneer proptech in the region and will continue leading the charge for years to come. 

Headquartered in Mexico City, Konfío is a leading online lending platform offering affordable credit and payment tools to Mexico’s SMEs. The company was founded in 2013 by David Arana and Francisco Padilla and backed by investors like Quona Capital, IFC, VEF, Goldman Sachs, Softbank, and QED Investors.

Over the course of the past decade, the company has scaled impressively:

• Raised $706 million in funding to date

• Achieved a valuation of $1.3 billion

• Extended 45,000 loans to more than 27,600 SMEs

• Supported 70,000 businesses and SMEs throughout Mexico

• Boosted SME clients growth by 25% year over year

Product 

SMEs are usually underserved by traditional banks who fail to cater their credit or payments products to the unique needs and demands of an SME. Konfío offers Mexico’s SMEs a robust suite of credit and payment tools including:  

1. Business Credit: SMEs can obtain multi-million dollar lines of credit through Konfío’s online portal without having to provide a guarantee.

2. Business Credit Card: The company offers business cards to easily pay expenses, reconcile invoices and define roles and permissions

3. Payments: Konfío offers a payment terminal for businesses to accept customer payments. It allows users to maximize their earnings and accept card payments with a commission from 1.35% to 3.5% + VAT.

Konfío has a straightforward business model. It generates interest revenue from its lines of credit and generates interchange revenue from its credit card products and point-of-sale terminals. Konfío charges steep rates on its line of credit and is currently charging an average annual percentage rate (APR) of 31.6%. For its Business Credit Card it charges an even steeper 67.4% APR. 

Market 

There are over 4.4 million MSMEs in Mexico that are underserved by the traditional banking system due to their size, informal nature, lack of credit history or the lack of ability to meet profitability requirements. While SMEs account for 99% of businesses in Mexico, they represent only 9.1% of all the loans disbursed. This is equivalent to just 3.7% of the Mexican GDP, compared to the 7 - 10% SME loan disbursement in other economies of Latin America. 

It can take up to two years for an SME to secure a loan from a traditional bank in Mexico. Alternatively, informal lenders are also a source of credit but often charge exorbitant rates of 100% or more. Thus, SMEs are starved for credit in Mexico and the SME loan market has the potential to expand by 2.4x, growing from its current size of $43 Billion to over $100 Billion (nearly 9% of GDP) over the next few years.

Competition

Konfío faces competition from a number of fintech players across Latin America including the likes of Covalto, Kapital, Creze and Kueski. 

Covalto (formerly known as Credijusto) is a Mexican digital bank that offers bank accounts, lines of credits, factoring and other financial products to SMEs. The company was founded in 2015 by Allan Apoj and David Poritz, and is headquartered in Mexico City. The company originated over $350 million in loans by the end of 2022 with estimated 2022 revenue of $64.5 Million. The company recently delayed its planned SPAC merger to 2024. This merger will give Covalto a pro-forma valuation of $547 million.

Kapital is a Mexican fintech company offering a rich set of financial products to SMEs in Mexico. The company offers business cards, revolving credit lines, collections tools and business loans. The company was founded in 2020 and has raised over $200 million in debt and equity financing to date. The company was founded by Rene Saul, Fernando Sandoval Oseguera and Eder Echeverria

Creze is a Mexican fintech company that offers credit products and services to SMEs. Creze uses machine learning to efficiently analyze credit risk and provide quick loan decisions with funds transferred within 3 business days. It offers unsecured loans to Mexican SMEs wanting to fuel their growth and improve their working capital management. The company was founded by David Lask and Bernardo Prum in 2015, is headquartered in Mexico City and has raised $17 million to date. 

Kueski is a Mexican fintech company that provides short-term loans to individuals. Unlike Konfío, Kueski does not have a specific focus on SMEs and instead lends only to consumers. However its product suite is similar to Konfío’s and it is one of the largest online consumer lending companies in Latin America. The company was founded in 2012 by Adalberto Flores and Leonardo de la Cerda and is headquartered in Guadalajara, Mexico. Kueski has raised over $323 million in equity and debt funding. The company has around 1.8 million customers and has disbursed over 10 million loans to date.

Growth Opportunities

Konfío has built a strong market position since its founding and a deep bench of customers. However, the Mexican SME market remains underbanked and underlent to, with significant room for further growth. 

Konfío has several possible growth paths ahead of it including: 

1. Expanding into digital banking services

2. Expanding into consumer lending

3. Geographic expansion 

In Mexico, only 45% of SMEs have access to the traditional financial system and are severely underserved by banks. The opportunity to offer banking services to SMEs is significant. Konfío’s primary competitor Covalto initially started as a SME lending business. However, in 2021 the company launched a major expansion of its platform by becoming the first Mexican fintech to acquire a bank when it acquired Banco Finterra.

Acquiring a bank and its banking license massively increases the diversity and sophistication of products that Covalto could offer to SMEs. Covalto now offers digital business accounts to its customers alongside a suite of lending products. Covalto also offers consumer accounts. Offering digital banking services through a partnership with an existing bank or acquiring a smaller bank is a logical expansion for Konfío to allow it to continue to compete with Covalto and diversify its revenue streams. Lending is a strong hook to acquire an SME and onboard them into a wider digital banking ecosystem. 

Acquiring a banking license can also give Konfío regulatory cover for a second expansion into consumer banking and lending. Mexico remains a highly unbanked market with 57% of men and 43.9% women reporting having a bank account. Penetration of consumer lending products is substantially lower than that. Konfío has built much of the digital infrastructure, credit facilities and underwriting technology to enable an expansion into consumer lending. It will have to redesign and optimize its technology for the consumer lending context and dataset. However, the owners of its SMEs and their employees and families are a natural set of customers to onboard onto a consumer lending and banking product. 

Lastly, geographic expansion is likely on the roadmap for Konfío in several years. While Mexico’s SMEs are particularly credit-starved, SMEs across Latin America face many of the same challenges accessing digital financial services and credit. However, geographic expansion will open Konfío up to a wider range of well capitalized competitors, especially in Brazil. Similarly, there is limited synergy with its Mexican business and any other potential geographies. The dataset it builds up in Mexico, the customer profiles and other insights will be unique to Mexico and unlikely to help underwrite customers in new geographies. 

Overall, Konfío is a success story for SME lending in LATAM and globally. The company has helped pioneer a category that has inspired numerous entrepreneurs globally to build similar products in different markets. Access to credit is a key driver of economic growth. Consumer access to credit drives higher consumer spending (mortgages, student loans and BNPL). Business access to credit drives higher investment, R&D and expansion. 

Poor credit access is one of the biggest bottlenecks holding back economic growth around the world, preventing developing economies becoming middle income and then wealthy countries. In March 2023 Konfío expanded its credit line to $227 million. Konfío is on a mission to close the credit gap for SMEs in Mexico and it has only just scratched the surface of its tremendous market opportunity. Watch this space!

In Southeast Asia a quiet proptech boom has been underway for the past decade. As of 2023, there are 548 proptech companies operating from Asia, with Singapore and China hosting nearly half these companies. The poster child of Southeast Asia proptech boom is Singapore-based PropertyGuru. 

PropertyGuru is Southeast Asia’s leading proptech company that offers a digital marketplace for agents, buyers, sellers and renters of homes as well as suite of data, marketing and home financing services. PropertyGuru was founded in 2007 by Jani Rautiainen and Steve Melhuish and is currently available in Singapore, Malaysia, Thailand, Indonesia, Australia and Vietnam. In March 2022 PropertyGuru listed on the New York Stock Exchange (NYSE) after completing a merger with a Peter Thiel-backed SPAC Bridgetown 2 Holdings Limited at a valuation of ~$1.6 billion

Since inception PropertyGuru has achieved impressive scale:

• Raised $670+ million in total funding 

• Has 1,700+ employees

• Receives 40 million monthly visitors

• Has partnered with 64,000+ agents in Southeast Asia

• Has 3.5 million listings on the platform

• Generated $101 million in revenue in 2022  

Product

PropertyGuru has built a dominant position as the go-to digital property platform in Southeast Asia. PropertyGuru’s product suite has expanded over time and includes:

1. Property Classifieds Marketplace: A digital platform matching agents, buyers, sellers and renters of property

2. Mortgage Marketplace: A marketplace to match buyers of property to mortgage products from different banks

3. Digital Sales and Marketing: Sales and marketing tools for developers to advertise new real estate projects and drive interest and sales 

4. Data and Software Tools: Proprietary real estate market intelligence for agencies, developers and bank

5. Home Services: A range of home services such as laundry, deep cleaning and pest control 

PropertyGuru operates a suite of unique brands in the different markets it operates in. For example in addition to the PropertyGuru brand it operates the CommercialGuru brand in Singapore, iProperty in Malaysia, Batdongsan and Dothi.net in Vietnam and thinkofliving.com in Thailand. 

Competition

PropertyGuru has built a commanding position in the property classifieds market in four of its six markets. Indonesia and Australia are the only markets where the company doesn’t have a majority market share of the property classifieds market today - an area of opportunity for future growth. 

Despite its dominant position PropertyGuru does face several competitors across its different markets including Pinhome, Rever, 99.co and many more. 

Pinhome is a digital marketplace for properties in Indonesia that functions much the same way that PropertyGuru does. The company was founded in 2020 and has raised $75 million in financing to date.  Similarly, Rever is a digital marketplace for properties in Vietnam with a similar set of products and services at PropertyGuru. The company was founded in 2016 and has raised $16 million in financing to date. 

99.co is a digital marketplace for properties that operates in Singapore and Indonesia. The platform connects buyers, sellers, renters and tenants through its digital platform as well as offers tools for agents and for users to secure mortgages. The company was founded in 2014 and has raised over $81 million in financing to date. Finally, Ideal is a digital mortgage broker in Indonesia that helps homebuyers secure mortgages quickly and efficiently. The company was founded in 2021 and has raised $3.8 million in financing to date. 

Growth Opportunities

While PropertyGuru has built a commanding position in Southeast Asia there remains a lot of potential growth ahead of it. Going forward the company has two main growth paths: 

1. Deepening its investment in Indonesia to capture market share

2. Growing its home services business line regionally

3. Expanding its fintech offerings

Indonesia is the largest and most important market in Southeast Asia with a population of 270 million today. The company to date has struggled to replicate the success it has had in other markets in Indonesia. In 2013, Steve Melhuish - a cofounder of PropertyGuru - publicly shared that the company’s initial approach to Indonesia had been incorrect. The company had overnight gone live in Malaysia, Indonesia and Thailand which caused its resources to be spread thin across these markets.

Capturing market share in Indonesia is vitally important for the company’s future growth prospects. The company can do this via acquisitions of local players such as its 2011 acquisition of Rumah.com and its 2015 acquisition of RumahDijual. As a public company it is better positioned to complete these acquisitions thanks to its access to greater and more complex forms of financing. Besides acquisitions the company will simply need to invest more resources into the country to onboard more agents onto its platform, bring on more listings and build its brand among consumerss. Indonesia is an enormous country composed of over 18,000 islands and is a challenging market to expand into for that reason.

Another potential growth path for the company is to deepen its investment in its home services product operated under the brand Sendhelper. Sendhelper was acquired by PropertyGuru in October 2022 and is a recent addition to its product suite. Sendhelper offers homeowners and tenants a single unified platform to secure a range of home services including cleaning, air conditioner servicing, laundry, pest control and more. Home services are a natural upsell opportunity for PropertyGuru as it acquires homeowners and tenants through its other product lines and can use home services to build a longer-term recurring relationship with these customers. Currently Sendhelper is only live in Singapore and the company will likely expand the product to its other markets over time. Home services can be a significant growth opportunity for the company as homes on averages require several thousand dollars of maintenance on an annual basis for their entire lifetime. 

Lastly - as in most emerging markets - expanding further into fintech is a significant growth opportunity for PropertyGuru. The company launched PropertyGuru Finance in 2020 in Singapore to help buyers secure mortgages and has since brokered over $2 billion in mortgages to date. Real estate is one of the most debt-intensive industries in the world and the opportunities to apply fintech are enormous. With more than 70% of Southeast Asia’s population categorized as unbanked or underbanked, the opportunity to provide them real estate related fintech products is significant. 

Overall PropertyGuru has built a dominant position as the go-to digital property platform in Southeast Asia for all the different stakeholders in the real estate market. As one of the few startups from Southeast Asia to successfully list on the NYSE the company is one of the early tech success stories out of Southeast Asia. As it embarks on its life as a public company and focuses on unlocking its next phase of growth it will be a key barometer of how large technology companies can get in Southeast Asia and what opportunities international investors see in the region over time.

Over the past decade, the subscription economy has grown by over 430%. Globally the subscription economy reached an impressive $275 billion in 2022 and is only set to grow in the years to come. The rise of the subscription economy has opened up a vast range of opportunities for tech companies to help support the entire lifecycle of subscriptions for businesses. One of the largest and most successful subscription management platforms is Indian startup Chargebee.

Chargebee is a recurring revenue management platform that provides subscription and recurring billing tools along with a host of other services for SAAS and ecommerce businesses. It powers their complete recurring revenue lifecycle, from subscription billing to cash, accounting, renewal and more. The company was founded in 2011 by KP Saravanan, Krish Subramanian, Rajaraman Santhanam and Thiyagarajan Thiyagu and was originally headquartered in Chennai, India.

Today the company operates out of its San Francisco headquarters and caters to a range of companies from startups to big enterprises. The company is backed by investors like Tiger Global, Insight Partners, Sapphire Ventures and Sequoia Capital India. Since inception, the company has reached impressive scale: 

• Raised $468 million in financing to date

• Achieved a valuation of $3.5 billion

• Acquired 18,000 customers

• Supports recurring payments across 150+ countries

• Doing an estimated $100m+ a year in revenue

Product 

Over the past decade Chargebee has built a vast and comprehensive platform for managing recurring revenue. Today companies trust Chargebee to power their full recurring revenue lifecycle, from subscription billing and invoicing to cash, accounting, renewal, and much more. 

Chargebee’s vast platform includes four main product areas: 

1. Billing & Revenue Management

2. Receivables Management

3. Revenue Recognition (RevRec)

4. Retention

Billing & Revenue Management

Chargee’s Billing and Revenue Management products are designed to cover all of a company's possible billing and revenue management needs. Companies can easily localize the pricing for their product to different regions, localize the privacy and e-invoicing rules across geographies and enable customers to pay in local currency while complying with local tax rules. Chargebee supports 100+ currencies and 30+ payment gateways like Stripe, Braintree, WorldPay and PayPal while covering over 53+ countries through its platform. 

Customers can also easily A/B test pricing across geographies and customer segments and easily manage one-time purchases versus subscription revenue. Chargebee also offers rich analytics on customer spending, revenue recognition, churn and much more. 

Receivables Management

One of the hardest and most important processes for a company to run is managing its accounts receivables (AR) and collections process. Many companies rely on outdated methods for managing their AR and collections including spreadsheets, manual data entry, manual follow-ups and more. 

Chargebee has built a suite of tools to enable companies to better manage their AR and collections. Through Chargebee a company can see a unified dashboard visualizing their outstanding AR, see detailed breakdowns of their AR data, measure and track their finance team’s performance and most importantly estimate cashflows based on customer commitments.

Revenue Recognition (RevRec)

While billing a customer and collecting your accounts receivables are critical business functions, once you receive the money correctly recognizing it, accounting for it and filing your financial statements are equally important. 

Chargebee offers a suite of revenue recognition tools that work seamlessly with its billings and receivables tools to enable full revenue lifecycle management for its customers. Companies can automate compliance with different accounting standards (such as IFRS-15), correctly recognize different types of revenue and much more. 

Retention

Lastly, Chargebee offers a range of tools for customer retention including tools to manage the cancellation experience, capturing cancellation reasons, experimentation tools to improve retention and integrations with other workflow tools. With these tools customers can run different retention experiments to reduce customer churn, increase LTV and improve the overall customer cancellation experience. 

Market 

SAAS companies have radically increased the prevalence of subscription models across industries. Subscription models can be very beneficial for businesses. For example, Adobe adopted subscription-based services in 2017 and within a year its revenue grew by 77%. By 2023, 53% of software companies are expected to adopt subscription models. Furthermore, 95% of B2B companies surveyed in 2020 offer at least one subscription-based product, while 75% of B2C organizations are estimated to offer subscription services by 2023.

Subscriptions lead to recurring sales and therefore provide predictability in costs which makes it useful for companies. However, this model can also be useful for customers. Rather than being bound to long contracts with businesses, customers can pay smaller subscriptions and maintain flexibility on how long they use the product.

The global SAAS industry is projected to grow from $254 billion in 2023 to $344 billion by 2027. This growth is fueled by “software eating the world” and increasing adoption of public and hybrid cloud-based solutions, especially after the COVID-19 pandemic. By 2021, companies were using an average of 110 SAAS solutions, which represented a 38% increase from 2020 and a 1275% increase since 2015. As the subscription and SAAS markets grow, so does the opportunity for Chargebee to grow its customer base.

Alongside the SAAS market the market for subscription ecommerce market grew from $72.91 billion in 2021 to $120.04 billion in 2022. Increasingly, consumer-facing products are being sold via subscription exclusively (streaming services, mental health apps, online magazines) or bundled with a subscription (such as Apple One and Google One). Subscription ecommerce includes everything from consumer subscription boxes, digital content subscriptions, and subscriptions to online services. Subscription ecommerce will continue to grow rapidly in the years to come, another strong tailwind for Chargebee to ride over the next decade. 

Competition

Chargebee’s vast number of features ensures that it faces competition from many players in the SaaS industry. The company’s biggest and most direct competitors today include Maxio, Stripe, Zuora, and Recurly.

Maxio offers a subscription and revenue management platform that helps SAAS companies offer flexible pricing and packaging. Support is provided over the entire subscription lifecycle. Its suite of services include subscription management, recurring billing, revenue recognition, analytics, revenue retention, and more. The company was formed in 2022 as a result of a merger between software companies SaaSOptics and Chargify, who were both leading providers of subscription billing management solutions. Maxio is headquartered in Baltimore and currently serves more than 2,300 customers worldwide and manages more than $10 billion in revenue.

Stripe was founded in 2010 by John and Patrick Collison as a developer-oriented commerce company. Headquartered in San Francisco (California), it helps businesses of all sizes accept online payments. The company combines payments infrastructure with features such as subscription management, fraud prevention, analytics and more. It works closely with leading software companies like Apple, Google, Tencent, Facebook, Twitter and many more. It is currently valued at $55 billion and has raised $8.7 billion in funding to date. In 2022, Stripe recorded $14.4 billion in gross revenue.

Zuora provides cloud-based software on a subscription basis enabling companies in various industries to transform into a subscription business. Its platform, called Zuora Central acts as an intelligent subscription management hub which automates the entire subscription lifecycle. It targets processes like order-to-cash, quoting, billing, collections, analytics, and revenue recognition. The company was founded in 2007 by Cheng Zou, KV Rao and Tien Tzuo and is headquartered in San Mateo, California. The company is publicly traded (NYSE: ZUO) and the company raised $647.5M on its way to going public. In Q4 2022, its total revenue was $103M, an increase of 14% year-over-year. 

Recurly is yet another subscription billing management platform which manages subscription revenues for companies in many different industries like digital media, streaming, SaaS, consumer goods, and more. Clients use its platform to manage subscriptions, optimize payment acceptance, automate recurring billing operations and more. The company was founded in 2009 by Dan Burkhart, Isaac Hall and Tim Van Loan, and is headquartered in San Francisco, California. It has raised $39.1 million in funding and processes $1+ billion in payments each month for brands like Sling, Twitch, Paramount, and more.

Growth Opportunities

Chargebee’s platform is robust and sophisticated and further expansion into new product areas is not the best use of resources to achieve further growth. Instead, the company should double down on trying to capture market share in the subscription economy market and try to become the clear market leader. Chargebee has two clear growth paths ahead of it:

1. Global Expansion

2. Acquisitions 

Chargebee has managed to expand its corporate footprint to different continents over the past decade. It was founded in 2011 from the Southern Indian city of Chennai but acquired its first customers in the US and UK by 2013. In 2019, it opened offices in Utah and New York. By 2020, it had opened offices and data centers in Australia and Europe. By increasing its on-ground presence and local sales teams the company can deepen its presence in strategic and fast-growing markets across Latin America, Europe and Asia. Localizing sales team in particular is one of the most important actions for globally-focused software companies to take and Chargebee is early in its global expansion.

On the other hand Chargebee’s scale positions it well to be an acquirer for smaller and more specialized companies in the subscription management space. The company has already tested the waters with a few acquisitions. For example, in October 2021 the company acquired Revlock, a revenue recognition software company. Chargebee integrated the company and transformed it into Chargebee RevRec, one of the company’s core product offerings today. Similarly, in January 2022 Chargebee acquired customer retention leader Brightback and integrated it into Chargebee’s Retention product. 

Chargebee’s large and global customer base make it an attractive and synergistic acquirer for smaller companies in the subscription industry. Chargebee can acquire more customers, deepen its feature set and enter new geographies via acquisitions. At the size the company is currently at, acquisitions can also be a better use of resources than building new features from scratch and investing in go-to-markets in new geographies. Given that its likely Chargebee will go public in the near future once the IPO market reopens as this will give the company access to much deeper pools of capital to finance further acquisitions. 

Overall Chargebee has carved out a strong position as a contender to win the battle for market share across the global subscription economy. As one of the few players in the space built in an emerging market the company has inherent cost advantages and a deeper understanding of global markets than US and European companies in the space. The company’s vast platform enable it to service businesses small and large globally. The company is likely to acquire more competitors and go public in the years to come so it will be worth keeping an eye on their journey.

In 2016, Growsari was launched as a B2B tech-enabled platform helping these Sari-Sari stores transform their business from simple FMCG outlets to comprehensive service hubs. The company provides these stores with the required infrastructure and digital tools and enhances their efficiency through a wide range of products and value-added services. Beside Sari-Sari stores, it also services roadside and market shops called carinderia as well as pharmacies.

Growsari was founded in 2016 by Andrzej Ogonowski, ER Rollan, Shiv Choudhury, and Siddhartha Kongara and is headquartered in Manila. The company is backed by investors like Tencent, KKR, Wavemaker Partners, IFC and Endeavor Catalyst.

Since inception, Growsari has grown across multiple fronts:

• Has raised $110 million in total funding

• Operates in 400+ municipalities and 20 key cities in Philippines

• Has 150,000 MSMEs active on its platform

• Created a network of 200+ service providers

Product

Growsari has built a comprehensive ecosystem of products to service Sari-Sari stores in the Philippines and enable their growth. These products include: 

• Growsari App: Through the app store owners can access a wide assortment of over 800+ FMCG products at competitive prices as well as other everyday products such as rice, sugar and flour. The orders are delivered straight to the stores, and come from suppliers like Unilever, P&G, Alaska, Nestle, and many more. This mobile app and logistics service enables Sari-Sari stores to digitize their inventory procurement, saving significant amounts of time and increasing their profit margins. 

• Digital services: Similar to regional player Lummo, GrowSari enables Sari-Sari stores to offer multiple digital services for the first-time such as recharging your phone plan and bill payments. Growsari also enables sari-sari stores to serve as online shopping ordering hubs for their communities for two of Southeast Asia’s main ecommerce platforms Lazada and Shopee.

• SariPay: offers working capital loans, cash management, remittances and other financial products to Sari-Sari stores. SariPay is recent spinout from Growsari that will be operated as an independent company. 

Growsari enables Sari-Sari stores to replenish their stocks with affordable on-demand inventory that can be sourced online and delivered straight to their homes free of charge. Store owners are given direct access to products at competitive prices, which helps them scale their business sustainably over the long run. Impressively, Growsari has managed to attract major local partners to invest in the company, such as Robinsons Retail Holdings which is one of the largest retailers in the Philippines. Some of Robinsons supermarkets act as Growsari’s fulfillment hubs. 

Lastly Growsari also provides Sari-Sari stores with features like pricing tools, inventory management and working capital loans to grow their business. For manufacturers and distributors, Growsari’s platform generates crucial data & insights into the operations of these stores to help them create their strategies and campaigns.

Market 

The presence of Sari Sari stores on street corners nationwide has cemented their role as a key pillar of the Philippines retail ecosystem. These stores are crucial pillars to both the economy and communities across the country. In fact, Sari-Sari stores make up over 90% of MSMEs in the Philippines. Unfortunately with the arrival of the pandemic, the Filipino retail sector took a huge hit due to lockdowns and physical distancing measures. Even the sari-sari stores were not spared, as the pandemic forced over 1 million of them to close their storefronts. Total retail sales in the Philippines are forecast to reach $68 billion by 2026 up from $53 billion in 2021. The growth of retail sales is powered first and foremost by the country’s high and steady GDP growth rate of between 4 - 7% annually almost every year since 2000.

Competition

The Philippines has long been an overlooked market for startups across Southeast Asia who have often focused on launching into Indonesia given the country’s huge population and market. Given that, Growsari is lucky to face limited competition from other B2B commerce startups today. Instead, the company faces one direct competitor Bukalapak and a few indirect regional competitors that likely aspire to expand into the Philippines over time. These competitors include BukuWarung, Ula, Gudangada, and BukuKas.  

Bukalapak is an Indonesian ecommerce platform that enables small businesses to sell online as well as offer services to help digitize these small neighborhood stores. The company was founded in 2010, raised over $900 million in funding and listed publicly on the Indonesian stock exchange in 2021. The company recently entered the Philippines and launched its SmartSari product into the market. Unlike Growsari, SmartSari doesn’t offer Sari-Sari stores the ability to procure inventory. Instead SmartSari exclusively enables these stores to sell digital products such as phone credits and game credits. In the near term the company plans to launch bill payments, grocery shopping and other related services. The company is well capitalized and thank to being public has the ability to raise large amounts of financing at its discretion. 

Ula is a B2B commerce startup that provides working capital and access to inventory for small stores across Indonesia (known locally as “Warungs”). The company was founded in 2020 and in the short time since then has managed to raise $140 million in funding from the likes of Tiger Global, Sequoia Capital India, Tencent and Bezos Expeditions. Ula has over 10,000 SKUs on its marketplace and has acquired over 200,000 stores in Indonesia to date. While the company has significant room to grow in Indonesia, over the longer-term geographical expansion across Southeast Asia is likely part of their plans. 

Gudangada is a B2B commerce startup that helps digitize procurement for Warungs across Indonesia as well as provides Indonesian good distributors digital tools to improve their business. The company was founded in 2019 and since then has raised over $130 million in financing from the likes of Sequoia Capital India and Wavemaker Partners. The company primarily offers these Warungs a digital platform to handle their inventory procurement as well as handles delivery of the goods. However, the company has recently expanded into fintech and is building both a point-of-sale solution as well as lending products to better serve its Warungs. 

Bukuwarung is an indirect competitor focused on building bookkeeping, digital payments and ecommerce solutions for MSMEs in Indonesia. Based out of Jakarta, it enables MSMEs to manage and grow their businesses. The startup was founded in 2019 with a vision to empower 60 million MSMEs in Indonesia to become financially aware and leverage technology for growth. The company has raised $80 million since inception and it is estimated to be valued around $250M. To date, it has 6.5+ million registered merchants on its platform in 750 Indonesian cities, and has processed about $1.4 Billion in annualized payments so far.

Another indirect competitor is Indonesian startup Lummo (see our breakdown of the business here). Lummo offers MSMEs tools for inventory management, digital ledgers and payments through its subsidiary BukuKas as well as tools to sell online through LummoShop. The company was founded in 2019 by Krishnan Menon (see our interview with him here) and Lorenzo Peracchione and is also headquartered in Jakarta. Lummo was founded in 2019 and since then has raised around $150 million in financing. The company has over 1 million merchants on its platform and is processing billions of dollars of payment volumes.

Growth Opportunities

Growsari has plenty of room to grow within the Philippines and has acquired around 15% of the Sari-Sari stores in the country to date. Aside from simply acquiring more Sari-Sari stores which will happen as a function of time and effort there are several other growth paths the company can pursue including: 

1. Expanding its suite of fintech products

2. Creating new products and tools for CPG companies and distributors

In 2022, after Growsari raised a $77.5M Series C round, it stated plans to expand its fintech offerings for sari-sari store owners. A common pattern across emerging markets is for SMEs to find it nearly impossible to secure credit from lenders. Sari-Sari stores are no exception and they lack access to working capital and capital to finance growth. In addition, as payments continue to digitize in the Philippines these stores will need access to a range of tools to facilitate digital payments from QR codes to point-of-sale terminals. Growsari is using the expertise of its investors as it branches into fintech. For example, the company is working with its investor IFC to help it develop an accurate credit scoring model to enable it to lend to its customers effectively. The spin out of SariPay is a clear sign that fintech is a major priority for the company moving forward. 

Besides Sari-Sari stores there is a significant opportunity for Growsari to build data products and digital tools for CPG companies and distributors across the Philippines. These companies lack the capability to build digital products in-house and international solutions to many of their needs don’t fit local requirements. Growsari’s access to detailed procurement data and consumption patterns is particularly valuable to both segments. Similarly, there is likely significant room for improvement in how these companies manage their logistics, a place where technology can make a huge difference. 

Overall Growsari has built a strong lead in the Philippines market and become a major technology player in the country’s retail ecosystem. By focusing on the Philippines and falling to the temptation to expand into Indonesia the company has managed to avoid the intense competition other regional players face. The Philippines will continue its steady growth in the years to come and will continue to digitize. Growsari is positioned to become one of the Philippines first and biggest tech success stories. 

While mobility startups such as Uber and Ola have flooded the Indian mobility market with more than a million cabs in the past decade, two-wheelers (motorbikes) and three-wheelers (rickshaws) remain a more popular transportation solution in urban cities. They are far more affordable and effective as they can zip through traffic faster. In fact in 2017 India was named the world’s biggest 2-wheeler market with 17.7 million units sold that year.

In 2015, Indian startup Rapido was born as India’s first and fastest-growing bike (motorbike) taxi aggregator. Unlike its major competitors Ola and Uber the company only operates in the 2 and 3-wheeler categories. In recent years, both Ola and Uber have also expanded to two-wheeler and three-wheeler categories. 

Rapido was founded by Aravind Sanka, Pavan Guntupalli and Rishikesh SR and is headquartered in Bangalore. It is backed by investors like Indian food giant Swiggy, Westbridge Capital, Nexus Venture Partners, Skycatcher, and India Technology Fund.

Since its founding, the company has managed to achieve enormous scale:

• Gain over 25M customers and 1.5M driver partners on its platform

• Log an incredible million rides across 100+ Indian cities on a daily basis

• Raise $310.4M in funds

• Achieve a valuation of over $800M

• Grow its scale of operations over 90% in FY2022 alone

Product 

Rapido started as a provider of bike taxi services but since has expanded to provide auto-rickshaw (3-wheeler) services, third-party logistics and an employee travel management service. The company’s mission is to reduce the number of vehicles on the road by bringing together people wanting to travel in a similar direction. Its target audience mainly comprises commuters looking for convenient, safe and affordable public travel options in their day-to-day lives.

Rapido’s products and services include:

• Ride-hailing app: Through the Rapido mobile app, customers can book a bike or auto-rickshaw, and those looking to be drivers can sign up to be “captains.” For the customers, Rapido offers convenient doorstep pickup, affordability with no hidden costs, and fast commute as it is easier for 2 and 3-wheelers to zip through traffic. For the captains, Rapido helps generate rides, offers insured rides with accidental coverage and medical benefits and redeemable earnings that can be transferred from Rapido wallet to a captain’s bank account directly. Rapido charges its drivers a fee of 20% of the entire fare.

• Rapido Store: An intercity logistics service offered to both offline and online businesses to enable them to deliver products to consumers' doorsteps. Rapido helps businesses overcome the manpower and cost challenges involved with offering last-mile delivery. Merchants can track all their deliveries through a dashboard.

• Rapido Corporate: Through this B2B partnership, Rapido offers organizations an employee travel management system. A central ‘Corporate Console’ allows the organization to add a corporate wallet and also add employees to the console. Employees book their own cashless rides and fare gets paid through the corporate wallet. Customers are provided consolidated expense statements as well.

Market 

In 2020, the automotive and transportation sectors were among the hardest hit as lockdowns restricted mobility across the world and people turned to personal means of transport. India was no different, with mobility via public transport falling 65-70% in India’s financial heart Mumbai. Coupled with the regulatory challenges faced by ride-hailing companies, India’s mobility landscape has presented difficulties in the years succeeding the pandemic. Despite this in 2022 Rapido managed to grow its valuation 3-fold and scale of operations by over 90%. However the same year, the company’s losses spiked 2.6x to achieve this growth.

Despite these challenges, the future of the mobility industry in India remains a huge opportunity. There are nearly 140M commuters in India on any given day, and a 2-wheeler is the popular choice for most Indians with 33% using a 2-wheeler in their commute to work. The industry has immense room for growth. In addition the increasing penetration rate of smartphones in India (estimated to reach 96% in the next 2 decades) is expected to fuel this trend of on-demand ride hailing services for decades to come. In recent years, there has also been a surge in e-bikes with sales of e-bikes expected to rise from less than 0.5% two years ago to 50% by end of 2025. Overall, India’s bike taxi market is forecast to be worth $1.4B by 2030. 

However, in the short-term Rapido has been in the bullseye of regulators across India who are cracking down on the company. India’s capital Delhi recently banned bike taxi services provided by Rapido as well as Ola and Uber due to the company lacking the right legal licensing. Similarly Rapido was recently banned in the entire state of Maharashtra by the Bombay High Court due to a similar lack of licensing. Finally Rapido has suspended bike taxi operations in Pune as well recently. It’s clear that regulators are cracking down on bike taxi services and Rapido will have to explore how to adequately license itself before it can restart operations in these major cities. 

Competition

The huge market for commuters and mobility services in India have attracted a range of competitors including Uber, Ola, Vogo and many more. 

Uber began providing ride-hailing in India in 2013 with its headquarters in Mumbai. In 2015, the company first launched UberAuto in India followed by bike taxi services called UberMoto in 2016. Uber has served more than 95 million riders in India through its platform to date and generated $52 million in revenues in India in 2022 alone. As of 2022, Uber is available in 120+ Indian cities and it is Rapido’s biggest competitor in India today.

Ola is a global ride-hailing company based in India that offers a range of mobility services for customers. The company was founded in 2010 by Ankit Bhati and Bhavish Aggarwal, and is headquartered in Bangalore. In 2014, Ola introduced auto rickshaw services and by 2016, it introduced bike taxi service on its platform. Today, its mobile application enables customers to book a range of cabs, auto-rickshaws, bikes, and shuttle buses. The company has raised $5 billion in funding to date and achieved a valuation of $7.3 billion. It has over 125 million users and over 1 million drivers on its platform and is available across 110+ cities.

Vogo was founded in 2016 and offers an on-demand moped and car rental service. Vogo has a dockless model and allows customers to rent mopeds for short one-way trips. Headquartered in Kormangala, India, the company was founded by Anand Ayyadurai, Balakrishnan Padmanabhan and Sanchit Mittal. Vogo is currently available at limited pick-up and drop-off points across Bangalore and Hyderabad and 3 other cities. To date the company has raised $191M in funding to date and has delivered 10 million rides with over 2.5 million registered users on its platform.

Growth Opportunities

Rapido has achieved enormous scale to date with over 25 million customers and 1.5 million drivers on the platform to date. However, the company has only just begun to penetrate its addressable market and the mobility market in India remains an enormous and fast-growing market. Today the company offers its signature 2-wheeler service across 100 Indian cities. In addition, the company also offers its 3-wheeler (rickshaw) service across Indian 26 cities.

To continue its growth the company can pursue several strategies including:

1. Broaden its logistics and fleet network across India

2. Invest in offering new electric vehicle services 

Rapido’s logistics service was originally launched in 2020 and was only available in Bengaluru, Karnataka and Vijayawada with plans to launch in more regions. India’s last-mile delivery market is forecast to be worth $7 billion by 2024 and Rapido is positioned to be one of the leading players in this market thanks to its existing network of drivers. India’s overall road logistics market (intracity and intercity) is worth $240 billion or about 8% of GDP. By extending its logistics service across the nation Rapido can begin to tap into the rich last-mile delivery opportunity nationwide. 

Rapido can extend the service to all the 100+ cities it currently operates in. In April 2022 Rapido raised $180 million in new funding with the stated goal of broadening its fleet network across the country. The round was led by Swiggy - an Indian food delivery giant - which has begun collaborating with Rapido to build an extensive logistics platform. 

Aside from expanding its logistics network there is a rich opportunity emerging around the electrification of transport in India. A growing push for electric vehicles is taking off across India and 2022 saw one million electric vehicles sold compared to just 320,000 the year before. The need for electrification of transport in India is clearer than almost anywhere else in the world. India has 39 of the 50 most polluted cities in the world with road traffic a major driver of urban pollution. There is a whole ecosystem of companies taking shape to manufacture, deliver and service electric vehicles in India. In fact, one of Rapido’s main competitors Ola has recently begun to manufacture and sell electric mopeds to the Indian market. Given Rapido’s position as a leading mobility provider in the nation it would be a waste for the company not to find some way to play in this emerging ecosystem whether by manufacturing, renting or just offering electric transportation services. 

Rapido’s growth ambitions are lofty and the company hopes to have 50 million customers on its platform by the end of this year. India’s market of 140 million daily commuters is only set to grow in the years to come as more young Indians get older and join the workforce. Mobility is an enormous need and opportunity in the Indian market and Rapido has built a leading position for itself in the two-wheeler segment (driving 78% of all its revenue). The company will now need to navigate its legal challenges as well as tap into new opportunities in logistics and electric vehicles to continue its spectacular growth to date. 

MarketForce is an operating system for end-to-end retail distribution in Africa. It offers a unified B2B ecommerce marketplace to facilitate product sourcing for informal merchants and faster and more efficient distribution for leading consumer brands such as Pepsi, Safaricom, Fort Beverages and others. The company was founded in late 2018 by Tesh Mbaabu and Mesongo Sibuti and is headquartered in Nairobi, Kenya. It is backed by Y Combinator,, SOSV, V8 Capital Partners and Africa’s Business Heroes.

Since its launch in 2018, Marketforce has managed to: 

• Raise $43M in funds

• Acquire 200K+ merchants and 50 FMCG brands on the platform

• Complete 300K transactions worth more than $500M 

• Launch operations in Kenya, Nigeria, Uganda, Tanzania, Rwanda and Ghana. 

Product 

MarketForce has built an end-to-end operating system for retail distribution in the six markets it operates in. Today the company has two main products: RejaReja and MarketForce One. 

RejaReja 

RejaReja - which means “retail” in Swahili - is MarketForce’s Super App for merchants. The app is a full ecosystem of services for informal merchants and enables them to source, order and pay for inventory digitally, access financing, collect digital payments and make extra money by reselling digital financial services such as airtime, electricity tokens and bill payments.

Through RejaReja informal merchants can access and easily procure inventory across a vast assortment of SKUs from leading FMCG brands with next-day delivery. This solves two problems across the retail supply-chain. Firstly for retailers it makes the process of procuring inventory faster and easier by centralizing their purchases into one single place and offering them next-day delivery. Meanwhile for FMCG brands RejaReja offers them the ability to extend their distribution network into areas where they don’t have a presence as well as offers them richer data on purchase behaviour across informal retailers. Unlike some other startups in this category RejaReja is an asset-light model. MarketForce doesn’t own warehouses and delivery trucks. Instead it relies on its network of partners which includes manufacturers and distributors to handle the storage and delivery of different SKUs.

In addition to enabling informal retailers to source goods, RejaReja also enables them to easily sell digital services. This is something that is unique to emerging markets where these informal retailers play an important role in their community and often serve as a bridge to digital services and financial services for their community. For example, in recent years in emerging markets a new phenomenon has emerged of “agency banking” where many of these informal retailers are authorized to act as agents for banks and serve basically as a bank branch in smaller cities and towns.

RejaReja offers retailers the tools to sell digital services such as airtime as well as to enable bill payments, enabling these retailers to participate in the physical as well as digital economy for the first time. This approach to enable physical as well as digital sales has been pursued by startups in other markets such as Indonesian unicorn Lummo.

MarketForce One

MarketForce One is a tool built to help financial institutions in Africa reach more potential customers by giving them streamlined access to MarketForce’s network of retailers and by creating workflow tools to make their sales processes more efficient. MarketForce One helps these sales teams with efficient route mapping, customer geolocation, sales forecasting and reporting, realtime quotations and other tools to make their workflows more efficient. 

Market 

Despite hundreds of billions of dollars of consumer goods being sold annually through informal channels, the African retail industry continues to be highly fragmented. Kiosks and informal retailers historically struggle to procure inventory from suppliers regularly and in a timely manner. Even more importantly these retailers struggle with access to capital, with MSMEs notoriously facing a $5 trillion credit gap in Africa. These two problems combine to put informal retailers in a bind and make it difficult for them to grow their business. 

Consumer spending in Africa is forecast to cross $2.5 trillion by 2030 powered by increasing per capita income and a growing population. 

Competition

The B2B ecommerce market has become one of the most popular categories for startups globally over the past few years. The category has attracted numerous players in Africa including the likes of Wasoko, TradeDepot, Alerzo, Chari and Sabi. 

Wasoko was founded in 2016 and is also headquartered in Nairobi, Kenya. The company aims to improve product sourcing for informal retailers. These retailers can easily order goods via SMS or mobile apps with free same-day delivery. The company was founded by Daniel Yu, David Jaress and Josh Raine and has grown revenue 1,000% since 2019. It is processing $300M in GMV across 150,000+ monthly orders and has delivered 2.5M orders to 50,000+ active retail customers in its network. To date, it has raised $143M in funding.

Like MarketForce, TradeDepot is a B2B ecommerce and embedded finance platform that offers a variety of consumer goods to SME retailers. Its end-to-end distribution platform connects informal African retailers directly to some of the world's top consumer goods companies, leveraging technology to improve the distribution process. The company was founded in 2016 by Michael Ukpong, Onyekachi Izukanne and Ruke Awaritefe, and is headquartered in Lagos, Nigeria. Since inception, it has managed to grow its GMV significantly and is currently servicing 100,000+ merchants through its platform. The company has raised $123M in funding.

Alerzo is a B2B ecommerce retail company founded in 2019 that empowers informal retail stores through on-demand inventory distribution and financial services. It also provides real-time market trends, customer feedback and other consumer purchasing data to brands and manufacturers. Founded by Adewale Opaleye the company has headquarters in Ibadan, Nigeria and has managed to raise $16M in funding to date. It has a network of 100,000+ small businesses, 90% of which are women-led. It exclusively serves tier-2 to tier-4 cities in Southwest Nigeria such as Ibadan, Ekiti, Abeokuta and more.

Chari is an ecommerce and fintech app that allows traditional retailers in French-Speaking Africa to order consumer goods and get delivered for free in less than 24 hours. It also  offers microloans to these retailers. Founded in 2020 by Ismael Belkhayat and Sophia Alj, it is headquartered in Casablanca, Morocco. The company has raised $7.4M in funding and is valued at $100M. It currently has a network of 50,000 merchants, transacts about $2.5M monthly and is growing 20% month-on-month.

Founded in 2020 Sabi provides digital infrastructure for the distribution of goods and services across retail supply-chains. Its platform provides agents, merchants, distributors and manufacturers access to inventory, commodities, logistics, business tools, data insights and financial services. It also offers them technology rails that can help them grow their businesses. The company was founded in 2020 by Ademola Adesina and Anu Adasolum, and is headquartered in Lagos, Nigeria. It registered an average monthly growth of 40% in Nigeria,  processes nearly $12M in monthly GMV and serves 250,000 merchants through its platform. The company has raised $28M in funding to date. 

Growth Opportunities

Broadly speaking the B2B ecommerce market has proven to be a challenging category for startups to grow sustainably in. Many of the players globally have used aggressive discounts and subsidies to acquire market share of retailers and grow their sales. However, informal retailers have shown a tendency not to be loyal to any specific platform but to order from the player offering the lowest prices in the market for any given good. 

The original thesis for startups seeking to disrupt B2B ecommerce was that by applying technology and economies of scale to the category these companies would be able to expand gross margins. However, this thesis broadly remains unproven globally as the huge salary costs these startups have for in-house developers and product managers has significantly increased their fixed costs in comparison to legacy, non-tech enabled distributors. 

Moving forward MarketForce has two main potential growth strategies it can pursue:

1. Geographical expansion

2. Doubling Down on MarketForce One

The most straightforward growth path for MarketForce is to continue its geographical expansion. However launching new geographies is a huge investment of resources and competition in all major African markets is intense. The only major market MarketForce is not currently present in is Egypt. However, the Egyptian market is highly competitive and exposes the company to a new set of competitors including Maxab and Cartona. At this stage, with the VC market tightening and availability of capital decreasing (especially for emerging markets startups) further geographical expansion is not the best growth path. Instead, MarketForce should focus on capturing market share and dominating the existing geographies it is present in.

The second potential growth path for the company is to double down on MarketForce One and broaden the product suite. Across Africa informal retailers are serviced by existing supply-chains and distributors. While these supply-chains are inefficient and have numerous issues, they do work well enough to keep goods flowing. The opportunity to offer better software and tools to the entire supply-chain is enormous. MarketForce One is the company’s first product dabbling in this space but the needs are huge. 

By offering distributors, manufacturers and retailers solutions that can digitize their business MarketForce can solve a major gap in the market - data. Because most of these supply-chains are manual the lack of data visibility is significant. Similarly, by digitizing these supply-chains MarketForce can drive efficiency across the entire supply-chain. In 2021 MarketForce partnered with Cellulant, a Pan-African payments company to help it expand into new markets. Partnerships like these to ease the acceptance of digital payments could also be a key feature for MarketForce One.

This growth path is far less capital-intensive than building new warehouses and expanding into new cities and geographies. Similarly by charging a transactional fee or SAAS fees MarketForce could also benefit from a bump to its valuation multiples as software / fintech businesses are valued more highly than lower margin ecommerce businesses. 

Overall MarketForce has built a substantial multi-geography business in the B2B ecommerce category. Unlike many other players in the market the company has also experimented with building digital products for different players in these supply-chains. However competition in this segment is intense across the continent and there are several well capitalized players vying for dominance. Over the next few years consolidation is likely in this segment across the continent and MarketForce has positioned itself to be one of the leading players in this category. 

NowPorts is a Mexican logistics tech company digitizing the import and export experience for Latin American companies. It was founded in 2018 by Alfonso De los Rios and Maximiliano Casal as the first digital freight forwarder shipping ocean containers to and from Latin America. 

NowPorts automates the entire supply chain to enable movement of client cargo via maritime, aerial and ground transportation. To enable this, NowPorts collaborates with leading airlines, shipping, railroad, and trucking companies. It also provides a BI platform, inventory financing, merchandise insurance, and customs coverage.

Nowports is headquartered in Monterrey, Mexico but operates across Chile, Colombia, Panama, Brazil, Peru, Uruguay, and the United States with a total of 11 active offices. It is backed by investors like Softbank, Tiger Global Management, Base10 Partners, Y Combinator and others. 

Since its founding NowPorts has also managed to:

• Raise $242.6M in total funding

• Achieve a valuation of $1.1B

• Build a team of 500+ experts in logistics, technology and supply chain

• Grow its revenue by more than 12x year-over-year (2022)

• Achieve a 10x growth year-over-year in containers shipped and customers served (2022)

Product

Nowports has quickly built a robust platform touching multiple parts of the logistics process. NowPorts handles cargo for clients in the form of maritime shipments, air freight and inland transportation. The company integrates technology into the import and export processes, granting clients agility, accessibility and transparency in logistics. 

NowPorts product suite includes the following:

• Logistics: NowPorts completely manages maritime, air and inland freight for clients in Latin America, the US and Canada. The company works with well-known shipping companies and international airlines, guaranteeing space, competitive prices and timely arrival of merchandise at its destination. For inland freight, NowPorts provides truck or rail, point-to-point or intermodal, national or international services where cargo can be tracked via GPS technology. 

• Visibility Platform: The company offers a digital hub that gives a shipper visibility across their shipments including locations, status and issues that might arise. Clients can speed up and closely monitor their international trade processes through instant cargo status updates, account statements, and customized insights.

• Financing: Nowports provides clients inventory financing by offering credit days for their freight shipping. This enables customers to import more merchandise and pay for it later, improving their cashflows.

• Merchandise Insurance: NowPorts provides protection against 3rd-party damage to client cargo’s air, sea or ground movement, with the support of international suppliers. It provides both regional and international coverage.

Market

The COVID-19 pandemic and the lockdowns it caused massively disrupted global supply-chains. Whole parts of global supply-chains - such as factories - shut down for weeks at a time causing the world’s highly interconnected supply-chain to be disrupted for nearly 2 years. Alongside this rising geopolitical tensions between the US and China and the West and Russia have continued to inspire efforts to restructure global supply-chains and reshore or “friendshore” production.

This period of profound disruption has transformed supply-chain considerations into some of the highest priorities for political leaders and businesses worldwide. More importantly this disruption has renewed interest in digitizing supply-chains to give visibility, realtime alerts and to enable resiliency.

Logistics is a particularly large industry in Latin America thanks to its position as a major exporter of food products and commodities (oils, metals, wood) to the rest of the world anchored by Brazil’s key role in the global agricultural market. In 2019 the LATAM logistics market was valued at $542 Billion and is expected to register a CAGR of 6.2% to reach a value of $784 Billion by 2027. 

A rapidly growing movement in the US to move production out of China and to other friendly countries is likely to be a huge tailwind for Latin America’s exporters and in particular Mexico, NowPorts’ home market. Mexico is the second-largest exporter of goods in the world to the United States and stands to benefit the most from this trend. Its membership in the USMCA free trade agreement along with membership in 10 other free trade agreements (giving it access to 45 countries across the world) position Mexico to significantly grow its exports in years to come. 

Competition

LATAM’s huge logistics market has attracted an array of startups that compete directly and indirectly with NowPorts including the likes of NuvoCargo, Klog, Trackchain and others. 

Klog is a digital freight forwarder founded in 2012 by Janan Knust and is NowPorts biggest competitor. The company has offices in Mexico, Bolivia, Peru and Chile and has over 4,500 customers on its platform today. The company seems to have been bootstrapped with limited press and no history of VC fundraising that is public. The company counts marquee companies as customers including the likes of Hugo Boss, Tommy Hilfiger, Guess, Crocs and many more.

NuvoCargo is an all-in-one digital platform for cross-border trade between USA and Mexico that offers solutions like freight forwarding, customs brokerage, cargo insurance and supply chain financing. It was founded in 2019 by Deepak Chhugani and Sam Blackman and is headquartered in NY, USA. Since the beginning of operations Nuvocargo has been growing its revenues by about 30% month over month. Over the years it has managed to raise $37.8M in funds and attain a valuation of $180M. 

TrackChain offers a platform for managing both shipper & carrier operations and is focused on trade between the US and Mexico. It provides services like freight quoting, booking, dispatch management, capacity management, load matching, contract negotiations, shipment tracking, workflow management, and many more. It was founded in 2019 by Eduardo Narvaez and Hugo Alvarez and is also headquartered in Monterrey, Mexico. The company has raised $1.8M in funds to date. 

NowPorts focus on shipping and freight forwarding from day one has positioned it strongly amid growing competition from other logistics startups. Although 90% of the world’s trade is carried by sea, there are multiple challenges involved with shipping freight by sea including delays, lack of realtime visibility and higher costs. NowPorts is the first digital freight forwarder shipping ocean containers to and from Latin America. 

Every year about 50 million containers are imported and exported from Latin America annually. Unfortunately, close to half of them are either delayed or lost due to human errors such as miscommunication or mismanagement. Nowports enables clients to keep track of each container through its digital management software and the platform can reduce delays by as much as 40%. 

Growth Opportunities

NowPorts started by focusing on digitizing freight forwarding but over the years has expanded its product suite to include inventory finance, cargo insurance and more. The company has managed to successfully ride the tailwinds around logistics digitization over the last few years and these tailwinds are only set to strengthen in the years to come. The company has plenty of room to grow in LATAM’s large logistics market in the years to come. 

Beyond simply growing in its existing markets the company has a few potential growth paths including: 

1. Expanding outside Latin America 

2. Expanding its financial service offerings

The problems that NowPorts solves related to container shipping are not unique to Latin America and are global in nature. The product suite the company has built across digital freight forwarding, realtime visibility, financing and insurance can help deliver value in other parts of the world. Despite having years of growth potential ahead of it in its existing markets the company may already be dabbling with expanding its footprint globally to start to tap into the global opportunity. The company recently opened an office in Miami, helping position it on either side of a major trade corridor between the US and Latin America. The company already has offices in Vietnam and Hong Kong as well.

NowPorts can expand globally by following the import and export flows from Latin America. China is already the largest trading partner of most countries in Latin America and when the time comes NowPorts can expand more aggressively into Asia and seek to digitize both sides of the import and export flow from Latin America. 

The other potential growth path for NowPorts is to continue to deepen its embedded fintech offerings. NowPorts’ inventory financing tool was first released in 2021. This tool enables customers to acquire merchandise for import and pay for it later. Clients can get faster financing with Nowports since the company can use its shipping history and preloaded information to approve them. In general businesses in emerging markets study to access credit and this constrains both their own growth and that of the wider economy. NowPorts embedded fintech products are a strong hook into its ecosystem for new potential customers.

Overall, NowPorts has positioned itself to ride several major macro tailwinds and executed well over the last few years. The company has barely scratched the surface of the $500 billion+ LATAM logistics market and has years of potential growth ahead. As global supply-chains are restructured, LATAM stands to benefit from the nearshoring of manufacturing from Asia. Exports from Latin America are likely to see continued strong growth over the next decade. NowPorts is well placed to be a major player in the logistics tech industry globally. The best is yet to come. 

QuintoAndar is a Brazilian proptech company, founded by Gabriel Braga and André Penha with the vision of streamlining renting and purchasing of real estate in Brazil. QuintoAndar - which means “fifth floor” in Portuguese - provides a digital marketplace that connects tenants and homebuyers to landlords and sellers in Brazil. The platform has evolved to become an end-to-end solution for long-term rentals and property buying and selling. 

The company is headquartered in São Paulo and is available in all five regions of Brazil across over 75 Brazilian cities. QuintoAndar is currently the most valuable proptech startup in Latin America and is backed by noteworthy investors like Silicon Valley-based Ribbit Capital, SoftBank’s LATAM-focused Innovation Fund, Kaszek Ventures and Dragoneer. 

Over the years, QuintoAndar has:

• Raised $755.3M in funding to date

• Present in Brazil, Mexico, Peru, Ecuador, Panama and Argentina

• Achieved a valuation of $5.1 billion, the highest valuation for a proptech in LATAM

• Reached 175,000+ active rental contracts

• Achieved $50 billion+ in assets under management 

• Made 60,000+ homes available for sale on its platform

Product

QuintoAndar offers a digital, end-to-end platform for real estate dealings and is essentially a complete ecosystem for brokers, agents, property owners and tenants. Technology simplifies the entire experience of buying, selling or renting a property. Customers are supported throughout the process, starting from browsing a verified property catalog to signing the final contracts. Through its tech-enabled services, QuintoAndar helps:

• Home buyers and renters: QuintoAndar’s main web application can be used to search for homes, schedule virtual or on-site visits, negotiate and complete all the steps of renting, buying or selling. All contracts are completely digitized, eliminating the need to physically visit notaries for finalizing a contract. QuintoAndar also removes a renter’s requirement to have a financial guarantor, large security deposits, or rental insurances.

• Sellers or landlords: Through the homeowners’ app, they can list properties for sale or rent, monitor visits, negotiate with buyers or tenants and close deals. QuintoAndar provides landlords with the guarantee that they will receive rent every month, and get coverage for any damages caused by a renter to a property. This enables landlords to have sufficient liquidity in the market.

• Real estate agents: They can use the agent’s app to manage their schedules, book visits, contact clients, and manage deals. On the property buying side, QuintoAndar offers a real estate financing simulation in partnership with major banks in the market. QuintoAndar also helps find the best rates and conditions with banks, intermediates the credit analysis, and helps with verification of all the necessary documentation. Once the financing process is started with the bank, it then monitors the process (for any pending issues, updated statuses, etc). Financing is then approved, and the contract can be signed by a buyer digitally.

Business and Revenue Model

QuintoAndar’s services are entirely digital. The company provides transparency by quoting single prices for each property which include any condominium fee, property taxes, and the rent itself and so there is no hidden fee. The company exempts tenants from providing any guarantor, a surety bond, or a security deposit and has also eliminated the need for any notaries through its digital signatures. The use of digital signatures also means a prospective tenant and a property owner can negotiate from 2 separate locations. 

QuintoAndar makes money through the rent payments and a fee charged from property owners. Once an apartment is rented via the platform, QuintoAndar collects the rent from the tenant on behalf of the property owner. The first month’s rent is kept by the company as a broker fee, and QuintoAndar further charges an 8% per month fee from the property owner. This fee is standard in the market and at par with what rental agencies charge.

Competition

The inefficiencies in Brazil’s rental and real estate market have attracted the attention of numerous companies in recent years including the likes of Loft, Tabas, Habi, La Haus and many others. 

Loft was founded in 2018 and is a Brazilian proptech unicorn based out of Sao Paulo with a valuation of $2.9B. The company platform aims to serve as a “one-stop shop” which helps Brazilians manage the home buying and selling process. The company uses technology to simplify and enable real estate and credit transactions and has raised $788M in funding to date. Loft currently has more than 40,000 apartments for sale in four cities and is gradually expanding its reach and portfolio through acquisitions.

Similarly, Tabas is also headquartered in São Paulo and was founded in 2020. Tabas is a tech-enabled property management company that provides beautifully-designed fully-furnished apartments and corporate housing. In 2021, the startup surpassed $145M in revenue, and has raised $16.1M in funding to date. Tabas has 360 furnished, tech-enabled apartments in São Paulo and Rio de Janeiro that are available for stays of at least one month. In November 2022, Tabas was acquired by New York-based global proptech company Blueground.

Colombia-based La Haus has developed an online real estate marketplace operating in Colombia and Mexico. The company has a very similar mission to QuintoAndar and aims to make it easier for people to buy homes quickly and easily. The company has raised over $200 million to date and has hundreds of developers listing houses on its platform today.

Compared to players like these, QuintoAndar has a first mover advantage in the market. The company is a pioneer in the category and have inspired several global copycats. Unlike real estate listing platforms, QuintoAndar provides an end-to-end platform which also acts as a digital brokerage. Everything is handled, including the monthly payments for the landlord and eventual separation when the tenant leaves. QuintoAndar’s service enables apartments to be rented 10x faster than the offline competition, in an average of 4 days compared to about 30 days with a typical rental agency. 

Its ability to provide rental guarantees to landlords is also a significant competitive advantage. This guarantee ensures the landlord receives timely payments even if the tenant has not been able to make a payment or makes delayed payments. This builds significant trust with landlords. Even more appealing may be the insurance and rent advance products the company provides, which enables owners to get months of rent in advance. 

For tenants, QuintoAndar has removed the hassle of having to provide a guarantor or deposits, which helps them save money. This trademark rental scheme is a result of QuintoAndar’s credit engine which is powered by advanced data analytics and can help predict a prospective tenant's capability to pay rent. 

Growth Opportunities

Brazil is one of the largest countries in the world with a population of 200 million and a $1.6 trillion economy. For the majority of its life QuintoAndar has been focused on growing its presence in Brazil given the huge opportunity the country offers. However in 2022 the company began dabbling with geographic expansion after establishing a presence in Mexico after its acquisition of Navent. Navent has more than 6 million properties listed on its platform across Argentina, Panama, Peru, Mexico and Ecuador. QuintoAndar has rebranded Navent as its new Benvi platform. 

QuintoAndar has several growth paths ahead of it including:

1. Expansion to other countries

2. Expanding solutions portfolio through acquisitions

3. Offering new real estate products

QuintoAndar is likely to continue the geographic expansion it started in 2022 and expand across Latin America. This pattern has repeatedly played out across different categories in Latin America. By starting from Brazil and building a lead in the Brazilian market which is the largest market on the continent, QuintoAndar has positioned itself to expand into new markets from a position of strength. Further geographic expansion will put it into direct competition with several major proptech companies based out of Colombia such as Habi and La Haus.

Another growth path for QuintoAndar is to expand its platform through strategic acquisitions. The company has shared it is open to acquiring more companies that it believes can be additive to its platform. In 2021 when QuintoAndar raised its Series E round, a large portion of this capital was invested in several acquisitions to help the company go beyond rental, buying and selling services, and add new products, such as real estate financing. That year, the company acquired Casa Mineira and its ads portal, for expanding the visibility of partner real estate agents through its marketplace. Similarly Atta Franchising, a network of 113 franchisees and 1,500+ real estate agents, was also acquired to speed up its ability to offer mortgage services to its users. 

Lastly QuintoAndar can continue its growth path by broadening the suite of real estate related products it offers. For example, in mid-2021 the company’s founders shared their long-term plan is to ​​evolve into a one-stop real estate shop that also offers mortgage, title insurance and escrow services. While the real estate market is a huge one the market for mortgages is equally large and inability to access mortgages is one of the key impediments in the entire real estate market. 

QuintoAndar has pioneered a category in Brazil that has quickly inspired companies around the world to copy its model in markets with similar problems to Brazil. However, QuintoAndar has barely scratched the surface of its addressable market in Brazil alone with its 175,000 active rentals a fraction of the total housing stock in the country. The company has significant growth ahead of it and shows all the signs of potentially following the steps of NuBank as a homegrown tech champion representing Brazil on the global stage. 

Globally remittances has been one of the largest and fastest growing segments of financial services for years. By 2022 remittance volume to low and middle-income countries reached a whopping $630 billion. Despite the size of this global market the remittance industry is plagued by friction and significant costs for end users. In particular, sending money to and from Africa has traditionally been a costly endeavor. However, with the African continent becoming a hotbed for fintech activity the continent has seen an explosion of new fintech startups founded over the last few years, many targeting remittances.  

One of the most exciting and fastest-growing fintech startups in Africa today is Chipper Cash. Launched in 2018 by Ugandan native Ham Serunjogi and Ghanaian native Maijid Moujaled, Chipper Cash is a fintech company offering zero-fee, peer-to-peer cross-border payment services in Africa, Europe and USA through its app. The idea for Chipper was born when the founders personally faced the struggles of sending money to Africa firsthand as international students.

After just four years of operations Chipper Cash has become one of the fastest-growing startups in Africa. Its founders have collectively raised $337 Million across 6 rounds of funding from notable investors like the now-defunct crypto exchange FTX, Ribbit Capital, Bezos Expeditions, SVB Capital and many others. Since its founding in 2018, Chipper Cash has managed to: 

• Average 40% Month-on-Month growth 

• Acquire 5+ Million users to date

• Process $1.65 in total payment volume in Q1 2022

• Earn gross revenues of $169 Million in Q1 of 2022

• Achieved a peak valuation of $2.2 Billion

By the end of 2022 unfortunately Chipper Cash suffered a setback when its lead investor FTX marked down its valuation by 37.5% to $1.25 Billion and declared bankruptcy in December. Understandably, Chipper Cash had to cut back on staff (12.5% of its workforce) to preserve runway as the company gears up for further growth in 2023.

Product

Chipper Cash is a lot more than a remittance company and today offers a broad suite of services across payments, investing and business tools with remittances being the core of its offering. All of these services can be accessed via the firm’s mobile apps, which are available for Android and iOS devices. Chipper Cash’s product suite includes: 

Payments 

• Sending and receiving cash: Users can easily and quickly move their money across Africa or the USA/UK, in a free and fully secure manner with the lowest cross-border rates. The app offers 2% cashback on Airtime, and users can instantly top-up from anywhere and send airtime to anyone across Africa. This service also allows instant bill payments through the app, with no additional fee.

• Chipper Card: This card allows online shopping, streaming and subscriptions from anywhere around the world. This card can be used for online purchases anywhere where visa cards are accepted.

Investing

• Investing in Crypto: Bitcoin can be bought and sold across Africa, with all crypto-money and personal information securely protected. Chipper cash allows a user to instantly convert local currency to Bitcoin and connect any mobile money or bank account. The app offers 24/7 real time pricing and instant trade execution. 

• Investing in Stocks: Users can build a stock portfolio by investing in fractional shares of publicly traded companies of their choice, with as little as $1. Users have access to 6,000+ US Public companies to invest in.

Business Tools 

• Network API: This is a payment method that gives businesses access to 5+ Million KYC verified customers. Chipper Cash enables them to accept cross-border payments at the lowest transaction fees, and send payouts across all its markets. It has an easy and accessible dashboard that provides access to all transaction data, allows sales insights and downloading of reports. Chipper Cash’s encrypted business wallet keeps the money safe with a guarantee. 

• Chipper Checkout: This allows merchants to sell on social media and messaging apps with payment links, at low transaction fees. These checkout buttons can be integrated directly with a merchant website or app. Even non-chipper users can get a fast guest checkout flow. 

Business Model

As sending money to and from Africa is expensive, Chipper Cash’s business strategy involves using its free money remittance service as a customer acquisition channel. The company then upsells the same customers into other products. Chipper Cash earns its revenue from foreign-exchange fees and crypto brokerage commissions. These include fees on stock and cryptocurrency transactions, interchange fees, and payment fees. 

Interchange Fees

Chipper Cash offers a virtual debit card in conjunction with Visa, which can be used to pay for goods and services at any merchant that accepts Visa payments. Everytime the card is used, an interchange fee is applied which is paid by the merchant. A typical debit card issued by Mastercard or Visa incurs an interchange fee of 0.5%, plus a fixed fee of $0.10 per transaction. This revenue is split between Chipper Cash, Visa and the local partners.

Investment Fees

Chipper Cash’s investment products allow members to purchase and sell stocks or cryptocurrencies. Users of the service may indulge in bitcoin transactions or purchase/sell shares of companies like Amazon, Netflix, etc. For each transaction through the platform, whether purchase or sale, Chipper Cash charges a 1% transaction fee. 

Payment Fees

Chipper Cash charges a payment fee from businesses utilizing its Network API. The Chipper Network API allows businesses to collect payments from their customers, pay suppliers or issue instant refunds. For all payments collected by a member business, Chipper cash charges a low 1% fee.

Market

Ever since the advent of global remittances banks and payment processors have charged exorbitant fees sometimes reaching into double-digit percentages. Prior to Chipper Cash’s launch, in 2017, African immigrants reportedly sent around $41 Billion to Sub-Saharan Africa in remittances to their friends and families. Another study from 2019 revealed that 8% of people in East Africa actively send or receive payments across borders. However, only half of these payments are being made through bilateral agreements between mobile money operators.

By 2022 the remittance market in Sub-Saharan Africa grew to $53 billion and is projected to grow at 3.9% in 2023. Of this the U.S. is responsible for almost 30% of the international remittances to sub-Saharan Africa. What makes Chipper Cash’s services even more relevant in the region is the significant interest in crypto ownership on the continent. In 2021, crypto adoption in Africa rose by more than 1,000%, with peer-to-peer transaction volume standing at $105 Billion. A lot of the crypto activity on the African continent is driven by users in Nigeria, South Africa and Kenya - countries where Chipper Cash is active.

Competition

Remittances has attracted the attention of numerous companies over the years and Chipper Cash is competing against the likes of MFS Africa, OPay, Interswitch and many more companies.

OPay was founded in 2018. It is a one-stop mobile-based platform for payments, transfers, loans, savings and other essential services. Currently, it has over 18 million registered app users and 500,000 agents in Nigeria who rely on OPay's services to send and receive money, pay bills and more. It has raised $570 Million in funding. 

Interswitch has been around since 2022. It is an Africa-focused integrated digital payments and commerce company that facilitates the electronic circulation of money as well as the exchange of value between individuals and organizations. It has raised $320.5M in funding, and by May 2022, it had issued 35M+ active debit cards since its inception. It oversees transactions for 190K+ businesses each day.

With stiff competition from these players, how does Chipper Cash differentiate its services? The answer lies in its remittance offering, where it has managed to grow its user base at a rapid pace by enabling them to get rid of those fees. This strategy is complemented by Chipper Cash’s simultaneous and quick expansion into as many countries as possible to enable cross-border payments. Furthermore, the company’s products are designed to include  low-income, remote populations. Chipper Cash solves issues related to inclusivity in finance by making its products affordable, accessible and easy to use. 

Since Chipper’s transfer product is free for end-users, it is inherently affordable for those who can access it. Being free is a key differentiator for Chipper in an otherwise crowded payments space. In terms of accessibility, to make use of Chipper Cash’s offering, a user needs mobile money accounts and smartphones. Fortunately ,smartphones are owned by hundreds of millions of people in Sub-Saharan Africa, and the penetration rates are predicted to grow to 66% by 2025. Moreover, Chipper’s interoperability feature makes its apps widely accessible for users with accounts or wallets across a number of MNOs (like M-Pesa and Airtel) that facilitate easy account opening. Finally, Nigerians with credit cards and bank accounts can also access Chipper’s products, reducing the barriers of smartphone ownership. Chipper’s products also have a high level of usability. Its user interface is simple, easy to navigate, and intuitive for even the most basic users. 

Growth Opportunities

Chipper’s growth has not come easy and the company has gone through many periods of fits and starts. After releasing its first version in July 2018 which allowed customers to send money from Uganda to Ghana at no cost, the founders struggled to raise funding in the initial stages. At the time, venture capitalists assumed that the African market wasn’t offering any attractive growth prospects. 

Despite its early challenges Chipper Cash today is one of the fastest-growing fintech startups in Africa. Going forward, Chipper has several possible avenues to continue its growth including: 

1. Doubling down on global partnerships 

2. Continued geographic expansion

3. Expand its fintech product suite

Chipper Cash has experimented with a few different types of partnerships so far in its journey. The company currently has a global partnership with Nigerian superstar Burna Boy, and has integrated with Twitter to support its “Tips Jar” feature for African users. Both of these partnerships are designed to help the company acquire users cost effectively and continue to power its growth. There are many further potential partnerships the company can explore to unlock its next phase of growth. Its user base of 5 million users is an attractive proposition to global businesses looking for targeted exposure to the African market and the company’s fintech products also serve as powerful financial infrastructure for global companies to take advantage of.

Besides global partnerships further geographic expansion is a logical growth path for Chipper Cash and the company has already begun the process. Chipper Cash is present in some of Africa’s biggest markets today but the continent has 54 countries. While remittances from the West are a major source of total remittance volume, a lot of Africa’s remittance volume comes from other African countries. For example, South Africa is a popular destination for migrant workers across the continent and a major source of remittances. 

By expanding across the continent Chipper Cash can access a larger share of the total remittance flows. In November 2022, Chipper cash announced its intentions to buy Zambian Fintech company Zoona in order to expand cross-border payments in Africa. The deal is expected to bring to Chipper Cash new online services, a new agent network and entry to Zambia. Chipper Cash executives have also shared publicly that the deal would bring together complementary products and services, and enable the two companies to connect consumers and businesses across Africa. Finally, the company already has plans underway to expand the Chipper Visa Card across the African continent given how large the continent’s unbanked population is. 

Lastly, besides geographic expansion further broadening its suite of fintech products is the final growth path for the company. To date Chipper Cash has been heavily focused on consumer fintech and remittances but the opportunity in B2B fintech is significantly larger than in consumer fintech in the long-term. Chipper Cash has already begun experimenting with business products through its launch of Chipper Checkout product. As payments increasingly go digital across the continent many businesses are struggling to play catch up and adapt to the wide range of mobile money wallets, cards and payment methods consumers want to use. Many of the continent’s largest fintech platforms have over time built products to service both consumers and businesses to build a synergistic loop improving its products on either side. The opportunity in B2B fintech is massive and competition in this segment is picking up rapidly. 

Overall, Chipper Cash is a powerful example of opportunity in delivering next-generation digital financial services in emerging markets. The company has experienced breakneck growth yet barely penetrated its core market of remittances. Much of the market is dominated by legacy players like Western Union which will take time to fully displace. The company’s growth path in years to come will be an interesting one to track as it navigates the geographical complexity of the African content and the complexity of payments and financial services. 

Yassir - which means “easy” in Arabic - is building a Super App offering on-demand services such as ride hailing, food and grocery delivery, banking and more (similar to Rappi in LATAM and Meituan in China). Often dubbed the Algerian Uber, Yassir was founded by Mahdi Yettou and Noureddine Tayebi in 2017. 

Since its launch in 2017 Yassir has hit some significant milestones including:

• Launched in Algeria, Tunisia, Morocco, South Africa, Senegal, France and Canada

• Incredibly a reported 3 out of 5 on-demand activities in Algeria are carried out on Yassir’s platform.

• Crossed an impressive 8 million users and 100,000 partners on its platform

• Currently live across 45 cities

• Raised over $200 million in venture capital financing

• Became the first Algerian startup to be accepted into Y Combinator

In November 2022, Yassir raised a huge $150M Series B round of funding from prominent global investors to become the most valuable startup in North Africa and one of the highest valued companies in the MENA region. 

Product and Business Model 

Yassir, like other Super Apps around the world, offers a broad range of services including ridesharing, food / grocery delivery, and financial services through which users can pay, save and borrow digitally. Yassir’s main products include: 

• Yassir Go: A ridesharing platform modeled off of Uber and Careem

• Yassir Express: A grocery and food delivery service focused on delivering to users in under 30 minutes

• Yassir Market: An Amazon-like ecommerce portal connecting buyers and sellers similar to Tokopedia (see our breakdown here)

• Yassir Business: Offering transportation services to businesses as well as experimenting with fleet management products

Yassir’s initial services have been all built around the themes of transportation and delivery. Yassir’s next major product push is to enter financial services, a playbook pioneered by Southeast Asian Super App Grab (read our breakdown here). The motivation and rationale to enter financial services is clear: it's a huge gaping gap in the market, something true of most emerging markets globally. Somewhere between 50 - 70% of Africans are unbanked varying slightly country to country and region to region. The lack of access to financial services for consumers and businesses slows down economic growth, increases the dangers posed by unexpected expenses and generally makes the movement of money inefficient across the economy.

In some ways Yassir is already a fintech company as payments are a core part of its platform where consumers pay for a range of services online or in cash and drivers and merchants are paid by the platform for delivering services. In fact, Yassir’s large user base and network of over 100,000 merchants and drivers gives it a strong foundation to build a series of financial products on top of. Yassir leverages this network for its payments services, offering top wallet provision and deployment of drivers and couriers as money agents.

This large install base positions it at a significant advantage versus many pure play fintech companies who have to invest enormous amounts of cash acquiring customers. In fact, it's still unclear if the unit economics of pure play fintech platforms in emerging markets can be sustainable. For example, McKinsey estimates that fintechs in Africa spend as much as $20 acquiring each customer to only generate $7 of revenue from that customer. 

Yassir’s core Super App business has allowed it to build a large install base while enabling it to generate revenue from a consumer across delivery, ridesharing and a range of other day-to-day services. This improves the unit economics of servicing an individual user and allows it to potentially offer new financial services to users in a sustainable manner with positive unit economics. In many ways embedded financial services are a superior method than pure play direct-to-consumer financial products when it comes to tackling underbanked populations in emerging markets. 

Competition

Ridesharing and Super Apps are some of the first technology-enabled business models to go global, starting in the 2010s and picking up dramatically in the last few years. Yassir is not alone in seeing Africa as a lucrative market and faces competition from the likes of Uber, Bolt, Glovo and Gozem. 

Uber first arrived in the South African market in 2013 and by May 2022 the company announced hitting the milestone of 1 Billion rides and over 10 Billion kilometers driven across all its markets in Africa. Its food delivery arm UberEats - which launched in 2016 in South Africa with just 1,000 restaurants - now serves over 8,000 merchants across 36 cities in South Africa and Kenya. It is available in several South African cities as well as in Kenya.

Another major competitor is  European ridesharing and food delivery giant Bolt, formerly known as Taxify. Bolt arrived in South Africa in 2016. While Uber has been mainly focused on major cities across Africa, Bolt’s expansion strategy includes specifically focusing on smaller cities and now operates in more African cities than Uber. Bolt’s food delivery arm was launched in Johannesburg in October 2021. South Africa is Bolt’s second largest market after Europe and the company intends on ramping up growth for its ride-hailing and food-delivery services in South Africa, rather than launching other verticals in the market. Currently, it has an impressive customer base of 40 million in Africa with 700,000 drivers in about 90 cities across 8 countries on the continent. Bolt is further trying to solve the issues of many drivers simply not owning a vehicle by offering vehicle financing since 2021 through its partnerships with Nigeria's Sterling Bank and FlexClub, something Kavak has been pioneering in other markets.

One of the only indigenous competitors to Yassir is Gozem, a Super App launched in Togo in 2018. Gozem now operates in 8 countries across West and Central Africa and has more than one million downloads and 7+ Million trips since its launch. In 2021, the company secured a US$5 million funding round, part of which has been deployed to step up its Super App model and offer a suite of services including transportation, e-commerce and financial services in Francophone West and Central Africa. It is mainly present in French-speaking Sub-Saharan Africa, and offers services to consumers, transportation providers, and businesses. It currently provides various on-demand transportation, delivery, and cashless payment solutions in one app to hundreds of thousands of users in the region.

Finally Glovo, similar to Bolt, is another European unicorn startup with its eyes set on Africa. By late 2021 the company was already present in 40 cities across Africa with  more than 300,000 users, 8,000 restaurants and 12,000 couriers on the platform. At the time the company committed to deploying another $50 million into its Africa expansion plans. Unlike some of Yassir’s other competitors Glovo is more focused on quick commerce and ecommerce delivery to enable efficient and effective last-mile logistics for restaurants, small retailers and online sellers. 

Growth Opportunities

In about half a decade Yassir has managed to create a network of 8 million users and become one of the most well-funded startups in Africa and MENA. While it started with a focus on Algeria, the company quickly moved to expand geographically after its $30M Series B round. In March 2022, Yassir announced its expansion plans into West African countries and the creation of a technology hub in Europe. With this technology hub (based out of Germany) the company aims to attract the best global talent to give it a competitive edge. Ths venture into West Africa and creation of a technology hub, will further spur its growth and consolidate its position in the countries where it is already present, or so that is what the founders believe. In November 2022 the company raised an enormous $150 Series C round of funding giving it ample firepower to fuel expansion. 

The company has two clear expansion paths ahead of it:

1. Further geographic expansion

2. Building a broad suite of financial services 

The case for further geographic expansion is clear. With much of the company’s technology infrastructure built already over the past few years, expanding into new geographies simply requires new payment integrations as well as funds dedicated to operations and marketing. Given many countries in Africa are relatively cheap to operate in, the company’s ample balance sheet makes further geographic expansion likely. This will make Yassir harder to compete with over time. 

The other strategy is to use its user base and existing business as a platform to launch a robust suite of financial products catering to users and businesses. This is something the company has already begun and clearly articulated as a key part of its future growth plans. However, as noted earlier offering financial service products in emerging markets is an expensive and complex endeavor. The company will have to navigate very different regulatory environments across its different markets, invest in localizing payments and data servers in the countries and much more. If the company aspires to expand into lending it will have to lend off its balance sheet while it tests the quality of its underwriting over time. Lending to the unbanked - while appealing as a market opportunity - has proven to be much harder than many people expected over the past few years, with Nubank being the main exception. 

Yassir is a fascinating company fighting the battle to put Francophone Africa on the map for startups and VC investing. The company has taken the Super App playbook that has proven itself so spectacularly in Asia and has aggressively deployed it across multiple markets in Africa. The company’s next chapter will likely see further geographic expansion as well as an aggressive plan to launch and test financial products across its multiple markets. With a warchest of $150 million it will be worth watching how the company evolves in the years to come.

However, people buy, sell and drive cars everywhere and the winds of disruption are also being felt globally. One of the most interesting startups founded in recent years is Mexican startup Kavak which is aiming to disrupt the used-car market in Latin America. The startup was founded as a private company by Carlos Julio Garcia, his sister Lorianne Garcia, and Roger Laughlin. Carlos Garcia came up with the idea when he personally experienced the inefficiencies of the used car market in Mexico. He had tried to sell his own car, and later ended up buying a used car with mechanical problems. At that point, he realized that there were risks inherent to the market due to a lack of transparency and guarantees. In 2016, along with the other co-founders and a team of only 15, they launched Kavak which has evolved into one of Latin America’s most iconic startups.

Headquartered in Mexico City, Kavak became Mexico’s first ever unicorn 4 years after being founded. Kavak is disrupting the used-car market in Latin America by ensuring used-cars can be bought and sold with transparency and guarantees. Kavak sells its refurbished vehicles through its ecommerce platform as well as a network of brick-and-mortar hubs. Since its founding in 2016 Kavak has managed to:

• Serve hundreds of thousands of customers since inception

• Build a global team of 7000 employees

• Build an inventory of more than 30,000 cars and open 75 operative centers

• Record more than 100% Year-on-year growth since 2016 

• Launch in 9 global markets: Argentina, Brazil, Chile, Colombia, Mexico, Peru, Turkey, Oman, UAE

• Hit an eye-watering valuation of $8.7 Billion to become the most valuable startup in Latin America

Kavak is backed by some of the world's largest investment funds including Softbank, Greenoaks, Kaszek Ventures and General Atlantic. These major funds all see value in Kavak’s core value proposition - which leverages data, technology and innovation throughout the whole process of buying a used vehicle, which formalizes a largely fragmented pre-owned car industry. With its unique approach Kavak is positioned to continue its rapid growth in the years to come across Latin American and in its current and future global markets.

Product

At the highest level Kavak offers an end-to-end solution to streamline the used-car market. Kavak buys, manages and sells pre-owned cars while also offering great after-sales customer services and auto-financing options. It has a wide catalog of guaranteed and certified cars which can be bought via its brick and mortar stores, e-commerce platform and mobile app. The company also has an in-house financing arm called Kavak Capital which provides car-leasing and loan options for its customers. Kavak also takes exceptional care to keep customers happy, even providing home delivery for cars that have been purchased.

Kavak buys pre-owned cars from sellers through a very simple process. Sellers can estimate the fair market value of their car through an online valuation tool offered by Kavak. After having the car inspected either via Kavak’s home service team or at one of their physical locations, Kavak finalizes the purchase of the car with minimal paperwork and often same-day transfer of payment.

Buying a car from Kavak is also a fairly straightforward process. A prospective buyer can browse through the catalog on Kavak’s website which has a simple interface with plenty of options to filter from, allowing for a seamless search process. The customer can either book an appointment to first see the car at a company hub, or directly reserve the car with reservations being valid for 5 days.

Once a car is reserved a buyer can make use of Kavak’s financing options to finance that car. The company offers personalized payment plans, which are tailored according to a customer’s preferences (regarding the initial down payment they can make and the monthly installments they can afford subsequently) and can be obtained through the website. Once a plan is finalized, partners of Kavak contact the buyer through phone, SMS or email to process the proposal. In the end, all that is required of the customer is some basic documentation (proof of identity, address, income, etc). The entire process can be done completely online, which makes it relatively hassle-free.

Kavak’s core business model is quite simple. The company has to purchase used cars at fair market rates and sell them to buyers at a profit. While straightforward this business model has proven hard for startups to execute with Carvana’s struggles in the US one recent example. In contrast, Kavak has been laser focused on efficiency and execution throughout its lifecycle. In the first 4 years of operations Kavak focused on building a viable business model in Mexico that could later be replicated in other emerging markets with similar market dynamics. 

Starting a business selling used-cars is a capital-intensive endeavor.  Kavak risked burning through mountains of cash inefficiently and having little to show for it. Instead, during these early years, the company smartly invested its capital on building a pricing algorithm which would be responsible for driving its growth. Kavak also built technologies to enable efficiency in every step of the sales process including inspection, purchase, reconditioning and sale, as well as warranty and after-sales services.

Besides its core product of car sales Kavak also makes money through its in-house financing arm - Kavak Capital - which was launched in partnership with financial institutions like HSBC, BBVA, Santander, and Credimovil. In Latin America, automobile financing is generally hard to come by as traditional banking institutions tend to reject 60% of the applications and charge high annual interest rates of up to 30% on those that are approved. This lack of financing opportunities makes an in-house financing arm a major advantage for the company. 

Kavak Capital provides affordable leasing options and makes car ownership possible for first-time buyers. It charges annual interest rates of 14% to 20% which has proven popular thanks to their relative affordability. Impressively more than 50% of Kavak’s sales include financing from the company, compared to a 10% average of the traditional industry within the region. The biggest risk here is that Kavak’s underwriting proves to be too lax in the long-term and that many of these automobile loans default. However, this risk is partly ameliorated by the fact that Kavak can repossess these cars which retain much of their physical value, especially in emerging markets where the supply of new cars is far lower than in developed markets. 

Market and Competition

Five years ago around the time Kavak was setting up in Mexico the used car market was beginning to undergo significant changes. It was projected that the market would register growth at a CAGR of 3.4%, rising from 18.4 Million unit sales in 2016 to 22.4 Million unit sales in 2022. In recent years Kavak has benefited from the massive disruption  to the used car market in Latin America brought on by the COVID-19 pandemic. As manufacturing facilities shut down and supply chains got disrupted across the globe at the peak of the pandemic, the production and inventory of new vehicles took a hit (28% decline in new car sales in 2020). The resulting supply-demand imbalances caused prices of new cars to shoot up, indirectly causing demand for used cars to rise. Additionally, because people feared getting sick with COVID-19 on public transport those who could afford to sought to purchase cars, only further increasing demand and upward pressure on car prices. 

The Latin American used-car market is characterized by a few traits that are very common across most emerging markets. It is a highly fragmented market, and transactions are often peer-to-peer which increases the potential for fraud. Car ownership is very much concentrated in urban areas and access to purchasing a car is limited by few available financing options. Furthermore, no formal player has more than 1% of the market and 90% of transactions occur between individuals. This has historically led more than 40% of sales to be exposed to the risk of financial, mechanical or other types of fraud. These conditions make it hard for institutions to take the risk of financing automobiles, in turn making it hard for an everyday person to purchase a car.  In the US where 90% of sales are financed and less than 10% are informal sales, 7 out of 10 citizens own a car. In contrast, only 1.5 out of 10 inhabitants in Latin America own a car.

Besides Kavak, several other innovative players are going after LATAM’s car market such as InstaCarro, Localiza, Superbid and Nissan Mexico. InstaCarro holds online auctions for used cars, promising to sell them in 1.5 hours or less to any of its 1,500+ dealers that buy used cars. Localiza is one of LATAM's biggest car rental companies. The company has a used car division which uses smartphone apps, offers good financing options, while also offering insurance and regular maintenance services. Superbid is a specialist in online car auctions and also has a fleet of used cars for selling. Nissan Mexico offers a catalog of almost-new and used cars, has a 154-checkpoint CPO program, financing, warranty, and on-demand maintenance and services. In comparison to its regional competitors, Kavak has stood out on many instances and as of July 2022, Kavak has expanded to six countries in Latin America, which it says represent 80% of the continent’s car business. 

Kavak differentiates itself from other car reselling businesses in three ways. Firstly, the car-buying process is end-to-end, which lends customers a sense of safety and ease on their car buying journey. All cars on the Kavak platform are inspected and reconditioned to the highest standards of quality. In fact, Kavak has a rigorous “240-point” inspection process for obtaining its inventory. Secondly, customer service is given a big priority at the company. Once a buyer finalizes a deal with Kavak, the company even delivers the vehicle directly to the customer’s address. The company has a 7-day return policy, which allows prospective buyers to go beyond basic test drives and keep the car for a week to see if they like it. All cars come with the Kavak warranty, free for 90-days and extendable to 2 years. 

Lastly, Kavak leverages technology to keep the car buying and selling process transparent, fair and brief. Its algorithms ensure customers can sell and buy vehicles from Kavak at fair market prices. Data and AI technology help reduce the time required for reconditioning cars and devise transparent financing options for buyers. Special financial technology provides populations with different credit profiles with the ability to purchase a car, even if they have never previously had a credit application approved.

Growth Opportunities

Kavak’s growth trajectory has been impressive. In the 5 years since its inception, Kavak has expanded through Latin America as well as recently launching in the Middle East. By 2021, the company had raised over US$900 million to disrupt the used-car market and became the most valuable private startup in Latin America. By July 2022 it became the largest pre-owned car operation worldwide, with 75 hubs and 9 reconditioning centers worldwide.

Kavak has several potential paths to unlock further growth moving forward including: 

1. Pursuing further global expansion

2. Expand into car leasing and auto servicing

3. Expand into new car sales 

On numerous occasions, Kavak has shared its growth plans for the future. In July 2021 the company stated its plans to open the largest vehicle reconditioning center for Latin America in Sao Paulo, which will support its plans to purchase over 200,000 units globally in the next 2 years of operations. It is clear Kavak plans on winning big in Brazil which is a $1.5 trillion economy and the most important economy in Latin America. In May of the same year, the company shared its long-term strategy to expand into Turkey where it plans to offer more than 300,000 cars to its customers by the end of 2025. This is yet another bold move, but not one without its logic. Turkey is among the 6th largest used-car markets in the world, and incidentally does not have a local established winner.

More recently Kavak launched in the Middle East after merging with Carzaty, a startup based in Oman that was disrupting the region’s used car market. Kavak has committed $130 million as part of its expansion plan in the region and the company is live in the UAE and Oman. The next step for the company is to launch in Saudi Arabia, the region’s economic giant where recent regulatory changes are making it easier to offer consumers debt, which will most likely see car sales rise significantly from the roughly 500,000 a year today. 

Aside from geographical expansion Kavak has a compelling opportunity to expand into the auto servicing market. Since Kavak will already have built a relationship with both buyers and sellers during a sales process, the company has the ability to try upsell these customers to a range of automotive maintenance services. Cars require constant maintenance and investment and accrue roughly $0.09 of maintenance and repair costs per mile driven. Maintenance and repair services also allow the company to build a long-term and recurring relationship with customers to unlock more revenue per customer. Finally, Kavak’s core value proposition of a trusted, high-quality centralized service for buying vetted used cars can be easily translated to offering a vetted, high-quality and centralized platform for car maintenance. 

Lastly, Kavak has been focused on disrupting the used car market in emerging markets where far fewer people can afford new cars and instead opt to buy used cars. However, the company has built much of the infrastructure and processes to expand into the new car sales segment over time. While this segment brings some new complexities it is also likely to continue to grow over time as emerging markets become wealthier. 

Kavak is one of the most important startups to have launched in the last few years in Latin America. Its international expansion into markets like Turkey, Oman and the UAE is blazing a new path that very few startups have. The company’s playbook of delivering a trusted, verified, vetted and centralized service in an industry where trust and standards are low can be applied to many other industries in emerging markets. The same dynamics are present in many different industries. Kavak has significant room ahead of it to continue its growth and the path it paves and example it sets will likely be followed by many more international startups with lofty global ambitions. 

Next week we’ll publish our first breakdown of the year analyzing Mexican online car buying platform Kavak and its unique growth story.

If there someone else in your network who you think would enjoy these breakdowns please forward this email along to them. See you next week!

Mikal

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This week Emergent interviews Krishnan Menon, CEO of Lummo.

Lummo is building a merchant operating system comprising accounting, finance, and e-commerce tools for small and medium-sized businesses in Asia. The company was founded in 2019 and since then has grown rapidly and today has over 3 million monthly active users. Lummo recently raised tens of millions of dollars from the likes of Jeff Bezos, Tiger Global and Sequoia India. 

Listen to the Interview

Read the Deep Dive

For more information on Lummo's product, market and growth opportunities, check out our deep dive.

Highlights from the Interview

[Lightly edited for readability]

Mikal: Krishnan, thanks for joining me today to share a little more of the Lummo story. Before we dig into Lummo I’d love to hear a bit more about your personal story. So you were born and educated in India but somehow ended up building startups in Indonesia. How did that happen?

Krishnan: Well first of all thanks for having me, it is nice to talk to you.

So most things in my life are driven by serendipity more than anything else. It was never a plan. I barely knew about Indonesia. I was an entrepreneur in India. It didn't really work out so I went for a Masters to France. Then I decided to do an internship and in the end in France more than 60 companies rejected me for an internship including Amazon. After that the only internship I ended up getting was with Rocket Internet to move to Singapore or Indonesia. The salary was like $800 and I thought “okay with that salary I'm going to die in Singapore so let me just go to Indonesia.”

So, it's really random. I had no idea anything. I just needed to make some money. So that's how I ended up here. Like very, very by chance. And this was long time ago for 2013. 

Mikal: It feels increasingly like the space for that slow, deliberate learning that you had at your previous startup Fabelio is disappearing. We have been in a funding environment for the last few years where entrepreneurs are increasingly awash with capital. Personally I've seen multiple startups raising successive rounds a couple of months apart with very limited progress in between. What do you think this is doing to founder psychology at the earliest stages?

Krishnan: This happened in India I think in 2015 or 2016, then it cooled down.

It has never happened in Indonesia at this sort of scale where left, right and center people are getting funded. Raising a $10 million check has become like quite easy here now. It's really not uncommon. When I did my first seed round for Fabelio in 2015 raising $200,000 was a big deal.

Now people raise a million bucks off of a powerpoint, right? It's completely different now. I think the negative of that is many people are new and fresh entrepreneurs and what's going to happen is they haven't seen any downturns right? I remember in my last venture back in 2016-17 there was something like a nuclear winter. Not a single VC would write a check period. They wouldn't write a check at all, and you know how the investor world is very herd mentality, right?

Once maybe the public markets tank, then the private markets will tank and boom, boom, boom suddenly you have a shutdown for 12 months. I don't think many entrepreneurs have experienced that. I don't think many of them are prepared for that. There's going to be a bit of a bloodbath when that happens for sure. But in the end, you know, casualties is a part of this space and the ones who survive go on to do even better. Plus the ones who survive learn a lot in the process. That's what's going to happen now. I'm very, very sure. And it's probably 12 or 18 months away.

We'll talk about the future vision for Lummo in a little bit but I'm curious, was there a light bulb moment at any point where you realized this was a real problem worth solving for merchants? Was there a single moment or a couple of moments? 

No not a single moment. Interestingly, I've never been a single moment person in my life. I am collecting information and processing it all the time. I I'm very jealous of those people who have that single moment. They see a train going and think “oh I'm going to make the train fly.”

Like I have never had those moments. There was one moment which I would argue was definitely always in the back of my head. So for Fabelio we have done close to $100 million in revenue over four years and have had $100 million dollars of money flowing through our bank and it's the same single bank BNI. We also have had $20 million of funding.

So altogether we've processed over four years a lot of money at the same bank. Now when I asked them for a credit card they said “no we cannot give you one. You need three years of profitability to get a credit card” That’s audited profitability by the way. And the only way you can get a card is if you deposit $20,000 they'll give you $16,000 in card in plastic and believe me today's it's the same. It has not changed at all. It's still the same, it was always the same. For me it's like I'm giving you $20,000 you're giving me $16,000 in credit back and charging me and this deal doesn't make sense at all, right? So these kind of unique moments in banking has always bothered me.

But it's a combination of a few of these and that's what I've always felt because of coming from India. I mean even my maid has a bank account in India. So there's all these comparisons that keep growing within India. I've always felt that Indonesia, even though it's such a better macro country than India, how can banking be still not there yet?

Listen to the Interview

Read the Deep Dive

One of the startups leading this charge is Lummo (recently rebranded from BukuKas). Lummo is building Asia’s merchant operating system and offers a range of accounting, financial service and ecommerce tools to Indonesia’s gigantic market of SMBs. Lummo was founded in 2019 and since then has scaled extremely rapidly:

• 6+ million users and 3+ million monthly active

• $150 million raised from the likes of Sequoia Capital, Tiger Global and CapitalG

• $25B+ in annualized bookkeeping volume

• 1+ million merchants using LummoShop

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Products

Lummo is laser focused on building tools to help SMBs grow and operate their businesses more efficiently. The company has two core product offerings for customers today: 

• BukuKas: A SMB accounting solution with a suite of tools to help SMBs run their internal finances

• LummoShop: Tools to enable retailers to setup online stores and start selling online 

BukuKas offers SMBs a range of tools to help digitize and automate many of their daily financial tasks including transaction records, invoice generation tools, receivable collections via Whatsapp or SMS, business dashboards and much more. BukuKas is designed to be used on mobile allowing it to serve any SMB owner or employee with a smartphone. A key feature of BukuKas is BukuKasPay - its payments tools for merchants which it launched late in early 2021. BukuKasPay crossed over $1.3 billion in annualized payment volume across 150,000 merchants by October of 2021.

Lummo began to experiment with ecommerce enablement during the pandemic as the lockdowns presented life-threatening challenges to many of its SMB customers who relied on in-person traffic and transactions. This experimentation initially took the form of simple, easy-to-setup ecommerce stores for these retailers which the company called Tokko. However, after seeing early success with Tokko, Lummo doubled down and invested heavily in broadening its ecommerce enablement tools and renamed its ecommerce set of tools LummoShop. LummoShop saw huge adoption in 2021 with over 1 million merchants using the product that year.

LummoShop offers many of the standard tools and functionalities offered by other ecommerce platforms globally including online product catalogs, order management, integrations with logistics partners and marketing tools. 

Market & Competition 

Indonesia is one of the largest and most promising markets for startups targeting SMBs. Indonesia has 59 million SMBs today that account for 60% of Indonesia GDP and employ an incredible 97% of the country’s workforce. In contrast, the United States - a country with 70 million more people than Indonesia - has 30 million SMBs that employ 60 million people. Indonesia’s enormous number of SMBs provide a rich opportunity to deploy new technology products at scale. 

‎Indonesia’s merchants are digitizing quickly - thanks in large part to the digital acceleration kicked off by the COVID-19 pandemic. In fact 28% of Indonesian merchants surveyed in Google’s recent E–conomy SEA 2021 report state that they would not have survived the pandemic if not for the digital tools they adopted.  The new behaviors triggered by the pandemic look set to stay in place and in most cases grow over time. Across multiple digital products a significant minority of merchants report plans to increase their usage of these digital tools over time.

‎The race to become the dominant technology player serving Indonesia’s SMBs has become a two-horse race in the past 12 months between Lummo and competitor BukuWarung, both of whom have raised a significant amount of venture capital funding and have millions of users on each of their platforms. 

Lummo’s recent expansion into ecommerce enablement through LummoShop gives it a significantly differentiated value proposition compared to BukuWarung which so far has remained focused on its core accounting and financial service automation tools. Lummo can now help customers both sell online and grow revenues through LummoShop and automate internal financial processes through BukuKas. This gives Lummo a favorable competitive position in the market vis-a-vis BukuWarung going into 2022. 

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Growth Opportunities

While Lummo has grown incredibly rapidly since its inception in 2019 it has just scratched the surface of the opportunity in serving SMB customers in Indonesia. Lummo has two possible growth vectors worth pursuing in the years ahead: 

1. Geographic expansion 

2. Evolve into a comprehensive business banking platform 

Lummo has already publicly stated plans to expand across Southeast Asia with Vietnam, Thailand and the Philippines already being studied by the company as potential near-term markets to launch in. Southeast Asia’s 600 million people present an enormous opportunity with the internet economy of the region forecast to cross $1 trillion in value by 2030. Geographic expansion is a must for Lummo to truly capture the potential of Southeast Asia’s SMB economy. 

Besides geographic expansion, Lummo has a compelling opportunity to evolve into a business banking platform for Southeast Asia’s SMBs. SMBs are typically highly underserved by banks and struggle to get access to credit - a crucial enabler for running and scaling a successful business. In Southeast Asia 33% of SMBs lack access to credit and this is likely an underestimate of the severity of the problem. Temasek estimates that digital lending will be a $110 billion opportunity in Southeast Asia by 2025. 

Lummo’s has a 360 view of its customers' businesses that is unmatched in the region and by equivalent businesses in much of the world. Lummo has the benefit of a deep view into the accounting and financial health of its customers via BukuKas as well as deep insight into its customers online sales, growth rate and marketing expenses via LummoShop. This will enable Lummo to underwrite loans using data that many other lending fintechs in Southeast will struggle to access. Similarly the combination of BukuKas and LummoShop allows the company to offer loans that are structured in unique ways. For example, the company can offer a customer a loan to spend on digital marketing to increase sales on its ecommerce store and automatically deduct a share of profits of every sale including in-person sales (tracked via BukuKas) to repay the loan. This is highly differentiated in the world of lending where typically ecommerce enablement and fintech startups are two distinct categories. 

Lummo is perfectly positioned to become the dominant player serving Indonesia’s SMBs and potentially Southeast Asia’s. The region is enjoying significant, secular long-time growth and the large share of GDP accounted for by SMBs make them an appealing target for tech companies to digitize. If Lummo evolves to become a full-service business bank offering credit, loans, payroll services and the like it will be able to capture a market ignored by most traditional banks and become the most valuable and powerful partner for SMBs across the region.

Listen to the Interview

For more information on Breadfast's product, market and growth opportunities, check out our deep dive.

Highlights from the Interview

[Lightly edited for readability]

Mikal: Mostafa, thanks for joining us today to share the Breadfast story. I'd love to start our conversation by learning about where the idea for bread fast came from and how you came up with the name.

Mostafa: Thank you, Mikal, firstly for having me and secondly for asking about the story. We started Breadfast back in 2017. The name is, yes, very unique.

We believe that bread is the most basic unit in the household and hundreds of millions of people globally, if not billions consider bread the most basic unit in the household. Before Breadfast my co-founders and I we built several tech companies. In 2016 a major currency devaluation happened in Egypt. It was a little bit of what I would call it an economic crisis. 

I had this week in 2016 thinking what's next? Should I leave and travel and co-found the company in the US, or should I stay? I had this week trying to talk to myself and thinking of my next step. This week was very, very unique because I had to really think of all the companies that I built previously.  

Before Breadfast, I personally failed four times and for me each failure was a very, very strong learning experience. So, I started to reverse engineer and think back, and I concluded each failure in one big statement.

For one of the companies the reason I failed was due to the commitment of my founding team. Another company’s failure was due to a very, very bad business model. A third company failed also due to the business model and the monetization strategy. So, for every learning I had to extract a statement and I had this whitepaper and I started to write. If I'm going to stay in Egypt, I'll try to avoid these mistakes. The first thing I wrote in this white paper was a very committed team. 

Most of the criteria and the lessons I wrote down were more customized for emerging markets. The reason why I decided to stay is I told myself, okay, I can go to the US tomorrow. No worries, I'm going to start a company. What about emerging markets? You know, I'm lucky being Egyptian. I'm lucky being from this part of the world which is currently the hottest spot in Africa and Middle East. The market is big. Egypt has 105 million people. The location of Egypt is very uniquely located between Africa and Middle East.

I decided that I think I'm in the right place. It's my decision to stay. I said okay, if I'm going to avoid all the mistakes that I made in my previous companies - I think I'm going to stay. The most important thing I decided was building a very committed team. You know it's very, very tough to find committed people in emerging markets. This is the first challenge. Basically my current co-founders Muhammad and Abdullah are the most committed people I have met in my life. I went and spoke to my co-founder Mohammed and told them "Hey, I'm going to start a new company are you going to join me, or do you want to travel and leave Egypt?"

He said "if you're going to start a company, I'll be joining you." And then I talked to our third co-founder Abdullah who's our CTO and we decided to build something. We didn't have a specific idea at that time in 2016. All we knew is that we were going to work together based on the commitment that we have, the trust we also have and that we really want to do something big out of Egypt, to be able to scale it across Africa and the Middle East. 

The three of us are all coming from tech backgrounds, and we're also coming from the school of validation. We started to think of many different ideas. When we started the process we started to think of things like VR, AI, AR because our minds are very, very influenced by tech. But every time we went back to check on the criteria in the whitepaper, we said “no, no, no, this is not the thing that we're going to create.”

We cannot over-complicate the product we're building for the customers we're targeting. It should be very, very simple. Basically, for each idea we had to conduct user interviews. For each idea we created a pitch deck and got the .com for it. Then we conducted somewhere between 100 and 150 user interviews for every single idea.

Then we sent the idea to our network of global investors to get the feedback. And if the idea was not good, if the feedback was not good, we killed the idea and we were doing this for almost one year. Until I was having this very late dinner with my co-founder Muhammad. We were having a dinner in a seafood place in Cairo, and it was very, very late. 

The first thing that came on the table was a basket of fresh Egyptian Bread. Basically, Mikal for this year any problem I saw in front of my eyes, it went from my right ear and then it went through my processor. Then it would go out from mm left ear as a very quick pitch line. So I looked at the bread and then I looked at my co-founder and then I told him Muhammad: "freshly baked bread delivered to your doorstep every morning using a mobile app."

Muhammad was sort of "okay hmm, interesting." Then we woke our third co-founder Abdullah up - it was like almost 1:00 AM in the morning. "Hey, Abdullah" - and I pitched him over the phone - freshly baked bread delivered to your doorstep every morning using a mobile app. Abdullah also liked the idea. And I remember the second day I was driving with my wife and I told her "Hey I'm starting a new company."

She started to laugh. Like what's new, you're starting a company every quarter. I told her, please, no jokes. I'm trying to find the name. So, she asked me to pitch her. I told her freshly baked bread delivered to your doorstep every morning, using a mobile app.

In less than three seconds she said "why not to call it Breadfast?" I stopped the car, looking for the .com, we're a little bit crazy when it comes to the domain. We always prefer to have a .com. The third day I met with my co-founders, and I mentioned the name and they said this is a very cool name, let's work.

We started to work on the story and basically the story of Breadfast - from bread to everything. From the most basic unit in the household and in time to the most advanced unit in the household. So Muhammad before we left that meeting said “guys, do you think we need a different name since we know that we're not going to only deliver bread in the future.”

 We said, yeah, why not? Then Muhammad suggested a great name as well. He said why not to call it habits - habits.com. So the first thing we did, we looked up the domain and we couldn't find the.com. So actually we became more attached to Breadfast. Part of our penetration strategy is to be able to deliver fresh bread every single morning to customers' doorsteps and to build a great customer experience on top of this very basic type of communication with customers.  

The plan was to continue adding products and be able to maintain the same level of experience. When we started Breadfast we started delivering three SKUs in the bread category. Today we deliver more than 2,500 SKUs - not only bread, but bread, fruits, veggies, daily products, fresh and non-fresh products. We even now deliver coffee machines to customers’ doorsteps. 

The first thought for the business model was - "hey guys, we're going to build Uber for Bread." There are lots of bakery shops around us in Cairo and very easy to build the stack just to be able to connect the consumers to the nearest bakery shop, and then we can handle the logistics. But I stopped and said "no, we are not going to build Uber for bread. We are going to bake the bread ourselves." 

I remember my co-founders Muhammad and Abdullah they almost had a panic attack – “what, what do you mean by baking bread?” I told them “guys, rule number one in emerging markets, reliability does not exist.” We had to go and start it from the scratch. Believe it or not but globally Breadfast is one of the first companies in the world to start what's called B2C native supply chain. The first six months with the company we had to learn how to bake. We were only three crazy guys trying to learn how to bake bread.

The one who taught us he's a very, very dear colleague of ours. He passed away in the beginning of 2021 due to a heart attack. This guy he's the one who taught us how to bake bread, and he's the one who basically pushed us all the way. He believed in our story he said "I think you guys are crazy, but I feel also there is something in your energy that's going to change things."  

We had to learn how to bake. I was the first driver in the company. My co-founder Muhammad he was the first customer experience agent in the company, and our third co-founder Abdullah he was the first coder in the company. We started as three people. Today Breadfast employs more than 1,500 employees. This is part of the story that we really feel proud of that today we're 1,500 people and we know that in seven or eight years from now Breadfast is going to be a family of 50 or 60,000 employees hopefully taking over Africa and the Middle East. Our goal basically is to change how people consume their daily essentials, starting from the basic unit which is bread, and in time to reach more and more advanced products. This is pretty much the story of Breadfast.  

Mikal: I love that story. What a beautiful origin story with all those little details. You mentioned your previous failures as a founder, which is a theme I'd love to explore with you today. I think we're in an environment where for the moment it's increasingly harder to fail. There's so much capital available. There's so much FOMO, MNA activities at record highs. The market has changed a lot, but how do you think the current market is negatively affecting founders today?

Mostafa: So look, I think failure is something also essential, right?

The liquidity in the market today wasn't the same five or six years ago or even 20 years ago. It changes with time, according to each environment. If you're raising in the US it is totally different than raising in Europe which is totally different than raising in India or Pakistan or Africa. But right now the liquidity is there, but of course this brings new types of challenges right?  

I have two current concerns based on the failures I experienced in the past. Right now people think that because money is available this means that it's easy to build a company. No, this is totally wrong. People get excited very, very quickly. People see all the titles and PR everywhere - like this company raised X number of money and that company raised another X of money, blah, blah, blah. Then people think, wow it's very easy, okay. Money is there. I'm going to quit my job and I'm going to start something.  

This is good, but also this is very, very bad because excitement is one of the things that founders feel at the beginning and after facing a couple of challenges they give up. I think if you're not a hundred percent sure of this step, don't ever take it because this step means you're getting money from investors. This means you're employing people who are going to rely on your income as a company to be able to feed their families. It is a big, big, big responsibility. So, the first concern, don't get excited too quickly, you have to study very well. You have to understand what type of responsibility you're going to be going through. 

Number two I see people who never built companies before, when it comes to teams - because liquidity is there - they start with a Ferrari team, this is what I call it. You cannot start with the Ferrari team from day one. Believe me, you have to believe in your own vision first and see it growing day after day before you onboard the Ferrari team. The Ferrari team has to come at the right time. If you're starting with the Ferrari team to impress investors, the founding team should be the foundation of the Ferrari team. But they shouldn't be the smartest guys who are going to lead the company's future.

You need people who have the right commitment and the trust at the beginning. I see lots of great founders today when they start the company, they only focus on having the best teams in town. I don't think this is the right approach. What will make the company sustainable and scalable is seeing your vision growing day after day and bootstrapping at the beginning. Don't rely on funds big time, because if the funds are not there in a year or two years time the company is not going to continue anyway right? 

These are two of the current concerns I see. Of course there are lots and lots of other things but this is what I have on top of my mind at the moment. 

Mikal: I love the concept of Ferrari team. It's such a great way to put it. You mentioned how hard it is to find and retain people in emerging markets and increasingly this is a global problem. People are changing jobs, professions, locations, and more. How do you think about retaining your Ferrari team at Breadfast? 

Mostafa: I think we're about to have our Ferrari team after five years. We took it step by step. We've been trying to focus on the engine at the beginning. Now we're completing the missing parts of the Ferrari. It depends also on the company, if you were a B2C company, in our case we're a B2C company, right? Thankfully as a company we really do our best to have a good reputation with our customers first.

You'll be surprised most of the team members we have today they already come to the first interview very, very excited and passionate to explore what the next steps are because they already have heard of Breadfast or someone told them these guys are trying to change something in a unique way. They are delivering bread at 5:00 AM! People come to us a little bit ready to discover and explore what we really want to do in the future. I think after they go through the story and see that we as a team we're not managers in the sense of telling people what to do on what not to do.

I think we really love to empower our teams because all of us are very, very hungry to learn. If you give or you send the sense of you being the manager and the one who knows and others don't know, this is a very bad thing.

Mohammad was the first customer experience agent and until today if there is a problem he puts his hands on the spot to solve this problem. Mostafa was the first driver in this company, if there is any rush Mostafa can go and deliver until today. Abdullah is the first coder in this company. Every new member in the management team they have the same attitude. Our COO when he joined us he had to deliver all the orders for quite some time. He goes until today to the warehouse. It's not about being a COO or a C-level in this company. I think this energy really exists in Breadfast big time. I believe this is one of the main reasons why we can retain our great employees.  

One thing I find very striking about Breadfast and your approach is how systematic and deliberate you have been in scaling the company at every stage. Unlike other businesses in the category that have raised one, two or three hundred million and blitzscaled you've been a lot more deliberate. I'd love to understand where this approach came from and what the benefits have been to Breadfast from that approach.

So let me tell you right now as you said the fundraising market has started to change dramatically.

I would also like to tell you part of the story here because I remember when I was pitching tech investors, because all the investors I know are coming from the tech world. I remember when I was pitching investors at the beginning once they heard we're baking our own bread they were like “what, what do you mean you’re baking your own bread?” I was like yes we are baking our own bread. “You mean you have equipment, is it an asset heavy business?” 

I would say Yes. Then they would say “Oh, I'm so sorry. We cannot invest. We only invest in asset-light models.” Again we started back in 2017 it was a big struggle to go and talk to a tech investor telling him that we're baking bread. Today, we feel so proud that Breadfast was one of the initiators of this trend. We believed that for a category like the grocery category it will never be sustainable if you're doing it in a marketplace model. It should be following the e-commerce playbook not a marketplace. You need to own the supply-chain, it should be an end-to-end supply chain game. Why was that? Because the margins are very, very thin.

The only way to sustain such a model is to build a good customer experience and to invest a lot in the brand you're building. Because it's going to be a relationship between you and the household. You need to focus on the frequency per month, on the retention and on the quality of the customer experience you're building. 

But anyways back in 2017 it was so, so, so hard to go and raise money. I think I would say part of it was luck. Luck that we couldn't raise much money in the past and this pushed us and forced us as a team to learn tons and tons and tons of lessons. We are confident of what we're building. We are confident of our vision. We know that we're going to do this and one day it is going to be from bread to everything. You have to navigate and find your own way around. If we were able to raise lots of money in the past I don't think Breadfast was going to be Breadfast we have today in Egypt and very soon in Africa and Middle East.

So I think we're a little bit lucky that we couldn't raise lots of money in the past. Recently we're having many very interesting conversations. We closed our Series A two months ago which we will announce in a couple of weeks. 

Let me give you also the example of Getir - one of the great examples we have in today's world. So these guys they were able to raise lots of money recently. When they started they started bootstrapped for quite some time. I think the team is a very strong team.

You can also look at GoPuff. These guys are not recent players. These guys have been operating now for a long time. At the beginning of each player of the names I just mentioned they really bootstrapped for quite some. These guys had to find their own way around. All of them really went through very unique learning experiences.

That's why these companies today are able to raise lots of money. But, at the same time they know how to spend this money. Some other companies raise lots of money and they spend it the wrong way. I see this as more of an investor decision, not only a company decision. Because if the investor decides to inject all this money and they are not sure if this team is the right team to execute and to scale the company using this funding I think this is also a responsibility coming from the investor side. It's not only the company side. 

Mikal: So today, Cairo is your main market in Egypt and also Egypt's biggest city and former capital. Personally, I think one of the most interesting features of emerging markets is that the capital city or the economic hub is often very different from the rest of the country. So, I'm curious as you're thinking about expanding across Egypt to some of the smaller cities such as Luxor or Aswan, what differences do you think there are in consumer behavior? What changes will you make to the product and operations to better serve adoptions across all of Egypt?

Mostafa: Thank you for this question. So a couple of things here. First the good and the challenging thing about being a grocery darkstore player: this game is a very, very hyper-local game. You're not scaling a SAAS company. You're scaling a very, very tricky part of the daily consumption by billions of people in the world, right? Scaling Breadfast in Cairo and Giza is totally different than scaling Breadfast in Alexandria, Mansoura or any of the cities that you were just talking about. 

This is the nature of how to scale a company. You need to always adapt to your operations to the local taste, to the local sense and to the local consumer behavior. We at Breadfast we consider all of this. We don't think scaling very fast is that a good thing.

When it comes to grocery darkstores you really need to understand lots and lots and lots of data points before you decide on where to expand and where not to expand. Cairo and Giza we call it Greater Cairo. It is a big enough market because Cairo and Giza now have almost 22 million people. It's one of the largest cities in the world. 

We as Breadfast we're expanding in the next year to eight cities, and we are about to start to do this after learning for four and a half years. We were just trying to learn to crack the operational model of Breadfast before we decided to go and scale to other cities within the same country. 

At the same time once you go and expand in Kenya or Nigeria or Emirates or Saudi, every single market has its own learnings. So, scalability here is a little bit tricky. Egypt alone is 105 million people. It's a huge market. It's the hottest spot in Africa and Middle East.

We're very excited for what's really coming in the next few years. It's not only Breadfast. There are lots of great companies coming out Egypt at the moment. Each company represents a specific industry, and each industry has its own challenges with serving their customers. 

Mikal: So you're offering over 2000 SKUs today, which is a huge range. How do you plan to evolve the product portfolio over time? Are you going to be experimenting with different types of delivery and what's your vision moving forward?

Mostafa: Actually right now most of our deliveries are delivered in under 60 minutes and in three months from now all of our infrastructure is going to be for 20 minutes delivery. We have a couple of fulfillment points at the moment delivering in under 20 minutes. Our goal to make it 20 minutes across all of them. This is happening in three months from now. As for the product portfolio we believe that as a household some of the items you need to be delivered very quickly. I mean if you're in the kitchen and you need a cucumber to make a salad. Of course you need the ingredients now, right? But if you want a coffee machine you're not in a rush to have the coffee machine right now. It can be delivered tomorrow, the day after tomorrow, next week, or in two weeks - there's no rush. 

We're studying at the moment all the consumer needs and we're trying to build a very dynamic and flexible operation. If you need it on the spot it will be delivered on the spot and for the stuff that you need it to be delivered on a scheduled basis, we're going to adapt to this as well.

This is also part of Breadfast's muscles. When we started Breadfast we started with a model called Breadfast Tomorrow. We were delivering bread at 5:00 AM in the morning. We're the only company that's delivering fresh bread at 5:00 AM in the morning in the world. Today we have Breadfast Now, our on-demand arm. For the on-demand deliveries of course there will be a limit for the number of SKUs. We believe it's going to be somewhere between 2000 and 3000 SKUs. For the scheduled deliveries the sky is the limit. 

Mikal: So I want to transition a bit and speak a little bit about Egypt and how the ecosystem has evolved. You've been in the ecosystem for over 10 years, building a variety of different companies and a lot has happened in that time. So, I'm curious from your perspective, how's the Egyptian ecosystem evolved over the past decade.

Mostafa: I've been now in Egyptian startup scene for almost 10 years. I remember when I started I was talking and getting advice from great entrepreneurs at that time. Most of the entrepreneurs at that time they couldn't continue because they couldn't raise any money. The reason behind this is because of the investment landscape. At that time, we didn't have any experienced investors. If you had investors most of them came from a real estate background.

So people who have money and were interested in learning about technology. They would say “okay we can invest money.” And then you see this investor who wants to invest $10,000 and take 50% of the or 20% of the company. 

They used to deal with the companies as if they are buying an apartment. The next day after the investment they would ask “hey, what is the return on my money.” We didn't have really good investors at that time. Today we have started to have really great seed investors and we are about to have great Series A investors after 10 years. But this is again part of building the startup world in such environment.

The startup scene has evolved big, big time. Today it's not only investors from Egypt who are looking at Egypt or not only investors from Emirates or Saudi or any of the surrounding countries who are checking on Egypt. Today we have big names from the US and from Europe checking on Egypt in general.

At Breadfast we have lots of great investors from Egypt, from Saudi, from Emirates, from USA and Europe.  There are lots of other great companies now in Egypt. You have started to see great founders who also have built companies before. Recently you have started to see lots of founders who really want to take the risk. They are bringing investments from everywhere in the world. Our friends at Telda for example, Sequoia invested in them. There are lots of other great companies like Trella, Maxab and lots of other great companies raising like 30, 40 and 50 million dollars.

This is now started to be the norm and these guys are really achieving great numbers. So, they are showing the potential of Egypt to the whole world. Which is the great part of the story. So man, it really evolved big, big time and I'm very, very happy and optimistic for what's coming next for Egypt.

Right now Egypt is going to lead all the innovation across Africa and the Middle East. Hopefully you will see lots of news in the next years about how many unicorns are coming out of Egypt representing the continent.

Mikal: Absolutely. The first generation of founders are always ambassadors for the country and ecosystem, right? How fast their companies grow, what investors they secure and the talent they help create have a significant impact. These early founders play a huge role in setting the trajectory for an ecosystem.

Mostafa: Exactly. 

Mikal: So do you think Egypt has an entrepreneurial culture? Is entrepreneurship rewarded? Is it part of the culture of the country or is it still something that's still under development?

Mostafa: I mean an entrepreneur is someone who has a vision for something and decides to take the risk to start it from the scratch.

We have had lots of great people in Egypt who were entrepreneurs. It is part of the culture. But I would say for the past 10 years there have started to be many more tech entrepreneurs - following the global trend. So, if you're talking about tech entrepreneurs yes it has now started to be integrated as part of the culture. In the past we also had entrepreneurs who started lots of companies and weren’t able to find as much success as recently.

You know, it's all about taking the risk Mikal. This is one of the main factors for any entrepreneur to start a company. So I would say like somewhere between 1980 and 2000 people were a little bit disappointed in Egypt. People didn't want to take the risk but before this and after this entrepreneurship has been part of the culture absolutely.

Mikal: So we've had all this progress in the ecosystem over the last decade. I'm curious from your perspective, what do you think are still the big challenges or gaps what's holding the ecosystem back that we as a bigger tech community need to work to solve?

Mostafa: I think it is the same challenge you mentioned a few minutes ago. Recruitment is a bit of a challenge. Tech talent in Egypt now, all the great guys they are working for US companies or for companies in Europe. The pool is very small when it comes to tech talent. So, recruitment in general honestly is a big challenge.

We have to be very innovative to solve it because you have hundreds of millions of people around you and you want to serve them. So, the only way to do it is to be innovative.

Mikal: My last question for you is what do you think foreign investors don't understand about Egypt today? What are they most often get wrong?

Mostafa: This is a very tough question. I think investors need to really come and visit Egypt. Most of the investors I know that had really easy decisions to invest in Egypt, they had visited Egypt. Sometimes you hear some stuff in the PR that really affects the country’s reputation. 

But this is PR right? There is always a political agenda behind every press release. If you are an investor and you really want to understand what's going on in Egypt, you have to visit Egypt. Egypt is a huge country with lots of diversity in everything and consumption is crazy, growth is crazy, internet penetration is crazy. It's flying at the moment. So again, I experienced this first-hand for all the investors who really had easy decisions to invest in Egypt. The common feature between them they have been to Egypt.

So I would like to invite any investor who is interested in learning about Egypt not to go and read online about us. Because the very interesting part is that when you read online about anywhere in emerging markets - not only Egypt - 90% of what you read is not built on data. You know it's built only on opinion. Like someone will just want to say something about this emerging market. But if you, if you really want to read online about Europe and USA it is a hundred percent data-driven right. There is sort of credibility and benchmarks involved.

But in emerging markets - not only Egypt - but any other country if you really want to understand what's going on you have to visit. You have to talk to locals. You have to understand what's going on here. This is my advice for any investor who wants to really understand more about Egypt.

Mikal: Awesome well Mostafa I really enjoyed this conversation today. Thanks for taking the time to share the BreadFast story and your take on where Egypt is today.

Mostafa: Thank you so much Mikal, my pleasure. And again, thank you for having me.

Listen to the Interview

With a population of 100 million people, Egypt is the largest country by population in the Middle East and North Africa (MENA) and a high priority market for regional startups from across Africa and MENA to expand into. But in Egypt - as in India, China and Pakistan - local founders with local context are leading the charge and building the first-generation of leading technology companies. One of the flagship companies of Egypt’s new wave of technology innovation is quick commerce startup Breadfast.

Breadfast is a quick commerce startup offering same-day and next-day delivery of a range of household items from groceries to electronics and cleaning supplies. Breadfast was founded in 2017 and since then has scaled rapidly: 

• Growing 25% month-on-month

• Serving 200,000 households across Egypt

• Offering over 2,500 different products (SKUs)

• Targeting 6 million deliveries over the next 12 months

• Raised over $30 million to date 

Breadfast has emulated quick commerce models pioneered worldwide by startups like Getir, Rappi and GoPuff and is the market leader in Egypt today with significant regional ambitions in the years to come. 

Products

Breadfast - as its name suggests - started as a delivery service for bread. The founders of Breadfast realized that bread is the most basic unit of the household and decided to start by perfecting the delivery of bread. In fact, in an effort to guarantee quality and a great customer experience Breadfast decided to bake all the bread it delivered in house and still continues to do so to this day. After honing their logistics and supply-chain with bread, Breadfast quickly expanded to other grocery and household items. Today, Breadfast offers same-day and next-day delivery of over 2,500 different items. 

Typical of most players in the quick commerce space Breadfast owns all of its logistics infrastructure and is the only quick commerce player in the world that manufactures part of its own inventory. In emerging markets like Egypt the warehousing and last-mile delivery infrastructure remains limited and unreliable, which pushes companies like Breadfast to build and own their entire logistics infrastructure in-house in an effort to maintain a high standard of quality. Today Breadfast has 30 dark stores across Egypt and manages its own sourcing and last-mile logistics fully in-house. 

Market

Egypt is MENA”s most populous country and the third most populous country in Africa behind Nigeria and Ethiopia. This large population has created a large and fast-growing food and beverage market which in 2021 is estimated to be over $50 billion. This is set to grow by over 30% in the next two years and cross $65 billion in 2023.

Today Breadfast is live in Cairo - Egypt’s former capital and economic hub - as well as Giza, Alexandria and Mansoura. Cairo is Egypt’s beating heart with over 20 million people living in the greater Cairo Metropolitan area alone. In 2022 Breadfast plans to launch in additional 6-7 cities in Egypt, broadening its footprint across the country. 

Despite Egypt’s large population, its rate of urbanization is relatively low with only 42% of Egyptians living in cities today, compared to the 60-75% rate for other countries in the region such as Algeria, Morocco and Turkey. This presents a challenge to Breadfast’s logistics model which relies on urban customers today. However, the good news for Breadfast is that urban residents have higher incomes and spend more food than rural residents. 

Growth Opportunities

Breadfast’s strong logistics know-how and recognizable brand is a strong foundation to fuel further expansion. The company has two main possible growth paths in the years to come beyond simply expanding to new cities in Egypt: 

1. Geographic Expansion

2. Expansion into the B2B wholesale segment for groceries and other supplies

While Egypt is MENA’s largest market by population, it is not the richest market in the region. The six countries of the Gulf Cooperation Council - particularly Saudi Arabia - are significantly richer than Egypt and present compelling opportunities for expansion. The size of the food and beverage market in Saudi Arabia is estimated to be over $50 billion - similar in size to Egypt’s market - despite having a population of only 30 million. Saudi Arabia’s population is also heavily urbanized with 84% of Saudis living in cities today. 

In addition to the countries of the GCC Pakistan is a major market for Breadfast to potentially enter. Pakistan’s population of 220 million people is 2.2x as large as Egypt’s and the rapid growth of the country's tech ecosystem over the past year has attracted hundreds of millions of venture capital financing. Many startups across the MENA region have ambitions to expand into Pakistan to take advantage of the huge potential of the market and many already have such as Jordan’s Abwaab. Despite its huge population Pakistan’s food and beverage market is also estimated to also be worth about $50 billion. However, Pakistan’s rate of urbanization is even lower than Egypt's at 37%, reducing the potential addressable market for the company. 

Aside from geographic expansion, Breadfast has a significant potential opportunity to expand its business beyond direct-to-consumer delivery and into the business to business (B2B) segment. In particular the HoReCa segment (hotels, restaurants and cafes) is a natural next set of customers for Breadfast’s range of products. According to Egypt’s most recent census in 2017/2018 there are 179,000 food service establishments across Egypt and nearly 2,500 establishments providing accommodations. However, the vast majority of these establishments are very small. For example, 75% of food service establishments in Egypt have only 1 employee and 20% have under five employees. Less than 4% of these establishments have more than 10 employees. Breadfast’s warehouses, fulfillment centers and network of drivers can with relatively limited effort be repurposed to also serve the B2B segment. By focusing on the largest businesses in the food service and accommodation segment Breadfast has the opportunity to significantly increase its sales and revenue in its core business. 

Overall, Breadfast is Egypt’s leading quick commerce business and rapidly expanding across the country. It can now take the foundation it has built and use it to expand regionally, expand into the B2B segment or open up a whole new line of business with financial services. It’s still early days for Breadfast and for Egypt’s technology ecosystem. The best is yet to come!

Companies such as Quickbooks, Square, Toast, Shopify and numerous others are putting powerful software tools in the hands of SMBs and helping them reduce their costs and maximize their revenue. Many of these startups are US-centric and have not yet expanded outside North America in a major way. 

One major exception to this rule is Indian SAAS giant Freshworks which recently went public on the NYSE and has a hefty $13 billion market cap today. Freshworks is a shining example of a world-leading software company and a global champion founded and built in an emerging market. 

Freshworks has achieved significant scale since its founding in 2010:

• 52,000 customers across 120 countries

• $308 million in Last Twelve Months (LTM) revenue

• Freshworks and Freshservice are both $100 million revenue run rate SAAS products in their own right 

• $484 million raised prior to IPO

Products

Over the past 11 years Freshworks has built a range of deeply interconnected and synergistic products across sales, marketing and customer service to give SMBs many of the tools and capabilities of large corporations. Freshworks core products are:

• FreshSales: A powerful and flexible CRM platform to power SMB sales teams

• FreshDesk: Customer support, messaging and call center tools 

• FreshMarketer: A marketing automation cloud enabling personalized marketing to different customers

• FreshService: IT service management software

• FreshTeam: HR software to manage hiring, onboarding and time-off

• Freshworks Neo: A suite of AI tools that supercharge all of Freshworks core products

• Freshworks Marketplace: A marketplace of third-party apps that extend the functionality of the core Freshworks products

According to their recent S-1 filing the core values driving Freshworks product ethos are transparent pricing, extensibility and customizability, user productivity and tangible ROI. The company’s different products are very affordable compared to other software companies with pricing starting as little as $0 per month and reaching $299 on the high end. 

FreshDesk and FreshSales are the company’s flagship SAAS products today and both generate over $100 million in annual revenue per year. FreshSales is a CRM product – similar to Salesforce or Hubspot – targeted to SMBs and is the core of the company’s platform. FreshSales has all the typical features of a CRM - deal management, email integrations, contact management and more. 

On top of this core CRM Freshworks has built a range of complementary products that empower SMBs to service customers throughout their lifecycle including FreshDesk - a suite of customer support tools - and FreshMarketer - a marketing automation cloud - as well as a few free products such as Freshping and Freshstatus. 

In recent years Freshworks has expanded into building internal-facing software tools for its customers such as FreshTeam, an HR software product to help HR teams manage company employees and HR functions and FreshService - software for IT teams to manage internal systems. 

Freshworks has wrapped a layer of intelligence around these different products it calls Freshworks Neo. The Neo product is designed to turn the significant data captured by Freshworks' different products and turn it into actionable insights. The Neo product’s core offering is Freddy AI, a cloud-based AI product. 

Finally, following a strategy pioneered by some of the earliest enterprise software giants such as Salesforce, Freshworks launched Freshworks marketplace where third-party developers can build and launch apps that help extend the functionality of the Freshworks platform. Today, the marketplace has over 1000 different apps that expand the functionality of all Freshworks products. 

Customers and Market

Freshworks' impressive $308 million in LTM revenue and $250 million in 2020 revenue was generated by a large and highly diversified customer base. What is most striking about Freshworks is the lack of concentration in its customer base. The company has over 52,000 customers and yet only 1,164 of those customers pay more than $50,000 a year to the company. In fact, Freshworks top 10 customers account for less than 5% of its annual revenue. These metrics help illustrate that Freshworks truly is an SMB SAAS company. 

Even more impressively, Freshworks customer base is highly global and not concentrated in India or the United States. In 2020, Freshworks generated less than 50% of its revenue from North America, the largest software market in the world. 

Freshworks claims that it is targeting a $120 billion global software market. This number is not overly aspirational as estimates of the global CRM market forecast it to hit $95 billion by 2027 and and the global marketing technology (martech) market is estimated to be worth $120 billion in 2020. These are just two of the product categories Freshworks plays in. The reality is that year after year the market for software products globally has proven to be far deeper and far larger than even the most optimistic of investors and entrepreneurs expected. Freshworks has a lot of room to grow globally in the years to come. 

Growth Opportunities 

Despite Freshworks’ impressive achievements, the company is still in the early phases of achieving its full potential. The company has several possible levers it can pull for growth including: 

1. Double down on non-Western markets

2. Move into the enterprise segment

3. Deepen its marketing cloud

Freshworks has been pursuing strategy one since the founding of the company. In fact, its first customer came from Australia and its first few customers came from four different continents. It’s clear that the company sees significant growth potential from non-Western markets. Fortunately the pricing of its product ($0-$299 / month) and its integrations with popular business tools in emerging markets such as Whatsapp position it far better than any other CRM and customer support software company to be the go-to CRM for SMBs across Asia, Africa and Latin America. Much of Freshworks growth has been organic, with customers finding its products, testing them out and then converting into paying customers all on their own right – the “bottoms up” SAAS playbook.

Beyond further investment in these markets, the company can grow its revenue significantly if it expands into the enterprise segment. The enterprise market for CRM software is huge, with Salesforce alone generating over $17 billion in revenue, the majority from large corporate customers. Freshworks has the opportunity to be the market leader in the enterprise CRM segment in non-Western markets if it continues to invest in building an enterprise-grade version of the Freshworks platform.

In a recent interview with CNBC Freshworsk CEO Girish Mathrubootham noted that Freshworks platform has consumer-grade UX/UI but enterprise-grade tech thanks to investments made in the last five years. Today the company has 1,500 enteprise customers, a small share of its total customer base. However, there are numerous corporations across Africa, LATAM and Asia that don’t use CRM, Customer Support or marketing software or use very antiquated tools. There is a huge opportunity here for Freshworks to capitalize on given its brand, existing customer base and global focus. 

Finally, Freshworks can grow its average contract value (ACV) by deepening its marketing cloud. The FreshMarketer product line is quite limited today compared to other leading marketing automation clouds such as Mailchimp, Salesforce Marketing Cloud and more. The martech industry is a highly fragmented one with over 7,000 tools competing for market share globally today. However, Freshworks' bottoms-up go-to-market model that has powered its growth so far will enable it to affordably acquire customers and upsell them over time into a deeper marketing cloud.

Overall, Freshworks is a shining example of a world-leading and global software company founded and built in an emerging market. Its IPO is a tipping point for entrepreneurs in much of the world who aspire to build large SAAS businesses. Historically investors have doubted whether large SAAS businesses can be built outside the US. Freshworks has decisively answered that question. Now the doors are opening to dozens of SAAS companies to be built of similar scale across the world. The best thing Freshworks can do is to continue to serve as a role model and inspiration for these companies by continuing to grow rapidly.

In particular, the continent of Africa has been simultaneously a laggard in financial inclusion and a global pioneer in specific categories of fintech, particularly mobile payments where Kenya’s MPesa has become the best in-class mobile money product globally. In fact over half of the world’s mobile money products are based in Africa. 

One of the most exciting fintech startups globally today is the Nigerian mobile money startup OPay. Uniquely Opay was incubated and initially funded by the Norwegian internet browsing company Opera, one of the most unique origin stories for a startup anywhere in the world. Opay was founded in 2018 and has achieved an incredible amount in under 3 years:

• $38 million in revenue in 2020 (ended 2020 with an annualized revenue run rate of nearly $70 million)

• Raised $570 million in funding

• Valued at $2 billion 

• Built a network of 300,000 offline agents to serve as real-world bridges to its financial products 

• Serving nearly 10 million Nigerians today 

• Processing about 1/5 of point-of-sale (POS) payments in Nigeria today 

OPay’s incredible scale is not unique for mobile money startups globally or even in Nigeria. However, the company’s recent $400 million round of funding gives it a huge warchest of capital to fuel its expansion in Nigeria and across the continent. 

Product

Opay started by launching its mobile money platform in Lagos (Nigeria’s largest city) in 2018. From there Opay quickly expanded its suite of services with the vision of becoming a SuperApp for Nigeria, similar to the vision Grab, Meituan and to a lesser extent JumiaPay have achieved. OPay launched ORide (a now-defunct bike-hailing service), OBus, a bus-booking platform (also defunct) OExpress (a logistics delivery service) OTrade (a B2B e-commerce platform) and OFood (a food delivery service). 

However, the only product to truly breakout for OPay has been its mobile money product and it has shut down numerous other business lines to focus on this product. Today, Opay has three core product offerings:

1. Opay Payments: A mobile application for peer-to-peer (P2P) transactions as well as making digital payments for goods and services

2. Opay Mechant Tools: A free point-of-sale system for merchants and other tools to allow them to instantly process and settle transactions as well as sell digital services (such as mobile data)

3. Opay Cards: The company recently launched debit cards as an extension of its platform.

Market

Africa is the next major frontier for the global economy and will see its population more than double from 1 billion today to 2.5 billion by 2050. GSMA estimates that sub-Saharan Africa has nearly 550 million mobile money accounts today with 160 million of these accounts being active on a regular basis. Significant opportunity remains to onboard new users as well as to increase engagement from existing users. Africa’s largest country economically and by population is Nigeria. The country’s burgeoning population (200 million) and large GDP ($450 billion) has attracted entrepreneurs and investors from around the world. Nigeria - like most emerging markets - is a very young country with a huge 44% of Nigeria’s population under the age of 14.

Nigeria’s economy has begun digitizing rapidly over the past few years. The COVID-19 pandemic has only accelerated this wave of digitization. This acceleration has been particularly pronounced in the world of payments. Nigeria’s mobile payments volume soared by 260% from 830 billion Naira in 2019 to over 3 trillion naira in 2020. As of June of 2021 Nigeria’s mobile payments volume has nearly surpassed the total volume for 2020. 

This rapid growth in digital payments has decades of growth ahead of it. According to data from the Nigeria Inter-Bank Settlement System (NIBSS) as of August 2021 the number of adults in Nigeria with a bank verification number (BVN) was 49 million, out of a total population of 100 million adults. This implies that nearly 50% of Nigeria’s adult population is unbanked and lacks access to financial services in a significant way. If Nigeria’s unbanked adult population was its own country it would be the 29th largest country in the world. 

Competition

Nigeria’s large population and economy has inspired numerous entrepreneurs over the years. The country is undergoing a multi-year fintech boom across mobile payments, digital banking and financial infrastructure. OPay has achieved significant scale in mobile payments volume in Nigeria, but it isn’t the only startup to do so. OPay’s main competitors in Nigeria today are: 

• Flutterwave: The company has a similar suite of products to OPay but operates across 11 core countries including Nigeria. See an earlier Emergent breakdown on the company here. 

• Chipper Cash: The company’s product suite closely resembles Flutterwave’s but includes the ability to buy stocks, a unique feature among all the mobile money startups in Nigeria. 

• Paga: The company mobile app allows users to send and receive money, pay bills and pay for other digital services much like OPay. 

• Interswitch: Interswitch is one of Nigeria’s oldest fintech companies and over the past two decades has built a broad suite of products including Africa’s largest credit card network Verve. See an earlier Emergent breakdown on the company here. 

Growth Opportunities

OPay’s rapid growth in Nigeria provides it a very strong foundation in the years to come to further expand its business. Each of the mobile money startups in Nigeria have employed slightly different product and go-to-market strategies as they have scaled. As OPay looks to the future it has possible strategies to pursue for growth including: 

1. Geographic expansion

2. Adding buy-now-pay-later and other consumer credit options

3. Evolving into a full-scale digital bank

To date OPay has focused on Nigeria - Africa’s biggest prize. Despite this, over 800 million people live on the African continent outside Nigeria. Flutterwave has aggressively expanded outside of Nigeria and operates in 11 core markets today and is available in some form or another in 30 countries on the continent. OPay will likely follow in Flutterwave’s footsteps and use its recent $400 million round of financing to expand into other major markets in Africa. In fact, earlier this year OPay launched in Egypt, Africa’s second-largest economy with a population of 100 million. In addition to Flutterwave, OPay faces major competition in Egypt from Fawry, an Egyptian mobile money and payments company that recently went public and has a market capitalization of around $1.8 billion. 

Aside from geographic expansion, OPay can broaden its product suite by adding buy-now-pay-later (BNPL) functionality and other consumer credit options. In emerging markets worldwide the availability of credit and penetration of credit cards is very low compared to the West. This lack of credit availability hamstrings both consumers and businesses. The BNPL business model has shown a lot of promise globally pioneered by companies such as Klarna, Affirm and Afterpay in the West as well as Kredivo (Indonesia) and ZestMoney (India) in emerging markets. Credit card penetration was as low as 1.5% in Africa as recently as 2018. The opportunity for BNPL and to provide credit in Africa is massive and mobile payments and wallets are critical enablers as a step towards this. 

Finally, if OPay pursues strategy one and two to grow then strategy three - becoming a full scale digital bank - becomes the logical evolution of the company’s product suite and business model. Opay’s broad user base will enable it to quickly evolve into a full-scale digital bank if it so chooses and mirror the tremendous success that NuBank has achieved in Brazil. Nigeria already has one major digital banking startup Kuda Bank which recently raised $55 million in financing at a valuation of $500 million. Kuda claims to have 1.4 million users today, compared to the nearly 2 million mobile money wallets with balances OPay claims to have and the 10 million Nigerians it claims to serve directly or indirectly. However, Nigeria’s financial regulators recently launched an aggressive crackdown on fintech companies in the country, introducing a raft of new regulations and restrictions. This is a major potential roadblock in any aspirations OPay may have to become a digital bank in Nigeria. 

OPay’s rapid growth in payment volume in Nigeria and recent $400 million of financing position it well for aggressive growth in the years to come, both within Nigeria as well as to new markets the company expands to. As the drumbeat of financial inclusion continues to grow across Africa, mobile money products like OPay are key for onboarding the unbanked into the financial system and towards more complex financial products such as credit cards, home loans, student loans - things that OPay could offer over time. Time will tell whether OPay stays focused on mobile payments purely or evolves into a full-scale digital bank, or something in between. Either approach will see OPay continue to grow rapidly and capitalize on its early momentum in Nigeria.