There is no end to the digitization of the processes of small and medium-sized enterprises (SMEs) in the traditional retail sector across sub-Saharan Africa. In Nigeria alone, this industry, worth more than US$200 billion, is reported to consist of over 40 million companies of various sizes.
Traditional retail in the country consists of small kiosks and open-air markets selling a variety of products, from food and beverages to groceries, personal care products and stationery. New B2B digital marketplaces like TradeDepot, Sabi, and Omnibiz have raised millions of dollars to help thousands of these companies purchase inventory from manufacturers while providing solutions for tracking cash flows, payments, and access to capital. Meanwhile, another group of startups is offering software and apps to help these retailers with their accounting and sales tracking processes, among other things.
Pastel, a second-tier startup that has been under the radar for more than a year, announces a $5.5 million seed capital raise led by pan-African venture capital firm TLcom Capital. Other VC firms such as Global Founders Capital (GFC), Golden Palm Investments, DFS Labs, Ulu Ventures, Plug and Play and Soma Cap also participated in the seed round. The startup raised $620,000 in pre-seed from some of its existing investors last year.
Pastel, formerly Sabi Cash, was founded by Abuzar Royesh, Olamide Oladeji and Izunna Okonkwo, Stanford students who shared similar interests in building solutions for micro and SMBs, according to co-founder and Chief Growth Officer (CGO) Okonkwo in an interview with TechCrunch in emerging countries, especially from their countries of origin: Afghanistan (Royesh) and Nigeria (Oladeji and Okonkwo).
The company’s flagship product, Sabi (not to be confused with a B2B e-commerce marketplace of the same name), is a digital accounting app that allows small businesses to monitor and manage their transactions and customers, gain insight into their cash flows receive and issue receipts, and effectively manage customers who owe you.
Small businesses in Nigeria have been offline for years, storing information and important data on paper or in books. All of these inefficiencies are not only time consuming, but also lead to errors and hamper cash flow and finances, which is why nine out of ten small businesses in the country fizzle out within the first five years. Accounting solutions like Pastel’s help these businesses digitally streamline processes and save money.
The accounting and customer relationship management system Pastel, which launched last year, recorded over 100,000 merchant signups as of December 2021, Okonkwo said. The free app currently has more than 45,000 active merchant users. Pastel recently added more features for merchants to get more value in this chain. However, unlike other platforms that have bundled multiple functions into one app, Pastel has chosen a different strategy and made each product standalone: Quick Receipt and Pastel Financing.
“Our thought process was to get traction quickly through solving pain point of a merchant with a free and easy solution. The The next step was acquisition Value. So we added value acquisitione characteristics to Sabi apartment that our customers love. Now we’re building a lot more‘ Okonkwo said of the company’s decision to build three standalone platforms rather than pairing them all into one app. “The way we thought about it, unlike many others, it’s like making a super app fintechs have or aspire to, we’re taking a more platform-based approach, which means any Pastel user can do it create an account with one of our apps. Wwith the same login You can Access Everyone the other solutions we offer.”
The Quick Receipt app provides businesses with easy billing and receipt tools and over 60,000 active merchant users. On the other hand, the Swift Money app, which uses local savings groups called ajo in Nigeria to fund businesses, has been secretly developed by Pastel Financing for the past three months.
Ajo or esusu is a popular financial system in Nigeria where a group of people donate money at varying intervals to a leader who keeps the money on their behalf. You may have various purposes for participating in this activity, e.g. B. Saving for a specific goal or accessing a large pool of loans.
The fast money App is designed for that work together with already established ajo leaders and their groups. Pastel does not aim to replace these leaders but rather to enable themols to better track the welfare of their groups and provide funding for the group members. In in addition to completing the formalities of cash collection and cash deposit in a [Pastel] bank account to save, the leader is downloading the app to set up profiles for members. WWhen one of the members (in this case traders) wants to access credit, the leader requests the appthe member is evaluated based on their storage history and if creditworthy, a business loan is disbursed to them.
the leader is then responsible for collecting these loans to a pasphone account similar to like they always did, pooling their savings.
Pastel only recently started generating revenue by charging interest and a small fee on these loans. It also has access to savings that it can use as a float for loan financing. The year-old company plans to raise debt capital by January to complement that process, Okonkwo said. “We have not taken on any debt now because we haven’t scaled our credit product.”
US-based and Lagos-based Pastel isn’t the only startup involved in this industry. In the past 24 months, several startups across West Africa including Kippa, bumpa (which recently started a social commerce integration with meta), OZEand Bamba, have dared to serve small and medium-sized businesses with accounting tools and loans. While they offer nearly identical features like accounting, inventory management, and sales tracking, Okonkwo argues that Pastel’s product-centric approach sets the company apart.
“As a team, we take a product-centric approach to growth, where we iterate after doing extensive research into how users are using the solutions and what they are asking for,” said the co-founder. The new capital will help Pastel increase its efforts in this area as it looks to expand its product offering and develop more productivity and financial management features and tools around group savings, loans and small business payments.