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Startups that solve the supply chain and operational challenges of players in the fast-moving consumer goods (FMCG) industry — by helping buyers find products from sellers on a single platform — attract investment capital from investors.
Cartona, one of the main players digitizing the traditional business market including mom-and-pop stores, FMCG manufacturers, wholesalers and distributors in Egypt, has raised $12 million in Series A funding. Jordan and the US-based early-stage venture capital firm, which led the round, welcomed participation from SANAD Fund for MSME, Middle East and North Africa Investment Fund, Arab Bank Accelerator and Sunny Side Ventures.
Investors such as Global Ventures and Keppel Ventures have doubled in less than a year after participating in the company’s $4.5 million pre-Series A funding round last September. At that time Cartona was in three cities of Egypt; It’s now in eleven. According to the statement, the investment will enable the start-up to cover all Egyptian buyers in 2020, enhance its products, technology and services and explore new heights beyond FMCG.
“So we believe we will achieve profitability with this money. We will only use this money for sustainable growth and sustainable growth. If we do not have positive unit economics in each city, we will not expand like crazy,” CEO Mahmoud Talat told TechCrunch in an interview. “We plan to cover all cities in Egypt.” , we focus a lot on technology and production.”
Cartona’s platform allows buyers to order items from a network of qualified sellers through an app that provides a communication tool for advertising and a dashboard for market insights.
The company operates in an asset-light marketplace that does not own a product or vehicle. This model has led to customer complaints on both sides of the platform. And because of this, Talat Kartona had to focus more on its technical integrations with large manufacturers and their warehouses, which led to a higher level of business. Through these combinations, Cartona will be able to simultaneously pursue capital efficiency and growth while growing its embedded financial products, he said.
Providing loans, working capital or BNPL to small and medium businesses is the sweet spot for the B2B e-commerce and retail market in Africa. But how they provide this service varies. CTO Mahmoud Abdel Fattah, a market leader in Egypt with other startups like asset-heavy MaxAB or hybrid model Capiter, stands out for integrating BNPL services into the marketplace without the help of third-party providers. So instead of making small businesses pay off their loans with interest every month like other platforms, Kartona allows them to pay off these loans every time a product is shipped.
“In a market like Egypt, retailers are not very comfortable with the concept of paying BNPL with interest at the end of the month. They don’t want to think that they are paying more interest than the foreign company that is giving you these working capital loans. They prefer it to be part of the product price and feel included in the order cycle, which is a little It makes us different, Talat added.
Cartona has borrowed from the balance sheet for now. But the management expects the company to receive some lines of credit and debt from local and international partners by January next year.
Image Credits: Cardboard
There are more than 400,000 shops and thousands of international and local brands across Egypt, and the sector grows by 8 percent annually. Reports also state that the total retail market size is $120 billion, while the food and beverage market is $70 billion. For platforms like Cartona, this huge opportunity has attracted investors like Silicon Badia into the B2B retail sector. According to the company’s founding managing partner, “The market is hungry for these types.[s] We believe that our solutions and Kartona’s asset-light approach will allow us to serve as many marketplace participants as possible with the highest efficiency.
In our interview with Kartona executives last year, the company had 30,000+ merchants and processed over 400,000 orders with an annual gross merchandise value of EGP 1 billion (~$64 million). Since then he has doubled some of his numbers. The company says it now serves 60,000+ merchants and has processed more than 1 million transactions with an annual gross merchandise value of EGP 2.3 billion (~$120 million). Cartona has more than 1,500 distributors and wholesalers and 200 FMCG companies on its platform, including big names like Unilever and Henkel. These numbers are up from 1,000 distributors, wholesalers and 100 FMCG companies last September.
The founders say they want to build Cardboard to be a better technology partner for these FMCG brands. Abdel Fattah, the executive who runs these technical integrations, said: “We started with very large FMCGs, but everyone, including multinationals, is interested because now they see our value. We are not competing with them or undercutting them. It’s not subsidizing their products like the competition sometimes does. We’re connecting them to the retailer, so it’s a seamless process.
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