Pastel, a Nigerian bookkeeping and digital platform for traders, raises $5.5m led by TLcom – TechCrunch
There is no end to the digitalization of small and medium enterprise (SME) operations in the traditional retail sector in Sub-Saharan Africa. In Nigeria alone, this industry, worth more than $200 billion, comprises more than 40 million companies of various sizes, according to reports.
Traditional retail in the country includes small kiosks and open-air markets selling various products ranging from food and beverages and groceries to personal care products and stationery. B2B digital marketplace startups such as TradeDepot, Sabi, and Omnibiz have raised millions of dollars to help thousands of these businesses buy inventory from manufacturers while providing solutions to track cash flow, payments, and access the capital. Meanwhile, another group of startups provides software and apps to help these retailers with their accounting and sales tracking processes, among other features.
Pastel, a tier two startup that has been under wraps for more than a year, announces a $5.5 million fundraising round led by pan-African venture capital firm TLcom Capital. Other venture capital firms such as Global Founders Capital (GFC), Golden Palm Investments, DFS Labs, Ulu Ventures, Plug and Play and Soma Cap also participated in the round. The startup raised a $620,000 pre-seed last year from some of its existing investors.
Formerly Sabi Cash, Pastel was founded by Abouzar Royesh, Olamide Oladeji and Izunna OkonkwoStanford graduate students who, according to co-founder and Chief Growth Officer (CGO) Okonkwo, in an interview with TechCrunch, shared similar interests in building solutions for micro and SMBs in emerging markets, especially since their country 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 application that enables small businesses to monitor and manage their transactions and customers, obtain information on their cash flow, issue receipts, and effectively manage clients who are indebted to them.
Nigerian small businesses have gone offline for years, storing critical information and data on the fly, on paper or in ledgers. All of these inefficiencies, besides taking time, lead to errors and affect cash flow and finances, which is why nine out of 10 small businesses in the country die within the first five years. Accounting solutions like Pastel help these businesses digitally streamline processes and save money.
The accounting and customer relationship management that Pastel launched last year has seen more than 100,000 merchant registrations by December 2021, Okonkwo said. The free app currently has over 45,000 active merchant users. Pastel recently added more features for merchants to capture more value in this channel. However, unlike other platforms that bundled multiple features into a single app, Pastel chose a different strategy and made each product standalone: Quick reception and Pastel Funding.
“Our thought process was that as soon as we had success, the next step was to capture value, so we added functionality to the Sabi app and what we’re building now is a bit more,” Okonkwo said. about the company’s decision to create three standalone platforms instead of pairing them all into one app.” The way we thought about it is, as opposed to creating one super app that a lot of other fintechs have or are looking for, we take a more platform approach, which means that any Pastel user can register with any of our applications with the same login and access all the other solutions we offer .
The Quick Receipt app provides businesses with easy invoicing and receipting tools and over 60,000 active merchant users. On the other hand, the SwiftMoney app, which relies on local savings groups called ajo in Nigeria to provide finance to businesses, was stealthily built over the past three months through Pastel Financing.
Ajo or esusu is a popular financial system in Nigeria where a group of people contribute money at varying intervals to a ruler who stores the money on their behalf. They may have different purposes for engaging in this activity, such as saving for a particular purpose or accessing a large pool of credit.
The ajo groups on Pastel have a leader who, in addition to carrying out the formalities for collecting and depositing cash in a [Pastel] bank account, download the app to set up member profiles. So when one of the members (who in this case are traders) wants to access loans, the leader asks on the app and then sends them the money before collecting the repayments when due.
Pastel only recently started generating revenue and does so by charging interest and a small commission on these loans; it also has access to savings to use as working capital for financing loans. The company, which has been around for a year, plans to raise loan capital by January to complete this process, Okonkwo said. “We haven’t raised funds now because we haven’t expanded our lending product. But the plan is that by January, once we’ve grown much faster, we’ll raise debt or partner with an existing debt player and then become the origination tool.
Lagos-based US-based Pastel is not the only startup operating in this line of business. Over the past 24 months, several startups across West Africa, including Kippa, bumpa (which recently spear a social commerce integration with Meta), OZÉ and Bamba, ventured to serve small and medium-sized businesses with accounting and credit tools. Although they offer almost identical features such as accounting management, inventory management and sales tracking, Okonkwo says Pastel’s product-centric approach sets the company apart from the rest.
“As a team, we take a product-driven approach to growth where we iterate after doing massive research on how users are using solutions and what they are asking for,” the co-founder said. The new capital will help Pastel scale up its efforts in this area as it seeks to expand its product offerings and develop more productivity and financial management features and tools around savings, loans and collective payments for small businesses.