Sabi Am has closed a $6 million bridge round amidst record growth. It also expanded to Kenya last month and plans to launch in South Africa next year.
Sabi was launched through Rensource Energy's business-to-business platform, Spaces O2O (offline-to-online). Announcing its $20 million Series A in December 2019, Rensource CEO Ademola Adesina said venturing into the budding O2O industry is a natural trajectory for the Lagos-based energy company.
With the $20 million, Rensource expanded its offerings beyond renewable energy to include tech-enabled value-added services for small and medium enterprises (SMEs). And when the global lockdowns due to the coronavirus pandemic hit last year, Rensource was positioned to scale its solutions for small businesses.
"Energy has always been our core business but in light of the pandemic, we see the opportunity to help small businesses by giving them access to customers online", Rensource chief operating officer Anu Adasolum said when merchlist.co was launched in April 2020.
A year later, Anu co-founded Sabi alongside Ademola Adesina, and serves as its CEO. Unfortunately, merchlist is no longer operational and Sabi now owns the tech. It's worthy of note that Rensource and Sabi are distinct entities.
Sabi announced the closing of a $2 million seed round led by Janngo Capital in August 2021. Other investors that participated in the round include CRE Venture Capital, Atlantica Ventures, and Waarde Capital. At the time, Sabi shared some numbers:
- 150,000 small businesses onboarded
- $1.2 billion+ worth of sales recorded via MyShop, its enterprise resource planning tool
- $80 million+ annualised transactions in view for 2021 via MerchBuy, its business-to-business marketplace
- 10,000 agents working across Nigeria
Sabi said its network of over 10,000 agents interact with merchants across all 36 Nigerian states, delivering the online and offline support needed to properly service the over 41 million micro, small, and medium-sized enterprises (MSMEs) in the country. These agents onboard merchants on Sabi and help them get accustomed to using the tools.
According to the statement sent to Benjamindada.com, over 175,000 merchants now use Sabi to manage their businesses and make business-to-business (B2B) transactions. And these merchants — encompassing manufacturers, distributors, wholesalers and retailers — are transacting over $200 million annualised gross merchandise value (GMV) on its platform. It's close to processing about $12 million monthly GMV.
B2B service providers in Nigeria and Kenya also use the platform to interact with merchants.
As of November 2021, Sabi app, which is only available for download on Google Play Store, has only 10,000+ installs. But Sabi representative told Benjamindada.com that it can also be accessed through a web platform.
Digitising Africa's informal sector
Between September and November 2o21, three startups — including Sabi, Bumpa and Kippa Africa — providing digital platforms for the informal sector received a total investment of $9.4 million. And these digital platforms range from accounting software (Kippa) to retailer application enabling merchants to sell online, offline and on social media (Bumpa)
Sabi explains that the quality of its services separate it from other companies; describing itself as a super application that allows you to manage your store, record your daily sales, sell online and order for goods at wholesale prices. Sabi also offers customer management and sales report and analytics.
"We actively curate our platform with service providers rather than allowing just any provider to join. This ensures the quality of our providers", Sabi representative told Benjamindada.com. "We are passionate about embracing the decentralized nature of the informal sector rather than trying to fundamentally change how merchants do business. We understand that informal merchants are used to diverse supply chains, flexibility, and fast moving products".
Sabi generates revenue through transaction fees charged on sale completed on its marketplace and margins on the financing it provides for merchants. Merchants pay a small fee when they complete any sale on the marketplace (MerchBuy) and there's a markup on the financing provided to them.
Sabi co-founder and director Ademola Adesina said they plan to roll out a subscription model where agents will pay a monthly fee to access a reseller model.
Understanding Sabi Am $6 million bridge round
Sabi explained that the bridge financing would fuel its rapid growth in Nigeria (about 40% month-on-month) and Kenya, and expansion into new markets with multi-billion dollar informal sector, starting with South Africa next year.
"We are excited to have closed this bridge round as Sabi continues to grow at an incredible pace. Our merchant-users are taking advantage of every part of our platform, and the quality of the B2B partners we have brought onto the market is clear from the ever-increasing transaction volume", Sabi.am co-founder and CEO Anu Adasolum said.
From the name, a bridge round is the link between the last funding round (in Sabi's case a seed round) and the next (Series A). But it's uncommon in Africa's tech ecosystem. Usually, African startups in between seed round and Series A would fundraise for a pre-Series A rather than a bridge round.
Olumide "D.O" Olusanya, founder and CEO of PayPecker commented on the bridge round with a caveat. He said, "I think it means they got it mostly from existing investors, to get them to their next milestones to raise a proper round from new investors (I may be wrong though)".
Indeed, all the headline investors that participated in Sabi's $2 million seed round also invested in this bridge round. CRE Venture Capital led the $6 million bridge round, with participation from Janngo, Atlantica and Waarde Capital.
"CRE Venture Capital is proud to support Sabi's continued growth across Nigeria and expansion into Kenya and South Africa", CRE Venture co-founder and managing partner Pardon Makumbe said.
"Sabi's online/offline approach to serving informal businesses, combined with the quality of its platform and service provider curation, has clearly taken root in Nigeria. The company is on track to be one of the fastest-growing African companies of 2021 and is showing no signs of slowing down".
SaaStr founder Jason Lemkin sums up the bridge round like this: "Bridge round when [a] company [is] not doing well: Never seen it work. Bridge round when [a] company [is] doing OK but not great, with great founders that know what to do next: Often works".
The founder of the leading community of SaaS executives, founders, and entrepreneurs, added that a bridge round is when you're doing okay, maybe even good, but not quite well enough to attract a next round investor yet. "VCs [venture capitalists] do plan for bridge rounds but [they] don't like them; the dynamics can be drama-full", he said.
Sabi said this funding round is bridging its growth to a Series A round.
According to Investopedia, bridge financing "bridges" the gap between the time when a company's money is set to run out and when it can expect to receive an infusion of funds later on. This type of financing is most normally used to fulfill a company's short-term working capital needs.