Sabi: Why We Invested

We believe companies like Sabi will emerge as the central utility for not only basic-goods purchases, but also social commerce, and access to financial services. With the best operating team and a clear product market fit, we believe massive economic activity in Africa’s fastest-growing markets will orbit around the Sabi platform.

90% of retail transactions in Africa flow through informal channels which are manual, expensive and fraught with inefficiency. For the small retailer, the value-chain is complex and fragmented with little room to extract value from transactions. There are over 100 million merchants on the continent facing:

§ Expensive logistics: transport prices are 3x more expensive in Africa than other developing countries;

§ Hard to reach locations: more than half of Africa’s population resides in rural areas;

§ High cash transactions: despite growth in digital transactions, about 90% of transactions remain cash-based leading to inefficiency and fewer data points to unlock access to credit; and

§ High inventory costs: fragmented and small average order values by merchants lock them out of volume bargaining and discounts.

Sabi’s marketplace allows inventory fulfillment actors to easily interact with each other under one platform, thereby providing them with the building blocks to scale their businesses. Sabi’s library of digital tools not only allows the marketplace participants to drive efficiency in their business, but also unlocks smart data to inform critical decisions about the product, the goods offered in specific locations and purchasing habits.

But, digitization of retail supply chain networks, although a big market opportunity in themselves, are a wedge to unlock something far larger. Sabi can be the operating system for small retailers and individuals, allowing them to unlock greater income, access to financial services, and overall greater prosperity. We like how A16z put it in their blog post, “come for the tool, stay for the network.”

Sabi, led by experienced operators Anu Adasolum and Ademola Adesina, has taken a different approach to their forebears Sokowatch and Trade Depot. Not only are they taking a capital-light strategy, driving efficiency in existing distribution networks rather than building their own centralized logistics, they are also including all players in the market, including wholesalers and distributors, meaning key stakeholders in the ecosystem are empowered, not cut out. This approach to doing business through partnering with participants rather than disrupting them, has allowed them to extract more value for their customers evidenced by the numbers —15 months into their launch the company has already surpassed 250 thousand merchants.

Act 2 for the company is what especially excites us. We see Sabi’s deep expansion into embedded financial products as a way to bank retailers as well as a way to build out agency banking; giving retailers access to much-needed credit, which is another avenue to further provide value to their own customers and drive higher growth for their own businesses.

What has given us the confidence that the company will realize this magnitude of scale so early into its life cycle? Network effects, leveraging a lean, data driven, technology-first platform coupled with a team that has built responsible processes and decision-making tools, and executed on building dense hubs to make this network effect a reality.

That’s a lot of words — to put it plainly, a big macro opportunity, with strong unit economics, and a stellar team that has demonstrated success.

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Norrsken22

Norrsken22

We are a technology growth fund partnering with exceptional entrepreneurs building Africa’s next tech giants.