Globally, food and grocery delivery startups have been raising mega-rounds of late, especially those in Europe as the pandemic has given rise to more people ordering online more than ever. This growth has translated to an increase in volume across e-commerce platforms all over the world.
While there has relatively been no action in Africa in terms of raising investments, startups in MENA continue to garner interest, mainly in B2B e-commerce. Today, the latest of these is coming out of Egypt.
MaxAB, a startup based out of Cairo that serves a network of traditional food and grocery retailers across Egypt, has raised $40 million in Series A financing.
The company, which claims to have launched in a new city every month this year, will be expanding its physical footprint across the Middle East and North Africa. In addition, MaxAB plans on hiring more talent and scaling its recently launched business verticals, including new supply chains and embedded finance solutions.
Founded in November 2018 by Belal El-Megharbel and Mohamed Ben Halim, MaxAB’s platform manages procurement and grocery delivery to shops in Egypt. Store owners can use the platform to purchase goods, request delivery or logistics to move the goods, and access a customer support team.
“It’s not just the technology platform; we operate our own warehouses, we operate our own fleet. And the idea was quite simple.” CEO El-Megharbel said to TechCrunch. According to him, small merchants in Egypt, representing a large chunk of the nation’s GDP, find it hard to procure their inventory. On the other hand, manufacturers also have to suffer immensely and incur so many costs to serve a market like Egypt, where over 400,000 small mom-and-pop shops sell 90% of groceries in the country.
“We saw that there is a massive role in optimizing this supply chain using technology so that we can have the right amount of products at the right place at the right time,” explained El-Megharbel, the chief executive who left Careem in 2018 to start MaxAB.
He calls MaxAB the Amazon for retail in the Middle East. There’s a slight comparison. In emerging markets, it can be challenging to find third-party e-commerce delivery companies to work with. Those available are either expensive or inefficient. This is why MaxAB has its own infrastructure. The company doesn’t build warehouses from scratch. Instead, it buys them outrightly and revamps them to fit its needs. After that, MaxAB uses internal technology tools to better manage inventory flow in, within, and out of the warehouse.
El-Megharbel noted that up until last year, MaxAB was focused on offering a single type of supply chain in one city. That was before and after completing its $6.2 million seed round with 9,000 merchants on its app. But with this new round, MaxAB solidifies both infrastructure and technology into a multi-supply chain and multi-city business.
The new development is accompanying a period of growth the company experienced in the last two years where it now services more than 55,000 merchants and delivers over 2,000 unique products. In terms of staff size, the company has grown more than 5x to 1,600 people and is looking to add to that number.
Talking about the embedded finance solutions, the plan for MaxAB is to offer financial services to its merchants. First of all, given the company’s database of merchants, MaxAB can predict their financial status. Then orking with banking and non-banking partners, MaxAB will offer credit facilities and capital financing to these merchants.
MaxAB’s Series A investment is one of the largest in this financing round across the MENA region. Impact investor RMBV led the round with participation from the IFC, Flourish Ventures, Crystal Stream Capital, Rise Capital, and Endeavour Catalyst. Exiting investors, Beco Capital and 4DX Ventures also took part. This round brings the company’s total investment to date to $46.2 million.
“The COVID-19 pandemic has highlighted the unique structure of Egypt’s economy, with hundreds of thousands of shopkeepers and small businesses becoming the lifeline of our country at the time of crisis,” said managing partner at RMBV Ahmed Badreldin in a statement. “We are delighted to be backing visionary entrepreneurs that have created a transformative business with impressive growth that is a catalyst for financial inclusion and job creation. We look forward to supporting MaxAB in its next phase of development as they continue delivering on growth and innovation.”
The pandemic has significantly increased technology adoption and enhanced the company’s unit economics. As a market leader, MaxAB has taken advantage to consolidate its position and scale sustainably amidst competition.
“There is competitiveness in the Middle East. Most of them are marketplace models but do not manage their supply chain per se. And this is what makes our model more unique is that we own the end-to-end cycle. It’s painful, but we believe that this is what this industry, the food and groceries B2B e-commerce space, needs,” the CEO said.
After expanding across MENA, does the company see any opportunity southward into sub-Saharan Africa where it might face competition from the likes of Sokowatch? “Not in the near future,” answered El-Megharbel. “I think this market [the Middle East and North Africa] is almost $200 billion per year. So we have a long way to go there before we go to sub-Saharan Africa.”