Introduction
Despite a challenging investment climate for B2B e-commerce in Africa, Egyptian B2B platform Cartona has successfully raised $8.1 million. This achievement comes even as investors have shown reduced enthusiasm for startups in this sector, highlighting Cartona's resilience and strategic growth.
Cartona's Funding Success
Cartona has secured an $8.1 million Series A extension, comprising $5.6 million in equity and $2.5 million in debt. This funding round, led by Algebra Ventures, also saw participation from existing investors such as Silicon Badia and SANAD Fund for MSME, with Camel Ventures and GlobalCorp providing the debt component. This brings Cartona's total Series A funding to $20.1 million.
Strong Financial Position
Founder and CEO Mahmoud Talaat revealed that Cartona raised this round from a significant cash position, stating, “We have double what we raised now in equity.” This capital infusion will support Cartona's market expansion within Egypt, particularly in the FMCG and HORECA sectors, and potentially into new regional markets like Saudi Arabia.
Evolution of Cartona's Business Model
Cartona initially launched as an asset-light B2B platform, connecting FMCG suppliers and wholesalers with retailers. This approach faced skepticism, as many believed asset-light models would struggle to retain customers compared to asset-heavy platforms. However, Cartona and similar platforms like Nigeria’s Omnibiz have successfully countered these notions.
Technological Enhancements
In its early years, Cartona focused on enhancing its technology, user experience, and fulfillment rates to rival asset-heavy models. This strategic focus enabled Cartona to secure significant funding in 2022 and continue improving its unit economics, bringing it close to full EBITDA profitability.
Strategic Growth and Market Impact
Cartona's recent funding will be used to deepen its operations in Egypt's FMCG and HORECA sectors. The platform plans to leverage its extensive network of suppliers, wholesalers, and distributors, enhancing their efficiency with tech tools rather than competing against them.
Significant Contributions to Suppliers
Cartona's approach has resulted in over 30-40% of its partner suppliers' sales coming through the platform. This significant margin contribution has led to active support from suppliers, facilitating Cartona's growth and expansion into new verticals like HORECA.
Financial Performance and Future Outlook
Cartona's annualized GMV has reached about EGP 10 billion ($210 million), up from EGP 2.3 billion ($120 million) in 2022. The HORECA vertical, although a smaller part of the business, is expected to contribute 15% of the GMV by the end of the year due to its higher take rates and average order value.
Expanding Credit and Financial Inclusion
Cartona's embedded finance offerings have grown significantly, now constituting more than 20% of its GMV. The platform's use of local currency facilities for credit orders has expanded, aligning with its growth trajectory.
Industry Context and Future Potential
Egypt's retail sector, with over 400,000 shops and a market size of $120 billion, offers substantial growth opportunities. Despite the presence of competitors and substantial funding in the sector, the market remains predominantly offline, indicating untapped potential.
Long-term Vision
CEO Mahmoud Talaat emphasizes that while B2B e-commerce penetration is still in its early stages, the market's vast size presents significant opportunities for growth. “Our real competition remains the offline transactions between companies, wholesalers, and retailers,” he noted, expressing confidence in the long-term value that B2B e-commerce will bring to the market.
