If there is one sector that has seen the biggest spike in the number of startups and venture capital in emerging markets since the beginning of last year, it has to be the digitization of family stores.
Today a new activity takes us to Morocco, where the YC Chari-backed company just raised a $ 5 million seed round at a $ 70 million valuation.
Founded by Sophia Alj and Ismael Belkhayat last year, Chari participated in the recent Y Combinator summer batch that concluded two months ago.
The US seed stage accelerator invested in this seed round, along with Plug and Play, Village Capital / MetLife Foundation, Orange Ventures, executives from Airbnb, SPE Capital, Pincus Capital Management, the Chandaria family, Michael Lahyani and the management company. from an American Ivy League university.
Rocket Internet, Global Founders Capital and P1 Ventures co-led the round, which is the largest of its kind in Morocco at the moment.
Chari wants to digitize informal retail stores in Morocco and provide them with credit. Belkhayat, a former strategy consultant at Boston Consulting Group, and Alj, a former McKinsey strategy consultant, were first alerted to changes in Africa’s e-commerce landscape last year. On a mandatory trip by her former employer, Alj was tasked with understanding how FMCRs operated in sub-Saharan Africa.
With Belkhayat dialing in, the couple discovered the pain points that small shops in the region faced when they had to source their wares. They never realized that in Morocco before that, but it became clear after returning to the North African country that the local mom and dad shops were in need of such a service.
With companies like TradeDepot, MaxAB, and Sokowatch bringing online stores to other African markets, the pair launched a similar platform in Morocco.
Chari operates as a mobile application that allows small retailers to order products from multinational consumer goods partners and local manufacturers and obtain them in less than 24 hours.
In August, Chari received new competition when regional player MaxAB, who, after raising $ 55 million, moved to the country by acquiring another YC-backed company, WaystoCap, for an undisclosed sum.
But in an identical but seemingly unrelated move, Chari acquired Karny.ma, a Khatabook-style app, the same month. The platform provides credit and accounting services to some 40,000 merchants and now serves as Chari’s strategy to provide payment facilities.
According to CEO Belkhayat, the acquisition has allowed Chari to be face-to-face with MaxAB in the country as it provides more merchants for the company to tap into. He adds that the company’s “great relationship” with suppliers also gives Chari an edge in the still fledgling industry.
“We have exclusivity in some digital operations. For example, P&G works with Chari exclusively. So in case any other player wants to sell P&G products, they either have to go through Chari or they have to buy the products in the supermarket,” he added .
Chari has distribution contracts with these consumer goods companies and takes a percentage (10-30%) of every sale she makes to store owners. The YC-backed company employs proper payment terms: it is not required to pay suppliers within 40 days, but collects instant payments from local stores. With an average of 15 days of stock, this system allows Chari to have a positive cash flow.
“The more we grow, the more funding we have. The main reason we raise this money is mainly to be on the radar of investors and grow outside of Morocco,” said the CEO, alluding to the fact that Chari is on the verge of achieving the cost effectiveness.
Unlike MaxAB, Chari does not own assets; rather, it rents them out. When asked if Chari will adopt a heavy inventory model later, the CEO said it is unlikely. There are many warehouses available in Morocco for rent, and doing so allows the company to scale faster, he said.
It is the same process in Tunisia, its second market after Morocco. And on the logistics end, a total of 100 people work as delivery agents in both regions.