Egyptian startup Cartona secures $12M in Series A funding

One of Egypt's leading startups, Cartona, recently raised $12 million in Series A funding to digitize the conventional trading industry, which includes mom-and-pop shops,

The SANAD Fund for MSME, the Arab Bank Accelerator, and Sunny Side Ventures all participated in the round, which was led by Jordan and the American early-stage venture capital company Silicon Badia.

Less than a year after taking part in the company's $4.5 million pre-Series A investment last September, investors like Global Ventures and Kepple Ventures increased their stake. Cartona is presently found in eleven Egyptian cities, up from three at the time.

Through an app that offers promotional content and market information, Cartona's platform enables customers to place inventory orders from a network of carefully selected vendors.

The business runs a market with few assets and doesn't own any goods or vehicles. Customers have complained about this model the platform operates.

“So we believe that with this money, we would reach profitability. We will use this money for sustainable growth and only sustainable growth. We won’t expand like crazy without having positive unit economics in every city,” CEO Mahmoud Talaat said in an interview. “We plan to cover all the cities in Egypt, focus a lot on technology and product.”

Talaat claimed that as a result, Cartona had to concentrate more on its technological interconnections with significant producers and their warehouses, which has increased the company's potential for growth. He said that with these connections, Cartona could scale its embedded finance offering while pursuing capital efficiency and growth.

The tipping point of B2B and retail sectors in Africa is lending money, working capital, or BNPL to micro and small businesses.   According to CTO Mahmoud Abdel-Fattah, Cartona distinguishes itself in Egypt's competitive market by incorporating BNPL services directly into its marketplace operations, as opposed to using a third-party supplier like asset-heavy MaxAB or hybrid model Capiter. Therefore, unlike other services, Cartona allows small businesses to return their debts whenever a shipment of goods is made, as opposed to making them do so everytime with interest.

Currently, Cartona makes loans from its balance sheet. However, the company's leaders claim that by January 2023, they anticipate receiving some credit lines and venture loans from domestic and foreign partners.

According to reports, the food and beverage sector accounts for $70 billion of the $120 billion global retail market. This huge possibility has drawn investors like Silicon Badia into the B2B retail space, including platforms like Cartona. The marketplace is clamoring for these kinds of services, according to the founding managing partner of the company, which thinks Cartona's asset-light strategy will enable them to service as many customers as possible.

Cartona had over 30,000 merchants, handled over 400,000 orders, and had an annual revenue growth value of EGP 1 billion (about $64 million) last year. According to Talaat, the company now offers services to more than 60,000 merchants and has handled more than 1 million transactions with an annually revenue growth value of EGP 2.3 billion (about $120 million). On its network, Cartona has over 1,500 wholesalers and distributors as well as 200 FMCG firms, including well-known brands like Unilever and Henkel. These figures surpass the 1,000 distributors, wholesalers, and 100 FMCG businesses from September last year.

“We started with very big FMCGs, but everyone, including multinationals, is interested because now they see our value. We are not competing with them or bringing down their prices. We’re not subsidizing their products as competition sometimes does. We’re just connecting them with the retailer, so it’s about making the process seamless,” said Abdel-Fattah, the executive in charge of handling technical integrations.

According to the founders, the goal of creating Cartona is to make it a better technological partner for major FMCG companies.