African merchants encounter many challenges when it comes to international shipping ranging from logistics and customs to hidden and excessive charges.
Digital freight forwarders on the continent have grown to tackle these supply chain issues. In some way, they are taking after the likeness of an $8 billion company and a market leader in the freight space, Flexport; some have dubbed themselves the “Flexport for Africa.”
Recent YC graduate Topship is one such startup and it has raised a $2.5 million seed round months after concluding the recent YC winter batch. Flexport is its lead investor. Other backers include Y Combinator, Soma Capital, Starling Ventures, Olive Tree Capital, Capital X and True Capital.
The individual investors in the round include Immad Akhund, Mercury CEO and Arash Ferdowsi, co-founder of Dropbox.
Topship was founded in 2020 during the pandemic when co-founder and CEO Moses Enenwali noticed a surge in merchants’ needs for shipping parcels and cargo outside Nigeria. He had built relationships with these merchants following his time with logistics company ACE Logistics and e-commerce fulfilment provider, Sendbox. Though demand was steady during his time with both companies from 2015 to 2020, this was different.
“The world was shutting down, but there was this high demand for stuff and demand for international shipping was going up simultaneously. So I was like, “this is interesting.” It wasn’t a business then as we just helped these people move stuff like a scrappy, little hustle,” Enenwali told TechCrunch over a call.
Globally, about 60% of air cargo is flown in the belly hold of passenger flights which is one reason why to an extent, shipping businesses done via air are more straightforward to start than those done via the sea. For Enenwali, it even made more logic as passenger planes flew half empty for most of 2020. After months of iteration, Topship went live in March 2021.
Topship says it wants to create the easiest way for African businesses to export and import parcels and cargo to their customers, suppliers, and distributors worldwide.
Topship and similar companies such as Sote, SEND, and OnePort365 want to improve the overall shipping experience in Africa. However, Topship’s expectations are pretty lofty; it said in a statement that “its mission is to make the shipping experience in Africa as easy and stress-free as booking an Uber ride.” And one factor that might work in its favour is its focus on air cargo even as others explore a mix of air, sea and truck haulage pioneered by Flexport.
CEO Enenwali argues that while African startups, including his, take some cues from Flexport’s playbook, he doesn’t think Africa is ready for the unicorn’s model, which is super-heavy on sea cargo movement.
“The reason why the Flexport model wouldn’t work here is it’s heavily invested in ocean freight and we don’t have enough ports on the continent. For example, in Nigeria, we have one function port, and for ocean freight to work, we need ports, railways, and roads for trucking. But we don’t have the roads, and we don’t have the railways,” said the CEO, giving reasons why Topship doesn’t involve itself with sea cargo.
“It’s difficult to connect the continent with ocean freight. Flexport’s business model makes a lot of sense even with the way they attack problems aggressively, and I love that. But for Africa, we need to tweak it to fit the use case here. So what we’ve seen is the way to connect the continent is via air. Every country and major city on the continent has a functioning airport, and airlines are flying to all those airports daily.”
Topship caters to a wide range of users. From a merchant moving tons of heavy equipment and a solo entrepreneur sending parcels to a student mailing documents to a school abroad and a Gen Z shopping from a foreign store, Topship is a borderline local and international shipping solution between digital freight and e-commerce fulfilment. Flexport has backed several African companies from both categories, such as Trella, Flextock, ShipBlu, Sendbox, and Freeterium.
According to Enewali, Topship allows 1,500 merchants to move cargo and parcels from Nigeria to over 150 countries. Although it can help Nigerian merchants receive parcel deliveries from the other way round, they can only accept cargo deliveries from the U.S., the U.K and China.
The company’s revenue comes from two ways: selling shipping insurance and taking a margin on transactions. Enewali said the company is exploring other revenue streams, including trade financing and customs clearance charges. The company has recorded ~50% month-on-month revenue growth since getting into YC this January.
“I think what YC does more than anything is just push you to dive as deep as possible in understanding your users,” said the CEO about Topship’s revenue growth after YC. I mean, look into the future, a lot of it’s coming from that ethos of just the user is the most important piece of the puzzle, and we have to be obsessive about it. We’re taking all the learnings and insights that we’ve learned from our users over the past five months or six months and building it into the product in a way that is merchants-focus.”
Late last year, merchant groups from Ghana, Tanzania and Kenya invited Topship to gauge the possibility of launching in their respective markets. Enewali said this new funding provides Topship with the pockets to follow through and start operations there. A portion of the investment will be used to improve its asset-light technology and build out proprietary global shipping infrastructure to make imports/exports significantly faster and easier, the CEO said.
In relating news, Topship has also set aside fashion design and retail grants worth $3,500 to award new and established fashion brands in Nigeria as a sign of “support for the future of the growing e-commerce sector” in the country.