Nigeria’s Freight Forwarding Startup, Topship, Raises $2.5m Seed Round

Nigeria’s Freight Forwarding Startup, Topship, Raises $2.5m Seed Round

The Nigerian logistics sector has seen tremendous growth in recent time. Spurred by technology adoption and uptick in export of goods and services from the West African country, the emerging market has risen to become one of the fastest growing industries in Nigeria. As of 2018, the value of Nigeria’s logistics sector was estimated to be 250 billion naira ($696 million), a rise of 50 billion naira ($140 million) from 2017 figures, according to data from the US Department of Commerce.

This has inspired the inflow of investors to the sector and many startups are grabbing huge sums of the investments’ flow. The latest among them is Topship – a Nigerian-based digital freight forwarding startup.

The company announced that it has raised $2.5 million in a seed round led by Flexport. The recent YCcombinator alumnus has other investors in this round including Soma Capital, Starling Ventures, Olive Tree Capital, Capital X and True Capital. Individual investors such as Immad Akhund, Mercury CEO and Arash Ferdowsi, co-founder of Dropbox were also involved in this round.

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Founded in 2020 during the pandemic, Topship helps African businesses ship their goods to any destination in the world. CEO and co-founder Moses Enenwali says that it helps about 1,500 merchants move cargo and parcels from Nigeria to more than 150 countries. For now, it only receives cargo deliveries from the U.S., the U.K and China for Nigerian merchants.

Topship earns revenue by selling shipping insurance and taking a margin on transactions. Enewali however said the company is exploring other revenue streams, including trade financing and customs clearance charges. The company claims it has recorded ~50% month-on-month revenue growth since getting into YC.

Enewali told TechCrunch in a discussion about Topship’s revenue growth after YC: “I think what YC does more than anything is just push you to dive as deep as possible in understanding your users.”

“Looking into the future, a lot of it’s coming from that ethos of the user being 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,” he adds.

Topship’s business model focuses rather on air cargo even as others explore a mix of air, ocean and truck haulage pioneered by Flexport. Enewali says that he does not think that the Flexport model will work in Africa because it is heavily dependent on ocean 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.

“It’s difficult to connect the continent with ocean freight. Flexport’s business model makes a lot of sense even with how 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 says that it is considering invitations from merchant groups to start operations in Ghana, Kenya and Tanzania. So this new funding will help it analyse the possibility of starting operations in these countries. Some of the funding will also be used to improve its asset-light technology and build out a proprietary global shipping infrastructure to make imports and exports significantly faster and easier.

Other African competitors in this business include Sote, SEND and OnePort365 who just secured $5 million in a seed funding round last month.

Following covid-induced shift to digital life which has seen Nigerians increase their e-commerce activities, the market revenue is expected to reach a CAGR of 20.5% in 2023, resulting in a market volume of around US$ 10,290.6 million by 2023, according to data from Mordor Intelligence, a market intelligence firm.

In 2019, the market’s largest segment was Fashion with a market volume of US$ 1,761.9 million and User penetration was 52.2% and is expected to reach 75.2% by 2023, the data said.

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