Kenyan e-commerce and fintech platform for mass market consumers Copia International eye John Lazarformer CEO of Metaswitch, a subsidiary of Microsoft, has joined its board of directors for $20 million in new funding.
Enza Capital, the African venture capital firm that Lazar co-founded in 2019, was among the top participants in the Series C extension round, which also includes global private bank LGT, investment firm Goodwell Investments, and the US International Development Finance Corporation (DFC). ). ), German financial services provider DEG, Swiss impact fund Elea, Perivoli Foundation, and Sorenson Foundation.
Lazar has deep experience in building and managing businesses. He joined Metaswitch Networks in 1987 as a software engineer before becoming Chairman and CEO as the company established its leadership in cloud communications software, with investment backing from Francisco Partners and Sequoia Capital. Lazar, who resigned from both roles in 2016, four years before the company was acquired by Microsoft, also chairs the UK-based charity Raspberry Pi Foundation, and is an angel investor and mentor in the UK and Africa, with more than 40 people in the pre-seed phase. And seeds. Investments.
In a conversation with TechCrunch, Lazar admits that having a long-standing professional relationship with the Copia team, which has impressed Enza Capital with its fulfillment network over the years and increasing digital adoption from consumers, is one of the reasons for supporting Kenyan e-commerce. like.
According to the International Monetary Fund (IMF), consumer spending in Africa is It is expected to exceed $2 trillion In the next three years, with the continent’s burgeoning middle class driving this growth. The decade-old company, Copia, targets middle- and low-income African consumers in rural areas. These consumers face challenges in accessing goods and services in terms of choice, price value and reliability compared to their urban or high-income counterparts who use Western-style, African-focused platforms such as Jumia and Takealot. Thus, despite the difficulties in locating this target market and its potentially smaller portfolio sizes, Copia sees an opportunity given the large number – around 750 million people across Africa – and the collective purchasing power when dealing with a hyperlocal strategy.
Copia uses a network of local agents and logistics services to reach this market. The company boasts a strong network of over 50,000 small business owner agents in towns and villages across Kenya serving over 2 million consumers. Most of these orders were fulfilled through Copia’s offline dealer network, where customers placed orders for household items, electronics, or food items in person at dealer stores, via USSD, or by phone.
However, buoyed by falling data costs and increasing smartphone penetration and ownership in Kenya (73% of middle- and low-income Kenyan consumers now own smartphones, a jump from less than 10% a decade ago), the 10-year plan A legacy e-commerce company recently launched a campaign to digitize its agent network, increasing their app usage from 5% to 80% in one year. KOPA, which noted, in a statement, that digital agents can double their income, will focus its subsequent digital efforts on millions of consumers by exploring smartphone financing models, thus tapping into the market where the likes of M-KOPA are thriving.
“We’ve admired this company for a long time, and we think the conditions are right. E-commerce companies are facing some difficulties right now, but this kind of push toward digitization feels like an inflection point for us,” said Lazar, who received a CBE Medal for his service. “It’s a game-changer on unit economics and efficiencies.” Engineering by UK in 2016. “So when Tracy contacted us to tell us they had this internal round and that they wanted to bring on an additional partner, we were very excited to come on board.”
Copia has experienced 100% annual growth over the past two years, with a focus on scale and rapid expansion as critical goals for profitability, Founder and Chairman Tracy Turner He explained in the same call with TechCrunch. However, as global capital markets experience downturn and investor focus shifts away from volume-based models of profitability to emphasizing the importance of demonstrating healthy unit economics today, Cuba underwent a fundamental shift last year in response.
The e-commerce company, having raised more than $120 million in funding since its inception, including a $50 million Series C round in January, has scrapped its expansion plans and implemented significant workforce cuts this year. With at least 700 roles cut, incl A 25% reduction in the number of its Kenyan employees In July and Closing its business in Uganda Three months ago, the move is consistent with a broader trend seen across industries this year in which many companies look to lower labor costs as the first strategy when employing cost-cutting measures.
“We realized in our capital markets environment that we did not want to continue the Ugandan operations, which was a great market and opportunity. Without the capital needed to reach profitability, it made sense to hold off at that point,” Turner said. “Then, we looked at the Kenyan operation.” “And we realized we had to simplify Kenya as well.” “Our shift to focusing on the digital world now comes from the fact that our customers have gone digital so quickly means we need to change the way we work in Kenya. So we did this to focus the business on the digital relationship with the customer, which is very different than it was just a year ago.
Copia’s shift in focus from simply enhancing profitability to achieving profitability in Kenya reflects a similar strategy to Jumia’s approach of cutting losses and slowing growth since new management took control in Q4 2022. Both companies have faced headwinds questioning the sustainability of B2C e-commerce. Trade in Africa though runs different e-commerce models. It is worth noting that B2B e-commerce platforms also face a set of challenges in the market.
Despite the challenges, executives at both e-commerce companies (whose operations span a decade), in separate conversations with TechCrunch, were unwavering in their confidence that their companies, which now offer financial services alongside e-commerce, can Achieving consistent profitability. They believe that overcoming these challenges is only a matter of time, expressing their optimism about the future profitability of their business. However, both platforms face different goals: Copia strives to achieve profitability in one market, Kenya, while Jumia has to compete across 11 markets.
However, Turner notes that Cobia, whose annual revenues will exceed $60 million by the end of 2023, is maintaining its pan-African ambitions despite its focus on becoming profitable in Kenya. The founder and chairman noted that once the e-commerce company achieves profitability in the East African market, it plans to expand its operations to 14 more countries it has strategically identified. “We are all busy and focused on Kenya right now, and we will only hold our heads up once we achieve this milestone. We have done a lot of reconnaissance and planning of where we will go next, and the international rollout plan will come after we reach profitability in Kenya,” she said. .
As for John, three things remain of utmost importance now that he’s on the company’s board, as he noted in the interview: drawing on his technology operating experience and network to assist with talent, providing sales strategy and revenue generation strategies, and serving as a steering board. To the executive team.