Nigerian businesses have strived for years without access to digital bookkeeping, exposing them to evitable loss of business transaction records. Recently, the situation opened a huge opportunity for startups trying to fill the gap.
Several startups across West Africa, including Kippa, Bumpa,OZÉ and Bamba, are creating platforms to offer digital bookkeeping services to businesses.
The startups, left with the job of digitizing the data of Small Medium Enterprises (SMEs), an industry reportedly worth more than $200 billion in Nigeria, have been attracting investors who see huge growth potential in the emerging market.
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Pastel, a digital bookkeeping startup has announced a seed raise of $5.5 million led by pan-African venture capital firm TLcom Capital. Participating in the seed round are other VC firms such as Global Founders Capital (GFC), Golden Palm Investments, DFS Labs, Ulu Ventures, Plug and Play and Soma Cap.
The startup has been under the radar. It raised a $620,000 pre-seed last year from some of its existing investors.
Launched in 2020 as Sabi Cash by Abuzar Royesh, Olamide Oladeji and Izunna Okonkwo, Stanford graduate students, Pastel has grown into a multimillion dollar company within a short period.
The company’s ultimate goal is to help small businesses in Nigeria that have stayed offline for years – using non-digital means to store information and essential data, to get their data online. The absence of digital storage for Small Medium Businesses (SMBs) is said to be responsible for the failure of many businesses, many of them couldn’t last longer than five years.
Cofounder and chief growth officer (CGO) Okonkwo said the bookkeeping and customer relationship management Pastel launched last year recorded more than 100,000 merchant sign-ups by December 2021.
Pastel has tried to distinguish itself from other companies offering digital bookkeeping and credit services with a different strategy. Unlike other platforms operating a sort of super app, where all their services are held together, Pastel has made each of its products, Quick Receipt and Pastel Financing, standalone.
This is believed to have boosted the number of enrollments, which stands at over 45,000 active merchant users, in the platform.
“Our thought process was to get traction quickly by solving a merchant’s pain point with a free and easy solution. The next step was to capture value. So we added value capture features to the Sabi app that our customers love. Now we are building a lot more,” Okonkwo said. “The way we’ve thought about it is, as opposed to creating a super app that a lot of other fintechs have or are in pursuit of, we are taking a more platform approach, meaning that any Pastel user can create an account with any of our apps. With the same login they can access all the other solutions that we’re providing.”
Functioning separately, TechCrunch reported that the Quick Receipt app provides businesses with simple invoicing and receipts tools and over 60,000 active merchant users. On the other hand, the Swift Money app, which leverages local saving groups called ajo in Nigeria to provide financing for businesses, has been stealthily built for the last three months through Pastel Financing.
Onboarding ajo, a popular financial scheme in Nigeria where individuals or a group of people contributes money in the care of a leader, the report said the Swift Money app is designed to work with already established ajo leaders and their groups.
The leader assumes an oversight role with tools to look after the group’s activities and interest that involves financing. The leader’s role includes downloading the app to set up profiles for members and helping them to collect and deposit cash in a [Pastel] bank account for savings.
Members of the group are evaluated based on their credit history to ascertain their creditworthiness when they need a loan. Pastel, which runs on a free app, only started making revenue recently and does so by charging interest and a small fee on loans.