Capiter’s Marwan Elshayeb, Co-founder/COO Ahmed Nouh, Co-founder/CEO Mahmoud Nouh, Hassan El-Tahan

WHY WE INVESTED

How Capiter brought Quona into the Egyptian Fintech Market

Advanced tech, a growing economy, and smart regulatory developments make Egypt an ideal fit for Quona’s MENA expansion.

The Egypt-based ride share startup Swvl became another unicorn startup this thriving ecosystem could claim when it announced this summer plans to go public in a $1.5 billion SPAC merger. So last July when its co-founder Mahmoud Nouh decided to branch out and start Capiter, a B2B marketplace that brings fast-moving consumer goods, wholesalers, and merchants onto one platform, it wasn’t a far-cry to expect him to knock it out of the park again. Swvl has served not only as a use case for what is possible in the tech space across Egypt, it has also helped get the momentum going for a country ripe for innovation. “When you have a successful tech company that attracts foreign investors and you spawn off a bunch of other entrepreneurs, it’s like a hummingbird pollinating multiple flowers,” says Monica Brand Engel, co-founder and Managing Partner at Quona Capital.

In September, Quona co-led a series A investment of $33 million into Capiter, adding Egypt to its existing MENA portfolio. With a population of 110 million, 30 percent of which is under the age of 15, Egypt is on track to become the seventh largest economy in the world, growing at a 7% annual rate. It’s a country not only quickly expanding, but also poised for tech innovation.

Why Egypt? Why now?

But at the crux of every business investment is the seed of an idea and a team committed to seeing it through. For Capiter, that focus has been clear from the start, in large part, because of its seasoned founder. “He’s made his money. He has had his success with Swivl,” says Engel. “He’s doing this because he wants to have an impact on the ecosystem. That’s very much aligned with Quona’s vision.”

Serving an unmet need

It’s a challenge SMEs in emerging markets across the globe are faced with. “The retail industry represents more than 90 percent of the economy in emerging markets,” says Nouh. “There are 1.87-million SME merchants in Egypt alone and the market size is $120 billion.” Because SMEs are caught in the middle of the supply chain between suppliers and consumers, they are left with little buying power.

Nouh understood that whoever is able to control the middle layer of the supply chain, would maintain more control over what’s happening on the consumer side. His goal with Capiter, which launched in Cairo in July 2020, was to connect suppliers and buyers of consumer packaged goods to significantly streamline the supply chain. “If you want to launch a consumer payment product, whoever is controlling the merchants is the one who is going to win because they’re going upward and downward to manufacturers and consumers,” he says.

Capiter addresses challenges across the supply chain for both sellers and buyers. On the seller side, it is able to offer reach, automation, and price transparency. Because commodities are cheap and costly to ship, companies selling them lose on delivery costs. Capiter is able to circumvent this problem with aggregation to help save on costs. The platform is also able to connect sellers with far more retailers than they could otherwise connect to on their own, increasing their purchasing power.

On the buyer side, Capiter addresses the challenge of access to financing and price transparency by offering a buy now, pay later model previously unavailable to SMEs in Egypt. SMEs are able to use Capiter as a one-stop-shop where they can order inventory and have it delivered and by qualifying for financing, they are also able to choose a buy now, pay later model that enables them to purchase on credit.

A data-driven approach

What’s more, Capiter is able to offer consumers an automated buy now, pay later option because of the advanced algorithms built behind its scoring engine that measure behavioral analytics data points of participating merchants. By aggregating and examining various data points including the number of SKUs, average revenue, and location, Capiter develops a credit limit score for each merchant that goes up or down based on their behavior on the platform. Once orders are out for delivery, real-time data is used to let dispatchers know the size, weight, and routing of each order.

A hybrid model

Capiter buys and delivers 70 percent of its inventory directly from sellers and acts as a marketplace for the remaining 30 percent of inventory, listing sellers’ products. That hybrid model helps safeguard the supply chain in the event of inevitable disruptions. “We want to scale very fast and it’s impossible to scale everything,” says Nouh. “Using suppliers as your warehouse ensures a high scalability.”

Goals for future growth

This year, Capiter has plans to launch in nine more cities across Egypt and will expand to North Africa and the Gulf Cooperation Council — which includes Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and the United Arab Emirates — at the start of next year. The company also plans on expanding its verticals to include more SKUs like electronics and will be growing its financial services to offer B2B payments between manufacturers and retailers. “We are building a network of buyers and sellers and giving more value-added services to them,” says Nouh. “That’s the network effect. You build a network and then you leverage the effect on it.”