African traders face many challenges when it comes to international shipping, ranging from logistics and customs to hidden and excessive fees†
Digital freight forwarders on the continent have grown to address these supply chain issues† Somehow they take on the likeness of an $8 billion company and an industry leader in cargo space, Flexport; some have called themselves the “Flexport for Africa”†
Recently graduated YC Topship is one such startup, raising a $2.5 million seed round months after closing its recent YC winter batch. Flexport is the main investor. Other lenders include Y Combinator, Soma Capital, Starling Ventures, Olive Tree Capital, Capital X and True Capital† Individual investors in the round include Immad Akhund, CEO of Mercury and Arash Ferdowsi, co-founder of Dropbox.
Topship was founded in 2020 during the pandemic when co-founder and CEO Moses Enenwali noted an increase in merchants’ needs to ship parcels and freight outside of Nigeria† He had built relationships with these merchants after his time at logistics company ACE Logistics and e-commerce fulfillment provider Sendbox. While demand was stable during his time with both companies from 2015 to 2020, this was different†
“The world closed, but there was a high demand for stuff and at the same time the demand for international shipping increased. So I thought, “this is interesting.” it was not a company like us only helped these people move things around like a messy little hustle,” Enenwali told businesstraverse.com during a phone call.
Globally, about 60% of air cargo is flown in the belly hold of passenger flights, which is one reason why air cargo shipping is easier to some extent to start with sea freight† For Enenwali it made even more sense to go this route as passenger planes flew half empty for most of 2020. After months of repeating, Topship went live in March 2021 with Junaid Babatunde as CTO.
Topship says it aims to create the easiest way for African companies to export and import parcels and freight to their customers, suppliers and distributors around the world† the company and sSimilar players such as Sote, SEND and OnePort365 are looking to improve the overall shipping experience in Africa. However, the expectations of Topship are quite high; 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 goneThe only factor that could work in his favor is the focus on air freight, while others are exploring a combination of air, sea and truck transport developed by Flexport.
CEO Enenwali argues that while African startups, including his, are taking some cues from Flexport’s script, he thinks Africa isn’t ready for the unicorn model, which is super heavy for ocean freight transportation.
“The reason the Flexport model wouldn’t work here is that it heavy invested in ocean freight and we don’t have enough ports on the continent. For example, in Nigeria, we have one function port and in order to operate sea freight, we need ports, railways and roads for freight transportation. But we don’t have the roads and we don’t have the railways,” the CEO said, giving reasons why Topship doesn’t engage in ocean freight.†
“It is difficult to connect the continent with sea freight. Flexport’s business model makes a lot of sense even with the way they handle issues aggressive, and I love that. But for Africa we have to adapt it to the use case here. So what we’ve seen is the way to connect the continent by air. Every country and major city on the continent has a functioning airport, and airlines fly daily to all those airports.”
Topship caters to a wide range of users. From a merchant moving tons of heavy equipment to a solo entrepreneur shipping packages to a student sending documents to a school abroad and a Gen Z shopping in a foreign store, Topship is a cross-border local and international shipping solution between digital freight and e-commerce fulfillment† Flexport has supported several African companies from both categories such as Trella, Flextock, ShipBlu, Sendbox and Freeterium†
According to Enewali, Topship enables 1,500 merchants to transport cargo and parcels from Nigeria to more than 150 countries. While it can help Nigerian merchants to receive parcel deliveries from the other side, they can only accept freight deliveries from US, UK and China†
The company’s revenues come from selling shipping insurance and taking margin on transactions. Enewali said the company is exploring other revenue streams, including trade finance and customs clearance fees† The company has posted ~50% month-over-month revenue growth since entering YC in January.
†I think what YC does more than anything is only pushing you to dive as deep as you can into understanding your users,” said the CEO of Topship’s revenue growth after YC† As we look to the future, much of it stems from that ethos of the user is the most important piece of the puzzle, and we have to be obsessive about it. We’re taking all the lessons and insights we’ve learned from our users over the past five or six months and incorporating it into the product in a merchant-oriented manner†
Late last year, trade groups from Ghana, Tanzania and Kenya invited Topship to probe the possibility of launching in their respective markets. Enewali said this new funding gives Topship the pockets to go ahead and start operations there. The CEO said part of the investment would improve its asset-light technology and build its own global shipping infrastructure to make imports and exports significantly faster and easier.
Topship has also set aside some money in fashion design and retail scholarships worth $3,500 each to reward new and established fashion brands in Nigeria as a sign of “supporting the future of the growing e-commerce industry” in the country.
