African merchants encounter many challenges when it comes to international shipping, ranging from logistics and customs to hidden and excessive charges.
Digital freight forwarders on the continent have grown to tackle these supply chain issues. In some way, they are taking after the likeness of an $8 billion company and a market leader in the freight space, Flexport; some have dubbed themselves the “Flexport for Africa.”
Recent YC graduate Topship is one such startup, and it has raised a $2.5 million seed round months after concluding the recent YC winter batch. Flexport is its lead investor. Other backers include Y Combinator, Soma Capital, Starling Ventures, Olive Tree Capital, Capital X and True Capital. The individual investors in the round include Immad Akhund, Mercury CEO and Arash Ferdowsi, co-founder of Dropbox.
Topship was founded in 2020 during the pandemic when co-founder and CEO Moses Enenwali noticed a surge in merchants’ needs for shipping parcels and cargo outside Nigeria. He had built relationships with these merchants following his time with logistics company ACE Logistics and e-commerce fulfilment provider Sendbox. Though demand was steady during his time with both companies, from 2015 to 2020, this was different.
“The world was shutting down, but there was this high demand for stuff and demand for international shipping was going up simultaneously. So I was like, “this is interesting.” It wasn’t a business then as we just helped these people move stuff like a scrappy, little hustle,” Enenwali told BlueHillco over a call.
Globally, about 60% of air cargo is flown in the belly hold of passenger flights, which is one reason shipping air cargo is more straightforward to start than ocean cargo. For Enenwali, it even made more sense to go through this route because passenger planes flew half empty for most of 2020. After months of iteration, Topship went live in March 2021 with Junaid Babatunde as CTO.
Topship says it wants to create the easiest way for African businesses to export and import parcels and cargo to their customers, suppliers and distributors worldwide. The company and similar players such as Sote, SEND and OnePort365 want to improve the overall shipping experience in Africa. However, Topship’s expectations are pretty lofty; 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 one factor that might work in its favour is its focus on air cargo even as others explore a mix of air, ocean and truck haulage pioneered by Flexport.
CEO Enenwali argues that while African startups, including his, take some cues from Flexport’s playbook, he doesn’t think Africa is ready for the unicorn’s model, which is super-heavy 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, giving reasons why Topship doesn’t involve itself with ocean cargo.
“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 caters to a wide range of users. From a merchant moving tons of heavy equipment and a solo entrepreneur sending parcels to a student mailing documents to a school abroad and a Gen Z shopping from a foreign store, Topship is a borderline local and international shipping solution between digital freight and e-commerce fulfilment. Flexport has backed several African companies from both categories, such as Trella, Flextock, ShipBlu, Sendbox and Freeterium.
According to Enewali, Topship allows 1,500 merchants to move cargo and parcels from Nigeria to more than 150 countries. Although it can help Nigerian merchants receive parcel deliveries from the other way round, they can only accept cargo deliveries from the U.S., the U.K and China.
The company’s revenue comes from selling shipping insurance and taking a margin on transactions. Enewali said the company is exploring other revenue streams, including trade financing and customs clearance charges. The company has recorded ~50% month-on-month revenue growth since getting into YC this January.
“I think what YC does more than anything is just push you to dive as deep as possible in understanding your users,” said the CEO about Topship’s revenue growth after YC. 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.”
Late last year, merchant groups from Ghana, Tanzania and Kenya invited Topship to gauge the possibility of launching in their respective markets. Enewali said this new funding provides Topship with deep enough pockets to follow through and start operations there. In addition, a portion of the investment would improve its asset-light technology and build out a proprietary global shipping infrastructure to make imports and exports significantly faster and easier, he said.
Topship has also set aside some money in fashion design and retail grants worth $3,500 each to award new and established fashion brands in Nigeria as a sign of “support for the future of the growing e-commerce sector” in the country.