African traders face many challenges regarding international shipping, ranging from logistics and customs to hidden and excessive costs.
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”.
Topshop, a recent graduate of YC, is one such startup, raising a $2.5 million seed round months after closing its current YC winter batch. Individual investors in the round include Immad Akhund, CEO of Mercury and Arash Ferdowsi, co-founder of Dropbox. Flexport is the main investor. Other lenders include Y Combinator, Soma Capital, Starling Ventures, Olive Tree Capital, Capital X, and True Capital.
Topshop was established in 2020 during the pandemic when co-founder and CEO Moses Enenwali noticed a surge in merchants’ need to ship parcels and freight outside Nigeria. He had built relationships with these merchants after his time at logistics company ACE Logistics and e-commerce fulfillment provider Sandbox. 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 wasn’t a business back then because we were helping these people move things around like a messy little hustle,” Enenwali told blog line during a phone call.
Worldwide, about 60% of air freight is flown in the belly of passenger flights, which is one of the reasons why air freight shipping is, to some extent, easier to get started than the ocean 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 iteration, Topship went live in March 2021 with Junaid Babatunde as CTO.
Topshop says it aims to create the easiest way for African companies to export and import parcels and freight to their customers, suppliers, and distributors worldwide. The company and similar 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 one factor that could work in its favor is its focus on air freight, while others are exploring a combination of air, sea, and truck transportation, a pioneering role Flexport has developed.
CEO Enenwali argues that while African startups, including his, are taking some cues from Fl export’s script, he doesn’t think Africa is ready for the unicorn model, which is super heavy for ocean freight transportation.
“The Flexport model wouldn’t work herebecauset there is a lot of investment in sea freight, and we don’t have enough ports on the continent. For example, in Nigeria, we have one functional port, and 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,” says the CEO, giving reasons why Topshop does not deal with ocean freight.
“It is difficult to connect the continent with sea freight. Flexport’s business model makes a lot of sense, even if they approach issues aggressively, and I like that. But for Africa, we must adapt it to the use case here. So we’ve seen that the way to connect the continent is by air. Every country and major city on the continent has a functioning airport, and airlines fly daily to all those airports.”
Topshop 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 ecommerce fulfillment. Flexport has supported several African companies from both categories, such as Trella, Flextock, ShipBlu, Sandbox, 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 the US, UK, and China.
The company’s revenues come from selling shipping insurance and taking a margin on transactions. Enewali said the company is exploring other revenue streams, including trade finance and clearance fees. The company has posted ~50% month-over-month revenue growth since entering YC in January.
“I think YC does more than anything, just push 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 the ethos that the user is the most important piece of the puzzle, and we need to be obsessive about it. We take all the lessons and insights we’ve learned from our users over the past five months or six months and build them into the product in a way that’s targeted at merchants.”
Enewali said this new funding provides Topship with enough depth to go ahead and start operations there. In addition, part of the investment would upgrade its asset-light technology and build its global shipping infrastructure to make imports and exports significantly faster and easier, he said. Late last year, trade groups from Ghana, Tanzania and Kenya invited Topship to probe the possibility of launching in their respective markets.
Topshop has also set aside some money in fashion design and retail grants 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.