Maad: B2B e-commerce in Senegal

This interview was conducted and transcribed by Lara Fakhry.

Biography

Jessica Long is the co-founder of Maad, a Senegal-based logistics startup.

Maad modernizes informal retail for thousands of small shops that sell food, beverages and everyday household products. Retailers get access to an app with relevant services (wallet, accounting, ordering) while suppliers get access to a SaaS platform facilitating the distribution, marketing and analytics of the products they sell.

Last month, the company announced a $3.2M seed round.

Tell us about your background. How did you end up in Senegal?

I grew up in Chicago before studying symbolic systems and computer science at Stanford. I've been drawn to working in Africa for as long as I can remember. A family trip to Kenya left a strong impression on me; I remember visiting a local school and being struck by how different it was from my own. That sparked my desire to make basic services more accessible to people on the continent.

With that idea in mind, I studied French in high school and became an emergency medical technician (EMT) at university. While I pursued my passion for technology, I always felt that my contribution would lie in a combination of my health and language skills. After graduation, I found a job in a rural hospital in Burundi, helping them with IT matters. While I loved the job, I reached a point where I wasn’t growing professionally anymore.

So, I moved to San Francisco, where I became an early engineer at Airbnb and later at an AI start-up. I continued to look for opportunities to return to Francophone Africa, the Western part specifically. I eventually found a job with an American software company in Dakar, Senegal, and immediately fell in love with the city.

In Dakar, I started looking for ways to combine my humanitarian ethos with my tech skills. This led to the creation of Maad.

How did Maad come about? How did you meet your co-founders?

Maad is the brainchild of Karimou Ba, my best friend in Senegal. Karimou left an immediate, strong impression on me. He founded a startup called “Carapiles”, which made remote-controlled cars. Carapiles was innovative because the traditional, artisanal version of these toys were made of sharp metal materials that were dangerous for kids. He then worked for the DER, the entrepreneurship-focused Senegalese government agency.

Karimou and I left our jobs simultaneously. He introduced me to a university friend of his, Sidy Niang, and the three of us hit it off. We shared a vision of increasing local companies’ productivity through better access to data. We reasoned that empowering local companies, and therefore the local economy, would have a tangible impact.

Maad's initial product was on-demand, virtual focus groups. We recruited people throughout Senegal to respond to surveys addressing companies’ pressing questions. "Data is the new gold, and you should get paid for yours" was our motto.

When COVID hit, it got harder to physically recruit panelists. We took our software and turned it into a data collection platform for companies with internal field teams.

Then, you pivoted. Why?

Some of our clients, like Yellitaare (who sell milk and yogurt), O’Royal and Miya (who sell water) and Patisen (who sell cooking products) were using our software for distribution purposes.

We realized that products like water and dairy, which require specific storage and handling conditions, weren’t efficiently managed by existing distributors. Our clients had to build their own sales/distribution team, and used our software to coordinate them. We thought: what if distribution became our software’s core feature?

This coincided with an opportunity we saw in the informal retail sector, which represents about 40% of Senegal's GDP. These retailers (mom-pop shops, kiosks, open-air markets..) lacked digital tools (bookkeeping, mobile banking, accounting, CRM…) and business services (loans, insurance, on-demand delivery…).

Some startups were building these tools in other parts of Africa, but not in Senegal. We thought the concept could work here as well.

The Senegalese retail market has strong, local brands. This differs from Congo-Brazzaville for example, which is mostly reliant on foreign products. Local brands are sensitive to sales granularity. They want to know who they’re selling to, where, how dominant they are in particular regions… Importers care less about market development: if they reach saturation on a particular product, they can source another one. This need for “granular retailer reach” informs how we’re building Maad, in the Senegalese context at least.

We launched our product in September 2021 and quickly found product-market fit. Retailers started using our application and placing orders, confirming that we had tapped a real need. Local retailers were hungry for more efficient, reliable stocking services.

Last month, 8,000 retailers ordered from us. That's 40% of the FMCG retailers in Dakar and 15% in Senegal.

What does the Maad product look like today?

Maad connects small Senegalese retailers to suppliers. Our processes are fully digitized, from predicting orders to dispatching deliveries. We keep a comprehensive digital transaction history for each retailer, regardless of whether they order through our mobile app, call center or field agents.

When we launched Maad, retailers could only order through call centers and agents. The app was added about six months later. Our sales team, which physically visits retailers and acquaints them with the app, was crucial in its adoption.

The breakthrough came when we started sending SMS blasts on app-only deals for popular products, such as the “Pinton” sardine spread and 3X energy drinks. Availability in the Senegalese market fluctuates, so this strategy pushed retailers to adopt the app. Once they saw the benefits, they continued using it.

It may seem that the app is the innovation but streamlining the end-to-end ordering and delivery process is where we pioneered. The app just happens to be a great ordering channel for retailers.

Tell us about your suppliers. What’s in it for them?

At first not much, so we had to fight to get them on the platform. Now, I think the value is more obvious. We distribute to more points of sale than any other distributor in Senegal.

While we might not always be the highest volume seller (although we just surpassed Senegal’s largest grocery store as the biggest purchaser for one of our suppliers), we reach more locations and provide the best analytics. Suppliers can analyze retailers’ ordering data, informing them on their products’ market share evolution. We’re adding even more granular tools, such as what channels retailers order from, for suppliers to gauge the efficacy of their promotions for example.

How scalable is your model and what countries are you looking to expand to next?

There are two pieces to that question.

First, the distribution part: to what extent is that a core part of our business and to what extent can it be detangled from our other services (bookkeeping, mobile wallet, working capital loans)?

That question is secondary for now because we're seeing a ton of distribution growth and we still have more area to cover. Eventually, we will probably start to offer fintech services to retailers who don’t order from us. This will decorrelate some of our growth from the physical infrastructure induced by deliveries.

The model is super scalable in Dakar: we can drive to any part of Dakar in less than an hour from our warehouse. We could double our delivery volume tomorrow by leasing more trucks and hiring more drivers - our processes are ready.

We are planning to expand soon. That will either be to other parts of Senegal or to a second capital city: Abidjan in Côte d'Ivoire. Our model taking off in Abidjan would show its potential for Francophone Africa as a whole.

If we go to Côte d'Ivoire, we have to rebuild both our supplier partnerships and our infrastructure from scratch. If we expand within Senegal, we get to keep all of our supplier networks and our suppliers are interested in expanding nationally.

I think there's an interesting question for us: to what extent does going deeper into the Senegalese market unlock better, more lucrative deals and stronger partnerships with our existing suppliers? Should we truly dominate the Senegalese market before setting foot abroad?

How do you navigate the regulatory landscape and what changes or support do you expect from the Senegalese government?

Senegal has a decent regulatory climate. Value-added tax (VAT) is consistent at 18%. Most product prices are set by the market while some products have fixed prices, like sugar. It’s relatively easy to navigate.

Some informal suppliers want to produce receipts that don't have VAT on them to avoid paying it. On top of being illegal, this would bar us from declaring and deducting VAT from our own taxes. We can't work with some suppliers because of that, but they are a minority.

The Chamber of Commerce is wary of speculation on core commodities, which impacts the price of everyday goods. We’ve been talking to both suppliers and the Senegalese government about practices that would ensure fair pricing and prevent hoarding.

How can Maad be a hedge against commodity speculation?

Speculation happens when a buyer swoops up large amounts of a specific import and sells it at a mark-up price. We can mitigate that by limiting the quantity of a product an individual retailer buys.

The last time we did this with 3X Energy, in 2 days, we were able to sell 1 container of 3X to more than 1,000 retailers spread evenly across Dakar (as opposed to some neighborhoods getting all the access, at marked-up prices).

This applies to suppliers but works for the government as well. When a new shipment of a "first necessity" product comes into the country (particularly rice and oil), they can refer the importer to Maad to sell a part of that commodity. We will ensure that these products get to all parts of Dakar while avoiding crazy mark-ups.

Given the recent challenges other B2B e-commerce businesses face in Africa, why do you think Maad managed to secure funding?

Maad recently announced a $3.2 million seed round, which is significant given the challenging climate for B2B marketplaces, especially in Africa. The excitement for these models surged during the pandemic when demand was artificially high.

This led to a rush for market dominance by both companies and investors. You saw companies like Wasoko or TradeDepot raising phenomenal amounts and aggressively pursuing international expansion. At the time, everyone wanted to build up a regional portfolio. Now, that phase has passed and many are refocusing on core fundamentals.

Maad's approach was different. We operated in a capital-efficient manner with a small tech team (my co-founder and I essentially built the product), avoided lowering prices to attract customers and embraced an asset-efficient model by renting delivery infrastructure (warehouses and trucks).

This maintained good margins and controlled costs. We focused on carefully building our local supplier/retailer network, one that is highly valuable to customers and investors.

Do you have any proxies for success? Any startups in Asia/LATAM you’re inspired by?

In Asia, models like ours have been around longer. GrowSari in the Philippines scaled impressively despite the country’s logistical challenges (the Philippines is made up of 7,000+ islands). One of their co-founders is an advisor and invested in our seed round.

How do you differentiate yourselves from competition?

We focus on our unique market adaptation. This can heed off even well-funded competitors.

For example, Wasoko struggled to adapt their value proposition to the Senegalese market.

Why?

A telling anecdote: most of their product and category names were in English, when that isn’t a language spoken in Senegal. We found their prices to be too low and they focused on selling commodities, which sport lower margins (oil, rice, etc…). Their reliance on commodities drove good early GMV growth, but seems to have hindered their expansion into higher-margin products: tomato paste, mustard, pasta, vinegar… Processed products with lower selling volumes. We think they also expanded too fast, quickly opening a second warehouse in Thiès (another large city) without nailing Dakar first.

Many of your continental competitors operate in Anglophone Africa (Kenya, Nigeria…). What operational changes come with building in Francophone Africa?

Francophone Africa uses the CFA franc, which is pegged to the euro. This maintains a stable currency environment, lower interest rates and higher investor confidence. This stability is invaluable for our capital-intensive business. It provides a safe harbor from the currency depreciation that’s currently affecting other major African markets such as Nigeria and Egypt.

What exit paths do you envision?

It's a tough question. There are several large players in the ecosystem. I've always liked Twiga for its emphasis on fresh food in addition to FMCG products.

The idea of cornering (going all in on one specific geography) could be interesting to a regional player. So there's still the possibility of that acquisition, although as we get bigger, it's less likely.

We see confluences with companies like Alibaba and Amazon. Amazon just opened its first office in South Africa and is looking towards African expansion. Alibaba has always had a good presence in Africa. I believe highly calibrated, efficient deliveries to shops are the first step towards reaching consumers. We're already talking to them, and learning from them - I look up to any company that has high throughput warehouse operations.

Companies like Maersk are also potential acquirers. I think our value proposition for them would be quickly receiving, processing and delivering unmarked products from more “informal” suppliers (Maersk is used to working with large multinationals, who already support standard processes for packaging and palletizing products).

The throughput we manage is what's unique about our business. Last week, we delivered 100 tons just in big sacks of rice. It is a value-add to a storage expert like Maersk or mass retailers that want to come into a new market like Amazon or Alibaba. We are also a last-mile distribution arm that could be interesting for large multinational corporations like Nestlé, Coca-Cola and such.

How do you envision the future of Senegal’s tech scene?

I love Senegal's tech scene. In Silicon Valley, I never saw myself as a startup founder because there, people start companies more for fun, solving niche problems they want to dig into. In Senegal, the focus is on solving real, pressing issues to drive economic development, especially in logistics.

The current phase is about tackling these basic challenges, which is essential for future growth. Senegalese founders are deeply connected to these real problems, and that’s what’s driving innovation.

My hope is that current Senegalese startups are building crucial rails for the next generation. What Wave (mobile money) has built for example could be the base on which so many other services are sold. I look forward to seeing the phase two versions of the problems we’re solving currently.

The Realistic Optimist’s work is provided for informational purposes only and should not be construed as legal, business, investment or tax advice.

PSA: We’re back from summer break! The Realistic Optimist will now be posting one article a week, instead of two. We’re prioritizing depth over volume.

More, from the Realistic Optimist:

African B2B e-commerce is a terrible business. But a fantastic Trojan Horse.

Ismael Belkhayat • Dec 14, 2023

About this op-ed’s author: Ismael Belkhayat is the co-founder of Chari, a Moroccan B2B e-commerce startup he launched with his wife Sophia Alj. Chari was the first Moroccan startup to get into Y-Combinator and is active in three African countries (Morocco, Tunisia, and Ivory Coast). Prior to Chari, Ismael founded three other companies: Wib.co, VotreChauffeur.ma, and Sarouty.ma.

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