What Capiter’s co-founder Mahmoud Nouh learned from co-founding Swvl: B2B e-commerce marketplace Capiter recently made headlines for raising USD 33 mn in one of Egypt’s largest series A investment rounds. Officially launched in July 2020, Capiter brings a hybrid business model to the B2B e-commerce market combining the operations, marketplace and financing business models with technology, serving MSMEs across the food and beverage, FMCG and electronics sectors. Think of it as a marketplace where MSMEs can order inventory, obtain delivery, and access buy-now-pay-later (BNPL) financing facilities via one single platform.

The company was co-founded by Mahmoud Nouh (LinkedIn), one of the brains behind Swvl, the homegrown mass transport startup heading for its very own SPAC-driven public listing on the Nasdaq.

We sat down for a chat with Nouh, who is still a shareholder at Swvl and is now Capiter’s CEO, to talk about what he learned from his time at Swvl and how it helped him build Capiter.

Edited excerpts from our conversation:

“I'm very grateful and proud of my Swvl journey,” Nouh says, dubbing it as a “turning point” in his life. The lessons he learned at Swvl are now acting as the foundation for his work at Capiter today, he adds. “Now, I can build something with a much more stable structure that can scale faster.”

Capiter addresses a local market worth USD 120 bn. The retail industry controls 87-90% of the economy, Nouh explains. “Egypt has 1.9 mn merchants and SMEs at a market size of USD 120 bn. When looking from Morocco to Pakistan, this number jumps to USD 500 bn,” he tells us. When you look at the market, 70-80% of merchants are underserved, because they either do not have the access to financing or are in remote areas where accessibility to products is more scarce, Nouh says. Additionally, when a product is manufactured, it passes through 4-5 players in order to reach a merchant.

The company tackles these issues through three business models: Retail operations, marketplace and credit. This means MSMEs buy products from sellers and stock them at Capiter’s leased warehouse to then be delivered to merchants via third-party fleets. The company also lists the sellers’ products on the platform and delivers on their behalf. Finally, it offers a credit-based BNPL model, where high-value merchants can access financing facilities in partnership with local banks and financial institutions.

It brings reliability to the market by owning the network and technology of the supply chain. “On the merchant side, we lift the burden of having to call 40-50 suppliers a day to ensure product delivery and having to wait for liquidity due to the lack of financing options,” Nouh says. “On the seller side, we solve the issue of reach to merchants and make the supply chain more cost-effective by optimizing its technology cost.” Through Capiter, manufacturers and sellers also see where the product eventually ends up, which helps them with their go-to-market strategy and identifying their market share.

Capiter has been consistently growing 30x month-over-month since its launch, Nouh says. Today, it has more than 70k merchants on its platform, 10 fulfillment centers, 1.5k white- and blue-collar workers, and is operating out of seven cities in Egypt. Transactions have exceeded hundreds of thousands of EGP a month, and the company is expecting to be present in 9 cities by end-2021, Nouh says.

And now it’s on track for cross-border expansion: “By the beginning of 2022, we will be operating outside of Egypt and we are also aiming to add one or two verticals under our umbrella every quarter to cover everything from construction materials to furniture over fashion by the end of next year,” he adds.

Biggest lesson learned at Swvl: Hiring a team that has built something similar before can go a long way. “We don’t need to re-innovate or reinvent the wheel. Everything has been done before, so all you need to do as a company is bring in people who have done this before and localize the product or service for a different geography and culture,” he says. Capiter employees come from eight different countries and have worked in places like Amazon and Flipkart.

Structure is equally important. Having a clear structure in place that allows people to grow contributes to the culture of the company, Nouh tells us. This is crucial for talent retention and determines how a team will communicate and the employees’ career path, he adds.

Swvl was always reminded that there were bigger, better fish in the sea. Bigger companies had launched their bus-reliant business models while Swvl was starting out, including Uber and Careem. “We’ve had to listen to people tell us several times a day that we would be crushed by the competition,” Nouh says.

But fierce competition is a good sign and brings more awareness and education to the market. Egypt’s B2B e-commerce arena has been witness to the rise of numerous startups, racing to solve supply chain dilemmas through technology, creating a very competitive space. But the concept in itself is still new to the market, and requires diligently raising awareness and educating the market. “This helps us grow faster and keeps us on our toes,” Nouh says. He expects to see consolidations (read: M&A) take place in the future, as startups will start to cluster up to create more powerful entities.

Investor portfolio diversification is key. “We have a very diverse investor list and that’s one of the things I’ve learned at Swvl: To choose investors that will propel you forward,” he says.

And although the availability of capital has increased in past years, raising finance hasn’t necessarily become easier. “Fundraising will always be tough, no matter how many books you read or for how many companies you’ve done it before,” he tells us. Although post-seed investment rounds are bigger today than they used to be, competition among companies and investors is much higher, adding a level of difficulty to the already hard process, according to Nouh.

But the ticket sizes have noticeably increased: 2021 in particular has seen several huge investments, including a blockbuster USD 120 mn round by MNT-Halan, which may be the largest-ever fintech round in the MENA region.

MENA still needs more growth capital funds. Raising at the seed stage is very easy, and it gets harder at series A, but it gets very difficult when looking at series B, he explains. When looking at the region, there are about three investors in that space, of which one is kind of active, so eventually, startups need to raise from funds abroad, Nouh adds.“There are a couple of initiatives in that regard, but investors really need to double down on the growth stage funds, because this is what you need to build the economy,” he says.

Capiter has long-term plans to go public, hopefully within the next five years, Nouh tells us. By that time, it plans to be operating across tens of countries in the MENA region. “We’re also always on the lookout for potential M&A, because we believe that this will better shape the market,” he concludes.