LAHORE: Lahore-based B2B fresh produce marketplace Tazah Technologies has raised an additional $4.5 million in its pre-seed extension round, bringing the total pre-seed raise to $6.5 million.
Tazah’s initial pre-seed tranche of $2 million was raised in October. The extension round was co-led by Pakistan’s Fatima Gobi Ventures (FGV) and US-based Vibe Capital.
The round was joined by Shorooq Partners, Nuwa Capital, Ru-net, Alter Global, Julian Capital, Kinnow Capital, Early Grey Capital and K3 Fund. The round also had participation from Silicon Valley based angel investors including Sahil Bloom, Siqi Chen, Matt Brezina, among others.
For Nuwa Capital, one of the largest funds in the Middle East, this will be their first investment into Pakistan. Existing investors including Global Founders Capital, Zayn Capital, i2i Ventures and notable angels also reinvested in the round.
Profit has seen internal documents and can confirm the $4.5 amount raised in the fresh round.
According to the Pakistan Bureau of Statistics (PBS), the agriculture sector is the largest, contributing around 24%to the country’s gross domestic product and accounting for half of the employed labour force. In a primarily offline farmer to retailer agri supply chain, fresh produce such as fruits and vegetables from farms are sold by farmers to middlemen, who then sell it to wholesalers. Individual retailers buy from wholesalers at a price inflated because of the margins earned by the two actors: middlemen and wholesalers.
Retailers then sell it to end consumers, deciding their margins based on the location they are selling at.
The massive hike in price from farm to retailer happens because of multiple actors taking cuts in the form of margins at each stage these products are traded. There are multiple points of handling and logistics for goods that are perishable in nature.
The handling and deliveries are done through an inefficient and archaic infrastructure which adds to the costs, increasing the prices further. It also leads to post-harvesting wastage and affects the quality of the products which are perishable in nature.
Middlemen and wholesalers are the ultimate winners since they are able to exploit farmers and enjoy better margins. Whereas farmers lose on these margins while relying on predatory loan sharks to finance their working capital requirements.
On the other hand, the retailer has to pick fruits and vegetables from wholesalers at the start of the day at rates that fluctuate daily. The product quality is also not top-notch because of the inefficiencies in the supply chain.
The end customer naturally suffers in terms of the prices he has to pay for staple vegetables and fruits that have a very low price at the beginning of the supply chain. In quality terms as well, the retailer and eventually the customer is paying a high price for a product that has lost on quality by the time it reaches these stakeholders.
Founded in August 2021 by two ex-Careem executives Abrar Bajwa and Mohsin Zaka, B2B marketplace Tazah aims to solve these problems by connecting farmers directly with fruit and vegetable retailers, eliminating the traditional middlemen and wholesalers. In turn, the prices at which retailers are able to buy from farmers are better.
Tazah also has parallel storage and delivery service through which it is able to deliver directly to the retailers instead of them having to go out and buy at the beginning of the day, and the product quality is also better.
The startup claims that since their launch, they have been able to hit an annualized gross merchandise value (GMV) of $7 million. Headquartered in Lahore, the startup has expanded operations into Karachi with another city launch in the pipeline.
The B2B agritech space is heating up, with one of Tazah’s competitors, Jiye Technologies, raising $2.5 million in pre-seed funding yesterday. On how Tazah plans to stay ahead in this market, Abrar Bajwa, co-founder of Tazah said that it all depends on the ability to execute.
“It is a hard space and there are challenges of execution on every scale. It is going to get difficult to execute at scale and we believe that we have the best team to scale quickly,” said Abrar Bajwa, co-founder of Tazah.
On future plans, Abrar said: “With the technology and talent pedigree that we are building, we believe that expanding into regional markets with similar dynamics is a logical move.”
Besides using the funds for expansion, the startup also plans to diversify its offerings and deploy financial products for farmers and retailers.
Tazah claims to have realised a high rate of month-on-month customer retention, with many users being return customers and exhibiting a subscription-like ordering frequency very rarely seen in other industries.
Mohsin Zaka, Co-Founder of Tazah, said: “Our experience of leading large national teams and growing complex marketplaces has helped us tremendously in quickly scaling our business and building the capability to manage multi-city operations. We have also built a very strong founding team by acquiring the best talent from different industries.”
Ankur Nagpal, Founder of Vibe Capital said, “It’s inevitable that this business should exist. It’s a very inefficient supply chain at the moment, and Tazah streamlines it.”
“The company is growing really fast and on track to hit eight figures in annualized GMV in the next couple of months and that still represents a very small percentage of the overall market. What we are most excited about is the ability to build additional products (particularly financial products) for this market. For instance, Tazah is in a great position to start extending lines of credit to their business buyers that they pay off after reselling the inventory,” he said.