We are excited to return this week with the BIG5D Podcast. We apologize for the unplanned hiatus we have taken over the past few months with the podcast and newsletter. The pause was due to a health challenge on our team that required taking extensive time off to recover. We are now back to creating unique content about B2B tech in Africa and the Middle East.

We are also well into planning our 2023 BigFive Summit, which returns to Cape Town on 15-16 March at the Radisson Blu Waterfront Hotel. Please add “Africa’s leading small business technology event” to your diary.

Write to us at [email protected] to discuss participating in the Summit.

This week’s guest, Tyler Karahalios, who leads financial services at the B2B marketplace startup MarketForce, will also be a speaker at the BigFive Summit. In fact, this podcast series will lean heavily over the coming months toward featuring some of the most engaging 2023 Summit speakers. Karahalios, a California native and Stanford University graduate who fell in love with Kenya and Africa’s entrepreneurial environment, is among them.

Karahalios’s formal title is Global Head of Special Projects and Merchant Banking at MarketForce. The East African retail distribution platform was founded in Kenya in 2018 by CEO Tesh Mbaabu and CTO Mesongo Sibuti.

MarketForce enables African informal retailers to order inventory — mostly fast-moving consumer goods (FMCG) —- via their smartphones. And take delivery within 24 hours.

This category has become a game changer for informal merchants, who often have to go to warehouses at dawn in search of stock. Or often they are forced to close up shop midday to hunt for fresh inventory. Both are suboptimal processes, for both the health and bottom lines of the retailers.

MsarketForce’s position as a distribution resource for retailers makes it natural to layer on fintech solutions like payments, inventory finance, and more.

Enter Karahalios, who is the fintech person at MarketForce. Here is how she describes her role. “I lead financial services at Market Force, which is all of our inventory finance, digital wallet, payments, any sort of financial service you can think of, we're thinking about extending to our merchant network. So that's my work across all of our operating countries.”

She says MarketForce is building “a super app for retailers to help them operate and grow their businesses.”

Karahalios talks about two key differentiators at MarketForce. One is having an asset-light model (from the Uber playbook) — no warehouses, no trucks, etc.

The second is focusing on finding growth in second-tier cities. MarketForce operates in 20 cities in Kenya for example.

“We typically enter into a capital city where there's a lot of a lot of activity, but then we very quickly branch outside of that,” Karahalios said. “We actually find that the unit economics in the secondary cities can be more profitable than in the primary cities.”

Since its founding, MarketForce has raised $42.9 million (per Crunchbase). The bulk of the funding — $40 million — came in a Series A back in February this year.

MarketForce, based in Nairobi, now operates in five markets — Kenya, Nigeria, Rwanda, Uganda, and Tanzania.

MarketForce has also dealt with challenges common to tech companies in today’s cost-conscious environment. In August, we learned the company reduced its workforce by 9% as part of a restructuring effort.

The company currently has roughly 400 employees across all of its operating markets, according to Karahalios.

MarketForce also faces competition from a wide variety of companies across its operating markets, including TradeDepot, Wasoko, Sabi, and others.

We hope you enjoy the interview. You can also view a video version of this episode on our YouTube Channel.

Interview Excerpts

The following are a few excerpts from our conversation with Tyler. Please listen to the podcast or watch the video to experience the full interview.

Why Africa?

I was very fortunate. I went to Stanford University [located in Palo Alto, California, deep in Silicon Valley] for my undergraduate degree. And that's where I got immersed in the kind of entrepreneurship and startup ecosystem. The energy in Silicon Valley is palpable. And it was impossible not to kind of get drawn into that. And then I, throughout the course of my studies had done some work in South Africa, up into Tanzania. And that's where I first got some exposure to the opportunity across the African continent. So in 2016, I moved to Kenya, I received advice to follow the money and South Africa, Kenya, and Nigeria, basically, are the VC centers so so made moves out here and really fell in love with the startup and venture ecosystems [in Africa]. People are creating incredibly innovative products and solutions that move the needle in people's lives. And it was impossible not to want to be a part of it. So that's what's kept me here.

What is MarketForce today?

We partner with manufacturers and suppliers and make their products available on our platform. And then merchants can order those goods via our app and have reliable next-day delivery. And so we're really solving that core need of reliable convenient delivery of goods. There's a large pain point around merchants waking up at four in the morning to go to a wholesaler that may or may not have what they need. And so this just eases their operations quite a bit. And then on top of that we've layered on access to value added in financial services, to have a digital wallet and digital payments, Bill Pay services where they can sell airtime or electricity to the end consumer and earn extra income, and then inventory financing as well to support their cash flows and help them order more and sell more.

MarketForce aims to be a super app for retailers to help them operate and grow their businesses. What that looks like being a super app is first, meeting their core need of reliably ordering goods. Second has been adding on value-added services, like bill pay, and then financial services. And inventory financing. We're also seeing a ton of startups pop up around business operation tools. So things like bookkeeping, or inventory management, and consumer credit tracking. These are solutions that I can see us building to have it really be a one-stop shop for them to access whatever they need to operate and scale their small businesses.

Does MarketForce help informal retailers formalize their businesses?

We serve formal and informal retailers. And I think that varies pretty significantly by market. So in Rwanda, almost if not all of our customers are formally registered. Part of that has to do with the regulatory environment and the incentives around formalization. That varies largely by market. I can see us getting to the point where we support merchants in their journey to formalize. But right now, yeah, we're all-inclusive, we serve everyone.

What’s on the near-term horizon for MarketForce?

We're really looking at scaling up our inventory financing solution for merchants, which is very exciting to me. We'll also have a digital wallet and Bill Pay services live in all our markets relatively soon. It's active in Kenya, Nigeria, and Uganda at the moment. But there's a 2018 World Bank IFC figure that there's a $330 billion financing gap for formal SMEs across the continent…there's an incredible opportunity to provide MSMEs with financing solutions that meet their needs. And I think one thing that's really unique about market forces, traditional financial institutions tend not to serve this customer segment because they're too costly and too risky.

But that's not true for us. And because of our existing business model, we also have really unique data that no one has access to…their entire transaction history… It really de-risks lending when you're financing inventory, and have a whole new layer of history and data to make those decisions off of. So we're really, really excited to scale that up.

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