In a significant move, an African B2B e-commerce startup has announced a workforce reduction of approximately 20%, impacting around 50 employees. This decision comes as the company transitions from its initial retail-centric model to concentrate on the burgeoning sector of commodity exports, which has shown promising growth potential.
The layoffs, confirmed by the company on Thursday, are part of a strategic restructuring aimed at reallocating resources to meet the increasing demand for traceable and ethically sourced commodities. This pivot is part of a new initiative called TRACE (Technology Rails for African Commodity Exchange), which the company began developing last year.
Founded in Lagos in 2020, the startup initially served as a software platform designed to assist informal retailers in digitizing their inventory and sales processes, especially during the disruptions caused by the COVID-19 pandemic. Over time, it expanded into a fast-moving consumer goods (FMCG) marketplace, integrating financial services and scaling its operations across Nigeria and Kenya. By mid-2023, the company boasted a network of over 300,000 merchants and achieved an impressive annualized gross merchandise volume (GMV) of $1 billion.
This growth trajectory enabled the startup to secure a substantial $38 million in a Series B funding round, reaching a valuation of $300 million. However, like many of its peers in the African B2B e-commerce landscape, the company encountered several challenges, including narrow profit margins, high capital requirements, and difficult unit economics. Unlike competitors that aggressively spent their capital, the startup adopted a more sustainable, asset-light approach, maintaining profitability even amidst market fluctuations.
In March, the company launched TRACE as a new business line alongside its FMCG operations. This new vertical focuses on exporting minerals and agricultural products, such as lithium, cobalt, tin, and cash crops, which are increasingly sought after by global buyers who prioritize transparency, environmental, social, and governance (ESG) compliance, and traceability.
Currently, the startup exports over 20,000 tons of these commodities each month to clients in the U.S., Europe, and Asia. Additionally, it has expanded its operations into the U.S. market and made key senior hires to bolster this growth.
In a recent statement, the company expressed its commitment to evolving its business model, stating, “We are entering a new chapter with a focused dedication to commodity trade and traceability for our global customers. We are intensifying our efforts in the areas of our business that are experiencing the highest demand, building on the solid foundation we have established since 2021 by supporting African merchants and their growth. To align with this momentum, we have made the challenging decision to restructure parts of our team.”
This transition highlights a broader trend within the African informal commerce sector, as companies seek sustainable growth. The startup’s evolution into a player in global trade infrastructure demonstrates that it is possible to achieve higher profit margins and clearer paths to profitability, albeit with the potential for internal restructuring, as evidenced by the recent layoffs.