80% of Nigeria’s 40 million micro, small and medium enterprises (MSMEs) fail to last beyond their fifth year, owing to a lack of digitisation and sub-optimal business practices. 3 graduate students at Stanford University: Abuzar Royesh, Olamide Oladeji, and Izunna Okonkwo, are trying to solve this problem through their startup, Pastel. They’ve just raised $5.5 million to do that.
Pastel’s $5.5 million seed round was raised by pan-African VC firm TLcom Capital with participation from Global Founders Capital (GFC), DFS Labs, Ulu Ventures, Plug and Play, Golden Palm Investments, and Soma Cap. This round follows a $620,000 pre-seed round the startup raised in 2021.
Pastel describes itself as a business management solution provider. Its founders met in school and realised that they all had a common goal to solve the pain points of small businesses in emerging markets. MSMEs in Nigeria, for example, are valued at over $200 billion and so the trio focused on Nigeria’s expanding MSME market. They launched first in Lagos as SabiCash, where they launched Sabi bookkeeping app, their flagship product.
SabiCash, which was officially rebranded as Pastel, enables small businesses to closely monitor transactions, manage customers, evaluate cash flow and handle debt. By bringing small businesses online and digitising their practices, Pastel hopes to eliminate the hurdles associated with time-consuming and outdated bookkeeping practices. According to Okonkwo, the Sabi bookkeeping app recorded over 100,000 merchant sign-ups by the end of 2021 and currently has over 45,000 active merchant users.
Pastel’s suite of products include Quick Receipt, a simple invoicing and receipt tool with over 60,000 current users, and Pastel Financing, an arm of Pastel that focuses on providing digital financial solutions for MSMEs. One of such solutions is the Swift Money app in the company’s pipeline. When launched, the Swift Money app will focus on digitising the Ajo system, a popular traditional savings scheme in Nigeria.
Speaking to TechCrunch on why the company chose to adopt a multi-app strategy rather than build a super app as is more common with their competitors, Okonkwo said:
“Our thought process was to get traction quickly by solving a merchant’s pain point with a free and easy solution. The next step was to capture value. So we added value capture features to the Sabi app that our customers love. Now we are building a lot more.
“The way we’ve thought about it is: as opposed to creating a super app that a lot of other fintechs have or are in pursuit of, we are taking a more platform approach, meaning that any Pastel user can create an account with any of our apps. With the same login they can access all the other solutions that we’re providing.”
In a statement shared with TechCabal, Pastel said that it will use the raised funds to expand its product offerings by creating new features and tools around group savings, loans and payments for SMEs in Africa.