Shopping for clothes in Kenya often means a trip to a large, open-air market where people sell goods from stalls and tarps. It can be fun, but it can also be frustrating. For shoppers, clothes and goods may be expensive because they have to make their way through too many middlemen. And for sellers, too little of the profits end up in their own pockets. Most operate informal, cash businesses, so they don’t have the records they need to get a loan, formalize, and grow.
Sabrina Dorman and William McCarren are working to change this. These two e-commerce veterans with experience in Europe and East Africa co-founded Zumi in 2016. The company connects apparel wholesalers and retailers in a transparent, affordable marketplace, but its secret sauce is embedded financing.
“By putting an informal retailer online and formalizing her business, we can then evaluate her for credit,” says Dorman. “And then, when we apply capital into her business, she gets out of this cycle of subsistence retail. She can start buying more and selling more, opening up a new shop, paying for school fees, paying for medical bills. And that’s where we think Zumi is really a special business. It marries business and finance, and that really can unlock growth for retailers in this market. It has a huge impact just by the nature of the model.”
Now, Prosper Africa is working with Zumi to help the company identify investors and complete its Series A fundraising round. The company is newly listed on the Prosper Africa Virtual Deal Room, an online match-making platform for businesses and investors in Africa and the United States.
We spoke to Dorman about why she is seeking investment now and the opportunities she sees in East and West Africa.
This interview has been edited for length.
Why did you start Zumi?
Sabrina Dorman: The idea for Zumi came from an experience I had shopping for clothing in Kenya. I was at the Toi Market, an open-air market in Nairobi. I found a pair of ballet flats from Forever 21, and when I went to buy them, they were twenty dollars. And I thought: that’s almost the same price I’d pay for them, brand-new, in New York City. It got my mind spinning, thinking that the supply chain here must be broken.
My co-founder and I started digging into the “why.” We sent runners into the wholesale markets to follow brokers around, and when we mapped the supply chain, we realized how fragmented it was and how many unnecessary middlemen were adding costs.
So, we started Zumi. It is an e-commerce solution for the apparel supply chain, focused on cost efficiency and embedded financing. We pivoted the business a couple times until we landed on the model that has really catapulted us into growth—the model we think is the right one to scale across the continent.
How did you learn about Prosper Africa?
Dorman: I found out about Prosper Africa through several different networks, actually. I’ve been to a couple of events here in East Africa, focused on investment. I heard about it over the dinner table with friends. Eventually, it became clear that Zumi was a good opportunity for Prosper Africa. Now we are up on Prosper Africa’s Virtual Deal Room, and we’re looking forward to speaking with people in the U.S. who are interested in business here in Kenya and particularly in Zumi.
Why are you seeking additional investment for your business now?
Dorman: We’re planning on raising our Series A towards the end of 2021. We’re raising between four and five million dollars, and it’s to support our expansion beyond Kenya, first into Tanzania, Uganda and the East African bloc, and then we’ll follow that up with West Africa.
Over the last 18 months, we have proven the replicability of our business model. We’ve proven our unit economics. We’ve shown how to unlock efficiency with our tech. And, we’ve also shown how to unlock growth in our customers with financing and access to credit. So, really the use of our funds for our Series A is to expand those things on all levels in order to drive us into hypergrowth.
Once we complete our Series A, we will obviously want to grow very fast. So, we are looking for an investor with networks of experts that can help in our business – whether that’s people in the apparel sector or manufacturing or the circular economy. We also want investors who will be our cheerleaders in our next fund raise—who can unlock further financing through their network.
And from my side as a founder, I need to have a personal relationship with that investor as well. At an early stage, it’s about knowing the founder, knowing the investor, trusting that you can go to the investor for support, trusting that the founder is going to figure things out when things get tough. That relationship is important.
Why should more investors be looking at Africa?
Dorman: I think that’s an easy one. It’s growth. All you have to do is look at the macroeconomic factors and some of the infrastructure factors here on the continent. You have internet penetration growing. You have mobile phone use growing. You have populations growing. You have more education. And so, just all of these metrics together, if you can put a business model in place that is adaptable and resilient, you can win and you can really ride the wave of this growth and build a great business. So in my opinion, this is the perfect time to invest in Africa because the only way is up.
Do you have any advice for investors who may be new to this space?
Dorman: I think it’s incredibly important for anybody who’s investing to really understand the context of these markets. They’re changing quite rapidly, so the businesses that you’re investing in need to be dynamic and adaptable. And then, to understand that Kenya is different from Nigeria is different from Zambia is different from South Africa. You have to really understand where each of those markets is. How risky are they? What changes from year to year with regards to technology, with trade agreements, with elections and politics?
For an investor with a certain risk appetite and longevity of how long they can invest, these markets are really great and really interesting. There is a certain amount of risk, but the reward is great. You have a huge amount of growth and a huge amount of tech disruption that’s happening in these markets. And so, there really is a huge opportunity for upside if you’re comfortable with the risk side.
Visit Prosper Africa’s Virtual Deal Room to get connected to Zumi and investment-ready companies across Africa.
Read more interviews and stories featuring investors and business leaders in the Prosper Africa Blog.