South African startup, Qwili raises US$1.2M seed round to improve its operations

SOUTH AFRICAQwili, a startup that offers a hybrid sales platform to micro and small merchants in South Africa, has raised US$1.2 million in seed funding, a year after concluding an undisclosed pre-seed round.

The round, which included participation from companies including Strat-Tech, Next Chymia, Untapped Global, Codec Ventures, and angel investors like Ashwin Ravichandran and Kanyi Maqubela, was led by the South African venture capital firm E4E Africa.

Qwili said in a statement that company will use the money for producing hardware, hiring new people to improve operations, and developing apps.

According to Qwili, the money will also enable it to accelerate the rate at which it scales its business in order to see its impact expand across all three of these sectors.

“We’re all about enabling people who are currently digitally excluded, to participate in the various forms of value that being digitally included has to offer,” CEO Luyolo Sijake said.

“So, the real barrier to that has been hardware: a reliable quality smartphone being too expensive, which means access to the mobile internet being too expensive. So, we hope to continue making smartphones available at below cost.”

The startup has acquired considerable traction since it was founded. According to Sijake, Qwili currently handles US$75,000 in GMV each month from its 500 merchants.

The South African platform, which experienced a high increase in turnover of over 300 percent between Q1 and Q2 of 2022, intends to increase those figures to US$1 million from 3,000 merchants by the end of the year after it enters Botswana, a nearby country.

“We believe that Qwili is both highly scalable and high impact. Qwili agents love the entrepreneurial opportunity that Qwili provides them while giving their community access to e-commerce and to fairly priced goods and services,” said Bastiaan Hochstenbach, co-founder and managing partner at E4E Africa on the investment.

Qwili’s founding team is exceptional, and the business model is a strong fit with E4E Africa’s aspiration to support diverse founders in creating a thriving, innovative, and inclusive Africa.”

Sijake and his co-founders Thandwefika Radebe and Tapfuma Masunzambwa first founded Qwili as a different concept. They used a business-to-customer model in which Qwili offered these devices to individual customers who paid for value-added services using the platform’s digital wallet.

The aim was that when customers used the phone and Qwili took a cut of each transaction, the phone would eventually commercialise itself and consumers would be able to buy them from Qwili. That didn’t work out, so the focus shifted to merchants.

“During those early stages, the phone wasn’t paying back quickly enough, and there wasn’t high enough adoption of the digital services. But what happened was that people started using the digital wallet to sell pay TV, electricity and other value-added services to people around them,” said the chief executive.

“They started using the phone in a way we hadn’t intended, making more sense commercially. That’s how we ended up with this agent model: essentially people using the device and the software to sell to others instead of buying services for themselves.”

Before the shift, Qwili sold over a thousand cellphones to end users. Its business-to-business strategy has also gained traction, with 500 micro and small merchants using the hybrid platform (about half of whom use Qwili’s NFC-enabled cellphones).

Its typical business customer is a merchant without a storefront who sells digital products informally to local communities and networks.

Purchasing a point-of-sale system with restricted capability makes little economic sense for this category; instead, a smartphone with the ability to accept payments and market products via WhatsApp suffices.

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