B2B E-Commerce to Fintech: How Chari is Charting a Path to Profitability
First of all, you are mutualizing some back office resources, including the office, including the developers, including the human resources. Plus, you are using b to b e commerce as a cheap trojan horse, a way of acquiring users, and you use fintech as a way of monetizing those users you brought out of ecommerce. And you we've seen it with all the the super apps around the world. They've all started with one vertical, usually ride hailing or food delivery or even messaging, and got a lot of users that they couldn't monetize because it's cheap acquisition cost, but with difficulties monetizing the services. And once they have a great number of users, what we call the network effect, that's when they start adding financial services and neo banking on top of it to start making money.
Speaker 1:Money.
Speaker 2:The decision to explore fintech and digital commerce together in this return to first principle series reflects a basic assumption that fintech provides a transaction infrastructure that enables digitalized trade. In this episode of the Trajectory Africa, I learned from Ismail Boukhiat, CEO and founder of Sherry, a b to b commerce and fintech platform for traditional retailers in French speaking Africa, how fintech and digital commerce merge inside the same company. We discussed Sherry's journey supporting traditional shopkeepers in Morocco, the financial infrastructure they've built, and how they're creating a sustainable business model by turning mom and pop shops into neighborhood financial services providers. Ismail also offers candid insights on geographic expansion strategic acquisitions in service of a growth strategy that prioritizes going deep in a single market and leveraging local talent when you expand. Let's get into this conversation about fintech, digital commerce, and the future of retail in Africa.
Speaker 2:Ismail, welcome to the Trajectory Africa. It's such a pleasure to have you on the show.
Speaker 1:All the pleasure is mine. Thank you for your invitation.
Speaker 2:I'm very excited to get into the dialogue. But when I was trying to get up to speed with the work that you do at Sherry, I listened to I think it was the Africa Business Heroes pitch that you did. And you mentioned a shopkeeper in Marrakesh, who's also a TikTok influencer. And I was very curious about this story. So I'd like to know how you discovered this gentleman and whether you've learned anything interesting about social media marketing or influencing from him.
Speaker 1:When I started Shari back in 2020, it was a mobile app for the local no name independent retailers, the small mom and pop shops, allowing them to order anything they need and resell in their stores. And I was speaking with my surrounding and saying, look. This is my ID, and everybody was telling me, you are crazy. These people don't know how to use a smartphone. And many of them don't even have a smartphone.
Speaker 1:They have a feature phone. And, still, I went on the market, and I focused on those who had a smartphone. And then five years fast forward, these guys are not only users of smartphones, but they are super users. And believe me, they do use many apps much better than you and myself, including the social networks. And then I realized that many of them were in groups, on WhatsApp, on Facebook, in which they were sharing the best practices, the best promotions of the day, saying, Look, this provider is providing with goods at the right promotion, and the info is shared very quickly through these social networks.
Speaker 1:And then they have their own influencers who are people who are being followed by thousands, if not tens of thousands, if not hundreds of thousands of shops who follow these influencers to get the latest news about the market, the new pricing, the new products, and so on and so on. And then I realized that these people had their own union, and through the union, they were building this network of users and followers through the social networks, and they are very well organized. And when I started back five years ago, I was ages from realizing that these people were so well organized, and I'm very happy for them. And I wanna tell all those who believed back at that time that they were not tech savvy, that reality is that they are more tech savvy than ourselves, and I'm very happy about it.
Speaker 2:That is a beautiful counterpoint to maybe what has become a tired narrative around how informal markets are disorganized and need to be organized by tech. This layer of communication that happens amongst shopkeepers is not something I've ever heard before, but I'm not surprised. It makes complete sense that people are understanding the power that comes from collecting information, sharing it amongst themselves, and making sure that they get the better end of the deal by coming together and sharing that information. So something else that you've said, which is pretty evocative, is that sherry is for the Mohammads of Morocco, the traditional shopkeepers who are now having to compete with large grocers like Carrefour, and part of what Sherry does is to support or enable those shopkeepers. You can make an argument that that is a social impact perspective on your mission, but what would you describe as a business case for doing what you do?
Speaker 1:Indeed. There is a social impact in what we do because we believe that, at least in Morocco, these small shopkeepers are part of our national heritage. And when you look at what happened in The US, in Europe, and in developed countries, these small independent retailers called traditional stores have progressively been replaced by the big chains, Walmart, for instance, in The US. And if nothing is done, same way they have disappeared in Europe or in The US, they will end up disappearing in Morocco and in developing countries. The only difference between the seventies and the eighties and today is that today they have the internet, they have mobile phones, they have mobile apps.
Speaker 1:So the idea is to use these new means of technology to help these small local shopkeepers improve their daily needs and improve their daily lives by being fully digitized. So the business case behind, just to answer your question, is to do financial inclusion and digital inclusion to allow these small shopkeepers to start using technology at a better price while still allowing companies like ours to make money out of it, And also provide them with financial services, allowing them themselves to be financially included, but allowing them themselves also to start offering financial services to their end users through a revenue sharing model with us. So we empower them to make more money and to sell some of the margins they are making through us with us.
Speaker 2:I think you had a conversation on the Unlocking Africa podcast with Tercer, and you talked about how you started as an ecommerce business with some fintech, with some embedded finance on the side, and now you're an embedded finance business with some ecommerce on the side. Can you talk a little bit about how that evolution happened and what you mean by enabling digital and financial inclusion by what you're doing now.
Speaker 1:Let's put back things into their context. We, as Shari eCommerce, started in 2020. I think everyone who is listening to us remembers the old days of 2020 when the interest rates were low or almost negative, and the money was free, and investors were looking after those startups that were growing very fast. And the investors were telling us, hey, keep growing. What is important today is your top line.
Speaker 1:Fast forward in 2022, you know what happened, the war between Ukraine and Russia started, then the inflation went up, and then all the central banks of the world brought up the interest rates, and of course, no more free money. And all those investors who used to ask founders like me to keep growing and focus on top line started all of a sudden asking about path to profitability, unit economics, bottom line. And, you know, we woke up one day and started realizing that many of us had great growing companies, but then with no real business model. So like everyone, we started looking into our unit economics, and we realized that B2B e commerce is a very tough business, in the sense that the margins are slim. At the end of the day, you are a distributor of fast moving consumer goods, so you are getting the same margins as wholesalers by the suppliers, and those margins have to cover your logistics, your technology, your back office costs, and so on, which make it, at the end of the day, very difficult.
Speaker 1:So back in 2022, with our investors, we started thinking on how to improve unit economics. So we started looking into ways of adding new additional revenue streams on top of our existing business. So B2B e commerce that was initially our core main business to grow fast became, all of a sudden, a Trojan horse or a Segway to keep acquiring the merchants and to monetize the merchants with fintech services. So we went to see the Central Bank of Morocco, we asked for a neo banking license that we were very fortunate to be granted with, and that we used to become a fintech activity using b to b e commerce as a chosen horse to acquire users. And this is how we do financial inclusion and digital inclusion.
Speaker 2:Maybe digging into the product side, you started as an ecommerce company with embedded finance on the side, and then you became an embedded finance company with ecommerce on the side. And so you mentioned that you received a license to deliver the financial services products. Could you talk a little bit more about what those products are and how shopkeepers benefit from them?
Speaker 1:Yes. Of course. First of all, one of the reason why we've applied to get a new banking license is because we realized that almost all of our GMV gross merchandise value was paid in cash by the shopkeepers. So basically, they order on the app the goods and then ask for what we call cash on delivery, which means they want to wait until we deliver the goods and then they pay us. And again, because the volumes were very high, we as a company had to handle a lot of cash.
Speaker 1:And as you may imagine, it's risky, there is some fraud, so maybe we should find solutions to try to digitize the flow. The first service we are offering to these small shopkeepers is a banking account or a payment account, which is an account that comes with a local iBAN, allowing them to basically save their money on it. We wanted to be a real fintech ecosystem for these small shopkeepers. What we said is, listen, you will take from us this payment account. It will come with a Visa card, debit card, allowing you to spend the money you have on the payment account.
Speaker 1:This money can be spent with us because we are your supplier or with any other supplier accepting Visa cards. And worst case scenario, if you still need your cash, then you can withdraw your cash from any ATM. Now the real question is how do they top up their own accounts to pay us with it? So solution number one is we are providing them with a payment terminal so they can start themselves accepting digital payments from their users, and with a payment gateway for those who have an online store. So we are multi channel acquirer, allowing these shopkeepers to start accepting digital payments, then the money settles on the payment account we have opened for them, and then we give them a card so they can spend the money.
Speaker 1:So this is what I call myself a fintech ecosystem, allowing the shopkeepers to become financially included. On top of these services, we also provide them with what we call added value services. So what we tell them is basically once you get your digital money, you can start topping up the mobile phones of your end consumers. So if you tie or goes to a small shopkeeper, you can ask him to top up your mobile phone because in developing countries, we have prepaid phone that we have to top up in advance. So the shopkeeper will use the Shari app, select your mobile operator, and top up your mobile phone.
Speaker 1:You pay him in cash, and he has done it fully digitally. We also allow him to pay the bills, his own bills, but also the bills of his end users. We also allow him to do insurance distribution. We got an insurance distribution license. We also allow him to transfer money domestically to other shopkeepers and so on.
Speaker 1:So the idea is to turn a shopkeeper who so far used to be only a fast moving consumer good reseller to becoming a local point of sale of financial services for himself, but also for his end consumers.
Speaker 2:And how does Sherry make money from enabling the shops to deliver these financial services?
Speaker 1:We make money through money in movement. So when money comes in, we have what we call an acquirer commission. When money goes out, we have what we call an interchange fee because we are the issuer. So we issue a client with a card. When the client pays with his card, we get our cuts.
Speaker 1:So this is moving money on which we get a cut. Then we get money out of sleeping money. Let's say the shopkeeper leaves the money in his account. We are getting an interest rate because ourselves, we put the money on what we call a custodian account that is being remunerated. And then a third business model is when we sell value added services.
Speaker 1:So let's say he does a top up for his end user, he gets a cut as a distributor, but we also get a cut as we are providing these services. Okay? As an example, one of the biggest telecom operators in Morocco is called Orange. It's a French telecom company. They have invested in Sherry, so they are in our cap table, and Sherry has become one of the four distributors they have in Morocco.
Speaker 1:So we are today a distributor of Orange Telecom through the local retailers who themselves end up serving the end users, and everyone in the chain gets his commission.
Speaker 2:I feel like this forces me to ask a fairly obvious question, but I'm going to ask the fairly obvious question anyway. I wish I could remember where I heard this, but at some point, probably a year or two ago, I heard someone say that at some point, shopkeepers are going to have to figure out whether they make more money selling things in their shop or reselling financial services like what you described. I don't know how old this transition is, but what have you observed in terms of the profit for shopkeepers at this point?
Speaker 1:It's not an obvious question. It's it doesn't have an obvious answer, at least. Myself, I grew up in Morocco, and then I went abroad for my university, and then I traveled the world. And the countries in which I learned the most were Sub Saharan countries, including Senegal, Ivory Coast, but also Nigeria, where I have seen those shopkeepers being really evolving when it comes to start using financial services. And when in Morocco, when you look at the landscape, and it's very funny because you see many shopkeepers who only buy and resell fast moving consumer goods.
Speaker 1:And right next to them, literally next to them, you will find other merchants who only offer financial services. And I have always wondered why these kind of merchants never merged to make one single kind of store that does at the same time fast moving consumer goods and fintech services. I think we are going towards that because at the end of the day, you can mutualize your rents. You can mutualize your human resources by selling at the same time both services. And I think that's the future.
Speaker 1:Every single fast moving consumer good will turn into becoming a kind of bank on top of being a grocery store.
Speaker 2:That actually makes a lot of sense just because it seems like something similar is a pathway for digital commerce businesses as well. It it seems like and you've already kind of confirmed this. It's very hard to make a a business out of supporting digital commerce only, that there has to usually be some additional value added services that you need to be able to deliver to make a business out of that business. For now, though, it sounds like this is a mass market play, but if you are in fact, this might not be the right way to put it, creating a a better neobank, let's call it this, do you think this stays as a mass market play, or do you think there's an opportunity to move upmarket at some point as well?
Speaker 1:It's a very good question. I believe in developed countries, the population is tech savvy, and they all know how to download an app and start using financial services independently and autonomously. But in other geographies and mainly developing countries, mainly Africa, the population is still reticent to using new services, and they need to get educated. And if a neobank wants to educate the end user, it may be very costly. So cost of acquisition would be high, cost of education would be high.
Speaker 1:One of the opportunity I see is that the population is today trusting the next door shops because they are shopping with them every single day. And I think these shops can become professors, educators to the end users. So if you, as a neobank, educate the shops to become financially included, you do what we call b to b services to them. But then, once they are fully convinced about the quality of your service, you can use them as ambassadors, as your middlemen, so themselves can end up educating the end user. And that's when you move from a B2B play to a B2B2C play, where the shopkeepers end up being your network of acquisition, to end up acquiring end users, training end users on how to use your services and educating them on how great it is to be fully autonomous when using a mobile app.
Speaker 2:I'm no expert on fintech, obviously, but solving the customer acquisition cost problem sounds massive. Well, the CAC problem and then also the consumer education problem. If the education is happening organically in the area where customers are seeking services, it makes complete sense. And then if it's happening naturally when people are making transactions that they make daily, it also makes sense that the cost would come down. What I wonder though is because effectively, at least to some extent, Sherry is now a neobanker operating like one.
Speaker 2:Do you think it is more profitable to do neobanking as an add on than to do neobanking, let's say, vanilla flavor, as in just strictly neobanking with no ecommerce demand generation.
Speaker 1:Let's go back to your initial question about how we ended up becoming a neobank. If you remember, I told you that if you take the b to b e commerce as a sole vertical, it's not a profitable business. So it doesn't survive. It's not sustainable to keep it as it is. And I told you we had to find additional revenue streams, and I told you we added fintech as an additional stream.
Speaker 1:Now, to answer your question, I believe that if you do only fintech by itself, it's not a sustainable business because the cost of acquisition is very high. So if you take fintech by itself, it doesn't work. If you take b to b e commerce by itself, it doesn't work. But the day you start mixing them up, it start making sense. First of all, because you are mutualizing some back office resources, including the office, including the developers, including the human resources, also the branding and so on.
Speaker 1:Plus, you are using b to b e commerce as a cheap trojan horse, a way of acquiring users, and you use fintech as a way of monetizing those users you brought out of ecommerce. So I think that the model, and you we've seen it with all the the super apps around the world, they've all started with one vertical, usually ride hailing or food delivery or even messaging, and got a lot of users that they couldn't monetize because it's cheap acquisition cost, but with difficulties monetizing the services. And once they have a great number of users, what we call the network effect, that's when they start adding financial services and neo banking on top of it to start making money. So that's exactly what Sherry is currently working on.
Speaker 2:I have to be honest with you. If I could insert a mind blown emoji here, I would do it because this is, an articulation of the super app playbook I've not heard in this context. I understand it now that you've you've explained it, but it's not something that was living in my head before. So, essentially, ecommerce is customer acquisition. Fintech is monetization.
Speaker 2:And then this other point about mutualizing back office also is pretty unique. I know you've been doing this for a while with other businesses, but I've not heard it expressed explicitly as a cost saving mechanism. So that's really useful as well. So you've explained that you deliver accounts, cards, and then the opportunity to deliver financial services like TopUp and eventually insurance. What's next on your roadmap?
Speaker 1:We also deliver POSs. You spoke about cards, accounts, POSs, added value services. Within the added value services, we can think of a lot of services. We spoke about mobile top up. We spoke about insurance.
Speaker 1:But you can also think of vouchers, including gaming, including streaming. You can also think of travel distribution, you know, train tickets, airplane tickets, bus tickets, even toll tickets, boat tickets because, as you know, Morocco is not that far from Europe, and we can cross the Mediterranean Sea. You can think also of e gov services, empower these shopkeepers to start charging on behalf of the states some taxes, utility bills, and many other services, out of which I really believe in one that is remittances. As of today, we have, like, 7,000,000 Moroccans living abroad. They are called the diaspora.
Speaker 1:They do send back to Morocco every single year around $10,000,000,000, and they do use big chains again. The chains are coming and coming again called MoneyGram, Western Union, and Ria. And these chains have in Morocco what we call franchisee shops, but the number of shops are not that high. And sometimes those who receive the money in small cities have to travel to other cities to get their money. So not only they don't receive everything that has been sent by their family abroad, but on top of it, they have to pay for the cost of traveling to get their money.
Speaker 1:Imagine the day you can tell anyone, hey. Go to the next door shop and get the money your grandson have sent you from wherever he is in the world. That's a dream, and that could be happening the day these shops learn how to use technology.
Speaker 2:I'm gonna be honest with you. I don't really understand the remittances business. It seems like a business that has a lot of risk involved, and so, like, if there there's risk if you have to build and own your distribution network to make sure the money gets all the way to the end user. If you don't do that, then you have to deal with third party risk. So what I wonder is if there's something about the infrastructure that Sherry has built that might make the remittance business model make more sense.
Speaker 1:So, again, got a neo banking license from the central bank, but Sherry has also built all the infrastructure to operate its own activities. You know, you end up meeting with a lot of founders who will tell you we are running a neobank. These founders, I think 99% of them, are building an amazing front end with great user experience, with great branding, and do great acquiring users, but usually behind the scenes, you have a real bank that is providing them with all the infrastructure. This model is called banking as a service, and we see it a lot in Africa. There is a bank called EcoBank that is providing its rails to many amazing founders in the continent.
Speaker 1:Myself, back in the old days when I was looking for additional revenue streams, my dream was to find a local bank that would provide me with banking as a service models, and unfortunately, I couldn't find any. So I had no other choice than getting my own license and building my own rails. It's a very difficult, long and complex path to follow, and I did follow it because I didn't have any other issue. With hindsight, I was just crazy, and I was very naive to believe that it was possible. And thank God I was naive because otherwise I would have never dared to do it, and I did it.
Speaker 1:And today, a few years later, I'm quite proud of saying that not only we are the front end, but we are also the back end. Everything behind has been built by our team, including the core banking system that is our proprietary core banking, including the connectivity with the local switch, including the connectivity with the local SWIFT to wire the money, including the certification that we got PCI DSS, including the building a card management system to handle the cards we are issuing and so on and so on. So we are fully integrated, which means that we don't use any third party, which means that we don't share any revenue with anyone, which means that we lower our OpEx. I mean, we did invest a lot in CapEx mainly to build all the infrastructure, but today, we have lowered our operational costs because we don't share anything with anyone. Now the second part of the question is, in order to succeed in a money transfer business, you need a network.
Speaker 1:And this network is very costly to build, and it's also very costly to use because you have to do revenue sharing. In our very case, this network has already been built because these people do trust us. They have been buying from us goods for years now. And when we come with new financial services, they also trust us because we've been delivering a good service over the last years. So we are able to educate them to start offering new services at a low cost by using our own technology and our own rates.
Speaker 2:That makes it sound like you are in a very rare and very enviable position. When I did a fintech series, I had a chat with Fingo in East Africa, and the founder there had the same struggle. He went around
Speaker 1:I know very well, Fingo, and I know Enda using Ecobank.
Speaker 2:Exactly. Exactly.
Speaker 1:All the struggles that come with it.
Speaker 2:Exactly. Exactly. Everyone laughed at him until he met Ecobank, and he went that route. But clearly, you can see the benefit of integration. But this also kind of raises even though it didn't work initially, you obviously have really great and valuable partners now.
Speaker 2:So you mentioned Orange, which is a strategic investor and a partner. So can you talk a little bit about how you work together? Because conventional wisdom says that it might be something around entering new markets in your distributors. So can you just talk a little bit about the relationship and how Sherry benefits from it?
Speaker 1:Yes, of course. So first of all, the relationship started very randomly because we applied to a contest Orange did organize in 2021, which was the Middle East North Africa Startup Challenge from Orange. And out of 500 startups who did apply, we got the first prize, allowing us to get some funding from Orange Venture, which is their venture arm. And then we raised the following rounds, and they kept following the rounds because they did believe in our model. And the great friendship relationship happened with the people at Orange Venture, including a great person who is today in my board of advisers called Gregoire de Padirac, really French name, who has been very helpful to me and who has, in the meantime, left Orange Ventures to join ProParco and who has remained in my board as an independent member.
Speaker 1:And, Gregoire has also introduced me to Orange headquarters in France and also to Orange Telecom in Morocco. So that's how we started at the very beginning distributing the scratch cards, you know, those cards that you scratched, which are physical goods that we were distributing. And then we realized that our go to market as Shari, being the small local retailers, was the exact same go to market as the one of Orange because, as you know, in Morocco, it's a prepaid market, when in The US, it's a postpaid market. So this prepaid market, the SIM cards, the top ups, are being sold through a network of local retailers. That's when, thanks to Orange Ventures, which is a venture VC found in our cap table, we ended up signing a distribution contract with Orange Telecom in Morocco, allowing us today to still distribute the scratch cards, but also the digital top ups.
Speaker 1:So today, if you open the Shari app, you can see, of course, your goods that you can buy, but you also get a wallet in which you have your own money. And then you click on a button that allows you to choose an operator and mainly orange, and then select the number of your clients, and it's an immediate top up, allowing the shopkeeper to get paid cash and then to pay Orange directly through his or her wallet.
Speaker 2:In that sense, it sounds like you actually help Oron scale, and you also help your shopkeepers generate more revenue.
Speaker 1:Exactly. That's the endgame. We are a company that helps at the same time the shopkeepers buy at better prices, so they save money on their supply, sell more services so they make money out of new services, and they are very happy to use us. And at the same time, we do help the suppliers who before did struggle to reach out to these small shopkeepers. Because imagine you are Orange or you are even Procter and Gamble in The US.
Speaker 1:When you want to sell your goods, it's easy because you speak with the purchasing body of Walmart, and all of the sudden, you sell to thousands, or if not tens of thousands of stores. But when you are in a developing country, each single store buys independently and autonomously. So you have to deal with hundreds of thousands of buyers. So you need people to aggregate them. You need wholesalers like us to aggregate them.
Speaker 1:So we are solving a problem for the suppliers and for the subkeepers.
Speaker 2:Just on that point of aggregation and the part of your business model that is still sitting in ecommerce, even if the financial services are driving your profitability, I guess it makes sense to assume that you don't want your ecommerce model to tank the profitability of the financial services. So what decisions have you made to ensure that the cost of running the ecommerce doesn't sink the business, essentially?
Speaker 1:It's a very good question. So let me just tell you about a quick story before answering the question. In 2022, we did acquire a credit book app. What is a credit book app? It's basically an app that helps the shopkeepers do bookkeeping.
Speaker 1:And we did acquire it for a certain amount, and then we had to run it because it had its own operating costs. And the revenue generated by this app was zero because this app was offered for free. So all of my investors were asking why are you acquiring a zero revenue company and running it? And that answer was very simple. Thanks to this app, we could acquire tens of thousands of shops, and not only grocery stores.
Speaker 1:We have drugstores, restaurants, hotels, hairdressers. Everyone is using this app. And we do use this app, of course, to do credit scoring and have the info and data about the shops, but we also use this app to do what we call cross sell, which means that we acquire you through this app. And once you start using it for free, we do call you after a few months, and we tell you, look. You've been using it for free.
Speaker 1:Now if you wanna keep using it, you will have to start using Shari with buying your goods, with opening a PMAT account, and so on. So the reason why I'm telling you this is because this bookkeeping app called Karny, k a r n y Ma, has been not non profitable at all if you take it as a standalone business. But reality is through cross sell, it has been profitable. So same with ecommerce. It's not profitable as a standalone business, but you don't have to think of it as a single model.
Speaker 1:You have to think of it as a mixed model. So to answer your question, we are obviously trying to lower the costs of b to b e commerce as much as possible to average down the weight it has on our other profitable businesses. But it's an I call it a necessary evil evil. So I'm sorry for my lousy French accent, but I think you have understood.
Speaker 2:I understand perfectly, and I really appreciate that you are wrestling with this necessary evil because, frankly, the entire sector, it seems like, has to wrestle as well. I think the other thing I mean, there are many things that are notable about this journey, but you've clearly done really well in leveraging really strong strategic partners and investors, but also acquisitions. So you mentioned Carney, but Carney is not the only acquisition you've made. You acquired an Ivorian app that also connects shopkeepers that sell FMCG, and I think one other one, the name of which
Speaker 1:Yeah. So so listen. The Ivorian app was more of a way to do what we call acquihire. By acquihire, I mean that when you want to expand to a new country, you need to make sure that the macroeconomics of the country are similar, but you also need to make sure that you have great people on the ground. And again, it's almost impossible to run two businesses at the same time unless you have the right people to do it.
Speaker 1:And there is no better right people than local entrepreneurs. So in my case, we did acquire Diago app mainly because we wanted the entrepreneurs to join forces with us and build a regional group. But apart from this, I don't advise anyone to expand if it's through greenfield or sending people from your own country to another country. I don't think this works. We've tried in Tunisia.
Speaker 1:We started the company, sent Moroccan team to run it, and it didn't work as well as the operations we have in Ivory Coast.
Speaker 2:With the acquisitions you've made, Carney, Diago, and AXA, how do you make sure that the because, you know, in in business school, when you take that class on mergers and acquisitions, and they say, oh, you need to extract the synergies, but then in the real world, nobody really ever extracts the synergies. How do you make that work?
Speaker 1:So we're very fortunate because there is a Harvard Business case about Cheri that speaks about this. It's on hbs.shari.com. And indeed, on the B2B e commerce, we realized that it was very difficult to create synergies because at the end of the day, it's a field business and you need people on the ground. So there is no way on earth you can mutualize sales reps or trucks or warehouses. The only synergy came from the tech team that was building a product for both Ivory Coast and Morocco.
Speaker 1:If you want to really create synergies, is when you have a SaaS product that is being built from one place and being distributed in many countries to people on the ground. So myself, I do think that there are some models that can easily expand and others that can't. And I believe that B2B e commerce is not a model that you can duplicate in other countries. I have seen some people trying to do it, but the issue is it's very difficult to mutualize the resources. And I believe that you should go deep into one country, make it work, add additional revenue on top of your existing business, and only when you are so big and you can't grow anymore, then you start thinking of moving to somewhere else.
Speaker 1:So yeah, synergies were difficult, but we did our best to make the most of the teams we had in each country so everyone could participate in value creation.
Speaker 2:I think your friends, although I don't know if you're friends or not. I'm I'm just gonna call you friend.
Speaker 1:Yeah. They are my friends.
Speaker 2:They're your okay. So your friends at MAD have a similar philosophy in terms of going deep in the value chain, but also going deep within a country.
Speaker 1:And they are right. It's the right it's the right strategy. I know the team at MAD very well, including Jessica and Sidi. They are great entrepreneurs, and they took the right decision to go deep into one country and do it well.
Speaker 2:And I think I would agree, although I don't have an educated opinion. But technically, you operate in three countries. So in those countries, what does it actually mean to go deep? Are you talking about, like, urban and peri urban and rural? What what does it mean?
Speaker 1:So here is what we've decided to do. When we realized that there was no synergies on the b two b e commerce, we decided to go deep on B2B e commerce in Morocco and keep doing B2B e commerce in Morocco. And when it comes to Tunisia and Ivory Coast, we kept our operations only with the bookkeeping app because it allows us to keep acquiring shopkeepers with the B2B app called Kearny. And by the way, we expanded it to nine countries, out of which only three Morocco, Tunisia and Ivory Coast has people on the ground. And we believe that a SaaS product can be easily expanded.
Speaker 1:The b to b e commerce activity is very tough to to expand. So we've shut down the b to b activity and kept only the fintech activity.
Speaker 2:I feel like when I listen back to this episode, I'm going to be able to extract so many specific learnings and first principles. But because you are the entrepreneur and you're the one who has done the hard work to learn these, my last question is basically to ask you in reflecting on this whole journey. You made a really beautiful statement at some point where you basically said that experience is a light that you put on your back to show to people who are following you the right way. What would you say to founders who are following behind you in terms principle for navigating profitably and successfully in this space?
Speaker 1:I would start by telling them do a great business in one country and do it well before thinking of expanding. I know VCs are asking for a regional play. I know they are asking for a quick value creation by duplicating models in various geographies. I don't think, unless you are a SaaS, I don't think that's the right model to follow. So don't always listen to VCs.
Speaker 1:Always listen to your guts and make sure that you have a profitable business in your own country. That's one. Two, I would say that make sure to get surrounded by the right people, not only VCs, but also the right co founders, the right first employees, because those are those people who will either energize you or bring you down. And because being an entrepreneur is a long journey with a lot of challenges, and believe me, you need the right people around to make sure that you will remain alive, at least mentally speaking. And then make sure to fight against the loneliness of the entrepreneur.
Speaker 1:You know, these negative thoughts that keep coming to your mind telling you that you may end up crashing or that your friends are today evolving in their own jobs. These negative thoughts can only be felt when, again, you make sure that you meet with other founders, you participate to acceleration programs, you hear about the issues of other companies, because that's when you realize you are not the only one in the sinking boats, but everyone is in the same situation. And those who succeed are only those who never give up, because the reality is you need to have a strong mind to make it work. It's a very tough journey, but everyone can succeed as long as he or she believes in what she or he does, and keep fighting.
Speaker 2:Thank you. Thank you so much, Ismael. Obviously, we're in times where I think those words are very sorely needed. We all need to keep fighting in one way or the other. But huge gratitude to you for making this space make sense because I think what you've shared goes a long way to squaring the circle and helping us to understand what's needed to make businesses work in this space.
Speaker 2:Thank you so much.
Speaker 1:My pleasure.
