Egypt’s Cartona raises $8.1M even as investors pull back from B2B e-commerce in Africa

Image Credits: Cartona

When Egyptian B2B e-commerce platform Cartona last raised money in 2022, global and local investors were eager to invest in African startups solving the supply chain and operational challenges for retailers and suppliers in the fast-moving consumer goods (FMCG) industry.

Two years on, investors aren’t as enthused anymore as the business models of such startups, both asset-light and asset-heavy, across the continent have come under pressure, leading to retreats, closures, downsizing and mergers.

Yet, Cartona, which is “very close to reaching full EBITDA profitability,” according to founder and CEO Mahmoud Talaat, has managed to raise more money — this time, $8.1 million in a Series A extension ($5.6 million equity and $2.5 million debt) from new and existing investors.

Egyptian VC firm Algebra Ventures led the round, which brings Cartona’s total Series A to $20.1 million. Silicon Badia, lead investor from the first Series A tranche, and SANAD Fund for MSME also participated. Camel Ventures and GlobalCorp, on the other hand, provided the debt component. 

Talaat told TechCrunch that the 4-year-old e-commerce platform raised from a significant cash position.

“We have double what we raised now in equity,” he said. That capital will be used to grow its market share in Egypt by deepening its operations in FMCG and HORECA (hotel, restaurant and cafe/catering), a vertical it launched over a year ago. In addition, Cartona may be looking to expand into other regional markets, including Saudi Arabia, and to explore other product lines within Egypt, the chief executive added.  

Egyptian B2B e-commerce platform Cartona raises $12M to scale and explore new verticals

Exploring new verticals with the asset-light model

Cartona first launched as an asset-light B2B platform connecting FMCG suppliers and wholesalers with retailers. A common criticism then was that asset-light models would find it difficult to retain customers and compete against asset-heavy B2B e-commerce platforms, which basically had more control of their tech and supply chain. 

Asset-light marketplaces, including Cartona and Nigeria’s Omnibiz, have fairly dispelled such notions.

Talaat, in an interview with TechCrunch, said Cartona spent its first two years focusing on improving its tech, user experience, and fulfillment rates to the point where it matched the service level of some asset-heavy models, allowing it to raise money in 2022.

Afterward, the B2B e-commerce outfit turned its attention to improving its unit economics in an industry where volumes are high but making each order profitable is often challenging. Achieving progress on that front over the past two years and almost reaching full profitability, especially with the devaluation of the Egyptian pound against the dollar, made Cartona attractive to investors, according to Talaat. 

Unsurprisingly, Cartona’s asset-light model is a contributing factor behind its push toward profitability. Talaat explains that Egypt’s informal market has a significant network of suppliers, wholesalers, and distributors that don’t need to be displaced or competed against but rather made more efficient with the tech tools that B2B e-commerce platforms provide. 

“Our mission from day one was to support and enhance these partners instead of competing with them. We focus on technology, embedded finance, and other exciting product enhancements and features we’ve developed while they’re strong in operations, buying, and selling inventory,” Talaat remarked. “They already have good prices and experience and can locally deliver very fast for their clients. Because we partnered with these suppliers, we’ve not only scaled and grown to be the largest marketplace connecting all these suppliers in one place but also built a strong reputation.” 

What African B2B e-commerce startups can learn from OmniRetail’s profitable run

According to Talaat, over 30-40% of Cartona’s partner suppliers’ sales now come through the platform.

When a platform contributes a significant margin to suppliers, they’ll actively support its growth. Similar success can be replicated in other verticals.

Take, for instance, Cartona’s expansion into serving hotels, restaurants, and cafes. The vertical leverages the synergies between FMCG and restaurant supply bases, as many items needed by these businesses overlap, including fresh meat, chicken, fish and vegetables. 

“We check our supply base and see what could work. For example, since we already have cosmetics in our marketplace, we could maybe add pharmacies that sell not only medicines but also cosmetics,” added Talaat, who founded Cartona with CTO Mahmoud Abdel-Fattah.  

Business is growing

Cartona’s annualized gross merchandise volume (GMV) is about EGP 10 billion ($210 million), up from EGP 2.3 billion ($120 million) in 2022.

Interestingly, while the HORECA vertical, launched last year, represents a small part of Cartona’s business (around 7% of the company’s annualized gross merchandise volume), its blended take rates and average order value from 3,000+ customers are double what the platform receives from its FMCG customers. Talaat expects the vertical to contribute 15% of the startup’s GMV by the end of the year.

More than 180,000 retailers (up from 60,000+ in 2022) from both verticals manage over 40,000 SKUs on Cartona. These retailers, who get their orders from 4,500 suppliers across 17 Egyptian cities, handle stock and working capital via cash or credit orders.

Initially, Cartona facilitated retailers’ credit orders using equity because its local currency debt portfolio had not matured. But as the platform grew, it secured local currency financing, which now makes up over 90% of its portfolio, with only 10% coming from equity, Talaat explained during the call. Embedded finance now constitutes more than 20% of Cartona’s GMV, up from just 2-3% in 2022. As Cartona’s transaction volume increasingly involves credit, using local currency facilities is expected to expand in tandem with the platform’s growth.

“The asset-light nature of its model creates a scalable infrastructure that can quickly be adapted for entry into new markets and adjacencies. Cartona has also been a driving force for financial inclusion in the retail sector as more and more of its small merchants take advantage of inventory financing options,” Omar Khashaba, general partner at Algebra Ventures, said in a statement. 

Challenging market but a massive opportunity

Egypt has over 400,000 shops and thousands of international and local brands, and the sector grows annually by 8%. Reports indicate that the overall retail market size is $120 billion, with the food and beverage market worth $70 billion. 

Venture capital has driven market digitization in the country, spurring growth and competition among players like Cartona, the now-defunct Capiter, and MaxAB, which is currently in merger talks with Wasoko. Despite the millions of dollars of funding and the presence of similar companies across Africa, they have barely scratched the surface or created significant value for stakeholders in the supply chain and investors backing them.

However, Talaat believes it’s only a matter of time before this changes.

“All the companies combined represent a very small part of the market, which is still predominantly offline. I would say we only cover around 2-4% of the entire market. Despite knowing the market is huge, our real competition remains the offline transactions between companies, wholesalers, and retailers,” said Talaat. The education and penetration of B2B e-commerce is still in its early stages. It’s coming, and it will come, because we add real value to those retailers and suppliers, but it will take time given the market’s vast size.”

Sources: Wasoko-MaxAB e-commerce merger faces delays amid headwinds in Africa

The Substack logo on a smartphone

Substack now lets anyone publish posts, even if they don't have a newsletter

The Substack logo on a smartphone

Image Credits: Gabby Jones/Bloomberg / Getty Images

Substack is opening up to more users with its recent announcement that anyone can now publish content on its platform without setting up a publication. With the change, Substack is likely looking to attract more types of writers and content creators, not just people who are interested in creating regularly distributed long-form written pieces.

While Substack is mostly known for being a newsletter platform, the company has recently taken strides to turn the service into more of a social network with the launch of social features, such as tweet-like Notes and DMs. This latest change takes those ambitions even further, as you no longer have to be associated with a newsletter to publish on the platform.

Now, anyone with a Substack account can share their writing, video or audio content on the platform. Users can collect free or paid subscriptions right from their Substack profile. If users do decide to create a newsletter on Substack, they can do so while keeping their posts and subscribers.

Substack also shared that it’s continuing to work to make its platform more mobile-friendly. A few weeks ago, Substack rolled out the ability for writers to draft and publish new posts directly from their phone via its iOS app, with Android support coming soon. The company also announced that it has started testing live video and in-app payments.

The company’s efforts to become more of a social network as opposed to solely a newsletter platform can be traced back to when Twitter (now X) sold to Elon Musk. When Twitter started changing, arguably for the worse, many users began looking for alternative platforms. Substack, along with platforms like Bluesky and Threads, aimed to capitalize on Twitter’s upheaval.

Study suggests that even the best AI models hallucinate a bunch

Robots work on a contract and review a legal book to illustrate AI usage in law.

Image Credits: mathisworks / Getty Images

All generative AI models hallucinate, from Google’s Gemini to Anthropic’s Claude to the latest stealth release of OpenAI’s GPT-4o. The models are unreliable narrators in other words — sometimes to hilarious effect, other times problematically so.

But not all models make things up at the same rate. And the kinds of mistruths they spout depend on which sources of info they’ve been exposed to.

A recent study from researchers at Cornell, the universities of Washington and Waterloo and the nonprofit research institute AI2 sought to benchmark hallucinations by fact-checking models like GPT-4o against authoritative sources on topics ranging from law and health to history and geography. They found that no model performed exceptionally well across all topics, and that models that hallucinated the least did so partly because they refused to answer questions they’d otherwise get wrong.

“The most important takeaway from our work is that we cannot yet fully trust the outputs of model generations,” Wenting Zhao, a doctorate student at Cornell and a co-author on the research, told TechCrunch. “At present, even the best models can generate hallucination-free text only about 35% of the time.”

There’s been other academic attempts at probing the “factuality” of models, including one by a separate AI2-affiliated team. But Zhao notes that these earlier tests asked models questions with answers easily found on Wikipedia — not exactly the toughest ask, considering most models are trained on Wikipedia data.

To make their benchmark more challenging — and to more accurately reflect the types of questions people ask of models — the researchers identified topics around the web that don’t have a Wikipedia reference. Just over half the questions in their test can’t be answered using Wikipedia (they included some Wikipedia-sourced ones for good measure), and touch on topics including culture, geography, astronomy, pop culture, finance, medicine, computer science and celebrities.

For their study, the researchers evaluated over a dozen different popular models, many of which were released in the past year. In addition to GPT-4o, they tested “open” models such as Meta’s Llama 3 70B, Mistral’s Mixtral 8x22B and Cohere’s Command R+, as well as gated-behind-API models like Perplexity’s Sonar Large (which is based on Llama), Google’s Gemini 1.5 Pro and Anthropic’s Claude 3 Opus.

The results suggest that models aren’t hallucinating much less these days, despite claims to the contrary from OpenAI, Anthropic and the other big generative AI players.

GPT-4o and OpenAI’s much older flagship GPT-3.5 performed about the same in terms of the percentage of questions they answered factually correctly on the benchmark. (GPT-4o was marginally better.) OpenAI’s models were the least hallucinatory overall, followed by Mixtral 8x22B, Command R and Perplexity’s Sonar models.

Questions pertaining to celebrities and finance gave the models the hardest time, but questions about geography and computer science were easiest for the models to answer (perhaps because their training data contained more references to these). In cases where the source of an answer wasn’t Wikipedia, every model answered less factually on average (but especially GPT-3.5 and GPT-4o), suggesting that they’re all informed heavily by Wikipedia content.

Even models that can search the web for information, like Command R and Perplexity’s Sonar models, struggled with “non-Wiki” questions in the benchmark. Model size didn’t matter much; smaller models (e.g. Anthropic’s Claude 3 Haiku) hallucinated roughly as frequently as larger, ostensibly more capable models (e.g. Claude 3 Opus).

So what does all this mean — and where are the improvements that vendors promised?

Well, we wouldn’t put it past vendors to exaggerate their claims. But a more charitable take is the benchmarks they’re using aren’t fit for this purpose. As we’ve written about before, many, if not most, AI evaluations are transient and devoid of important context, doomed to fall victim to Goodhart’s law.

Regardless, Zhao says that she expects the issue of hallucinations to “persist for a long time.”

“Empirical results in our paper indicate that, despite the promise of certain methods to reduce or eliminate hallucinations, the actual improvement achievable with these methods is limited,” she said. “Additionally, our analysis reveals that even the knowledge found on the internet can often be conflicting, partly because the training data — authored by humans — can also contain hallucinations.”

An interim solution could be simply programming models to refuse to answer more often — the technical equivalent to telling a know-it-all to knock it off.

In the researchers’ testing, Claude 3 Haiku answered only around 72% of the questions it was asked, choosing to abstain from the rest. When accounting for the abstentions, Claude 3 Haiku was in fact the most factual model of them all — at least in the sense that it lied least often.

But will people use a model that doesn’t answer many questions? Zhao thinks not and says vendors should focus more of their time and efforts on hallucination-reducing research. Eliminating hallucinations entirely may not be possible, but they can be mitigated through human-in-the-loop fact-checking and citation during a model’s development, she asserts.

“Policies and regulations need to be developed to ensure that human experts are always involved in the process to verify and validate the information generated by generative AI models,” Zhao added. “There are still numerous opportunities to make significant impacts in this field, such as developing advanced fact-checking tools for any free text, providing citations for factual content and offering corrections for hallucinated texts.”

Study suggests that even the best AI models hallucinate a bunch

Robots work on a contract and review a legal book to illustrate AI usage in law.

Image Credits: mathisworks / Getty Images

All generative AI models hallucinate, from Google’s Gemini to Anthropic’s Claude to the latest stealth release of OpenAI’s GPT-4o. The models are unreliable narrators in other words — sometimes to hilarious effect, other times problematically so.

But not all models make things up at the same rate. And the kinds of mistruths they spout depend on which sources of info they’ve been exposed to.

A recent study from researchers at Cornell, the universities of Washington and Waterloo and the nonprofit research institute AI2 sought to benchmark hallucinations by fact-checking models like GPT-4o against authoritative sources on topics ranging from law and health to history and geography. They found that no model performed exceptionally well across all topics, and that models that hallucinated the least did so partly because they refused to answer questions they’d otherwise get wrong.

“The most important takeaway from our work is that we cannot yet fully trust the outputs of model generations,” Wenting Zhao, a doctorate student at Cornell and a co-author on the research, told TechCrunch. “At present, even the best models can generate hallucination-free text only about 35% of the time.”

There’s been other academic attempts at probing the “factuality” of models, including one by a separate AI2-affiliated team. But Zhao notes that these earlier tests asked models questions with answers easily found on Wikipedia — not exactly the toughest ask, considering most models are trained on Wikipedia data.

To make their benchmark more challenging — and to more accurately reflect the types of questions people ask of models — the researchers identified topics around the web that don’t have a Wikipedia reference. Just over half the questions in their test can’t be answered using Wikipedia (they included some Wikipedia-sourced ones for good measure), and touch on topics including culture, geography, astronomy, pop culture, finance, medicine, computer science and celebrities.

For their study, the researchers evaluated over a dozen different popular models, many of which were released in the past year. In addition to GPT-4o, they tested “open” models such as Meta’s Llama 3 70B, Mistral’s Mixtral 8x22B and Cohere’s Command R+, as well as gated-behind-API models like Perplexity’s Sonar Large (which is based on Llama), Google’s Gemini 1.5 Pro and Anthropic’s Claude 3 Opus.

The results suggest that models aren’t hallucinating much less these days, despite claims to the contrary from OpenAI, Anthropic and the other big generative AI players.

GPT-4o and OpenAI’s much older flagship GPT-3.5 performed about the same in terms of the percentage of questions they answered factually correctly on the benchmark. (GPT-4o was marginally better.) OpenAI’s models were the least hallucinatory overall, followed by Mixtral 8x22B, Command R and Perplexity’s Sonar models.

Questions pertaining to celebrities and finance gave the models the hardest time, but questions about geography and computer science were easiest for the models to answer (perhaps because their training data contained more references to these). In cases where the source of an answer wasn’t Wikipedia, every model answered less factually on average (but especially GPT-3.5 and GPT-4o), suggesting that they’re all informed heavily by Wikipedia content.

Even models that can search the web for information, like Command R and Perplexity’s Sonar models, struggled with “non-Wiki” questions in the benchmark. Model size didn’t matter much; smaller models (e.g. Anthropic’s Claude 3 Haiku) hallucinated roughly as frequently as larger, ostensibly more capable models (e.g. Claude 3 Opus).

So what does all this mean — and where are the improvements that vendors promised?

Well, we wouldn’t put it past vendors to exaggerate their claims. But a more charitable take is the benchmarks they’re using aren’t fit for this purpose. As we’ve written about before, many, if not most, AI evaluations are transient and devoid of important context, doomed to fall victim to Goodhart’s law.

Regardless, Zhao says that she expects the issue of hallucinations to “persist for a long time.”

“Empirical results in our paper indicate that, despite the promise of certain methods to reduce or eliminate hallucinations, the actual improvement achievable with these methods is limited,” she said. “Additionally, our analysis reveals that even the knowledge found on the internet can often be conflicting, partly because the training data — authored by humans — can also contain hallucinations.”

An interim solution could be simply programming models to refuse to answer more often — the technical equivalent to telling a know-it-all to knock it off.

In the researchers’ testing, Claude 3 Haiku answered only around 72% of the questions it was asked, choosing to abstain from the rest. When accounting for the abstentions, Claude 3 Haiku was in fact the most factual model of them all — at least in the sense that it lied least often.

But will people use a model that doesn’t answer many questions? Zhao thinks not and says vendors should focus more of their time and efforts on hallucination-reducing research. Eliminating hallucinations entirely may not be possible, but they can be mitigated through human-in-the-loop fact-checking and citation during a model’s development, she asserts.

“Policies and regulations need to be developed to ensure that human experts are always involved in the process to verify and validate the information generated by generative AI models,” Zhao added. “There are still numerous opportunities to make significant impacts in this field, such as developing advanced fact-checking tools for any free text, providing citations for factual content and offering corrections for hallucinated texts.”

Substack now lets anyone publish posts, even if they don't have a newsletter

The Substack logo on a smartphone

Image Credits: Gabby Jones/Bloomberg / Getty Images

Substack is opening up to more users with its recent announcement that anyone can now publish content on its platform without setting up a publication. With the change, Substack is likely looking to attract more types of writers and content creators, not just people who are interested in creating regularly distributed long-form written pieces.

While Substack is mostly known for being a newsletter platform, the company has recently taken strides to turn the service into more of a social network with the launch of social features, such as tweet-like Notes and DMs. This latest change takes those ambitions even further, as you no longer have to be associated with a newsletter to publish on the platform.

Now, anyone with a Substack account can share their writing, video or audio content on the platform. Users can collect free or paid subscriptions right from their Substack profile. If users do decide to create a newsletter on Substack, they can do so while keeping their posts and subscribers.

Substack also shared that it’s continuing to work to make its platform more mobile-friendly. A few weeks ago, Substack rolled out the ability for writers to draft and publish new posts directly from their phone via its iOS app, with Android support coming soon. The company also announced that it has started testing live video and in-app payments.

The company’s efforts to become more of a social network as opposed to solely a newsletter platform can be traced back to when Twitter (now X) sold to Elon Musk. When Twitter started changing, arguably for the worse, many users began looking for alternative platforms. Substack, along with platforms like Bluesky and Threads, aimed to capitalize on Twitter’s upheaval.

Egypt’s Cartona raises $8.1M even as investors pull back from B2B e-commerce in Africa

Image Credits: Cartona

When Egyptian B2B e-commerce platform Cartona last raised money in 2022, global and local investors were eager to invest in African startups solving the supply chain and operational challenges for retailers and suppliers in the fast-moving consumer goods (FMCG) industry.

Two years on, investors aren’t as enthused anymore as the business models of such startups, both asset-light and asset-heavy, across the continent have come under pressure, leading to retreats, closures, downsizing and mergers.

Yet, Cartona, which is “very close to reaching full EBITDA profitability,” according to founder and CEO Mahmoud Talaat, has managed to raise more money—this time, $8.1 million in a Series A extension ($5.6 million equity and $2.5 million debt) from new and existing investors.

Egyptian VC firm Algebra Ventures led the round, which brings Cartona’s total Series A to $20.1 million. Silicon Badia, lead investor from the first Series A tranche, and SANAD Fund for MSME also participated. Camel Ventures and GlobalCorp, on the other hand, provided the debt component. 

Talaat told TechCrunch that the four-year-old e-commerce platform raised from a significant cash position.

“We have double what we raised now in equity,” he said. That capital will be used to grow its market share in Egypt by deepening its operations in FMCG and HORECA (hotel, restaurant and cafe/catering), a vertical it launched over a year ago. In addition, Cartona may be looking to expand into other regional markets, including Saudi Arabia, and to explore other product lines within Egypt, the chief executive added.  

Egyptian B2B e-commerce platform Cartona raises $12M to scale and explore new verticals

Exploring new verticals with the asset-light model

Cartona first launched as an asset-light B2B platform connecting FMCG suppliers and wholesalers with retailers. A common criticism then was that asset-light models would find it difficult to retain customers and compete against asset-heavy B2B e-commerce platforms, which basically had more control of their tech and supply chain. 

Asset-light marketplaces, including Cartona and Nigeria’s Omnibiz, have fairly dispelled such notions.

Talaat, in an interview with TechCrunch, said Cartona spent its first two years focusing on improving its tech, user experience, and fulfillment rates to the point where it matched the service level of some asset-heavy models, allowing it to raise money in 2022.

Afterwards, the B2B e-commerce outfit turned its attention to improving its unit economics in an industry where volumes are high but making each order profitable is often challenging. Achieving progress on that front over the past two years and almost reaching full profitability, especially with the devaluation of the Egyptian pound against the dollar, made Cartona attractive to investors, according to Talaat. 

Unsurprisingly, Cartona’s asset-light model is a contributing factor behind its push toward profitability. Talaat explains that Egypt’s informal market has a significant network of suppliers, wholesalers, and distributors that don’t need to be displaced or competed against but rather made more efficient with the tech tools that B2B e-commerce platforms provide. 

“Our mission from day one was to support and enhance these partners instead of competing with them. We focus on technology, embedded finance, and other exciting product enhancements and features we’ve developed while they’re strong in operations, buying, and selling inventory,” Talaat remarked. “They already have good prices and experience and can locally deliver very fast for their clients. Because we partnered with these suppliers, we’ve not only scaled and grown to be the largest marketplace connecting all these suppliers in one place but also built a strong reputation.” 

What African B2B e-commerce startups can learn from OmniRetail’s profitable run

According to Talaat, over 30-40% of Cartona’s partner suppliers’ sales now come through the platform.

When a platform contributes a significant margin to suppliers, they’ll actively support its growth. Similar success can be replicated in other verticals.

Take, for instance, Cartona’s expansion into serving hotels, restaurants, and cafes. The vertical leverages the synergies between FMCG and restaurant supply bases, as many items needed by these businesses overlap, including fresh meat, chicken, fish and vegetables. 

“We check our supply base and see what could work. For example, since we already have cosmetics in our marketplace, we could maybe add pharmacies that sell not only medicines but also cosmetics,” added Talaat, who founded Cartona with CTO Mahmoud Abdel-Fattah.  

Business is growing

Cartona’s annualized gross merchandise volume (GMV) is about EGP 10 billion ($210 million), up from EGP 2.3 billion ($120 million) in 2022.

Interestingly, while the HORECA vertical, launched last year, represents a small part of Cartona’s business (around 7% of the company’s annualized gross merchandise volume), its blended take rates and average order value from 3,000+ customers are double what the platform receives from its FMCG customers. Talaat expects the vertical to contribute 15% of the startup’s GMV by the end of the year.

More than 180,000 retailers (up from 60,000+ in 2022) from both verticals manage over 40,000 SKUs on Cartona. These retailers, who get their orders from 4,500 suppliers across 17 Egyptian cities, handle stock and working capital via cash or credit orders.

Initially, Cartona facilitated retailers’ credit orders using equity because its local currency debt portfolio had not matured. But as the platform grew, it secured local currency financing, which now makes up over 90% of its portfolio, with only 10% coming from equity, Talaat explained during the call. Embedded finance now constitutes more than 20% of Cartona’s GMV, up from just 2-3% in 2022. As Cartona’s transaction volume increasingly involves credit, using local currency facilities is expected to expand in tandem with the platform’s growth.

“The asset-light nature of its model creates a scalable infrastructure that can quickly be adapted for entry into new markets and adjacencies. Cartona has also been a driving force for financial inclusion in the retail sector as more and more of its small merchants take advantage of inventory financing options,” Omar Khashaba, general partner at Algebra Ventures, said in a statement. 

Challenging market but a massive opportunity

Egypt has over 400,000 shops and thousands of international and local brands, and the sector grows annually by 8%. Reports indicate that the overall retail market size is $120 billion, with the food and beverage market worth $70 billion. 

Venture capital has driven market digitization in the country, spurring growth and competition among players like Cartona, the now-defunct Capiter, and MaxAB, which is currently in merger talks with Wasoko. Despite the millions of dollars of funding and the presence of similar companies across Africa, they have barely scratched the surface or created significant value for stakeholders in the supply chain and investors backing them.

However, Talaat believes it’s only a matter of time before this changes.

“All the companies combined represent a very small part of the market, which is still predominantly offline. I would say we only cover around 2-4% of the entire market. Despite knowing the market is huge, our real competition remains the offline transactions between companies, wholesalers, and retailers,” said Talaat. The education and penetration of B2B e-commerce is still in its early stages. It’s coming, and it will come, because we add real value to those retailers and suppliers, but it will take time given the market’s vast size.”

Antoine Puymirat of Planity

Planity raises $48 million because even hair salons need their own SaaS product

Antoine Puymirat of Planity

Image Credits: Planity

If you’ve ever traveled in rural areas in France, you may have realized a French peculiarity. Even in the seemingly less-populated towns, there’s a hair salon.

French startup Planity has been taking advantage of France’s love affair with hair salons to launch a SaaS product for these businesses in particular. Over time, the company expanded to other types of beauty salons, such as barbers and nail salons.

And it has been working surprisingly well, as there are now more than 40,000 small businesses relying on Planity for appointment booking and more. In fact, the startup recently raised a €45 million Series C round ($48 million at today’s exchange rate) led by InfraVia Capital Partners with existing investors Crédit Mutuel Innovation, Revaia and Bpifrance’s Digital Venture fund also participating.

Planity’s trajectory is an interesting one given that it isn’t the first big European tech company trying to simplify beauty salon appointment booking. In particular, Treatwell is already live in a dozen European countries and had seemingly captured the digitization opportunity of this highly fragmented market.

Doctolib for beauty salons

So what’s different with Planity? The startup’s co-founder and CEO Antoine Puymirat first started working on online appointment booking in 2007. His first startup, called ClicRDV, was a white-label online booking solution for all sorts of businesses. It was acquired by PagesJaune (now SoLocal).

After a few years working for SoLocal, he left the company and went back to the drawing board with a more focused approach. Instead of creating an all-encompassing appointment solution, he chose to focus on beauty salons specifically.

Around the same time, Doctolib was starting to take off. The French startup, which is now a unicorn, has completely changed appointment booking for doctors and other health-related jobs. Its impact is even bigger than that, as it has profoundly changed how French people deal with health issues.

Planity drew some inspiration from Doctolib. It’s a SaaS platform that completely replaces the good old paper notebook that was widely used in hair salons. When people call for an appointment, employees write down the appointment in Planity directly. And, of course, people can also book appointments online through Planity’s app and website. It becomes the single source of truth and simplifies salon management.

Unlike Treatwell, Planity doesn’t charge a commission on each future sale. Instead, Planity is a traditional SaaS product with a monthly subscription fee. The main product currently costs €69 per month. (With a little back-of-the-envelope calculation, it means that Planity likely generates tens of millions of euros in annual recurring revenue.)

“Most of the existing players have adopted a traditional marketplace model like the one of Booking.com or TheFork,” Puymirat told me. “Clients pay a percentage of the total amount of each reservation. But we realized that this model wasn’t working as some companies have been around for 15 years, but they never really reached a significant scale in Europe.”

According to him, the main issue is that most customers are returning customers. And you don’t want to pay a commission every time they book an appointment. With Planity, the more your customers use it to book appointments online, the less time you waste on the phone — and it doesn’t cost you more. That’s why beauty salons encourage their customers to use Planity.

“We go a bit further than that. We also let our businesses manage working hours. Employees can clock in and out in the morning and in the evening. We handle vacations. We can export payroll information,” Puymirat said.

Every month, around eight million people visit Planity. The platform handles around 10 million bookings per month — 4 million of them are booked directly by the end customers on Planity. Other appointments are entered manually by employees when a customer is talking to them directly.

The platform handles waiting lists, sends reminders via text messages and creates a personalized schedule for each employee. Planity can also replace the point-of-sales solution for an additional €20 per month.

Some clients also get payment terminals from Planity. In that case, Planity uses Stripe’s APIs for the payment stack and takes a small cut on each transaction. But small shops that are already working with their bank for their payment terminals can keep using those terminals.

Up next, the company plans to handle well-being and fitness centers. Planity’s main market remains France — its home country — but the company is starting to grow in Belgium and Germany.

In addition to the fragmentation of the beauty salon industry, there’s a barrier to entry to create a Planity competitor. The company has a large sales team. They go and meet new clients to make sure that they understand how the software platform works.

This strategy is both capital-intensive and requires a solid sales playbook to work. There are currently around 200 sales people working for Planity, and the company plans to hire even more.

Garena is quietly making India-themed games even as Free Fire's relaunch remains doubtful

Garena's India-themed game Versus based on Hindu Mythological characters

Image Credits: Jagmeet Singh / TechCrunch

Game studio Garena found itself in the middle of a geopolitical struggle when the Indian government banned its hit game, Free Fire, over national security concerns. Now more than two years later, Free Fire is still banned, but the publisher, a division of Singapore gaming giant Sea, has found another route to the market: TechCrunch has learned and confirmed with sources that Garena is quietly developing new games in India with local themes.

Last week, Versus, a 1v1 fighting game with a Hindu mythology theme, was released on early access on Google Play. Neither the Play Store listing nor the game explicitly confirms Garena’s role in its development. However, TechCrunch found through regulatory filings that the studio behind the game — AstroTech Studio — is led by Harold Teo, one of the directors of Garena. Teo is also the global producer of the popular, banned battle royale game Free Fire.

People familiar with the company told TechCrunch that the studio’s India team is based in Pune, and that it has been working on Versus for more than two years. Some gaming enthusiasts and people in the country’s esports scene were given access to the title a few months ago before it was released on early access, the people said.

In addition to Versus, TechCrunch has learned that studio’s Pune team is working on a game based on cricket, the biggest sport in India by far. The company is also coming up with a title based on the classic board game Ludo, which has found a popular incarnation as a smartphone game. This game is being developed by a team based out of Mumbai.

The discovery of the new studio and its titles highlights three things. First, India’s bans can take a very long time to fix — if ever — which is a major problem for companies working in the fast-moving, fickle consumer market. Second, the most ambitious consumer companies will look for ways to work around this. Third, creating localized services could be one route to getting back into the market.

Garena does not allow its employees in India to manage its games and studios, and it therefore has executives from Singapore leading development, a person familiar with the matter told TechCrunch. However, the company has employed a significant team in India to develop and market its titles locally.

Free Fire was a massive success in India before it was banned, with market research firms estimating it had around 40 million monthly active users in the country. Sea had announced it would relaunch the game in India last September, but the title never actually dropped.

Although the specifics of the reason for the ban were never spelled out, it was understood that it was allegedly related to national security concerns, because it used data centers in China. The company never addressed this, but at the time that it made the relaunch announcement, it said it would partner with Indian data center company Yotta Infrastructure for its cloud and storage needs.

During Sea’s earnings call in March, group chief corporate officer Yanjun Wang said the company was still making changes to Free Fire to consider “users’ preference locally,” though he did not disclose a timeline. A person familiar with the matter told TechCrunch that most of the changes required have now been integrated.

Sea and Garena did not respond to requests for comment.