Why We Invested in ShopUp
In the world’s biggest, fastest-growing frontier market, small is beautiful. Bangladesh is a country of 166 million people and in 2018 its economy grew at a real rate of over seven percent. It’s counted among the N-11 high-potential economies—by the same Goldman Sachs analysts who defined the BRICS—and its growth is largely powered by small businesses.
In Bangladesh, micro, small and medium enterprises (MSMEs) account for 80 percent of employment and contribute 75 percent of export earnings. With over 60 percent of Bangladeshis self-employed, even nano-enterprises play an important role in the development of a modern manufacturing sector and livelihood creation—especially for women, who make up half of the country’s labor force.
Women like Bushra are a fine example of how the right support can allow entrepreneurs to flourish. In 2015, Bushra started selling cosmetics and personal care products out of her home in Dhaka. She started the business, “because I wanted to be financially independent,” as she says. With more than 90 million mobile internet subscribers in the country, online shops like Bushra’s have taken off. Bangladesh has 430,000 shops on Facebook and nearly 80 percent of all online orders in Bangladesh are from small businesses like these.
While overall credit to MSMEs in Bangladesh is growing at about 20 percent a year, there is still a huge gap in credit flowing to digital micro-enterprises, nano-enterprises, and to female entrepreneurs. These entrepreneurs are too big to be served by microfinance institutions and too small to get the attention of banks and nonbank financial institutions. The high operating costs of the branch model for traditional lenders make it prohibitive to market to—or perform due diligence on—digital and home-based entrepreneurs.
That’s why we invested in ShopUp. Using analytics and algorithm-driven assessment, ShopUp targets micro- and primarily home-based entrepreneurs. Their integrated solution provides tools for managing an online storefront, digital marketing, logistics support, and access to collateral-free credit for working capital.
“I came to know about ShopUp on Facebook and attended a session by one of their SuperSellers,” said Bushra. “I was inspired by it and started working with ShopUp and that changed everything for me.”
ShopUp’s tools give entrepreneurs like Bushra one-click posting for product catalogues, order tracking, invoicing features, and a messenger chatbot. Through its partners, ShopUp also provides delivery via local couriers and digital payments with BKash. Bushra was able to reliably fulfill her orders through ShopUp and grow her sales. Based on her digital sales track record, ShopUp offered her a collateral-free loan to buy additional stock of her products. Bushra’s business has grown so well that she recently opened a physical store in addition to her online business.
There are over 130,000 merchants using ShopUp’s platform to source products, display them online, generate demand, and fulfill orders. ShopUp uses these merchants’ digital data to assess their creditworthiness and offer loans of USD $500 to $3,500 (through ShopUp’s lending partner Brac). The entire loan origination, assessment, and collection process is online, at a fraction of the cost of the physical branch model.
By offering an integrated solution for small merchants to grow online through social commerce (such as on Facebook and its Messenger app), ShopUp embeds much needed working capital into business processes—while pioneering a new digital model of engagement for MSMEs in Bangladesh.
It’s exactly the rigorous, transformative “Big Data, Small Credit” model we champion, and why we were excited to recently conclude a second round of Pre-Series A funding in ShopUp along with Sequoia. Together, we’re backing this data-driven model in the high-potential, entrepreneur-powered country of Bangladesh.