Gokada, one of Nigeria’s leading last-mile delivery companies, turned to GetEquity, a Nigerian investment platform, to raise $750,000 at a $10 million valuation. Why does a market leader turn to retail investors in its home country to finance its operations?
It’s no longer news that last year there was a downward spiral in the global funding of tech companies. Rising interest rates around the world hit venture capital (VC) firms, prompting a global VC slowdown as international venture funding fell 35% last year. In Africa, a different tune was being played, as venture financing increased by 8%, according to Partech Africa. More than 1,000 unique investors signed their first check, and 89 of them invested in more than five deals.
However, as a region heavily dependent on foreign investors, forecasts for 2023 have been cautious. Against this backdrop, Gokada, a Nigerian e-commerce logistics company, went the crowdfunding route to try to raise $750,000 at a valuation of $10 million. The company had previously raised $5.3 million in Series A funding in 2019 to expand in Nigeria.
The ban on two-wheelers in Lagos in 2020 affected the upward trajectory of the ride-sharing sector. In response, the company laid off 80% of its workforce and moved from ride-sharing services to logistics. Fahim Saleh, the company’s former chief executive, who was described as a “missionary founder,” was also assassinated in his New York apartment in 2020, compounding a difficult year for Gokada.
From disaster to teacher
However, the last two years have been more favorable for Gokada. According to Dika Oha, Gokada’s former director of product and technology, by 2021, the company was already delivering more food than any other delivery company in Nigeria. At the time, enterprise customers such as Jumia and Fan Milk were taking advantage of Gokada’s extensive logistics network and its integration with payment systems such as Paystack and Flutterwave to reach their customers.
According to the company, Nikhil Goel, CEO of Gokada after Fahim Saleh, increased the company’s revenue tenfold and the volume of delivery orders by one hundred. The company was also profitable as of 2021. On its path to profitability, it introduced services such as grocery delivery, package delivery, and e-commerce, in addition to food delivery.
a year of metamorphosis
In 2022, Gokada expanded its product offering, and in May, the company opened up an investment opportunity for individuals and businesses by allowing them to operate under Gokada’s NIPOST license and access Gokada’s thousands of customers. For context, in 2021, the Nigerian Postal Service (NIPOST) implemented a courier license for delivery services that was too expensive for many operators.
In June, Gokada had partnered with Octamile to launch a digital insurance product that provided digital insurance to protect its “pilots”, merchants and customers. The company also appointed Olutosin Oni as CEO in July, making him its first Nigerian CEO. In a LinkedIn post, Oni said he was “very eager to work with the Gokada board and team to build Africa’s leading last-mile solutions provider, starting in Lagos, Nigeria.”
Could retail investors help Gokada become Africa’s leading provider of last-mile solutions?
The seemingly upward trajectory Gokada has been on since 2020 makes the decision to list shares on GetEquity and raise $750,000 from investors with a minimum of $500 to invest, fascinating to say the least. There is no doubt that if the company achieves its goal of becoming the preferred last-mile delivery service in Nigeria, it will need additional funding. But why are you trying to raise these additional funds from your community?
This is not the first time that a company will try to take advantage of its community and the GetEquity platform. In 2021, Herconomy, a women-focused fintech, raised the bulk of its $600,000 pre-seed round on GetEquity. Ife Durosimi-Etti, CEO of Herconomy, told TechCabal that the move to create a private investment room was inspired by the active community that supported her company and a desire to include community members in its fundraising.
However, it’s hard to ignore that $750,000 is a tall target, considering that Nigeria is one of the poorest countries in the world by at least one metric. According to an email shared by GetEquity, Gokada’s platform has 4,000 passengers, making it the leader in the Nigerian delivery scene and has twice as many passengers as its closest competitor, Jumia. This claim would also be supported by a cursory examination of the streets of Lagos, where numerous bikes bearing the Gokada logo are frequently seen.
The email also claims that Gokada delivers over 40,000 orders per month, enabling it to have 3x year-over-year growth and 2x year-over-year growth in the e-commerce market. Revenue in Africa’s online food delivery market is expected to grow to nearly $10 billion this year, while revenue in the e-commerce market is expected to hit $49 billion this year. With Gokada’s position as the market leader in vertical delivery of both sectors in Africa’s largest economy, it is not unreasonable to assume that the company will benefit from the revenue generated. So why is he ignoring the fundamental investor route and instead turning to average Nigerians to finance his operations?
“Don’t forget that if you have friends who would love the opportunity to build wealth while building the future of last-mile logistics in Africa, you can invite them to join our private GetEquity room,” reads a message from Oni, The Director. Gokada’s current executive, to members of the firm’s private GetEquity room.
At the time of publishing this article, Gokada had lowered the target amount of his crowdfunding effort to $100,000. Representatives for Gokada and GetEquity declined to comment on this change or any other aspect of this article.