Domestic e-commerce startup Marketforce has announced that it will close its business-to-business (B2B) distribution business Leija Leija, citing razor-thin profit margins and difficulty achieving profits at the unit level.
Co-founder Tesh Mbaabu also said in a blog post on April 17 that the move was due to high price elasticity, which led to constant price competition in this business sector.
“Unfortunately, this is the final chapter. After significant efforts to make our business model sustainable, including downsizing operations to extend the runway as much as possible, we are no longer operating Leisure Leisure. We have come to the conclusion that it is no longer possible to continue,” Mbabu said in the post.
MarketForce originally started as a sales automation software in 2018, but has since branched out into B2B e-commerce RejaReja. It is a service that enables neighborhood retailers and small retailers to stock fast-moving consumer goods (FMCG) in their stores.
Mr Mbaab said that in their aggressive expansion drive and hunger for rapid growth, they did not realize that they were entering new, uncharted territory, and the lack of funding that hit soon after. This will make the situation even worse.
“This taught us a very hard and painful lesson. Venture capital is not a good company, not even a great company. It's about making huge profits in the right market at the right time. “It’s for very good companies,” he said.
“We got this completely wrong and it hurt that the capital we put in wasn't fully utilized. Now we know that every dollar a startup can raise is a gift. It should not be the lifeblood of your business.”
Starting in 2018, the company bootstrapped for about a year and a half before convincing angel investors to inject $200,000 (Shs26.6 million at current exchange rates) in seed capital.
Shortly after the funding, the coronavirus crisis hit nearly every global economy, and Market Force reported losing most of its recurring revenue during the same period.
At this point, the company pivoted from a software-as-a-service (SaaS) company focused on selling enterprise software to large FMCG and financial institutions to a B2B company that directly serves neighborhood retailers. Moved to Marketplace.
RejaReja's venture got off to a strong start, signing over 1,000 merchants within the first six months.
The business also thrust the company into the international spotlight after successfully validating the Y Combinator accelerator in 2020, officially launching RejaReja, and raising an additional $2 million ($266 million) for product development and expansion. 10,000,000) gave a much-needed boost to the funding.
