Zaraye, business-to-business raw materials marketplace, has raised $2.1 million in a pre-seed round headed by Tiger Global, which has previously invested in Bazaar and CreditBook in Pakistan. Tiger Global’s first pre-seed investment in Pakistan is in Zaraye.
Tiger Global previously invested in a comparable startup in India. OfBusiness, India’s Zaraye, is backed by Tiger Global and SoftBank and is now preparing to raise $2 billion in what will be one of the country’s largest technology IPOs. OfBusiness was recently valued at $5 billion in a round of financing.
According to Ahsan, Zaraye’s business model in Pakistan is significantly influenced by OfBusiness. Tiger Global’s performance in a market comparable to Pakistan provided Tiger with the conviction to invest in Zaraye.
Zaraye’s pre-seed round was led by Pakistan’s Zayn Capital, which previously invested in Tazah, CreditBook, Oraan, and Abhi Finance. Additionally, +92 Ventures, angel investors Alan Rutledge and Jack Rizvi, and current and former Careem workers participated in the round.
Zaraye is powered by an app and a website that connect buyers to a sizable number of providers. A buyer submits an inquiry indicating that he requires a specific amount of a product by a specified date.
Suppliers of that product list the prices at which they are willing to sell, allowing the buyer to choose from the best available pricing in a transparent manner rather than depending on a broker.
Zaraye arranges for third-party logistics companies to transport the materials to the purchasers’ specified location and also provides after-sales assistance. Zaraye provides loans to both buyers and sellers through its financing facility to assist them in meeting their working capital requirements. The finance facility provided by Zaraye is currently active at a very low level, accounting for less than 5% of the company’s sales.
According to Ahsan, Zaraye’s current focus is on data collection in order to make responsible loan selections. “Because the market is so fragmented, the challenge for our fintech division is how to collect the right data.”.
Once they have a sufficient amount of data on buyers and sellers, it will assist them in assessing credit and disbursing credit on the basis of actual creditworthiness.
Zaraye began by acquiring clients in the textile and construction industries, with the intention of expanding its offerings in these areas and expanding into new categories as the company grows. The firm earns money by charging suppliers and buyers a commission on each transaction.
The firm claims to have grown tenfold since conception and anticipates growing another tenfold within the next three months. The firm did not divulge its gross merchandise value (GMV) in order to establish its rate of growth and instead stated that it anticipated reaching somewhat more than $10 million in annualized GMV in the next two to three months.
Faisal Aftab, managing partner and co-founder of Zayn Capital BitRate Fund, stated that the Zaraye model of a B2B marketplace has demonstrated success in comparable countries and that they were pleased to support the Zaraye team and had faith in their ability to tackle problems in Pakistan.
In September 2021, Ahsan Ali Khan, Hashair Junaid, and Taha Iqbal created Zaraye with the goal of streamlining the acquisition of raw materials for buyers and sellers. According to them, the opportunity is enormous: Pakistan’s industrial manufacturing sector provides a substantial 20% of the country’s GDP and has a $35 billion yearly raw material market, with raw materials accounting for 60-65% of overall production expenses.
Historically, buyers and suppliers of industrial raw materials have spoken with a small number of brokers who assist purchasers in procuring and sellers in selling raw materials. The process is lengthy and tedious, and the broker receives a commission from both sides in a deal. The widespread view is that whenever there are middlemen, inefficiencies exist that can be addressed by a marketplace-like mechanism.
Karachi-based As a result, Zaraye was founded as a business-to-business marketplace that enables buyers to purchase raw materials from sellers at competitive and transparent pricing. This enables organizations that procure raw materials to achieve cost savings that are critical for survival and growth in the low-margin industries in which they operate. Suppliers of raw materials also experience an increase in sales.
Apart from resolving the pricing issue, Zaraye also provides both parties with working capital finance. Small buyers and sellers are frequently disregarded when it comes to credit facilities by formal financial organizations such as banks.
While these are the primary issues that Zaraye seeks to address, it also addresses the issue of order fulfilment via the Zaraye platform.
The business claims to have gained substantial traction on the platform by signing up 300 partners and suppliers in the textiles and construction sectors across 20 locations. The opportunity’s development and size attracted the attention of VC heavyweight Tiger Global, which invested in Zaraye.
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