Deal focus: Pakistan’s Dastgyr aspires to emulate Alibaba

When William Bao Bean started investing in China with SoftBank in the mid-2000s, the total market capitalisation of the country’s internet companies was about USD 3bn. Now with SOSV, he has transitioned away from China, favouring South and Southeast Asia. SOSV went hard into Pakistan in 2019, tapping into rapid growth that has carried internet start-ups to that USD 3bn threshold.

“It feels like a bit like China or India in the early days,” he said. “You are competing against nothing, it’s greenfield. China is an inspiration – more than an echo – because a lot of the challenges faced by small businesses in Pakistan are the same as in China in 2004. But it’s not exactly the same. The transition is happening faster in Pakistan, and you must respond to different local conditions.”

SOSV has backed approximately 15 start-ups in Pakistan, typically writing small cheques in early rounds. It often prepares the ground for some global GPs that are less familiar with emerging markets and get comfortable with opportunities based on SOSV’s approach to investments.

Nearly 12 months ago, SOSV joined a USD 3.5m seed round for Dastgyr, a Pakistani B2B e-commerce marketplace. Last week, Dastgyr closed a USD 37m Series A from the likes of DEG, Zinal Growth, Khwarizmi Ventures, Oman Technology Fund, Cedar Mundi Ventures, GoingVC, Reflect Ventures, Haitou Global, Astir Ventures, K3 Diversity Ventures, Chandaria Capital, and Century Oak Capital.

SOSV re-upped and helped bring in several new investors. It also claims a relationship with Veon, owner of Jazz, Pakistan’s largest mobile provider, which put in USD 15m to lead the round. Veon is part of the telecom operator and handset provider network through which SOSV provides customer acquisition and advertising services to portfolio companies.

Dastgyr was founded in 2020 by Muhammad Owais and Zohaib Ali, who previously worked for Airlift, a last-mile delivery start-up that raised Pakistan’s largest-ever Series B round of USD 85m last year. Dastgyr is now responsible for the country’s biggest Series A.

The company connects retailers directly to suppliers, with a view to eliminating tiers of intermediaries in Pakistan’s fragmented supply chain ecosystem. It offers real-time visibility on pricing and financing rates, as well as 24-hour delivery.

Dastgyr has served 100,000 customers to date – the base has grown threefold in the last year, Bao Bean said – from bases in Karachi, Lahore, Sialkot and Gujranwala, fulfilling over 1m orders. The new capital will support expansion into 15 new cities as the company looks to address a larger portion of what it estimates are Pakistan’s 2m underserved small-scale retailers.

By leading the digitisation of informal supply chains in China, which enabled greater consistency in quality and the delivery of financial services, Alibaba Group helped individual stores increase revenue by 33%, while profit rose even higher, Bao Bean noted. In Pakistan, the improvement in store-level economics is even greater.

“When you show up with a simple platform that allows people to double take-home income, they get very excited,” he said. “The number of merchants is growing 15-20% month-on-month, and it’s unfunded – it’s not like the retail wars in China when people were setting money on fire. We see rapid growth with positive unit economics. Before this round, Dastgyr didn’t raise much capital.”

In this sense, Dastgyr differs from its earlier Chinese counterparts, which raised substantial amounts of capital and ploughed into directly-owned infrastructure as well as user acquisition. Some rivals in Pakistan have taken the China approach. Tajir, a B2B e-commerce marketplace that received a USD 17m Series A led by Kleiner Perkins last year, is one such company, according to Bao Bean.

“Tajir started off with its own warehouses and trucks, and like Airlift, it has spent a lot of money,” he said. “Dastgyr’s model is asset-light; it doesn’t take inventory, leverages other people’s supply chain infrastructure, and leverages other people’s warehouses as well as building its own. The company won’t be asset-light forever, but you only make that change once you achieve scale.”

Veon’s investment – made through its venture capital unit – is significant in that it gives Dastgyr access to a network of around 75m subscribers as well as the JazzCash mobile payments platform. The arrangement with Dastgyr is much like that struck last year with Bangladesh B2B marketplace ShopUp as part of a USD 75m Series B.

Bao Bean added that Veon has no desire to internalise e-commerce competencies, unlike India-based Jio (another SOSV network partner). “Not everyone is trying to do everything themselves,” he said. “Veon wants to introduce an equity-based element to close strategic partnerships. It did the same with ShopUp and there haven’t been any complaints about that.”

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• Topics
• South Asia
• Early-stage
• Technology
• Pakistan
• TMT
• e-commerce
• Venture
• SOSV
• German Investment and Development (DEG)