The twenty-first century could be a period of unprecedented economic growth and social change for the African continent, which is poised for explosive change — but much of that change is predicated on an outmoded trade infrastructure that hasn’t changed much since the beginnings of the last century.
That’s the problem that Sote wants to target. The company just raised $3 million in seed funding to support its Nairobi and San Francisco operations designed to transform the logistics infrastructure for African shipping — starting with customs clearing and forwarding.
The goal is no less than becoming the digital logistics gateway to the African continent.
“They are trying to transform an industry that hasn’t seen any innovation in a century. That’s the case with receiving and forwarding on the continent,” said Marlon Nichols, a co-founder and managing director of MaC Venture Capital and an investor in Sote’s seed round. “It’s so dense and there’s limited open waterways. The only way to move things is by vehicle. There’s a lack of infrastructure inside the continent and limited ways to get things into the continent. The traditional method was just taxing… the difficulty of clearing something through customs.”
Sote “creates transparency and will open up Africa for business,” Nichols said.
Initially, Sote’s pitching a software service enabling customs clearing and forwarding to give industrial cargo owners a central dashboard for all of the parties involved in the process.
While logistics startups like Flexport have managed to amass a $22 billion valuation for logistics services, the African continent has been underserved by tech developers, Nichols said. And Sote is hoping to change that.
The company’s software can serve as a workflow tool to manage freight clearing and forwarding as well as a dashboard to track shipment status, payment history and the estimated arrival time for containers.
Sote was founded by the Kenyan native Felix Orwa and co-founders Meka Este-McDonald, a former product manager at Verizon and Gigster, and Scott Yacko a former director of software engineering at Amazon and director of architecture at Walmart.
MaC Venture Capital puts the total addressable market that Sote could tap at roughly $20 billion, given the company’s vertical integration.
It can work with companies like Kobo Networks and Lori Systems, which have both built large, venture-backed businesses handling the land-locked logistics problems of finding truck transport to bring goods to local markets.
There are roughly 20 million containers that move through Africa annually, and over 1 million containers move through Sote’s initial home market of Kenya. Kenya actually accounts for one-sixth of Africa’s shipping market, and is the fifth-busiest port on the continent, as well as the gateway to Eastern African nations like Tanzania, Uganda, Somalia, Rwanda and South Sudan.
The company charges approximately $1,000 per container handled, and if it were to handle transport of a fraction of a percent of the total number of containers shipped, it could hit $100 million in annualized revenue in the next 10 years, according to MaC Venture Capital’s predictions.
Este-McDonald and Orwa have been working on the business for the past three years.
“Our foundational product is actually like Flexport,” Orwa said. “What we do for customers is what Flexport does in the U.S., we help manufacturers move cargo across … they don’t get into having to get into a license and all that. Flexport does because you have to clear the cargo and pay the taxes. We are licensing with the government agency and helping to pay the taxes.”
Ultimately, Sote expects to handle warehousing services and book transportation on trucks. “That process — to move one container — requires 60 back and forth messages of calls and texts and emails flying back and forth between all of these players,” said Orwa.
Additional backers who put up cash for the company’s seed round, which closed last month, include Acceleprise, Backstage Capital, Future Africa and Rob Solomon — the chairman at GoFundMe. Nichols is taking a seat on the company’s board.