“Pakistan’s manufacturing industry hasn’t changed much in 70 years,” said Ahsan Ali Khan, co-founder and CEO of Zaraye, a business-to-business procurement marketplace that announced today that it had raised $ 2.1 million in pre-seed funds. “We have some great businesses, but they are struggling to compete in the global market.”
The business case for Zaraee is based on Khan and his co-founders’ diagnosis of two issues that stuck Pakistani manufacturers. First, these are businesses that operate on paper-thin margins and for which raw materials account for 65% of the total cost; The difficulty of sourcing competitively priced raw materials is therefore problematic. And second, manufacturers are struggling to secure funding for their working capital, which is hampering their growth potential.
Zaraei aims to solve both of these problems. It has created an online marketplace through which raw material suppliers can connect directly with manufacturers interested in purchasing. Buyers post their requirements and suppliers then compete to offer the stricter terms. In addition, for those manufacturers who are struggling with working capital, they offer financing as well as expansion.
The platform primarily focuses on two manufacturing sectors, specifically targeting buyers of textiles and construction. About 300 location-based suppliers across Pakistan have signed up to Zaraye to offer these buyers raw materials, although the platform is primarily aimed at two city-based companies based in Karachi and Faisalabad.
The agreement for both parties is that signing up on the platform is free. Zaraye earns a commission – usually between 1% and 7.5% – if the platform offers a contract advantage, buyers and sellers pay nothing else.
In terms of working capital, Zaraei noted that many manufacturers in Pakistan only see banking systems closed for them, have to negotiate credit agreements with their suppliers or arrange expensive financing agreements with informal lenders. The platform promises to significantly reduce the latter, enabling manufacturers to reduce the cost of acquiring raw materials as a growth goal.
Zara’s founders argue that their proposal offers a win-win situation for all concerned. “Our goal is to help entrepreneurs find optimization and benchmarks by strengthening the backbone of the country’s economy,” Khan said.
Traditionally, manufacturers have had to connect to a handful of intermediaries or deal directly with individual suppliers, an extended process that is costly and time consuming; Through Zaraye, they can reach multiple buyers in one place. For suppliers, meanwhile, the platform provides access to significant demand combined in a single location.
This is a pitch that seems to resonate. In addition to the 300 suppliers who have signed up to offer their materials, Zaraye has brought 400 buyers to the platform. Founded last year, within four months of its launch, the platform enabled annual মূল 1 million worth of transactions – this number currently stands at $ 3 million and Zaray expects to reach $ 10 million by the end of this year.
Today’s fundraising announcement suggests that business is likely to accelerate. Once the concept is proven, the platform can grow through multiple routes – increasing the number of cities open to buyers, expanding to other sectors of the manufacturing industry, and even pursuing cross-border opportunities.
Financial support from investors led by Tiger Global and Jane Capital will help. Zaraye plans to invest its funds in new recruitments and improvements to the technology stack. Khan added, “We can aggressively create volume to give us the ability to create value for customers.”
His two co-founders enjoyed the opportunity. “Small and medium business owners are caught in a cycle of high competition and lack of financing options,” said Junaid Ahmadani.
Taha Iqbal Teli added: “Our goal is to help these entrepreneurs focus on producing and selling their products – Jaray will handle the entire purchasing process, get quotes, ensure quality, deliver to their doorsteps, provide after-sales support. “