Zaraye plays matchmaker for Pakistani manufacturers
“Pakistan’s manufacturing industry hasn’t changed much in 70 years,” says Ahsan Ali Khan, co-founder and CEO of Zaraye, a business-to-business sourcing marketplace that today announces it has raised $2.1 million dollars of pre-seed funding. “We have great companies, but they struggle to compete in the global market.”
Zaraye’s business case is based on Khan and his co-founders’ diagnosis of two issues holding back Pakistani manufacturers. First, these are companies that operate on very thin margins and for which raw materials represent up to 65% of total costs; the difficulty of sourcing raw materials at competitive prices is therefore problematic. And second, manufacturers are struggling to secure financing to support their working capital, which hampers their ability to grow.
Zaraye aims to solve both of these problems. He has created an online marketplace through which raw material suppliers can connect directly with manufacturers who want to make purchases. Buyers post their requirements and suppliers then compete to offer the most advantageous conditions. Additionally, for manufacturers struggling with working capital as they grow, Zaraye also offers financing.
The platform initially focused on two manufacturing sectors in particular, targeting buyers in textiles and construction. Some 300 suppliers based in locations across Pakistan have registered with Zaraye to offer raw materials to these buyers, although the platform is initially aimed at companies based in two cities, Karachi and Faisalabad.
The deal for both parties is that it is free to register on the platform. Zaraye earns a commission – usually between 1% and 7.5% – in the event that the platform facilitates a transaction, but buyers and sellers pay nothing otherwise.
On the working capital side, Zaraye points out that many manufacturers in Pakistan simply find the banking system closed, forcing them to negotiate credit agreements with suppliers or enter into costly finance deals with informal lenders. The platform promises to significantly reduce the latter, allowing manufacturers to lower the cost of raw material acquisition as they target growth.
Zaraye’s founders say their proposal offers a win-win situation for all parties involved. “We aim to strengthen the backbone of the country’s economy by helping entrepreneurs find ways to optimize and scale,” says Khan.
Traditionally, manufacturers have had to connect with a handful of intermediaries or deal directly with individual suppliers, a time-consuming process that is costly and time-consuming; thanks to Zaraye, they can approach several buyers in a single space. For suppliers, the platform gives access to a large demand, aggregated in one place.
It’s a tone that seems to resonate. Apart from the 300 suppliers who signed up to offer their materials, Zaraye also brought 400 buyers to the platform. Founded last year, within four months of its launch, the platform was enabling transactions with an annualized value of $1 million – the figure currently stands at $3 million and Zaraye plans to reach 10 million later this year.
Today’s fundraising announcement suggests the business now has the potential to accelerate. After proving the concept, the platform can grow in several ways – by increasing the number of cities where it is open to buyers, expanding to other sectors of the manufacturing industry and even looking for opportunities. cross-border.
Financial support from investors, led by Tiger Global and Zayn Capital, will help in this regard. Zaraye plans to invest his funds in new hires and improving the tech stack. “We can aggressively increase volumes to give us the efficiencies needed to create value for customers,” adds Khan.
Its two co-founders relish the opportunity. “Small and medium business owners have been trapped in a cycle of high competition and a lack of financing options,” says Hashair Junaid Ahmedani.
Taha Iqbal Teli adds, “Our goal is to help these entrepreneurs focus on making and selling their products. Zaraye will handle the entire sourcing process, from obtaining quotes, quality assurance, door-to-door delivery, to after-sales support. .”