Tabby raises $58M at $660M valuation as PayPal Ventures makes first investment in GCC
MENA-based buy-now, pay-later startup Tabby has raised $58 million, led by Sequoia Capital India and STV, at a valuation of $660 million. The investors led the fintech’s Series B expansion round in June last year.
PayPal Ventures, the global corporate venture arm of PayPal, is one of the participating investors (this marks its first investment in the Gulf Cooperation Council (GCC), but second in the MENA region after Egyptian fintech Paymob). Other investors in Tabby’s new funding round include Mubadala Investment Capital, Arbor Ventures and Endeavor Catalyst.
According to a statement shared by the Dubai-based company, the funding will be used to expand Tabby’s product line into a multitude of consumer financial services and support the company’s growing operations which now include Egypt. The fintech has raised more than $410 million in equity and debt since launching in 2019.
Until last September, Tabby, which allows users to shop with flexible payments online and in-store from global brands including H&M, Adidas, IKEA, noon and Bloomingdale’s, was active in Saudi Arabia, the UAE and Kuwait. Co-founder and CEO Hosam Arabin a TechCrunch interview last June, Egypt called an attractive market of underbanked consumers looking for ways to spend online outside of what is readily available to them, which is cash.
“The Egyptian consumer right now is quite used to buying on installments, which usually comes with additional costs in the form of interest or additional fees. So coming in with a completely free product for the customer has been quite different, and we’ve seen a lot of strong demand there,” Arab said, giving an update on how the expansion has fared. “Having said that, the Egyptian market and the economy as a whole is in quite a difficult place at the moment with a constant devaluation of their currency. And so there are clear challenges for this market, at least in the short to medium term, outside of just pure consumer requirements.”
Consumer demands vary across regions, and noting the nuances behind each market is sufficient to survive as a fintech. In developed countries where credit is traditionally available through credit cards, BNPL can be seen as a nice to have, mainly because of the installment aspect. But for developing markets where credit penetration is low or having a credit history is too demanding, BNPL has a more robust use case. That’s why Arab believes his startup is somewhat insulated from the problems affecting Affirm, Afterpay and Klarna, global private and public BNPL players that have become worryingly loss-making and thus hit their valuations.
“I would say there has been pullback from a demand perspective. And just as important is the pending credit crunch coming to some of these more developed markets, which brings higher credit risk, which could end up hitting the bottom line of these companies,” said managing director, who argued for Tabby’s growth in a cooling BNPL space. .
“Now the structure of the economy is different for some of the markets we [Tabby] is in today. Credit penetration in the MENA region is significantly lower than in other developed markets. From a credit risk perspective, consumers are not overstretched because they don’t have two or three credit cards. So from a demand perspective, there is a real gap and opportunity we are filling.”
Despite the valuation crisis and subdued demand for growth companies globally, Tabby has managed to double its valuation from 18 months ago, although it raised less capital in a subsequent round; as such, it is currently one of the most valued startups in the MENA region. Arab said commanding this current valuation conveys Tabby’s product relevance and ability to build a sustainable business in a reasonably challenging space, including upstarts such as Saudi-based Tamara and Egypt’s Sympl and Khazna.
The relevance Arab talks about can be seen in Tabby’s new numbers. In March of last year, for example, the buy-now-pay-later upstart had just over 1 million active users who shopped more than 3,000 brands annually. Now Tabby says more than 3 million users shop from 10,000+ brands, including nine of MENA’s 10 largest retail groups.
The fintech company has also issued more than 150,000 Tabby cards just six months after launching the card program, with in-store sales now accounting for over 10% of the company’s volumes. The company stated that revenues have increased 5 times in the past year.
Speaking on the investment, GC Ravishankar, managing director of Sequoia Capital India, said Tabby has the ability “to offer more innovative products to its consumers and improve access while creating more affordability.” About this, CEO Arab explained that Tabby recently launched a product for daily purchases, such as groceries and food, and will allow customers who do not have access to credit cards to make purchases and pay at the end of the month.
“There are clear gaps in the market when we look at offering consumers better financial services and products. One area in which we see great opportunity is to allow our customers to use us for their day-to-day purchases,” noted the CEO. “We believe this is a great opportunity to provide a deeper engagement with our customers as they begin to shop with us more frequently.”
