ShopUp: Expansion of the Bangladeshi startup

Dec 15, 2020

Why has ShopUp been in the news?

In October 2020, ShopUp announced that it had raised a new investment round of $22.5 million, co-led by Sequoia Capital India and Flourish Ventures, with additional participation through VEON Ventures, Speedinvest, and Lonsdale Capital. ShopUp is the first investment by Sequoia Capital India and Flourish Ventures in Bangladesh. The company has raised about $28 million to date from investors and merged with Indian e-commerce platform Voonik earlier in the year as it looks to expand its presence outside of Bangladesh.

ShopUp said it has seen a rise in demand amid COVID-19. Neighbourhood stores’ weekly transactions increased by 8.5x between April and August on the platform, and RedX is processing 13x more daily parcel volume than it did in April. The company plans to deploy the capital to strengthen its partnerships with manufacturers and expand its tech infrastructure. “This fresh round of funding will support us in increasing our retail reach, deepening our partnerships with manufacturers, and focusing on building tech-first infrastructure,” said Afeef Zaman, CEO of ShopUp.

What opportunity set does ShopUp target?

ShopUp is targeted at the large network of 4.5 million “mom-and-pop shops”, known locally as Mudi Dokaans, in Bangladesh that account for 98% of the country’s retail sector. While it is an extreme example, this sort of fragmentation within retail in frontier markets is common. As in other markets, the vast majority of these small shops have little-to-no digital presence; both for their store, inventory, and order management, and in their relationships with their customers. These issues have been exacerbated by the coronavirus lockdowns.

A research report by the United Nations Capital Development Fund in 2018 highlighted both the importance of these shops for the Bangladeshi economy and the opportunity for businesses that can solve their problems when it comes to digitalisation*. The 1.3 million micro-merchants covered by the report have $18 billion in annual turnover and employ close to 2 million people, with a disproportionally high level of youth employment. Scaled up to include the larger “mom-and-pop shops” that ShopUp targets as well, the opportunity is clearly huge.

However, these businesses face an array of problems. Firstly, ordering from suppliers is most often manual and in cash. Secondly, they struggle to scale their businesses because they do not have access to digital store management tools. Thirdly, they typically do not have access to working capital finance at affordable rates, which, since 73% of their sales rely on credit instead of cash or digital payments, creates a massive liquidity crunch. These problems for small retail stores are practically universal across frontier economies, and yet there has been not nearly as much investor attention given to the SME opportunity as there has to B2C e-commerce and solutions.

What is ShopUp today?

ShopUp has built what it calls a full-stack business-to-business commerce platform to solve some of the key problems outlined above. It provides three core services to neighbourhood stores: a wholesale marketplace to secure inventory, logistics (including last-mile delivery to customers) and working capital.

The marketplace, “Mokam”, has over 10,000 products at wholesale prices for SMEs to purchase. The delivery platform, “RedX”, caters to the expanding e-commerce sector in Bangladesh by providing tech-first delivery support for both businesses and individuals. RedX delivers across Bangladesh in under 72 hours, with doorstep pickup and delivery and SMS updates. Crucially, it accepts cash on delivery (COD) and bank payment or bKash**

The ShopUp “eLoan” app allows businesses to receive a working capital loan for 3 to 12 months with zero collateral, and interest rates from 7% to 24% maximum, provided by ShopUp’s banking partners. The documents required are minimal, and the money is deposited within 7 days of signing the loan agreement. Repayment is possible in multiple different forms, including bKash, automatic deduction, and cash.

ShopUp also enables thousands of SMEs to use their network through social media as a source of additional income. Its “Reseller” app enables individuals to start an online business without any upfront investment in stock, while “Store” allows clients to set up an online store in 2 minutes. This taps into a trend somewhat unique to Bangladesh, where Facebook has become the dominant B2C marketplace in the country. No-one knows exactly how many sellers operate on the platform (some estimate more than 300,000); however, most of them rely on external providers such as ShopUp to manage their inventory, delivery, and payment collection.

ShopUp was founded with the core value of enabling small and medium-sized businesses to succeed, with a principle of technology-first. As it reaches an ever-wider audience in the country of 172 million people, its potential for positive social impact also grows. SMEs in frontier markets such as Bangladesh contribute a larger proportion of GDP and employment than their developed market peers; in Uzbekistan, for example, SMEs generate 50-60% of the GDP and up to 80% of employment. Therefore, businesses which solve the fundamental pain points for these companies through the provision of technology-enabled digital solutions can generate not only outsized financial gains but also social returns.

Key takeaways

  • SMEs play a vital role in frontier market economies, supporting both economic growth and employment; however, they are critically underserved by technology-enabled solutions.
  • There is a huge opportunity for companies to digitise SME stores, inventory and order management, as well as bringing them online for B2C transactions. This can have an outsized social impact given the number of people employed by SMEs and their economic background.
  • Covid-19 has accelerated this shift to digital, and we would expect to see increased investment opportunities in companies such as ShopUp that are solving these key pain points for SMEs.
  • Sequoia Capital India and Flourish Ventures’ first investment into Bangladesh is indicative of a shift among VC investors to look more at frontier markets where the opportunity to invest at competitive valuations and maximise upside is greater than in more developed markets.



** bKash is a mobile financial service in Bangladesh whose users can deposit money into their mobile accounts and then access a range of services, in particular transferring and receiving money domestically, making payments, recharging prepaid mobiles and paying mobile post-paid bills. Its shareholders include the International Financial Corporation (IFC), the Bill & Melinda Gates Foundation and Ant Financial.