Dhaka-headquartered ShopUp said on Tuesday it has raised $22.5 million in a round co-led by Sequoia Capital India and Flourish Ventures, reports the Economic Times.

ShopUp is the first investment by Sequoia Capital India and Flourish Ventures in Bangladesh.

For both the venture firms, this is the first time they are backing a Bangladeshi startup.

Veon Ventures, Speedinvest, and Lonsdale Capital also participated in the four-year-old ShopUp’s Series A financing round. ShopUp has raised about $28 million to date.

There are 4.5 million neighbourhood mom-and-pop shops in Bangladesh, known locally as Mudi Dokaans, that account for 98% of the country's retail sector.

This makes Bangladesh one of the most fragmented retail markets in Asia.

“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.

These small shops are facing a number of challenges. They are not getting inventory on time or enough inventory and they are paying more than what they should, said Zaman.

And for these businesses, more than 73% (PDF) of all their sales rely on credit instead of cash or digital payments, creating a massive liquidity crunch. So most of these businesses are in dire need of working capital, he said.

Zaman declined to reveal how many mom-and-pop shops today use ShopUp, but claimed that the platform assumes a clear lead in its category in the country. That lead has widened amid the global pandemic as more physical shops explore digital offerings to stay afloat, he said.

The number of neighborhood shops transacting weekly on the ShopUp platform grew by 8.5 times between April and August this year, he said.

The pandemic also helped ShopUp engage with e-commerce players to deliver items for them.

“Sequoia India has been a strong supporter of the company since it was part of the first Surge cohort in early 2019 and it’s been exciting to see the company become a trailblazer facilitating digital transformation in Bangladesh,” said Klaus Wang, VP, Sequoia Capital, in a statement.

The startup has no intention to become an e-commerce platform like Amazon that directly engages with consumers, Zaman said. E-commerce is still in its nascent stage in Bangladesh. Amazon has yet to enter the country and increasingly Facebook is filling that role.

ShopUp sees immense opportunity in serving neighborhood stores, he said. The startup plans to deploy the fresh capital to deepen its partnerships with manufacturers and expand its tech infrastructure.

It opened an office in Bengaluru earlier this year to hire local tech talent in the nation. Indian e-commerce platform Voonik merged with ShopUp this year and both of its co-founders have joined the Bangladeshi startup.

Zaman said the startup will hire more engineering talent in India.

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