B2B procurement platform, Zaraye has raised $2.1 million in a pre-seed round!

Zaraye, a B2B procurement platform based in Pakistan, has raised $2.1 million in a pre-seed fundraising round.

“In 70 years, Pakistan’s manufacturing industry hasn’t altered much.” “We have some fantastic firms, but they’re having a hard time competing in the global market,” says Ahsan Ali Khan, co-founder, and CEO of Zaraye.

The Zaraye business case is based on Khan and his co-founders’ diagnosis of two challenges that are preventing Pakistani manufacturers from progressing. To begin with, these are businesses that operate on razor-thin margins, with raw materials accounting for up to 65% of total costs; sourcing competitively priced raw materials is thus a challenge. Second, manufacturers are having difficulty obtaining financing to support their working capital, which is limiting their potential to expand.

Zaraye aspires to solve both of these issues. It has created an online marketplace where raw material suppliers may interact with firms wishing to make purchases. Suppliers compete to give the best terms after buyers express their criteria. Zaraye also offers to fund manufacturers who are suffering from working cash as they expand.

The platform’s initial concentration was on two manufacturing industries, with buyers in textiles and construction in particular. Zaraye has signed up 300 suppliers from around Pakistan to sell raw materials to these consumers, though the platform is originally targeted at companies situated in Karachi and Faisalabad.

Signing up on the platform is completely free for both parties. If Zaraye executes a transaction, the platform earns a commission – normally between 1% and 7.5 percent – but buyers and sellers pay nothing else.

On the working capital front, Zaraye points out that many Pakistani manufacturers are simply unable to access the banking system, forcing them to negotiate credit agreements with suppliers or arrange costly financing transactions with informal lenders. The platform is expected to undercut the latter greatly, allowing manufacturers to lower the cost of procuring raw materials as they pursue growth.

The founders of Zaraye say that their proposal is a win-win situation for everyone involved. “By assisting entrepreneurs in discovering opportunities to optimize and scale, we hope to reinforce the backbone of the country’s economy,” Khan says.

Manufacturers have always had to connect with a few intermediaries or deal directly with individual suppliers, which is a lengthy and time-consuming procedure; with Zaraye, they can approach several buyers in one place. Meanwhile, the platform gives suppliers access to a large amount of demand that is all in one place.

It’s a tone that sounds like it’s reverberating. Zaraye has got 400 buyers onto the platform in addition to the 300 suppliers that have signed up to provide their supplies. The platform, which was founded last year, enabled transactions worth an annualized $1 million within four months of its introduction — the amount is now $3 million, and Zaraye aims to reach $10 million later this year.

With today’s announcement of a new round of funding, the company appears to be on the verge of expanding. After proving the concept, the platform can expand in a variety of ways, including growing the number of places where buyers can find it, expanding into new industries, and even exploring cross-border prospects.

Investor assistance, led by Tiger Global and Zayn Capital, will assist in this area. Zaraye intends to use its capital to hire more people and improve its technology stack. Khan continues, “We can aggressively expand volumes to provide us efficiencies to produce value for clients.”

His two co-founders are ecstatic at the prospect. Hashair Junaid Ahmedani adds, “Small and medium business owners have been locked in a cycle of intense competition and a lack of funding options.”

“Our goal is to enable these entrepreneurs to focus on manufacturing and selling their products,” says Taha Iqbal Teli. “Zaraye will handle the entire procurement process, from collecting quotations to ensuring quality, delivering to their doorstep, and giving after-sales assistance.”

Image Credit: Zaraye