Exclusive: After two fundraises in 2023, Alerzo cut its workforce in February due to “digitization”

Alerzo, the B2B e-commerce company backed by Nosara Capital and FJ Labs, laid off at least 70 employees in early February despite raising funds twice in 2023. Two people familiar with the matter said the layoffs were driven by a need to cut costs and extend runway. However, the company said digitisation and a need to create a sustainable business drove the decisions.

The company has laid off employees twice in the past year, reducing its headcount by at least 400 in 2023. Many affected employees were warehouse staff.

The layoffs in February 2024 also affected junior employees at warehouses and front offices, two persons familiar with the matter told TechCabal.

Alerzo confirmed the layoffs but declined to share the number of employees affected.

“In February we also had a large workforce of almost 1500 employees. While any layoff is regrettable, we’ve done our best to limit the amount affected,” the company said in a statement to TechCabal.

“All those who were laid off were still given severance packages and had health benefits extended for an additional three months.”

As the startup cut costs, it raised funding twice in 2023 but did not disclose the funding amounts.

It is unclear if existing investors participated in both funding rounds.

Per Crunchbase, Alerzo raised “undisclosed non-equity assistance” after it was selected as a member of the June 2023 cohort of World Economic Forum’s Technology Pioneers.

Three people familiar with the conversations claimed the company also raised funding in April and September 2023.

“We did raise some capital in 2023 but are unable to disclose the amount,” a spokesperson for the company said.

Founded in 2018 by Adewale Opaleye, Alerzo raised $525,000 in pre-seed funding in 2020 and $5 million in a seed round in 2020. Its $10.5 million Series A round was also well-publicised. It also raised an undisclosed amount in a January 2022 Series B round.

Struggles in Africa’s B2B e-commerce

Alerzo’s layoffs highlight the difficulty of the B2B e-commerce model in Africa. Many startups in the sector set out to solve the inefficient distribution of goods to millions of small retailers in Africa backed by big VCs and millions of dollars in funding.

Instead, many have found themselves in a fix, distributing similar products from FMCGs, with little or no differentiation from their competitors.

“Everyone is collecting from the same FMCGs and distributing to the same retailers. And because consumer spending is shrinking, the volumes the retailers are buying is reducing,” one person with knowledge of the industry said.

“The other problem is that there’s also a price war in a shrinking space.”
Startups also compete with big-time “offline” distributors who move huge volumes from FMCGs without steep technology and marketing costs.

“One of the biggest distributors for a particular FMCG buys products worth up to ₦10 billion monthly and their operation is pretty small. Those volumes are more than what most B2B e-commerce startups have,” said one person with knowledge of the sector.

The ability to move such huge volumes attracts incentives and the best rates from the FMCG companies. These informal distributors have also built a strong network of customers over the years.