Tabby nabs $200M in Series D funding at $1.5B valuation – Over the last six months, a number of startups have experienced a decrease in their valuation due to a decline in venture capital funding amid an increase in interest rates.
Fintech companies operating in the public and private marketplaces, including Affirm, Afterpay, and Klarna, have had difficulties, particularly those who specialize in buy now, pay later services for Western consumers. However, Tabby, a platform that provides Middle Eastern clients with BNPL services, is now doing quite well.
Tabby nabs $200M in Series D funding at $1.5B valuation
After moving its headquarters from Dubai to Riyadh, Tabby completed a $200 million Series D investment round, valuing the company at $1.5 billion. This highlights the significant growth and market importance of the shopping and financial services app in terms of how consumers purchase and pay by positioning it as the first fintech startup unicorn in the Gulf.
This comes less than a year after Sequoia Capital India and STV, two investors in the most recent unicorn round, led Tabby’s $58 million Series C round. Former backers like PayPal Ventures, Arbor Ventures, and Mubadala Investment Capital joined. The lead investor Wellington Management, one of the best independent investment management companies in the world, and growth equity investor Bluepool Capital are among the new backers at the same time.
“We’ve seen pretty incredible growth over the last year. And with that, we saw a lot of inbound interest from investors that I think always saw value in the BNPL model. Despite seeing the challenges with the model in other markets, there was that interest in understanding why this market is different and why we’ve grown profitably,” said founder and CEO Hosam Arab regarding the company’s growth and investor interest.
“We explored various discussions with interested parties and many of the investors that came in already have exposure to this model in other markets. For us, it made sense to raise capital at this time. We do see this as potentially the last round of capital that we would raise before an IPO. And we brought in investors that have public market expertise.”
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Three important components are highlighted in Arab’s remark. First off, Tabby reached profitability, setting a challenge for its counterparts worldwide. The company has raised over $950 million in debt and stock. Although Tabby’s profitability was not made public, Arab claimed that the startup’s sales had increased threefold. He explains Tabby’s profitability by saying that it operates in a market whose structure makes sense economically for a BNPL model.
Over 30,000 brands—including Adidas, Amazon, H&M, and SHEIN—as well as ten of the biggest retail chains in the MENA area collaborate with Tabby to offer BNPL services to over 10 million customers in Saudi Arabia, the United Arab Emirates, and Kuwait at the point of sale and in-store. Even though Tabby launched a few years after services like Afterpay and Affirm, it still has a sizable customer base—far lower than Klarna’s enormous 150 million customers—that is nearly equal to Afterpay’s 16 million and Affirm’s 14 million active users.
However, Tabby asserts that BNPL providers are lucrative in the GCC, in contrast to the US and Europe, where they frequently run at a loss. There are numerous explanations for why this could occur. Consumers’ access to credit options is limited, despite the region’s comparatively low e-commerce penetration, especially in Saudi Arabia and the UAE (8% and 15%, respectively). Consequently, BNPL functions as a vital credit source; whilst in developed markets with a plethora of credit options it is considered a convenience, for many consumers in the Middle East and, consequently, the Gulf, it is indispensable.
Tabby appeals to two different markets. The first is caused by the low credit card penetration in countries such as Saudi Arabia, where only 15% of people have credit cards (the GCC as a whole has about 10%, but in the UAE, it is approximately 40%). Customers who find Tabby’s tokenized payment system convenient make up the second group.
Tabby is frequently the first and only source of credit for both segments. Because consumers value having access to credit, the startup’s distinct market position has resulted in strong payment performance, allaying worries about impulsive spending and unmanageable debt brought on by BNPL services.
“Buy now, pay later doesn’t help in markets where customers are overstretched when it comes to credits. It’s an additional burden on these consumers. The regulations of those markets aren’t there yet, and affordability needs to remain a factor that buy now pay later providers check for,” added Arab. “However, in our markets, these are the two components that help. One, consumers are not overburdened and overstretched. And two, the regulations have come fairly early on in the market. For example, in Saudi Arabia for instance, there is already a BNPL permit. To add, one key factor that we also address within is checking for customers’ ability to pay so we’re not able to lend to consumers that are not able to borrow.”
Before Tabby enters a market, consideration is given to the extent of e-commerce penetration, the degree of credit card penetration (low to moderate), and the spending power of the consumer. This explains why it left Egypt, a market it had entered six months earlier, in February. Egypt’s e-commerce market and penetration are smaller than those of Tabby’s more well-known markets, despite the country’s low credit penetration rate of 4%. Additionally, the country’s credit system is less effective than that of Saudi Arabia and the United Arab Emirates, and its customers have lower purchasing power. Notwithstanding its withdrawal, Tabby might return to the Egyptian market, according to Arab, if the firm “begins to see promising signs with e-commerce opportunity.”
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Saudi Arabia continues to be Tabby’s biggest market, accounting for 80% of its clientele and the majority of its $6 billion annualized transaction volume. The fintech’s decision to increase its footprint in its largest market and move its headquarters from Dubai to Riyadh was inspired by these figures as well as the company’s IPO preparations on the Saudi stock exchange. The precise date of this listing on the Tadawul is still unknown, though.
almost 4,000 businesses now accept the payment option in its second-largest region, where it introduced Tabby Cards last year to let users in the UAE make in-store purchases. This accounts for almost 20% of the platform’s overall volumes, up from 10% in January. The business also just introduced Tabby Shop, which allows customers to find and follow the greatest offers and items in one location by displaying over 500,000 products from thousands of brands.
According to Arab, the firm intends to make larger investments in its present markets by providing clients with extra goods that improve their financial security. This involves broadening the scope of Tabby’s product offerings to include a wider variety of financial services, like payments and savings, and adding different credit choices that increase Tabby’s reach outside of its network.
“Tabby created a new industry and is transforming the way people consume and pay across MENA,” said Abdulrahman Tarabzouni, founder and CEO of STV, an investor in Tabby since its Series A round. “Hosam and team built an iconic enterprise that is a reference model in terms of both discipline and disruption; two things that are hard to crack in tandem. We are excited to see Tabby become an integral part of Saudi’s fintech landscape, nurturing growth and empowering the broader economy.”
