Lori Systems, the Google-backed Kenyan logistics startup, raised $2 million at a steeply discounted $5 million valuation in 2024. The logistics startup, once valued at about $120 million, saw its valuation slashed to $5 million in the latest bridge round, which was led by Delta40, with participation from Future Africa, FP Capital, and other investors. The latest fundraise brings the company’s total funding to over $46 million.
Lori Systems’ valuation decline from $120 million to $5 million reflects a broader trend of shrinking valuations for African startups. However, it also signals that Lori likely fell short of the growth targets it had set for its investors.
While Lori declined to disclose specifics, similar underperformance has plagued other logistics startups struggling to deliver the technology-driven scale investors expected. In Kenya, one of Lori’s key markets, only two other logistics startups—Afrogility and ApexLoad—raised a modest $200,000 in total. In Nigeria, only three logistics firms—Renda, Fez Delivery, and Cargo Plus—disclosed funding rounds, raising a combined $2.1 million.
Nonetheless, investors in Lori’s new round remain bullish.
“Delta40 invested in Lori in 2024 because of the immense market opportunity it presents in Africa’s trucking and logistics sector—a $180 billion market growing at 8% annually,” Delta40 said in a statement. “Lori’s technology and business model uniquely position it to both create and capture value, even in a challenging macroeconomic environment.”
Jean-Claude Homawoo, Lori’s co-founder and CEO, is equally optimistic. He says the company will achieve profitability this year, a milestone he believes will unlock access to traditional bank financing.
“We have noticed that our lending partners give loans to profitable companies. And that has been our drive towards profitability,” Homawoo noted. Homawoo claims Lori has improved its EBIT margins over the past three years, although he declined to share exact figures. EBIT, or earnings before interest and taxes, measures a company’s operating profitability.
The company is also re-engineering its financing model to address cash flow constraints that have hampered logistics startups across the continent. Typically, Lori pays transporters upfront to secure trucks and is reimbursed by cargo owners 30 to 90 days later. The lag strains working capital and forces startups to rely heavily on revolving credit lines from banks.
One of the investors, who declined to be named as he is not a company spokesperson, says the startup is confident because it is currently rejigging its business model to fix the working capital issues that have dogged logistics startups across the continent.
Launched in 2016 by Homawoo and Josh Sandler, Lori set out to reduce the cost of moving goods across the continent by connecting shippers with transport providers through its aggregator platform.
The typical customers—manufacturers, distributors, and high-volume shippers—are characterised by long payment cycles. Their vendors typically have to wait 30 to 90 days for manufacturers and distributors to settle invoices. On the other hand, the transporters must be paid almost immediately, the part before the trip and the rest upon fulfillment.
“One of the biggest problems of the logistics space is that the manufacturers and distributors don’t pay back debts on time, which creates cash flow challenges for startups,” said the investor. Take Kobo360, for instance. The startup struggled to provide upfront capital to its drivers after its financial partner cut off funding over unserviced debt.
The investor claimed Lori is exploring a new model that allows banks to finance transportation directly, keeping it off Lori’s balance sheet. Under this setup, the logistics startup draws on an invoice facility at the bank, prices the interest at its rate, and uses the funds to kick off the trip and pay the driver. The bank charges an 8% fee for financing the process.
“Since a bank’s core competency is recovering loans, it makes sense that they handle that,” the investor said.
While this model reduces the risks of cashflow challenges for the logistics startup, it offers significantly lower margins than the previous model, which allowed Lori to earn interest on upfront payments.
Lori declined to comment on this.
“With Delta40’s support, we have secured bank partnerships, including with Ecobank, to structure working capital in a long-term sustainable way,” Homawoo told TechCabal.
Still, this tweak could be the missing piece for asset-light logistics startups like Lori, which have struggled to balance scale with sustainable unit economics. The asset-light trucking model has left startups struggling to pay off debt and losing investor confidence. As more African logistics companies scale back or pivot, questions have been asked about the sustainability of the asset-light model, where logistics startups rely on partnerships with third-party transporters rather than owning trucks in Africa.
“It is very viable and looks fantastic on paper, as Lori Systems can offload the risk and fulfil many trips. But the only concern is that banks in Kenya charge interest as much as 2% monthly, or 3% if they are uninsured loans,” said Steve Okoth, a director at DBO East Africa, a business advisory company. This means the cargo owners who typically operate with thin margins have to pay a higher price for transportation due to the interests. Okoth acknowledged that this financing is increasingly common, but it may be challenging for a logistics startup with this model to compete on price, for manufacturers and distributors who may be unwilling to pass the cost on to consumers.
Homawoo remains a believer. “It requires financial discipline, the right financing, and a focus on execution,” he said. “There are no flaws in logistics—just errors in execution.”
He acknowledges that Lori has had its fair share of mistakes and has learned from them. Over the past five years, Homawoo claims, Lori has doubled its take rates, kept receivables low, and improved margins and EBIT.
“The work isn’t done. There’s still a lot we need to do to be successful,” he said. For Lori, which currently operates in Nigeria—its largest market—Kenya, and Uganda, that path to success includes structuring working capital in ways that don’t weigh down the balance sheet.
Looking ahead
As startups continue to use technology to tackle inefficiencies in logistics across Africa, Lori Systems is expanding its tech stack to stay competitive. The company claims it uses AI to plan routes, match front hauls with backhauls, and boost operational efficiency.
Lori is also exploring the use of electric trucks to cut delivery costs. With electric energy priced below diesel, EVs potentially lower the cost of cargo movement per kilometre.
“Those are just two of many innovations that can help us continue to lower the cost of transportation,” Homawoo noted. “As long as we keep focused on our mission and work to do that sustainably, we believe we can successfully take advantage of the huge market opportunity that is electric transportation in Africa.”
For Homawoo, the stakes go beyond Lori’s survival. If the cost of moving goods across Africa can be lowered, he argues, the goods themselves will become more affordable, making African businesses more competitive globally.
