Pakistani startup PostEx , offering financial and logistics services to online merchants, is set to enter new markets, beginning with Saudi Arabia this year, TechCrunch has exclusively learned.

"We want to go into other markets to really disrupt them because we see the gap," said Muhammad Omer Khan, founder and CEO of PostEx, in an interview.

E-commerce in Pakistan, which currently sits at around 1.5% of its total retail market, has grown 50% in the last 12 months. PostEx is a likely contributor to that growth.

Online merchants in Pakistan find it challenging to sustain their business and achieve growth, as 95% of transactions are paid with cash on delivery. Courier companies in the South Asian nation take 10 to 15 days to settle those transactions from the dispatch time to delivery. All this leads to working capital issues for online merchants.

In 2020, Khan founded PostEx to solve these issues by giving merchants upfront payments against cash-on-delivery orders, and an attached logistics service. After getting regulated as a non-bank financial institution in Pakistan, the startup also launched a growth capital offering for online merchants. However, to reduce risks, the startup does not provide pure financial support to merchants, and only gives them credit if they use its logistics service.

Khan told TechCrunch that this model has helped PostEx keep its non-performing loans below 0.03% since inception.

"Because we control the flow of the funds, meaning that if we are giving the credit, we're doing the deliveries on our own, and then we're collecting the cash directly from the consumer," he said.

The co-founder added that of its active 15,000 merchant base, over 80% merchant have signed up purely for upfront payments with logistics, while the remaining 20% are using only its logistics service.

Initially, PostEx started the financial service from its own equity, as Pakistan's capital controls makes it hard to raise significant debt from traditional lenders. However, as it scaled and got a proven number of merchants and credit-payback history, the startup began working with conventional banks to provide loans to merchants directly from their balance sheets.

PostEx expanded its logistics footprint in Pakistan by acquiring rival Call Courier in August 2022. The acquisition helped the startup grow its market from three key markets to over 650 cities in one go. It also enabled onboarding smaller businesses and enterprise customers — alongside large merchants — to become a nationwide service for e-commerce companies of all sizes.

Khan said that just over a year after Call Courier's acquisition, PostEx became profitable in November last year. It also recently crossed an annual recurring revenue rate of $21 million, with four million monthly transactions, and projects to surpass $25 million by the end of this year.

"There is no cost of acquisition, except there is only just the cost of debt or cost of capital," he said. "So, we are focusing on healthier margins for profitability… we're growing 10–15% month-on-month."

Entering new markets with $7.3M in new funding

The startup has now raised $7.3 million in an all-equity funding round led by Dubai-headquartered Conjunction Capital to sketch out its market expansion, which plans to go beyond Saudi Arabia and stretch to the United Arab Emirates (UAE) over time.

In the next three months, PostEx plans to enter Saudi Arabia. The startup also looks to raise another round of $15 million to double down in the new market. Talks for the new round with investors are ongoing, Khan asserted.

PostEx is also testing its platform in the UAE and already has a license for financing. It plans to launch there after successfully cracking the Saudi Arabian market.

For Saudi Arabia, Khan told TechCrunch that PostEx will apply for a financing license with the local regulator, the Saudi Central Bank. Meanwhile, it has started a pilot in the country with a handful of small and medium online merchants and one or two large players by tying up with local financing partners.

At the same time, PostEx plans to expand its presence in Pakistan, expanding its headcount of 6,500 across 600 cities to 9,000 by the end of the year.

"We anticipate growth in certain cities more as compared to other cities. So we invest in those cities more," Khan said.

The startup is also testing a digital payments service for online merchants in Pakistan, allowing them to digitize payments at the doorstep or checkout page. It already offers an expense management system to merchants to help them manage salaries, supplier and vendor payments and expenses through a single portal.

PostEx's most recent round also saw participation from Dash Ventures and Sanabil500 as well as its existing investors VSQ, FJ Labs and Zayn VC. Before this round, the startup raised $8.6 million.