Sote - turning cargo Into collateral
Date
2018 - 2024
Service
Fintech • Logistics tech
Client
Sote inc.
Project Overview
Background
Africa faces a $100B trade loan deficit among medium and large businesses. The root cause: banks require tangible real estate as collateral, and it's finite.
What if real-world logistics containers in Africa were the foundational proprietary data source for an underwriting model?
We built Sote to unlock a new collateral class; cargo moving through supply chains. That was phase one. The longer game: become the credible third party banks rely on for creditworthiness assessment and underwriting. Build client credit history through cargo-backed loans. Then, once that history was established over a few years, scale lending without collateral entirely.
We achieved $7.2M annualized revenue, moved $20M GMV monthly across 700 TEU containers, and raised $10M. Then we failed to scale.
Here's what we built, why we failed, and what that revealed.
Why logistics was the wedge: the data + control layer
For the $100k to $20m ticket range, most fintech approaches to trade finance start with data. But in a market built on real-estate as collateral, data alone doesn't collateralize anything. Banks can't seize a spreadsheet. Without an existing credible third party data provider, the collateral gap had to be bridged.
We started with logistics. Sote Logistics was an end-to-end global freight forwarding operation for Africa. Ports, borders, warehousing, customs, sea, air, and rail. This operation generated two outputs that together create a new collateral class:
Output 1: Proprietary underwriting data. Real-time, auditable intelligence on each client's trade activity—cargo status, documents, invoices, transaction history, suppliers, and more. This formed deep validated trade loan profiles.
Output 2: Physical control over cargo. Legal framework and money back insurance to hold a borrower's cargo in custody on behalf of a bank. Peak value: $20M in cargo under our control at any given time. This provided our underwriting arm.
Neither output works alone. Data without custody is unenforceable. Custody without data is blind. The combination enabled banks to make $100K–$10M credit decisions based solely on our platform, without requiring real estate.
Key components: An internal ops workflow app + client app for real-time cargo tracking + distributed field operations teams + bank facing trade loan management platform
The GTM bet: banks as partners
Our expertise was in credit assessment, underwriting, and custody through logistics to deploy capital effectively. We had no expertise raising large debt capital for lending in Africa. We chose to lean on our strength (the platform) and partner for the weakness (balance sheet).
The logic:
Clear market: $100B deficit
Clear growth path: Long sales cycle, and once a bank onboards, access to their portfolio plus credibility compounds growth
Tailwinds: African banks appeared to be embracing technology at the time
We ran successful pilots
In one pilot turned cased study, it helped a bank avoid a $250K loss in a single loan, identifying a potential default three months early. Senior leaders communicated the value early and clearly on many occasions.
Key Highlights
Why we failed
We underestimated the effort required to go beyond pilots with legacy banks in Africa. Deployment would require board approval to lending-policy changes. As a subject of multiple banks’ board meetings to discuss our proposal, we simply never got prioritized enough for a decision.
Our product represented an industrial change for banking. While incumbents can adopt innovation, they generally are not the drivers of industrial changes. For example, in retail: Walmart did not become Amazon. And Amazon built the warehouses.
What we learned
Through direct testing, we achieved clarity: the Kenyan banking system is overly enamored with legacy practices. Activating mutually beneficial partnerships proved nearly impossible.
To achieve scale, the right approach in such industries is to build the full end-to-end solution. Amazon did not partner with retailers for warehousing—it built warehouses. Sote would have needed its own balance sheet.
Could we have raised balance sheet debt earlier? Our assessment is that the confidence in raising that debt today has only been achieved through the Sote experience.
The takeaway
When a product requires an incumbent client to change how they operate, you are not selling software. You are asking for institutional transformation. Quite similar to AI today. Mid-level champions cannot deliver that. Senior sponsorship is necessary but insufficient.
Either build enough leverage that adoption becomes inevitable, or own the full stack yourself.
For deeper conversation on the nuance behind these statements, reach out directly.
