How can fintech startups outlast the VC winter?

The decade-long summer of free money is over. Venture funding declined by $90 billion (53%) in the third quarter of 2022 from a year earlier and fell $40 billion (33%) compared to the second quarter, per Crunchbase data. That makes Q3 2022 the slowest quarter for VC funding since the start of the pandemic.

However, in spite of all the crazy stories this year, there are real opportunities for aspiring fintech startups to become the new heroes of the multitrillion-dollar banking and embedded finance industry.

In particular, I’m hearing that investors are reluctant to fund future potential unless it comes hand in hand with concrete customer traction. So if you’re building a fintech idea and you need funding today, it’s vital to get your product into the hands of customers quickly.

How will you do that? By gathering feedback, using it to sharpen your focus and prioritization and ultimately rewarding your customers for helping you.

Here are three tips for achieving those goals:

  1. Get feedback and insights from your customers with a working product.
  2. Aim high for the long term, but don’t work on anything except your minimum viable product (MVP) in the short term.
  3. Always remember the problems you’re trying to fix for people and reward them for choosing you.

It’s critical to gather feedback and insights from your customers

Everything else being equal, embedded banking startups and new fintechs will live and die on the basis of the user experience they provide.

In this operating environment, startups have a better chance of impressing investors if they can point to tangible results.

What does that look like in reality? Prepare for these common questions before you head to an investor meeting with your pitch deck:

  • Who are your users?
  • What are the problems you’re trying to fix for them?
  • What do they like and what do they want?
  • Where are you going to meet them?

The only way to find these answers is to ship something real — a working product that people can interact with and use. That means everything you’re building right now should be in service of getting an MVP out the door.

I’m not saying, “Build it and they will come.” Far too many tech companies shut down shop because they were making solutions in search of problems. It is really easy to slow yourself down by thinking too far ahead in terms of what you need to create.

For instance, if you’re building a consumer fintech startup, do you really need to build your own payments processor? In my experience, that would take 10 to 20 engineers, about 18 months and millions of dollars, and they’d likely end up building something that may never see the light of day.

Eighteen months is a very long time in an environment where fintechs and embedded banking startups can get to market in three months, if not faster, according to Bain & Co. research. Moreover, speed begets opportunity: The study expects embedded finance transactions in the U.S. to surge to $7 trillion over the next four years, up from $2.6 trillion at present.

How can fintech startups outlast the VC winter? by Ram Iyer originally published on TechCrunch

Railsr, formerly Railsbank, raises $46M for embedded finance, says it now has 300 customers

Embedded banking — used by companies that do not build financial products like credit, payments or deposits from the ground up but want to offer those services to their customers to grow revenues — has been on a big growth tear in the last several years, and today one of the bigger players building finance as a service tools like these and others is announcing a round of funding to continue its growth. Railsr, the London startup that rebranded from Railsbank earlier this year, has raised $46 million.

This is a Series C that is coming in the form of $26 million in equity and $20 million, in debt the company said. The equity portion is an inside round, meaning all repeat investors, with Anthos Capital leading and Ventura, Outrun Ventures, CreditEase and Moneta also participating. Mars Capital provided the debt.

The company is not disclosing its valuation but it’s one worth trying to track down: last year, when the company raised a larger Series B of $70 million (also led by Anthos), CEO and co-founder Nigel Verdon (who is a repeat founder in the world of fintech, having founded Visa-acquired Currencycloud, and BAE-acquired Evolution) told me that it was getting close to $1 billion.

“As a policy, we rarely talk about valuation as we prefer to talk about customers,” he said at the time. “Valuation is a very inward-facing and self-centered metric. Saying that, near-unicorn would best describe us today.”

However, 2022 has been a significantly tighter year as far as venture funding is concerned, and valuations have generally followed, so it’s not a given that Railsr’s would have gone up here. The company is not yet profitable, Verdon noted in a statement today, describing this round as a “significant step on our route to profitability.”

The state of the market, it seems, is not far from Railsr’s mind — its home market currency, the pound, has been reeling against the dollar and many believe the world is on the way to a recession — and while buying activity might be slowing down on a macro level, there remain opportunities to serve customers even in a more bearish climate.

“Whilst we must take into account the challenging macroeconomic and geopolitical backdrop we operate against today, it remains a good time to be a fintech business growing new embedded finance micro-economies,” Verdon said today.

Be that as it may, Railsr is one of the bigger players in embedded finance out of Europe, working with some 300 customers that integrate APIs from Railsr to power credit, credit cards, loyalty, and more classic banking services.

Customers include companies in the retail, venue, sporting and events sectors; as well as other fintechs. It may seem odd that a fintech might not build its own fintech services, but typically, this is because the company might be more focused on other areas like insurance or payroll and use embedded financial services to quickly expand into adjacent areas that are not their core competency. In cases of more direct banking providers, such as neobanks, the focus of the business might actually be around personalization and customer service. Banking thus becomes a basic (nearly commoditized) product that is easier and faster to integrate with an API rather than build from the ground up.

Railsr cites Wagestream, Aviva and racing car brand McLaren (via QtmPay) among the case studies on its site, and also notes that HelloCash, Sodexo and Payine are customers. Partners to provide services and integrations include AWS, Salesforce, Visa, MasterCard and Plaid.

Embedded finance has typically been one of the more bullish parts of the financial services market, so much so that even current research that factors in the state of the market seems to be positive on its growth. Railsr cites data from Bain & Company from earlier this month that embedded finance was powering some $2.6 trillion of financial transactions in the U.S. in 2021, and that this figure is expected to continue growing, to pass $7 trillion by 2026.

That’s one reason why existing investors are willing to back Railsr again.

“It has been a pleasure to see Railsr go from strength-to-strength as a challenger to old finance and a creator of the embedded finance economy,” said Meirav Harnoy, co-founder and managing partner of Moneta VC. “Railsr’s customers, technology and people have impressed me since I led the Series A investment round. I’m excited to see what comes next.”

Railsr, formerly Railsbank, raises $46M for embedded finance, says it now has 300 customers by Ingrid Lunden originally published on TechCrunch

Noble emerges from stealth to help companies extend lines of credit to their customers

Credit lines are a lucrative product. U.S. consumers alone pay $120 billion in credit card interest and fees every year, according to the Consumer Financial Protection Bureau. Given the revenue opportunity, it’s no surprise that there’s enduring interest from both startups and established companies in delivering credit-based products. But challenges stand in the way, including — but not limited to — complying with local laws and regulations and modeling credit risk.

Enter Noble, a putative solution in the form of a platform that allows businesses to build credit-based products like credit cards and buy now, pay later services with no-code tools. Founded by WeWork veterans, Noble allows clients to connect data sources to create custom credit offerings, providing a rules-based engine to edit and launch credit models.

Noble today emerged from stealth and announced the close of a $15 million Series A round led by Insight Partners with participation from Cross River Digital Ventures, Plug & Play Ventures, Y Combinator, Flexport Fund, TLV Partners, Operator Partners, Verissimo Ventures, Interplay Ventures and the George Kaiser Family Foundation. The new cash brings the company’s total raised to $18 million, which CEO Tomer Biger tells TechCrunch will go toward opening a new office and expanding Noble’s portfolio to support additional use cases.


Connecting data sources in Noble’s admin dashboard. Image Credits: Noble

Biger and Noble’s CTO, Moran Mishan, worked together at WeWork on building underwriting infrastructure to help screen and assess the creditworthiness of tenants. Prior to WeWork, Biger was the product manager responsible for business-to-business (B2B) lender Behalf’s underwriting infrastructure, while Mishan was a software engineer at, a job candidate sourcing platform.

“From these firsthand experiences, [we] saw how complicated it is for companies to build underwriting infrastructure and launch new credit-based products, Noble aims to change that,” Biger told TechCrunch in an email interview. “[We allow] companies to launch additional products that their end-customers want — access to credit.”

With Noble, companies can access credit bureaus, banks and income verification providers in deciding to which customers to extend credit lines (e.g. loans and cash advances). The platform’s interface lets businesses deploy workflows that automatically approve, decline or flag users for manual reviews, while on the backend customizing the experience to match a brand and auditing underwriting data from a single view.

“This increases lifetime value, boosts customer retention and ultimately can be an entirely new revenue source for companies,” Biger asserted. “Noble empowers … companies to do this quickly and efficiently without expending much internal engineering or product resources.”

Daniel Aronovitz, principal at Insight Partners, sees Noble’s primary customers as fintechs, software-as-a-service companies with financial offerings and B2B marketplaces and wholesalers. It’s early days, but he claims that the company already has “tens” of clients including major fintechs, with “millions of dollars” of loans originated through the Noble platform.

“With its strong product offerings and impressive founding team, Noble has already acquired B2B and business-to-consumer customers across use cases,” Aronovitz said in an emailed statement. “Noble has created a platform for credit underwriting infrastructure as a service, enabling any company to build proprietary credit products in-house.”


Conditional logic in Noble’s credit decisioning engine. Image Credits: Noble

But Noble isn’t unique in providing credit infrastructure. Fintech startup Alloy, which last year raised $100 million at a $1.35 billion valuation, recently expanded into automated credit underwriting. Stilt raised $114 million in March to expand its credit offerings. There are also firms like Finally, which focus on credit products for small- and medium-sized businesses.

For his part, Biger believes the market is robust enough that Noble isn’t at risk of getting crowded out. He’s not necessarily wrong — credit originated at the point of sale in the U.S. is projected to grow from about 7% of unsecured lending balances (i.e. without collateral) in 2019 to about 13% to 15% of balances by 2023, according to a McKinsey report. By 2023, the report projects that “pay in four” players — i.e. vendors like Klarna and Afterpay — will originate about $90 billion annually and generate around $4 billion to $6 billion in revenues.

Of course, credit products don’t guarantee profits — the buy now, pay later sector in particular has suffered steep losses and slashed valuations as of late. But Noble’s small-but-growing customer base proves that some companies, at least, are buying the sales pitch — and perhaps seeing some success.

“There are simply too many challenges that companies face when looking to build credit products including compliance, debt funding and underwriting,” Biger said. “Noble’s mission is to remove these barriers and enable the inevitable movement of lending experiences from offline to online in the same way that payment processing platforms built the new payment rails that enabled the explosive growth in online payments witnessed over the past decade.”

Noble emerges from stealth to help companies extend lines of credit to their customers by Kyle Wiggers originally published on TechCrunch

Daily Crunch: Xeneta raises $80M to build out its real-time analytics platform for shipping and air freight 

To get a roundup of TechCrunch’s biggest and most important stories delivered to your inbox every day at 3 p.m. PDT, subscribe here.

The incomparable Mike Butcher just celebrated 15 years at TechCrunch. You get less for murder these days, so that’s a hell of a milestone, and (as far as we know) he didn’t even seriously maim, far less murder, anyone. Awesome work, Mike. Glad to have you here with us! — Christine and Haje

The TechCrunch Top 3

  • Crowdsourcing the shipping world: Backers delivered $80 million to Xeneta, on a $265 million valuation, for the Norway-based company’s crowdsourcing approach to determining air and sea freight rates, Ingrid reports. Xeneta has already acquired 300 million data points from over 100 of the world’s biggest shipping companies to figure out the market rate for certain routes.
  • Sound on: Floor sound just got elevated — Sonos’s new Sub Mini subwoofer drops October 6 in some markets. Darrell has more.
  • Keep reaching for that wallet: The digital wallet just got some open source love, Paul reports. The Linux Foundation has created the OpenWallet Foundation to develop interoperable digital wallets and evolve them from just a place to keep your currency into basically a physical wallet replacement.

Startups and VC

Meta Platforms is looking at India’s burgeoning startup ecosystem as it bolsters its bet on the metaverse. The social juggernaut has partnered with the Indian IT Ministry’s startup hub to launch an accelerator in the country to broaden innovation in emerging technologies, including augmented reality and virtual reality, Manish reports.

Following this week’s closing of the Ultimaker/MakerBot merger, the combined company is announcing a new name. The entity will be known as [drumroll, please] UltiMaker. Yes, really. As far as merged names go, it’s not a particularly exciting one, as Brian comments in his article — but the executive shakeup has some more juicy details in it: MakerBot CEO steps up and Ultimaker CEO steps down.

You’ve sold your company. Now what?

Scaling a company from conception to acquisition is a real accomplishment, but it’s not the finish line, according to investor and frequent TC+ contributor Marjorie Radlo-Zandi.

“You may wonder if the acquirer truly understands your products, values, culture or the customer needs that drive the business,” she writes. “Staff will wonder if there’ll be a place for them as a part of another company.”

In her latest column, she shares “six guiding principles that will set a transaction up for success” and help you achieve your full earnout.

(TechCrunch+ is our membership program, which helps founders and startup teams get ahead. You can sign up here. Use code “DC” for a 15% discount on an annual subscription!)

Big Tech Inc.

It’s a Twitter kind of a day! Elon Musk may be regretting one of his choices, but today, most of Twitter’s shareholders were confident about theirs — they gave the green light to Musk’s proposed $44 billion buyout offer, Taylor writes. Paul tells us that Twitter and Musk are due in court on October 17 to see if the social media giant can make Musk carry out his purchase. In other Twitter news, we enjoyed Zack’s look into what was uncovered about the company when Peiter Zatko, who can now go by “Mudge” and people know who that is, testified to Congress. Also today, Aisha reported on Twitter rolling out podcasts to Blue subscribers.

Daily Crunch: Xeneta raises $80M to build out its real-time analytics platform for shipping and air freight  by Christine Hall originally published on TechCrunch

3 investors explain why earned wage access startups are set to cash more checks

It always feels good to get paid, so it’s no surprise that a payroll model like earned wage access (EWA), which lets employees withdraw their accrued wages at any time, has exploded in popularity.

The pandemic certainly played a big role in helping people understand the benefits of being able to treat their accrued salaries like a small bank account. While wage advances and payday loans have been around for much longer, they serve a very different purpose. With EWA, since you’re only accessing money you’ve already earned, there’s no risk of accumulating debt, and workers can better manage their finances.

The potential for this model is huge, but the industry is still very much in its early stages. Several countries don’t yet have an EWA provider, and in most others, providers are still taking their first steps.

Jennifer Ho, partner at Integra Partners, is confident that the EWA industry is going to keep growing after positive early interest. “In 2021, over $1.13 billion was raised by startups offering EWA products. Due to changing lifestyles, rising costs of living and the residual impact of COVID-19, many small and medium-sized enterprises have grown dependent on EWA,” she said.

That’s not to say there aren’t some issues. Most EWA providers are still experimenting to find out what works, and the business models vary widely, which is a symptom of an industry trying to find its footing. Two of the more prominent models involve either charging the employer a flat fee or charging employees per transaction.

Aris Xenofontos, partner at Seaya, believes an employer-paid model is the way to go for two reasons: social impact and long-term viability. “From a social impact perspective, would you want the party that needs the money the most, the employee, to pay for the services? And from a long-term viability perspective, offering the service for free to employees helps drive better adoption — often 2x-3x the adoption you get when employees pay per transaction,” he said.

“EWA companies are typically B2B2C businesses and face the same challenges that many B2B2C businesses face: The decision-maker and the consumer have different incentives and priorities.” Jennifer Ho, partner, Integra Partners

“Taking into account that the purely EWA business model is not among the strongest in the fintech world, choosing the model that helps drive better adoption leads to more cross-selling opportunities, and eventually, better economics.”

To get a more in-depth look at the state of the EWA industry, how it should be classified and where the money is going, we spoke to a few active investors in the space:

EWA is already prevalent in the U.S. in industries such as retail and fast food, so how difficult will it be for startups to bring the technology to new sectors? Which sectors are the most ripe, and which ones offer the most resistance?

Jennifer: EWA works in any sector where wages are not paid instantly, and it works best when they can serve large pools of financially underserved employees. The less savings people have to finance their day-to-day ahead of wage disbursement, the more valuable EWA becomes.

In developed markets, this typically means sectors that have a large blue-collar workforce. However, in emerging markets like Southeast Asia, where financial literacy remains relatively low, and large segments of the middle class remain financially underserved, EWA can have a far broader impact.

Aris: We have been observing recently a penetration of EWA in two dimensions: vertically and horizontally.

From a vertical perspective, retail and fast food are indeed some of the first ones to come to mind, but other sectors are seeing growing penetration as well. Especially those where the headcount is blue collar dominated, such as manufacturing and transport.

From a horizontal perspective, we see EWA penetrating nearly every sector at the lower compensation/entry-level employees point. This is for sectors where the proportion of permanent full-time employees is high.

We believe the cost of living crisis that started in 2022 and will presumably last for some time is likely to promote this horizontal penetration.

Aditi: The best way to roll out EWA to new sectors is by distributing through payroll providers. One sector where EWA is viewed favorably is the nursing/medical industry.

Earned wage access is still a fairly new service, and we see multiple models, with some charging employers and others charging employees. Which earned wage access model is the strongest? Why?

Jennifer: From a financial inclusion perspective, models where the employer — rather than the employee — bears the cost have the stronger social impact case. What we’ve found is that EWA startups typically service a mix of customers across both models, where the employer pays in some cases and the employee pays in others.

3 investors explain why earned wage access startups are set to cash more checks by Karan Bhasin originally published on TechCrunch

Runa Capital kicks off new fund as it joins the VC ‘Scramble for Europe’ by moving to Luxembourg

Runa Capital, which launched there in 2010, says it has raised $55 million towards its fourth fund, aiming for a hard cap of $250 million.

And after 12 years in the US, the normally Palo Alto-based VC says it is now relocating its HQ to Luxembourg, to re-focus its attention on the European market, as several other US VCs have done this year.

TechCrunch understands the move is in part motivated by the higher returns now available from European startups, a trend we’ve seen as other US VCs – such as Sequoia and Lightspeed – have opened European offices.

Runa’s partners will now be now spread across Luxembourg, London, Berlin, San Francisco, and Palo Alto.

The firm has also promoted principals Konstantin Vinogradov and Michael Fanfant to General Partners focusing on Europe and the USA, respectively.

The fourth fund will continue to focus on early-stage investments in enterprise software and deep tech, such as open-source software, machine learning, quantum computing startups, finance, education, and healthcare.

The first investments of the new fund include Barcelona-based embedded finance provider Hubuc, Paris-based open-source enterprise software developer OpenReplay, as well .

Founded by the teams behind the Acronis and Parallels software companies, Runa Capital has so far over 100 early-stage investments in Europe and North America.

Its portfolio consists of Mambu (valued at $5.5 billion), Nginx (acquired by F5 for $700M), Ecwid (acquired by Lightspeed for $500M), Acumatica (acquired by EQT), and Drchrono (acquired by EverCommerce).

To date, the fund has raised around $500M for its three early-stage funds and one “opportunity” VC fund. 

In a statement Dmitry Chikhachev, General Partner and Co-founder at Runa Capital said: “Runa Capital has a tight-knit team and a track record of promoting our partners from within. Konstantin and Michael will bolster our push into the most exciting and promising areas.”

Indeed, new partner Vinogradov originally joined Runa Capital in 2012 as a Junior Analyst while Fanfant previously сo-founded fintech startup Octane Lending.

Runa Capital’s portfolio includes Nordic banker Nicolai Tangen and Andreas Gauger (CEO at OpenExchange).

Despite its Russian ethnicity in terms of founders, Runa hasn’t made any investments in Russia-based companies since 2012 and, in fact, issued a vehement statement last March openly criticizing Russia’s invasion of Ukraine. Soviet-era-born technology entrepreneur Serguei Beloussov (who has since taken the name Serg Bell and Singaporean citizenship) founded Runa after starting Acronis, and has since gone on to also establish the Acronis Cyber Foundation which has partnered with UNICEF, built schools and educated migrants to Switzerland.

Runa Capital kicks off new fund as it joins the VC ‘Scramble for Europe’ by moving to Luxembourg by Mike Butcher originally published on TechCrunch

Pakistan’s Neem raises $2.5M to serve underbanked communities with its embedded finance platform

Pakistan’s embedded finance platform Neem has raised $2.5 million in a seed funding round as it works to support underbanked communities in the country.

The Karachi-based startup targets communities across sectors including agriculture, MSMEs, e-commerce, logistics, healthcare and others. It offers a lending platform that its partners use to provide tailored lending products to consumers and MSMEs. Neem is also working on a Banking-as-a-Service (BaaS) platform, which will go live in December, that will onboard partners to embed wallets and payments and offer financial products such as insurance and savings customized to specific community’s needs.

Three-year-old Neem was founded by Nadeem Shaikh, Vladimira Briestenska and Naeem Zamindar who previously worked as fintech entrepreneurs, operators and VCs.

“Most of the [existing] players are providing a B2C solution; we are a B2B2C solution. If you look at the embedded finance space, it is a $167 billion opportunity,” Shaikh said in an interview with TechCrunch.

Owing to COVID, the strong growth in digitization has helped Neem embed its finance services across private and public sectors.

Citing industry figures, Shaikh said about 53 million people in Pakistan are currently underbanked. Over time, the startup plans to go beyond Pakistan and support underbanked communities in other developing markets.

The seed funding, which the startup aims to use to expand its existing team of 20 people, roll out the BaaS platform and capitalize licenses, was led by Hong Kong-based SparkLabs Fintech. The funding round also saw the participation of Pakistan’s investment banking firm Arif Habib, Cordoba Logistics and Ventures, Taarah Ventures, My Asia VC, Concept Vines and Building Capital. Additionally, partners at Outrun Ventures and strategic angels as CSO of tech house BPC, founding partner at Mentors Fund and fintech veteran and ex-CEO of Seccl also participated in the seed round.

“We have strong conviction about Neem’s mission to enable financial wellness for underbanked communities, and have full confidence in the Neem leadership team to realise this vision amidst macro challenges across the globe,” said William Chu, Managing Partner, SparkLabs Fintech, in a prepared statement.

The startup was bootstraped before receiving the seed funding.

Pakistan’s Neem raises $2.5M to serve underbanked communities with its embedded finance platform by Jagmeet Singh originally published on TechCrunch

Solid banks $63M for easier deployment of embedded fintech products

Solid, which rebranded from Wise in 2021, raised a $63 million Series B round of funding to continue providing its fintech-as-a-service offering for companies wanting to launch and scale their own fintech products.

The San Mateo-based company works with fintech and vertical SaaS companies and offers banking, payments, cards and cryptocurrency products via easy-to-integrate APIs.

We last profiled the company in 2020, before its name change, and after it had picked up both a $5.7 million seed and a $12 million Series A.

Arjun Thyagarajan, co-founder and CEO at Solid, told TechCrunch that the company spent the last 18 months working with early customers on product-market fit.

Traditional fintech infrastructure was not built for the modern company, he explained, and that results in companies needing dozens of point solutions and often spending millions in upfront and ongoing maintenance costs, all before launching an actual product.

Instead, by utilizing APIs and a few lines of code, customers can embed fintech products and get them up-and-running quickly.

“Customers aren’t looking for UI/UX, but really for DI/DX, that developer interface with a powerful dashboard that is self-service,” he said. “We understood what they were looking for — that demand for modern infrastructure. They work with banks, but those often don’t have tools for launching the fintech experience or the building blocks to make it easy to put together.”

It was also during that time that they decided to rebrand as they solidified their business-to-business focus. The new Solid name also resonated more with customers, Thyagarajan added.

Over the past year, Solid grew 10x in revenue, doubled its customers to 100 and became profitable. Year to date, the company processed $2 billion in transactions.

After being in sort of a stealth mode during the past 18 months, Thyagarajan said the company was now on a journey to get to 100 customers. To do that, he and co-founder Raghav Lal thought it was time to go after new funding. They started the process in May and closed the Series B at the end of July.

“We saw early signs of product market fit, so our thought process was to do the Series B when we were ready for hypergrowth, and now we have cash in the bank,” Thyagarajan said. “We are going after the mid-market, so we had to go back and fine-tune our product as we figured out what businesses need. The key was to build our technology from the ground up to own the complete experience so we could give customers what they want.”

FTV Capital led the new investment and was joined by existing investor Headline. To date, Solid has raised $80.7 million. Thyagarajan didn’t disclose a specific valuation with the new round, but did reveal it was 5x over Solid’s Series A valuation.

The capital infusion will help accelerate Solid’s entrance into some new verticals like travel, logistics, construction, healthcare, education and the gig economy. The company is looking at where money is moving and identified 40 to 50 different verticals where there is an impedance in how money moves, but they want to benefit their customers.

The company is also focusing on mid-market and larger companies, which is another reason why Thyagarajan said the investment was important.

“We are talking to Fortune 1000 companies and they feel more comfortable working with companies with a strong balance sheet,” he added. “A lot of work has been under the radar, so we are getting the brand out and showcasing we are the ‘AWS of fintech,’ a one-stop shop. Our goal is to be alongside them as a partner, not just a vendor.”

Kenyan fintech Pezesha raises $11M backed by Women’s World Banking, Cardano parent IOG

Access to finance remains a key growth constraint for small businesses, with data showing a $330 billion financing deficit for the small enterprises that make up 90% of Africa’s businesses.

This is the gap that Kenya’s embedded finance fintech Pezesha seeks to bridge as it expands into Nigeria, Rwanda and Francophone Africa following a $11 million pre-Series A equity-debt round led by Women’s World Banking Capital Partners II with participation from Verdant Frontiers Fintech Fund, cFund and Cardano blockchain builder Input Output Global (IOG). The round also included a $5 million debt from Talanton and Verdant Capital Specialist Funds.

The fintech’s new growth strategy follows its plan to power its embedded finance offering beyond its current markets including Uganda and Ghana, to bridge the financing gap affecting millions of micro, small medium-sized enterprises (MSMEs) across these markets.

Founded in 2017 by Hilda Moraa, Pezesha has built a scalable digital lending infrastructure that allows both traditional and non-traditional finance institutions to offer working capital to MSMEs.

“The opportunity and impact in solving working capital problems for SMEs is huge. [We are] solving the root cause, which is information asymmetry issues, to ensure quality and responsible borrowing. Pezesha solves this through our robust API driven credit scoring technology,” Moraa, also the CEO, told TechCrunch.

Kenyan fintech Pezesha raises $11M backed by Women World Banking, Cardano builder IOG

Pezesha is tapping local and international banking institutions, HNWIs and DeFi for additional liquidity for onward lending. Image Credits: Pezesha

The fintech works with partner companies such as Twiga and MarketForce, which integrate its credit scoring APIs in their platforms to enable their customers get real time loan offers.

Pezesha said it is currently working with over 20 partner companies that have enabled it to extend loans to over 100,000 businesses to date. It expects this number to grow before the end of the year as an additional 10 companies integrate with its infrastructure. The fintech is able to extend loans of up to $10,000 at single digit interest rates, and a repayment period of one year.

Pezesha plans to create a $100 million financing opportunity each year for businesses by tapping local and international banking institutions, high net-worth individuals and decentralized finance.

“We are building for the future and this means tapping new innovations for additional liquidity that allows us to offer affordable loans to SMEs,” said Moraa, a two-time founder, who started Pezesha after successfully exiting Weza Tele in 2015.

Charles Hoskinson, the co-founder of IOG and Cardano, while commenting on their investment in Pezesha said in a statement that, “Facilitating the movement of capital into emerging markets to support economic growth and job creation is a core promise of blockchain and cryptocurrencies. Our vision is centered on using technology to make it easier for people across the globe to borrow and lend to each other in a regulated way. This investment in Pezesha is an important milestone, and we’re excited to be a part of their growth story.”

The IOG’s investment into Pezesha follows an earlier announcement that the two companies had partnered to build a peer-to-peer financial operating system for Africa.

Kenyan fintech Pezesha raises $11M backed by Women World Banking, Cardano builder IOG

Image Credits: Pezesha

Moraa said that working with strategic partners like Cardano will open up the debt liquidity market and offer the affordable capital critical for the growth of all sectors of the economy.

The fintech plans to open up more lending opportunities for women entrepreneurs who continue to be locked out by the formal banking sector.

“Pezesha is dedicated to solving Africa’s working capital problem through its robust lending infrastructure, and this investment will allow them to deepen the range of financial products offering especially to women owned MSMEs,” said Christina “CJ” Juhasz, the chief investment officer of Women’s World Banking Asset Management.

Pezesha did not reveal how much it has raised in the past, but Moraa noted that 20% of its initial pre-seed investment in 2017 was from local angels. The fintech, which raised seven figures last year, counts Seedstarts, GreenHouse Capital and Consonance Investment Managers, among its several investors.

“We have the right business model, are profitable, and continue to pursue the kind of investors that are aligned with our goals and values,” Moraa said.

Nigerian YC-backed startup Anchor comes out of stealth with $1M+ to scale its banking-as-a-service platform

In 2015, the emergence of fintechs such as Flutterwave and Paystack changed the game for online businesses in Africa by making it easier to integrate payments into customer interfaces without building those features from the ground up or merging with tacky foreign software.

Amplify was another payment platform that launched during that period. However, it differentiated itself by committing to payments on social media platforms, which Nigerian digital bank Carbon was interested in when it acquired the startup in 2019.

At the time, the startup’s co-founder and CEO, Segun Adeyemi, said that he was taking a break and would “likely start another company” later. While he worked as a Nigeria country manager for JUMO, a South African fintech that offers credit infrastructure to large mobile money operators across Africa, Adeyemi quit last year to launch Anchor, another fintech where he is also chief executive, this February. The new company is akin to Amplify in terms of infrastructural play; however, it provides financial features instead of payment ones. Adeyemi launched the fintech with Olamide Sobowale and Gbekeloluwa Olufotebi.

We’re now seeing a new development where businesses want to offer different products and financial services beyond just payments,” Adeyemi told TechCrunch over a call. “We strongly believe that the way is not just by latching banking-as-a-service on a payments platform, but there has to be proper banking as a service platform built with the right infrastructure and go-to-market strategy. That’s the problem we decided to solve as a team, basically the full end-to-end infrastructure for startups to be able to build, embed, and launch financial services.”

Banking-as-a-service (BaaS) platforms are one of the hottest segments in the global fintech space, with upstarts like Unit and Rapyd hitting unicorn valuations and older startups such as Stripe spinning off similar services. These platforms have become popular with neobanks or upstarts in different segments trying to embed financial services into their offerings because large, incumbent banks have been relatively slow to bring their services up to speed with the pace of change in the world of tech and banking. As such, banking-as-a-service platforms see an opportunity to provide more personalized services and flexibility at less cost.

The situation is no different in Africa. Despite fintech accounting for over 60% of VC dollars last year and the proliferation of financial services, building a fintech startup is an expensive and lengthy endeavor. Per reports, it can take up to 18 months and an average of $500,000 to launch a fintech on the continent as they deal with issues ranging from licensing and compliance processes and multiple integration layers to managing third-party relationships and core banking infrastructure.

Anchor wants to “abstract away these complexities” so pure fintechs and businesses offering embedded finance can get started in 5 minutes, said Adeyemi in a statement. “For startups building a full-scale digital bank or providing embedded finance, we can provide compliance covering that allows them to launch quickly. So from build to embed to launch, our goal is how can we do all of that in the shortest time possible without compromising on security, compliance and scalability. That’s our value proposition,” he added on the call.

The seven-month startup provides APIs, dashboards and tools that help developers embed and build banking products such as bank accounts, funds transfers, savings products, issuing cards and offering loans.

Anchor, accepted into Y Combinator’s summer batch this year as the first banking-as-a-service platform from the continent, went live with its private beta this May. Over 30 startups accessed it, including Pivo, another YC S22-backed company, Outpost Health, Dillali and Pennee. Anchor claims to be transacting several millions of dollars while growing 200% month-on-month. The startup makes revenue by charging fees and taking cuts from every billable part of the business: account issuing, money movement, savings and deposits among others.

After testing these features with a select few, Anchor is coming out of stealth with a $1 million+ pre-seed and making its platform public. Anchor plans to use this investment to attract the best talent, improve the company’s tech infrastructure, invest in compliance and regulatory infrastructure, and acquire customers. Investors backing the BaaS fintech include Byld Ventures, Y Combinator, Luno Expeditions, Niche Capital, Mountain Peak Capital, and angel investors such as SeamlessHR CEO Emmanuel Okeleji.

Meanwhile, Anchor isn’t the only company trying to simplify how businesses offer financial services in Nigeria and Africa. Other upstarts, such as Bloc, have identified this same opportunity, and larger fintechs like Flutterwave are also looking to tap into that market. Adeyemi argues that the founding team’s technical experience, attention to security and scalability and the speed at which businesses can go live on its platform give Anchor some edge. While the CEO built Amplify, the startup’s CTO Sobowale worked at four prominent Nigerian fintechs: AppZone, TeamApt, Kuda and Carbon and Olufotebi was a full stack developer at, where he built financial operations software.

“There’s an understanding of the space as founders and the core team building this. We have seen first-hand the painful process of closing banking partnerships, negotiating third-party contracts, and obtaining regulatory approvals. And more generally, the extensive time and effort required to launch financial products,” the chief executive said.

“We optimize for speed of go to market while at the same time, we don’t compromise on security and scalability. So there are a lot of use cases we’ve built for, that if you start from scratch, it will take you some time to get started stage.”

The CEO also pointed out how Anchor has created a network effect with its service where the more platforms it onboards, the stronger its infrastructure and support system. Businesses also need to consider high switching costs when using BaaS platforms, and for a startup like Anchor, being a first mover is a sustainable competitive advantage, he added.