Seedstars Capital launches to support new fund managers around the world

The venture market is in the middle of a downturn, but there are still plenty of emerging fund managers. Seedstars International Ventures, the investment firm that backs high-growth startups around the world, announced today it has launched a platform called Seedstars Capital with Swiss-based investment holding company xMultiplied to help new fund managers around the world launch funds and develop their investment firms.

Seedstars Group co-founder and Seedstars Capital managing partner Michael Weber and Seedstars Capital partner Benjamin Langer told TechCrunch in an email that “Seedstars’ mission is to impact people’s lives in emerging markets through technology and entrepreneurship.” Over the past decade, it has supported various stakeholders, mostly tech entrepreneurs, through entrepreneurial programs.

“We’ve seen so many talented entrepreneurs grow their companies very fast, to the standard of the U.S. or Europe, but unfortunately too many struggle to raise capital to grow even faster. To continue our mission to support them, Seedstars is now supporting the next generation of VC fund managers in emerging markets that will then back those promising entrepreneurs.”

Seedstars Capital will look for sector and industry-specific strategies in regions and countries like Brazil, Nigeria, Indonesia and India. It is looking for funds that target pre-seed to Series A companies, since that is where they see the biggest funding gaps and potential.

“Ideally, we want to support gender-diverse teams as we know we need a more inclusive industry,” said Weber and Langer. “We are convinced this will have a tremendous impact at the portfolio level and we will be able to empower more women entrepreneurs.”

The platform will incubate, accelerate and invest in new venture capital funds in emerging markets like Latin America, Africa, the Middle East, Central and Eastern Europe and Southeast Asia. Managers have usually raised a micro fund, already have experience as angel investors or worked at larger investment firms, and are in the process of launching their first institutional funds of between $15 million to $50 million.

Many fund managers are ones that Seedstars has known for a long time “and despite having relatively little track record on their own we knew they had the necessary skills to become top performing managers,” Weber and Langer said.

In fact, this is how Seedstars International Ventures began. Weber and Langer had worked with co-founder Charlie Graham-Brown since 2014, and in 2019, launched its first global fund for emerging markets, focusing on pre-seed stage. Last year, it launched Fund II with Patricia Sosrodjojo, which is now backed by the IFC, the Rockefeller Foundation, Visa Foundation and Symbiotics, among other investors.

Seedstars Africa Ventures, which invests across the continent, was also formed in a similar way. Seedstars had known Tamim El Zein and Maxime Bouan since they worked at Blue Orchard, focusing on Africa. They hired a third partner, Bruce Nsereko-Lule, and now the fund has LBO France as an anchor investor.

“Over the last year, we have meet with many exceptionally talented teams working very hard building their ecosystems and investing in outstanding entrepreneurs across emerging markets,” Weber and Langer said. “We want to partner with them and allow them to develop their strategies and have a powerful and positive impact.”

Seedstars group partners Michael Weber, Alisée de Tonnac, Pierre-Alain Masson, and Charlie Graham-Brown

Seedstars group partners Michael Weber, Alisée de Tonnac, Pierre-Alain Masson, and Charlie Graham-Brown

Seedstars Capital is committed to the United Nation’s Sustainable Development Goals and plans to use ESG and impact considerations as it selects a diverse group of fund managers. It also plans to serve as an investment catalyst with the goal of getting fund managers over $500 million of new funding in total. Seedstars Capital says this will create more than 10,000 new jobs and generate over $20 billion of additional GDP in emerging markets over the next 10 years.

Challenges Seedstars Capital will help emerging VC managers solve include ones like access to international funding. Since most of them typically have assets under management below $50 million and focus on a specific country or sector, they often rely on local individual investors, family offices and development finance institutions (DFIs), which can make fundraising periods stretch as long as 18 to 24 months.

Many emerging managers also lack access to infrastructure, even though they are good at investing in high-growth startups. That means they don’t have the resources to build the right support infrastructure for their portfolio companies and firms, including marketing budgets, tech stacks to manage deal flow and investors, tools and framework to measure the positive impact of portfolio companies or a network of mentors to support their founders.

They also lack access to a community of people, including mentors, investors and other managers, that can help them share best practices, deal flow, market trends or informal events, Weber and Lager said. “These are critical components of building a brand that will allow managers to select the best opportunities and attract the best talent.”

Weber and Langer said Seedstars can help solve these issues because it has over 10 years of experience in emerging markets, and has accelerated or incubated more than 2,000 ventures. It also has a network of more than 1,000 experts and mentors and is therefore “in a prime position to become that partner who can support emerging managers thrive in the industry and develop their investment firms in an institutional manner.”

In terms of investment, Weber and Langer said Seedstars Capital has tested several models, including investing in the management company, providing warehousing facilities or serving as an LP.

In the future, it will work with managers throughout the fundraising stage, providing access to Seedstars network and relationships to help funds hit their first or final close more quickly. It will also be an LP in all funds, and plans to invest between 3% to 5% of the fund size, with the goal of increasing that allocation to up to 10% in the future.

“Having said that, we do not intend to become an investor and our goal will always remain the same, working alongside the most talented emerging managers as partners in the development of their investment firms,” Weber and Langer said.

Seedstars Capital launches to support new fund managers around the world by Catherine Shu originally published on TechCrunch

Crypto adoption skyrockets in Middle East and North Africa due to favorable economic climate

The Middle East and North Africa (MENA) was the fastest growing crypto market in 2022, according to a new report by Chainalysis.

Users in the region transacted $566 billion in cryptocurrency between July 2021 and June 2022, up 48% from a year earlier, the report found. In comparison, crypto transactions rose 40% in Latin America, 36% in North America, and 35% in Central and Southern Asia. Other regions saw growth of 22% or less.

For the report, Chainalysis conducted interviews in countries to cast what it described as a “really wide net” and talked to regulators, private businesses, OTC brokers and anyone who operated in crypto across the regions, Kim Grauer, director of research at Chainalysis, told TechCrunch.

In MENA, Turkey remains the largest cryptocurrency market — its citizens used $192 billion of crypto in the period, the report said.

“Based on the data, we see a ton of activity across the board in Turkey, Lebanon, Saudi Arabia, Egypt and the UAE, and that’s just raw transaction value,” Grauer said.

Saudi Arabia and UAE stand out when adjusting for metrics like population size and relative purchasing power, Grauer noted. “In terms of their kind of becoming a crypto hub/hotspot, whether it’s because of regulatory initiatives to develop that market or because there’s more disposable income and [they’re] seeking alternative investments, those two areas seem to be attracting international businesses to relocate there.”

Crypto adoption skyrockets in Middle East and North Africa due to favorable economic climate by Jacquelyn Melinek originally published on TechCrunch

Polygon founder raises $50M for emerging markets-focused web3 venture fund

Ethereum layer-two scaling platform Polygon raised $450 million earlier this year in its first major financing round. Now, the protocol’s cofounder Sandeep Nailwal is launching another project, he told TechCrunch exclusively — this time, in the form of Symbolic Capital, a venture capital fund built by and for web3 founders.

Nailwal, alongside Cere cofounder Kenzi Wang, has raised $50 million for the fund from investors including other venture firms, crypto exchanges, family offices and institutions, though they did not share specific names. Symbolic plans to primarily back companies building consumer-facing decentralized apps (dApps), Nailwal said, a move that seems aligned with Polygon’s own goal to speed up web3 app development. 

“My core mission is to bring mass adoption to web3, and that mass adoption is only going to happen via apps. It’s not like I’m going to build a blockchain, and people will come and use the blockchain — nobody uses blockchain directly. They always use it via some app,” Nailwal said.

The fund has already made ~15 investments, including in web3 gaming studio BlinkMoon, Polygon-based metaverse Planet Mojo, and esports platform Community Gaming, according to Nailwal.

As an Indian founder, Nailwal has often sought to support his home country — he made headlines last year when Vitalik Buterin donated $1 billion worth of crypto to an Indian COVID-19 relief fund he had arranged. Through this new venture fund, Nailwal says he aims to allocate 80 to 90% of the capital to founders who, like him, hail from emerging markets.

“It’s not closed for anybody who’s building in Silicon Valley, of course not. But being from India, like, technically, I would be an angel investor or an advisor to 95% of all the good projects that you would see coming out of the Indian subcontinent — they would come to me some way or the other, for help or guidance,” Nailwal said.

Wang, meanwhile, is deeply familiar with the web3 ecosystem in China and Southeast Asia, giving the pair a wide view of countries across the world, Nailwal added. He views founders in emerging markets are generally more pragmatic because of the constraints they face compared to their better-resourced counterparts in Silicon Valley.

“Because they are all pushed against the wall for their survival, they need to build something that will generate some revenue, and they can survive on that,” Nailwal said. He added that he took a similar approach in growing Polygon, where he said he would test out one new technology at a time and wait until it had acquired a certain number of users before experimenting with the next idea.

That background is part of why Nailwal thinks Symbolic is especially well-positioned to assist emerging market founders.

“Many of them have the capability that they are able to build businesses which eventually acquire users, but you need to help them to keep reinventing themselves and upping their bar so that once they have a proven model at a smaller scale, they keep growing at a much bigger scale and reinvent their ideas and business model,” Nailwal said.

A major motivation behind launching Symbolic for Nailwal was the opportunity to more formally support companies that are already in his orbit, he said, adding that he doesn’t feel he will have to spend much extra managing the fund because it will help him realize synergies from relationships he’s already building, in part through Polygon’s own venture fund. He and Wang are already prolific angel investors in startups — the pair has co-invested in over 40 companies since they met at Binance Labs in 2019, he said.

Nailwal said that within Symbolic’s focus on apps, he is particularly interested in startups that fall into the “creator economy” subsector, such as fantasy sports companies.

“In web3 fantasy, you can have NFTs, and you can put those NFTs on rent when you are not playing, so you can get some passive income, plus you can earn the tokens on the platform and become part of the platform from a very early stage,” Nailwal said.

Those sorts of incentives can oftentimes be more meaningful to users in emerging markets, he added. He brought up the examples of Chinese “move-to-earn” app StepN’s recent user growth and play-to-earn video game Axie Infinity’s appeal as a supplemental income source for low-income workers in developing countries to illustrate his point. (Both Nailwal and Wang happen to be angel investors in Axie Infinity’s parent company, Sky Mavis).

“Many of these crypto models are able to achieve better sustainable economics in those contexts where the cost of living is much lower,” Nailwal explained. India’s Jio 4G network is arguably the fastest in the world and reaches even deeply rural areas, he added — a piece of infrastructure that could help web3 startups capture users across the country if they offer the right economic incentives.

Some web3 play-to-earn startups have been criticized for putting already vulnerable people at risk in the event that anything goes wrong, such as the $625 million hack that occurred Axie Infinity’s Ronin bridge in March. Nailwal acknowledged this risk is “a problem,” saying that he advises web3 entrepreneurs to provide as much education and disclosure to users as possible whenever a transaction takes place on their platform.

One key differentiator for Symbolic will be its internal data platform the firm has built to support its portfolio companies as well as to bolster its own diligence process, Nailwal said. The platform will aggregate and analyze data such as GitHub contributions, Discord engagement and token performance as well as employment and hiring trends, according to the firm. 

Eventually, Nailwal hopes to create a “proprietary social ecosystem” around the platform which he likened to Y Combinator’s network.

“We want to do [this] for the both for the portfolio companies, as well as the founders, who we believe eventually will become angel investors in many of the new projects that will come [through Symbolic],” Nailwal said.

Seedstars launches second fund to invest in 100 startups in emerging markets

Seedstars' portfolio founders

Seedstars’ portfolio founders

Since its launch nine years ago, Seedstars has invested in 81 companies in over 30 emerging countries. Now it’s set a goal of investing in 100 more startups with the launch of its second emerging market seed-stage fund, called Seedstars International Ventures II (SIV), with a first close of $20 million. The fund is expected to total $30 million and its limited partners include the International Finance Corporation (IFC), Visa Foundation, The Rockefeller Foundation and Symbiotics. The firm’s is to invest in pre-seed and seed-stage startups in Asia, Africa, the Middle East and Latin American over the next three years, with follow-on investments up to Series A.

Some examples of Seedstars’ portfolio companies include Pakistan e-commerce startup Dastgyr; Saudi Arabian cloud-based point-of-sale and restaurant management system Foodics; Indonesian workforce marketplace MyRobin; Latin American restaurant CRM OlaClick; and Nigerian B2B marketplace Omnibiz.

Patricia Sosrodjojo, partner at Seedstars, told TechCrunch that the second fund’s investment thesis is similar to its predecessor: to come in at very early stages, in tech ecosystems in emerging markets, and look for startups that have the potential to make a wide impact.

“I think of it as three different levels,” she said. “The first one is the fact that we’re coming in very early, we’re usually one of the first institutional checks after the angels so we can help catalyze capital. The second is the countries we cover, where the ecosystems is still not that developed yet. And the third one is that we look for business models that can scale up quickly, similar to the normal VC model, but that they would be able to affect a lot of people. We align ourselves with a lot of the ESGs.”

One difference between SIV II and the first fund is that it can writer bigger checks. Initial checks will be between $150,000 to $250,000, with potential follow-on investments of $500,000. It will also have a tighter geographical focus. The first fund invested in 30 countries, and the second fund will also have a global outlook, but it will focus on one to three countries in each region.

Specifically, these are Indonesia, Vietnam and the Philippines in Southeast Asia (though Sosrodjojo said SIV II will also look at other countries); Pakistan and Bangladesh in South Asia; Egypt in MENA; and Mexico in Latin America. Its view on Africa will be more distributed; it has already done investments in Kenya, Tanzania and Nigeria.

SIV II plans to follow on 25% of its portfolio.

“We’re really looking to diversify holdings, leveraging learnings from one market to another,” said Sosrodjojo. “For example, if we’ve invested in a B2B supply chain play in one country, we can take the learnings from that and apply it to another geography. We see that different trends can come in at different times in different markets, so it helps us to see the typical trajectory of a certain industry.”

The fund will focus on verticals including finance, commerce, health, work and education. In particular, “financial inclusion is challenging in many of these markets. It’s something we’ll continue focusing on,” said Sosrodjojo.

One of the things that makes SIV II unique is that it has a blended finance structure with facility provided by IFC, one its LPs. As part of the fund’s mandate, it will invest up to 25% of the fund in IDA countries, or low-income countries as defined by the World Bank. This mitigate the risk of these investments, because there is a first loss guarantee. That means if SIV II makes an investment in an IDA country like Senegal and the company doesn’t do well, a portion of the investment will be covered through the structure.

To help them scale up, Seedstar portfolio companies take part in a program called the Value Creation Platform, which has a network of 1,300 mentors and includes a three-month “mentor-led sprint” called the Growth Track. Supported by Seedstars’ entrepreneur-in-residence Jon Attwell, formerly of Naspers and Prosus, with operators who have experience working at high-growth firms like Careem and SkyScanner. During their time in the Value Creation Platform, companies can perform experiments to see what growth strategies are best for them.

“Startups can cover different modules, like if their key is acquisition,” said Sosrodjojo. “They can really look at their acquisition strategy and if it’s not working well. They will work together with their mentor and our entrepreneur-in-residence John, create a strategy, run with that, monitor it and see if it works. Each startup will decide on what experiment they want to do and decide if they want to translate it into their operation or not.”

Gender equality is also important for Seedstars, which points to data that shows just 11% of enterprises that obtain seed funding in emerging markets are led by women. Seedstars’ team has already achieved a 50:50 gender split, and its first fund had 26% female co-founded businesses. Seedstars has set a challenge for it second fund of at least 30% of its portfolio companies having female founders or leadership. Another criteria is to back local founders.

“There are cases where there are expert founders with really good startups, but we do try to cultivate local talent,” Sosrodjojo said.

Weather-focused IBISA raises seed round to back its microinsurance solutions for low-income small farmers

Agricultural microinsurance startup IBISA announced that it has raised a seed round of €1.5 million – approximately $1.70 million. The round was led by London-based specialized investor Insurtech Gateway, with participation from Rockstart’s AgriFood fund and others.

Microinsurance typically refers to offering coverage to low-income people against a specific class of risks. In IBISA’s case, these are small farmers whose livelihoods might be affected by adverse climate events, which are unfortunately on the rise.

While based in Luxembourg, the startup is focused on emerging markets, with a partnership-based approach. “We work with mutuals, insurers, microfinance institutions, research institutions, farmers and breeders associations and governments,” its site explains.

Since being founded in 2019, the company has worked with partners in the Philippines, India, and Niger. It now plans to use its funding to hire and expand its presence in existing and new markets.

It’s easy to see why farmers might be relieved to get compensated when their crops get damaged. But there are also several reasons for them not to have agricultural insurance – most of them don’t, according to IBISA. On one hand, options might be too costly; on the other, paperwork to claim a payout might be too daunting.

This is where technology comes in: IBISA’s payouts are meant to be quick and hassle-free, because rather than requesting individual claims, it relies on a collective index. That’s index-based insurance, also known as parametric insurance, since payouts are triggered by a certain parameter – for instance, notice of catastrophic weather events.

This approach also helps reduce operating costs on the insurer’s side, making lower rates worth offering, said Insurtech Gateway’s co-founder Stephen Brittain.

“Historically, microinsurance was not commercially viable due to many reasons such as low premiums, expensive claims handling, challenging distribution and a lack of trust.”

What changed? Again, technology.

If IBISA and others put trust into an index, it’s because it is supported by data. Its co-founder and CEO María Mateo Iborra worked for several years in the satellite industry, and a key element of the startup’s approach is its reliance on orbit images to assess damage. In addition, it relies on crowdsourced data from local ‘watchers.’

Spacetech and crowdsourcing aside, there’s also a blockchain element to IBISA, which sees it as a way to keep costs low. Its name actually stands for “Inclusive Blockchain Insurance Using Space Assets,” and it has been accelerated by the European Union’s blockchain-focused project Block.IS.

The company also recently presented itself at Rockstart’s AgriFood demo day. At the time of joining the program last September, IBISA’s co-founder Jean-Baptiste Pleynet made mention of IBISA’s insurance, satellite and blockchain components, as well as of its potential to drive positive impact.

But Pleynet also emphasized an interesting point of synergy: “We believe our solution will be very valuable for the food industry to bring resilience to the supply chain and manage climate risks and we wanted to accelerate this path,” he explained.

Meet the startups changing mobility for emerging middle classes

In emerging economies, where spending billions to build public transit infrastructure can be out of reach, startups are using technology to meet the mobility needs of a rising urban middle class.

Swvl, Treepz, Jatri, SafeBoda, Urbvan, Chalo and Buser are just a few of the startups that have popped up in Africa, Asia, the Middle East and South America in recent years, all with a focus on providing on-demand access to transportation. Not only are these startups products of the emerging markets, but because mobility is so essential to a thriving economy, they’re actually driving development. 

“We know that if you want to get good economies of scale and see the positive spillovers of a big urban space, you need to be able to get around at a low cost and in an efficient way,” Nikos Tsafos, the James R. Schlesinger Chair in Energy and Geopolitics at the Center for Strategic and International Studies, told TechCrunch. “What this does is it enlarges the labor market and makes it more efficient.”

Necessity might be the mother of innovation, but that innovation isn’t limited to the economies where it was conceived. These startups are also providing a less car-centric blueprint for the rest of the world, including economies with existing public transit.

The table stakes stretch beyond the financial future of a handful of startups. If startups like these don’t succeed, one of the risks is that as GDP continues to grow in emerging markets, populations with more discretionary funds will end up purchasing their own vehicles, which will only contribute to the global climate crisis.

Swvl: Repurposing underutilized vehicles for shared transport

Swvl is a Dubai-based startup that provides shared transportation services for intracity and intercity trips for both individual commuters and corporations, schools and tour operators. Since its founding in 2017, the startup has expanded across UAE, Egypt, Saudi Arabia, Jordan, Kenya and Pakistan.

Its business model revolves around repurposing underutilized buses or minivans that are privately owned, usually by small or medium-sized businesses and fleet owners, for different uses throughout the day. For example, when a bus that usually drives kids to and from school only twice a day signs on with Swvl, it will also be used for a combination of intracity B2C routes, corporate drives, intercity rides or tour group rides.

“This significantly increases utilization of that vehicle,” Mostafa Kandil, CEO and founder of Swvl, told TechCrunch. “With every incremental utilization of the vehicle, the fixed component of the cost of the vehicle itself gets amortized over more and more rides, so we’re able to pay less and less on a per-unit level and on a per-ride level. Hence, we’re able to continuously drop our price to the end consumer while actually significantly increasing our margin.” 

Riders can book a seat on a fixed route and track their ride at every step. In cities where public transit is unreliable or dangerous, services like Swvl’s can be a game-changer. 

That Swvl is close to becoming a unicorn is a signal of the strength of this industry. In July, the company entered into a SPAC agreement with Queen’s Gambit Growth Capital with an implied enterprise value of $1.5 billion, according to the company.

Swvl says it is forecasting an annualized gross revenue of $79 million through December, which is an increase of about 55% from February 2020 revenues of $51 million. By 2025, the startup also plans to achieve $1 billion in annual gross revenue and operate in 20 countries on five continents, with SaaS or transportation as a Service (TaaS) expansions set to occur across Europe, the U.S. and the APAC region through a recent acquisition of Spanish-based mass transit SaaS platform Shotl

Due to the immediate need to provide basic transportation to growing middle classes, Kandil says the initial product-market fit is naturally within emerging markets, but he sees Swvl’s services in global terms. 

“Governments across the world spend billions of dollars on transportation infrastructure that are actually becoming obsolete,” he said. “If you think about New York in the summer versus in the winter, it’s a totally different city. The movements, the patterns in a city change quite significantly throughout the year, but the public transportation system doesn’t really change. So what we are building is the mass transit system of the future that can serve any type of city with a public transportation system that’s demand-responsive, that can change every day, every hour, and can self-optimize based on how the entire city is moving.”

How Treepz provides ‘Uber for buses’ in Nigeria

Onyeka Akumah, CEO and founder of Treepz, formerly Plentywaka, said the day his startup was conceived was the day he got off a plane in Lagos and had to take two bikes, a boat and then a bus just to get around town for meetings. He described the bus experience as a harrowing one where he literally “had to hold one of the doors throughout the trip from falling off.”

Lagos is Nigeria’s largest city, with 14 million residents who have to commute daily. While the country has the most startups in Africa, it falls short of other metrics that would help it rank competitively among other African nations, according to an African Tech Ecosystem ranking. For entrepreneurship to thrive, fDi Intelligence, the specialist division within Financial Times that published the report, says a country must have cost-effectiveness, country-wide tech talent, cooperative government, good internet access and healthy infrastructure. Much of this simply cannot be achieved if people can’t move around easily, efficiently and cheaply.

Treepz provides another example of the public sector stepping forward and, hopefully, driving the country toward prosperity. The startup offers a similar service to Swvl, one where commuters can book intracity or intercity travel through an app, reserve their seat and track their ride. While Treepz has expanded throughout the country, it also plans to move into Uganda, Ghana and a handful of other African nations over the next few years. 

“Millions of people have to commute on a daily basis using public transportation, and if they can’t afford an Uber ride, and they want to get to work on time, this is the only way they can do it,” Akumah told TechCrunch. “We wanted to give people a better way to commute with predictability, where they can know when the bus will get here, the certainty that they will have a seat on the vehicle, that it’s a decent vehicle and a safe one.”

While Swvl allows customers to book a seat online and then pay the driver later with cash, Treepz presently won’t accept cash, which is part of the reason the service is really geared toward the middle class. Akumah said at the moment, cash is too risky because it invites corruption at the worst and difficulty keeping track of sales at best.

Creating accountability for Bangladesh’s public transport with Jatri

Bangladesh-based Jatri aims to address the problem of inconsistent public transportation timetables, payment difficulties and constantly changing routes. The startup says it’s the first bus tracking and digital ticketing platform in Bangladesh, serving both bus companies that need to regulate how their buses were functioning and commuters who need a more frictionless service. 

Riders can subscribe, plan their trips, track buses and secure tickets, while operators can utilize Jatri’s bus trip analytics. The company is also working on creating data that regulators can use for urban planning purposes. 

Jatri was founded in 2019 and in that time has digitized the operations of thousands of bus partners, hosting more than 3.5 million transport tickets on its platform across three cities. Earlier this month, the startup raised a $1.2 million pre-Series A round that it says it will use to expand its nationwide coverage. It recently partnered with BRTC, a state-owned transport corporation of Bangladesh, to provide its tracking and ticketing services for many of its routes, with the possibility of nationwide adoption.

The role of transportation in emerging markets

As the middle class grows and incomes rise, people tend to become more concerned with the quality of services like mass transit. Experts say rising expectations could potentially become a source of friction for a country like Bangladesh, where its citizens may experience what economist Albert Hirschman described as the “tunnel effect.”

This is when vulnerable members of society start to see increased inequality based on an uneven growth process. They initially tolerate it, expecting that their time for prosperity will come. But if they do not catch up in time, their tolerance may morph into frustration — and ultimately sociopolitical upheavals. 

Which is what makes the emergence of startups dedicated to easing the strain of public transportation so vital.

“Transportation systems have the ability to connect people to jobs, as well as leisure and like green spaces and entertainment,” said Tsafos. “Those are the central elements for the vibrancy of the city, so what I would be expecting is in the absence of those transportation solutions is a city that’s underperforming and is not living up to its potential because you just have a fragmented urban space that can’t take full advantage of the human capital that resides in this sort of broad metropolitan area.”

Emerging markets lender Lendable seeks $100M to fund fintech companies

Emerging markets fintech financier Lendable is targeting to raise a $100 million fund to invest in African and Asian fintech companies, the firm said in an emailed statement today.

In March, the firm said it planned to raise funds between $120 million to $180 million to give new loans to fintechs so they could then provide credit, asset finance, payments and remittances to individual customers and businesses in emerging markets.

It is unclear if the fund announced today continues that discussion since there’s no reference in this recent statement. But what is clear is Lendable stating that this is its fourth fund.

Dubbed the MSME Fintech Credit Fund, Lendable says it will provide credit to African and Asian fintech companies so they can offer credit facilities and financial services for over 150,000 small businesses.

So far, the fintech lender has closed $49 million from impact investors such as DFC, EMIIF (DFAT), Calvert Impact Capital, Ceniarth, BIO, FMO and FSD Africa. It expects to close another $20 million this fourth quarter before a final hard close in 2022.

The first close takes Lendable’s overall committed capital to more than $200 million, although it has managed a pipeline of over $400 million since launching in 2016, per the firm’s statement. The lender has also disbursed $180 million in that timeline.

Founded by Daniel Goldfarb and Dylan Friend, Lendable has provided over 1.4 million consumer and small business loans, over 80,000 productive asset loans, and more than 105,000 solar home systems. In addition, Lendable says it has delivered an annualized net return of 14.32% to its investors.

“We have had an amazing response to this Fund and have brought on board an impressive slate of leading impact investors and DFIs who back our approach,” Goldfarb said in a statement. “Through our fintech investments, we are providing essential working capital for MSMEs that enables off-grid customers to buy energy products and opens the door to innovative digital banking services to consumers.”

Lendable has provided debt financing to several fintechs from nine emerging markets. Some include Tugende, Carbon, Uploan, KoinWorks, Planet42, FairMoney, Trella, Payjoy, Solar Panda, and MFS Africa. The fintech financier said its debt facilities range between $2 million to $15 million with a payback duration between three to four years. So far, Lendable has a default rate of about 0.01%, said a company’s spokesperson in an interview with TechCrunch this year.

VertoFX picks up $10M for cross-border payments play in emerging markets

VertoFX, a global B2B payments platform that allows small and medium-sized enterprises (SMEs) to make payments to their suppliers, today announced that it has closed $10 million in Series A funding.

Quona Capital, an emerging fintech-focused venture capital firm, led the round. Other firms also participated, including The Treasury, founded by Betterment’s Eli Broverman and Acorns’ Jeff Cruttenden; Middle East Venture Partners (MEVP); U.K.-based TMT Investments; Unicorn Growth Capital; Zrosk Investments; and P1 Ventures

The lack of interoperability between African currencies is primarily behind why a Kenyan business owner who wants to pay an invoice to another business owner in South Africa with either shillings or rands ends up using the dollar — the currency that powers almost 80% of Africa’s bilateral trade.

As trade and supply chains become increasingly global, international payments remain a complicated and expensive proposition. The case is particularly problematic in emerging markets like Africa, where local currencies are less liquid than those in developed markets

While fintechs are creating solutions around peer-to-peer payments and remittances, most are consumer-focused. Meanwhile, the B2B market, accounting for 30% of the world’s global imports and 45% of total employment in emerging markets — is largely untouched.

Hence the reason why Ola Oyetayo and Anthony Oduwole started VertoFX in 2018. And instead of focusing on Africa, the two U.K.-based Nigerians took an emerging markets approach.

Initially, the YC-backed company acted as a currency exchange marketplace to help businesses transact illiquid currencies into liquid pairs. But upon gaining transaction and subsequently raising a $2 million seed round two years ago, feedback from users highlighted the importance of providing cross-border payments as well.

It is not hard to see the value chain: a business going to a platform to swap or exchange one currency for another invariably does that intending to pay another business in a different country.

“We’ve now evolved more from not just being a currency exchange marketplace to a full suite of cross border payments product for businesses,” Oyetayo told TechCrunch.

On the VertoFX platform, businesses can exchange money in over 200 countries across 39 currencies, up from 120 countries and 19 currencies the last time the company spoke with us.

Per its website, VertoFX is designed for freelancers, SMEs and corporates, providing payments, exchange and multi-currency accounts to each segment.

These business owners can send cross-border B2B payments at FX rates up to nine times cheaper than they could through traditional banks, CEO Oyetayo said. And most importantly, without a fee.

A no-fee proposition has caught on well with a userbase of over 2,000 businesses, each transacting an average of $30,000. Together they have facilitated billions of dollars in transaction volume yearly, according to the company

The CEO says since the start of the pandemic, VertoFX’s user growth has grown 11x and 8x in revenue without giving specific numbers.

Similar to most fintechs, the company has benefited from a global shift of people moving to digital methods of payments and the fact that more homogeneous businesses in Africa are transacting with each other through digital channels.

Not only can businesses use VertoFX for their personal payments needs, but they can also piggyback on the company’s rails to build solutions for their end clients. For instance, an investment management platform that allows customers to buy stocks on its platform can use Verto to convert currencies and facilitate pay-ins and payouts.

“That solution is geared towards developing markets where it takes businesses to pay customers days or weeks to make payments,” said Oduwole. “Our in-house compliance solution allows them to transact and get settled instantly, or in some cases a couple of hours.”

If cross-border payments are free, how then does the company make money? VertoFX takes a small amount of commission when businesses use its currency exchange service and charges a 1% commission when they use its price discovery marketplace solution.

In the future, at some point, VertoFX “will potentially start making revenue of API calls, and also revenue off payments made on the platform,” the CEO said.

In a statement, Monica Brand Engel, the co-founder and managing partner at lead investor Quona Capital (also a backer of Nigeria’s Cowrywise), hails the platform’s ability to address problems businesses face with low visibility, slow speeds and high costs of cross-border payments. VertoFX is doing “important and impactful work,” she said.

Before the end of the year, VertoFX expects to increase the list of currencies on its platform to 51, CTO Oduwole said. The company will use the investment to achieve that while building its platform to enable businesses to move money across borders more efficiently, it added in a statement.

Interestingly, VertoFX has only six African currencies on its platform; they cover 60% of the continent’s GDP. And with the B2B global payments industry expected to grow to almost $200 trillion by 2028, VertoFX plans to accelerate its geographical expansion into more markets in Africa and the Middle East.

“We want to get to a point in the future where someone can easily swap a Ghanian cedi to rand without having to transact with dollars or euros,” the founders said.

They also pointed out that the company, in a way, drives financial inclusion for businesses that could not move money from, say, India to Turkey without going to a bank. VertoFX is placing businesses in underserved regions on an even playing field as their counterparts in developed markets, said the CEO.

Ultimately, we want to help a business in an emerging market send money to another business elsewhere, as easy as sending a text message.”

Zola Electric closes $90M funding round to scale technology and enter new markets

Millions of people in sub-Saharan Africa and emerging markets continue to live without access to electricity. Some reports peg these numbers between 500 million and 2 billion people despite the prevalence of renewable energy providers in these regions.

Zola Electric, one such provider, is announcing today that it has closed $90 million in new funding to enter new markets and drive distributed renewable energy.

When Zola Electric was launched in 2011 by Erica Mackey, Xavier Helgesen and Joshua Pierce, the company provided solar home solutions to off-grid rural communities in Tanzania.

The company has evolved since then. In an interview, Bill Lenihan, the CEO who joined in 2015, told TechCrunch that Zola Electric found over time that its singular product could not work for the entire market of customers it wanted to go after — from off- or on-grid to rural or urban and residential or commercial.

“More than 2.2 billion people in the world lack access to reliable and affordable energy. We needed an energy ladder and a series of products that were all connected in some ways but solve different problems for these 2.2 billion people,” he said. “So we then started to grow and provide more power in these systems.”

Zola has now become a technology company whose products can solve energy access problems in almost any market, the company said in a statement.

Last year, Zola launched Infinity, a product the company says can power any home or office appliance while integrated into any energy source — grid, solar or battery. The product works with power grids, solar panels and other power sources before switching to a ready energy source and storing it simultaneously.

ZOLA

Image Credits: ZOLA

These solutions are managed by Zola’s SaaS software system called Vision and it provides customers with data, analytics and control of their systems.   

“What we have is the semblance of an energy ladder where we can pretty much go into any market and solve any problem, no matter what. Now, there are still gaps in that technology and market segments that we haven’t addressed. And that’s where our development and capital is going — to fill out that energy ladder.”

The $90 million funding raised is a combination of debt and equity, $45 million each. The equity bit was led by TotalEnergies Ventures — the capital venture of TotalEnergies; SF-based impact VC firm DBL Partners; Africa’s largest PE firm Helios Investment Partners; Vulcan Capital, the investment arm of Paul Allen; Lyndon and Pete Rive (founders of Tesla-owned SolarCity); and New York-based utility-focused hedge fund Electron Capital Partners.

The debt financing features top energy lenders FMO and SunFunder, two firms known to provide debt capital to solar companies in emerging markets.

“This group brings more than just capital to the equation. They bring strategic benefit to this company and awareness that is over and above the capital. And importantly, this is the group that demonstrated their confidence and desire to really solve what is a global problem,” said the CEO.

He adds that Zola will use the funding to improve product development and commercial efforts. First, around product development, the team is eager to build next-generation digital renewable energy.

Lenihan shares his view on how the Infinity product is the answer for people in emerging markets where lack of power has resulted in the installation of millions of backup solutions like diesel generations and lead-acid batteries — solutions that can are unreliable and can be difficult to use and manage.

He describes the system as an epicentre of energy provisioning. With a similarity to the offline grid, Infinity connects to all the loads in a residence or business place and controls them digitally while providing data and analytics in the process.

“These are the core differences. The solutions in this part of the world today are backup systems. Zola is primary power, and that’s how we differentiate ourselves.”

More than 1.5 million users and over 300,000 homes and businesses use Zola products across multiple African countries — Ivory Coast, Ghana, Namibia, DRC, South Africa, Zambia and Nigeria.

Outside Africa, the company is also present in the U.S., Brazil, Pakistan, and the Philippines. It has plans to expand further into Northern Africa, Asia and South America.

While speaking with Lenihan, two primary metrics from this news struck me — the total number of users and the growth-stage non-billion-dollar valuation round.

For a startup around the block these past 10 years, a little over a million customers seems like a meagre sum. While Lenihan somewhat agrees, he cited the concept of digital distributed energy which is yet to take off globally (the startup only employed last year) and a dearth of on-the-ground personnel as reasons behind the seeming low figure.

“It’s not as simple to create technology and drop into the shores of whatever country and think your product would get installed. We need on-the-ground personnel, strong developers and integrators and distributors; people who can connect with the customer on the ground, solve their problems, install the systems and service those systems,” he said.

In addition, this current round comes after Zola’s Series D equity round of $55 million in 2018. Lenihan did not disclose if this present round is the company’s Series E which would look like a down round if that was the case.

Since 2011, the company has raised over $230 million in debt and equity financing. And in this age of unconventional rise in funding and valuations, any startup having raised that amount of venture capital could be easily worth a billion dollars. However, that’s not the case with Zola, at least not just yet. When asked about valuation, Lenihan said he thinks about valuation differently from the traditional market play and only stated that “the company is very valuable.”

That said, Lenihan is enthused and believes that digital distributed energy would fix the problems faced by emerging markets faster than other traditional energy providers.

“This is a different ballgame because most people initially thought the solar systems would solve emerging markets’ energy problems because Western technology backup systems and inverters are solid. But now it’s not that solid. We need to start from scratch. We need grid-like characteristics in these markets, and we need integration, modularity and intelligence. That’s our view.”

Taptap Send gets $13.4M for a no-fee money transfer service aimed at price-conscious emerging market users

Remittances — specifically when people in developed countries send money to family or friends in emerging markets — continues to be a huge lever to help those in more challenging economies survive and improve their lot. Today, a startup that has built a remittance platform that it believes is the most economically sympathetic and useful to the people who use those services the most is announcing some funding to continue growing.

Taptap Send, which provides a “free” mobile money transfer service from eight countries to 15 others, has raised $13.4 million, money that it will be using to continue expanding its scope and the services that it provides to its customers.

The 15 receiver countries include some of the poorest countries in the world that are the hardest to service, plus emerging markets with some of the poorest populations — DR Congo, Mali, and Madagascar among them — while the eight originator countries include some of the most common places to which people from these countries emigrate — United Kingdom, Belgium, Canada, France and Italy among them.

The Series A was co-led by Canaan Partners and Reid Hoffman, with other unnamed investors also participating.

There is a reason that a lot of companies launch and build services in countries like the U.S. or regions like Western Europe: there is a lot of money there, and specifically consumers and businesses with the kind of income that allows them to invest in new technologies and simply to do more. Of course, that doesn’t mean that other, less wealthy demographics don’t exist, or don’t also need new technology; but building for them is usually less lucrative and more risky.

Taptap Send is among the startups that is trying to approach the promise of tech with this in mind, and with a view to bucking that trend. The company’s business model works by way of charging no commission or any other fees for transfers, instead making a cut on foreign exchange. It has built its whole tech stack from the ground up and says that this lets it pass on lower exchange rates to its customers, typically lower than others that might be serving the same markets. On top of this, there is an economy of scale principle at play here: having better rates will drive more users, which in turn might not mean better margins but a higher volume of transacting and more returns overall.

The startup is the third entrepreneurial outing for Michael Faye, a development economist who previously worked for the United Nations. Before Taptap Send, Fay founded GiveDirectly and Segovia. In each business, he’s tried to take the same approach: building financial technology to improve the lot of people living in emerging markets. GiveDirectly (still going strong) did this for philanthropic donations — it’s an NGO that sets up donation campaigns where individuals and big businesses can contribute, and people in receiving countries can directly get the funding via mobile money transfers. Segovia (acquired by Crown Agents Bank) did this for B2B use cases — it built a mobile-money-transfer-as-a-service, which other money transfer companies could use to power their businesses, by way of an API.

Taptap Send can be thought of as Faye’s hat trick in the space, taking the bigger concept of remittances used to help people, and building it as a C2C business: aimed at individuals who are sending people “back home” money to live on.

“Taptap Send is taking advantage of this structural change in mobile money and other distribution networks to offer what we hope is the fastest and best price service to customers,” he told TechCrunch in an interview.

Taken together, cross-border remittances is a massive market, worth some $540 billion annually when you consider the established channels, with more “informal” methods (which can be as analogue as passing money via a person making a trip from one country to the other) estimated to be of nearly the same size. They are also, in fact, more valuable even than foreign direct investment: the World Bank has tracked that remittances overtook the money donated by states in 2019.

Mobile technology has played a big part in that, making it easier both to send and receive money, but it’s also opened the door to a lot of potential exploitation by bad actors, preying on people who might use a service for convenience and not be fully clear on how the actual pricing breaks down.

For that reason, the UN has set a goal for remittance pricing and commissions to be no higher for any company than 3% of the total sent — one way to ensure that players focus more on volume and less on margins. Taptap send says that it’s the only company in the space that has publicly committed to that goal (it has yet to hit it, it seems).

The company is not yet disclosing many numbers on its size or customers served but Faye tells me business overall grew 5x in the last year, and is posting a gross profit. “Even with everything happening you did see this massive increase in digitization,” he said of Covid-19 and its impact on business. He’s also undeterred by the vast amounts of competition in the space, which includes not just companies like Western Union and Money Gram but lots and lots of smaller remittance startups like Remitly, World Remit, and many more without the word “remit” in their names. “It’s easy to look at remittance and say it’s crowded, but so was video conferencing before Zoom or social networking before Facebook,” he said.

This is also why investors are interested.

“The company has a nuanced, yet powerful strategy that Michael has put into place to allow [it] to be the lowest-cost provider in every market they enter. As the world rapidly shifts toward digital wallets and e-money, it creates an opportunity for remittance companies to create an even more magical experience by sending funds directly to those wallets,” noted Brendan Dickinson, a general partner at Canaan. “Taptap Send gives as much of cost savings as possible to the customer, and as a result, is almost always the cheapest player in the market. All of that makes it economically viable to send smaller remittances – and in doing so, expands the total market and volume of remittances sent. This approach is strongly resonating with customers, as Taptap Send’s massive growth has been 90+% organic.”