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The Fundraising Market in Africa is Growing, But it’s Hard Out There for Startups, Says DAI Magister

Analysis of the current African market by boutique investment bank DAI Magister, reveals that investors have so far bucked macrotrends by exhibiting confidence in investing into African businesses, particularly in first and second round raising.

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Analysis of the current African market by boutique investment bank DAI Magister, reveals that investors have so far bucked macrotrends by exhibiting confidence in investing into African businesses, particularly in first and second round raising.

However, nascent start-ups are facing difficulty, with just half the number of accelerator deals taking place in Q2 2022 compared with Q2 2021.

DAI Magister has analysed the African market over the past four to six weeks in anticipation of the upcoming fundraising season, to assess the challenges and requirements for key finance functions through the lens of fundraising.

The global investment market overall has declined, with many investors treading cautiously. However Africa’s ecosystem has experienced two very strong quarters in the first half of 2022. June 2022 was the market’s strongest June yet, while Q2 and H1 2022 were also the strongest performing Q2 and H1 on record. The ‘big four’ venture capital markets in particular have seen capital flow into their regions, particularly Kenya, Egypt and Nigeria while South Africa has remained neutral.

According to DAI Magister, in the past few weeks African raises have definitely slowed, with the general pace of activity more moderate than this time last year. However, capital is continuing to flow into deals where companies can demonstrate a clear path to profitability and an open market to continue to scale. Also, Africa continues to have high structural growth rates, which are much higher than the rest of the world, and an ecosystem of startups that are geared towards solving primary ‘must have’ needs.

Risana Zitha, Head of Africa at DAI Magister said: “We’re building an interesting picture of the mindset of an investor looking to pool their resources into African businesses. There is an increased emphasis on compliance and capital efficiency, and many companies are exploring dual track mergers and acquisitions (M&A). In fact, all African M&A deals we’ve been a part of recently have been dual tracks.”

Growing businesses in the African market are in a constant state of raising capital, and it is essential that businesses have repeat, successful rounds to stay competitive. However, it’s no longer the seller’s market that many African investors and startups saw in 2021. Now it’s a more balanced picture, with many investors taking more time and being more choosy than this time last year.

Risana continued: “We’re seeing that the rules have changed since last year. Restructuring to cut costs was not on the agenda in 2021, but now, businesses are being open about layoffs – and it’s being encouraged.

“Investors have formed strong views on what they ‘like’ and ‘don’t like’, which is very different to even just a year ago. In response to this, African businesses need to debate whether they take a radical approach to rethinking their business model and how they make their money, or whether they need to make minor adjustments in order to attract investment during a period of balance. Also, it’s important to remember that successfully raising even a smaller amount than originally anticipated has far more value in the current environment. Basically, a $ raised now is worth far more than a $ raised 12 months ago, because many competitors are seeing fundraisings delayed, and capital is always far more valuable when others do not have it..

“Flexibility is crucial to ensure that businesses are responding to the market so get that all-important ‘yes’ from investors.”

While the fundraising market overall is growing steadily, nascent start-ups are having a harder time raising capital. Just 16% of deals in Q2 2022 were accelerator, compared with 32% in Q2 2021.

Risana added: “There has been a significant decrease in accelerator deals when comparing Q2 2022 and Q2 2021. This is in part due to decrease in first time investors from the US and Europe, increase in financing in later rounds and an increased level of sophisticated questions from investors.

“Startups are likely to have less experience raising investment, so it’s essential that they’re able to take advantage of the growing market. This can only be done with the right guidance and resources to ensure they can make a success of their business and reap the benefits of the increased funding we’re seeing in later rounds.

“The same goes for businesses in Africa of all sizes. It’s a volatile time no matter what round you’re raising, and we’re seeing the need for leaders to begin to think differently about their business and approach to fundraising.”

Is the CEO/Founder of Investors King Limited. A proven foreign exchange research analyst and a published author on Yahoo Finance, Nasdaq, Entrepreneur.com, Investorplace, and many more. He has over two decades of experience in global financial markets.

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Fund Raising

Property Tech Company, VENCO Secures $670,000 Pre-Seed Funding

The company stated that the fund will be deployed to scale its all-in-one technology platform

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Nigeria property technology company, VENCO has secured $670,000 in an oversubscribed pre-seed funding round.

The company stated that the fund will be deployed to scale its all-in-one technology platform that manages collections, service charge administration, utilities, and visitor access, among other services associated with multi-unit property developments across Africa.

Founded by Chude Osiegbu (CEO), Reagan Mbitiru (CTO), and Uzochukwu Alor (COO), VENCO already has a growing presence in both Nigeria and Kenya with the plan to expand to other cities and countries in Africa. 

The CEO, Chude Osiegbu stated that VENCO was used by 100 estates on about 4000 property units in 2021. He added that the startup is currently in 186 estates with about 12,000 property units and now has larger estates like Banana Island and 1004 in its roster.

Although Osiegbu noted that the company presently relies on subscription fees that it charges for the deployment of its software solution, he nevertheless stated that VENCO has a long-term plan to introduce a number of monetised operations.

He added that the startup already helped finance the purchase of prepaid energy meters for the Primewater View Gardens estate, and the Tejuosho Market, a shopping mall.

In the last 9 months, VENCO says it has recorded over 200 percent growth, currently in 6 cities in Nigeria and Kenya. 

Dating from the beginning of this year, VENCO noted that it has processed more than $10 million in transaction value via its platform. The company added that it is already in talks with e-commerce platforms to enable easier access to merchants within and around the community. 

Investors King learnt that some of the investors that participated in the pre-seed funding round include Zrosk Investment Management, Voltron Capital, Decimal Point Ventures, Fast Forward Fund, Tayo Oviosu (CEO of Paga), Odun Eweniyi (COO of Piggyvest), Oo Nwoye, Desigan Chinniah, Dakar Network Angels and Viktoria Business Angel Network.

Speaking at the event, Samson Esemuede, Managing Director and Chief Investment Officer at  Zrosk Investment Management, said, “ We view VENCO as both a SaaS and a financial inclusion play with a potential for strong multiplicative impact across the continent.”

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Fund Raising

Nigerian Based Food Tech Startup, Orda Raises $3.4 Million in Seed Funding

Orda Africa has now raised a combined $4.5 million raised by the African-centric food tech company. 

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Nigerian-based food tech startup, Orda announced it has raised a sum of $3.4 million in seed funding after it raised $1.1 million in pre-seed funding at the beginning of this year. This makes it a total of $4.5 million raised by the African-centric food tech company. 

Investors King understands that Orda is an African restaurant cloud operating system that helps restaurants to move from pen and paper to a fully automated digital platform. 

According to the startup, it aims to help more African restaurants maximize their business operations and expand distribution. 

The tech company added that it plans to improve on some new features which include loan, credit, and payment options which will eventually enable its clients to maximize the potential of their business. 

Investors King learnt that this new round of funding was co-led by Quona Capital and FinTech Collective. Other institutional investors which participated in the seed funding include Far Out Ventures, Lofty Inc Capital, Enza Capital, and Outside VC.

In the last one year, Orda has been able to increase its customer base to more than 600 restaurants across Nigeria and Kenya while its weekly processing orders has increased by more than 500 percent. 

Speaking about the growth and focus of the company, Orda’s CEO and co-founder, Guy Futi said “From day one, Orda has been focused on building solutions for small and medium-sized restaurants”.

“These businesses operate with slim profit margins and the power of Orda’s software and financial solutions can catapult their business. Our goal is to provide end-to-end solutions that help them optimize their operations so they become more prosperous”. 

Founded in 2020 by Guy Futi, Fikayo Akinwale, Mark Edomwande, Kunle Ogungbamila, and Namir El-Khouri, Orda has the vision to help small-sized African restaurants optimize their business and achieve sustainable growth.

Meanwhile, the company has attributed its growth over the last 12 months to the excellent team it has put together, a trend it hopes to continue in the coming months. 

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Fund Raising

Proptech Startup SmallSmall Announces The Raise of $3m in Seed Funding

Lagos-based Nigerian prop-tech startup SmallSmall has announced the raise of $3 million ($2 million equity and $1 million debt) in seed funding.

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Lagos-based Nigerian prop-tech startup SmallSmall has announced the raise of $3 million ($2 million equity and $1 million debt) in seed funding.

Formerly known as RentSmallSmall, the startup gives renters access to monthly rent payments while eliminating the pain points of landlords.

Speaking on the recent funds raised the startup co-founder Tunde Balogun said, “We started by understanding the pain points of landlords. Even though they collected rent one year upfront, the default rate of the yearly system is very high because when people’s finances take a hit, they might not be able to pay subsequent rent.

“The legal process of evicting tenants where they’ll have to wait six to 12 months is also not supportive of the landlords. “Our market is for young professionals with an average age of around 28 years. It’s a huge market.

“We surveyed almost 3,000 people last year in Lagos, which showed that 80% of them wanted to pay their rent monthly. So that tells you how much adoption the monthly space would have if the markets eventually opened up.”

He further disclosed that the fund will be used to expand the startup operations to other cities in Nigeria, such as Enugu, Jos and Portharcourt before the end of Q1 2023.

Founded in 2018, the startup has been leveraging technology to revolutionize Nigeria’s property rental market and has so far had over 476,000 people registered on the platform.

It has also saved renters from legal and agency fees, which has seen it transcend into one of the leading advocates for affordable and flexible rental payment platforms across West Africa.

SmallSmall has also enabled landlords to access quality tenants and help curb defaults of payments.

In 2021, the startup was accepted to join the techstars Toronto accelerator program, making it the first African property technology platform selected to join the program. 

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