Jeremy Leach, Founder and Chief Executive Officer, Inclusivity Solutions
Africa is an exciting market and, despite the challenges, deserves the moniker of Africa Rising was coined in the early 2000s. However, until pretty recently, Africa’s fintech and inclusive insurance, has struggled to attract the type of investment seen in developed countries. During my consulting days at BFA Global, I completed a study in 2014 on investors in inclusive insurance for the Micro Insurance Network. This was before the current fintech and now ’embedded finance’ hype curves and it showed limited investment activity in inclusive insurance except for a few brave impact related investors.
When we secured a Series A round in 2019, I was hopeful that with my established network from my work with investors and with the increased interest in Fintech / Insurtech and financial inclusion that identifying investors would be, if not easy, relatively smooth. Little did I know. Thankfully we were incredibly successful, and some serious investors joined our anchor investor RGAX including international impact investor, Goodwell Investments, alongside Umkhathi Wethu (in association with Allan Gray) and Pan African fintech, MFS Africa. Some of the lessons from this time include:
- Networks are critical: ‘We only engage with those referred to us by trusted parties’. This disclaimer was even written on some of the venture capital (VC) websites amazingly and when a VC did respond, often as much they said the same thing. So what I found was that one’s Linkedin network was only good insomuch as you had people who could introduce you to investors. So building up a network is critical.
- Location counts: We are an African fintech representing 11 nationalities across 7 countries and partnering with some of the biggest brands on the continent. However, our HQ is South Africa which, whilst cost effective and reflects our base, is seen as problematic for many investors due to the painful foreign exchange and IP rules. It also appears to suffer from the ‘African discount’ where investments are often lower or at higher cost than in developed countries. It is notable that a number of fintechs have since set up entities in the US and Europe for the sake of fundraising, which has helped secure astronomical levels of investment.
- Always overestimate the time to raise: multiple articles talk about the time it takes to fundraise. Listen to them. In our case in 2019, it took 12 months to secure investors from a pipeline of 90+ investors and then 6 months to finalise the deal, partly due to the Christmas silly season. And we did well compared with many others, although a few outliers claim 3-6 months is sufficient.
Even since 2019 there has been a significant increase in funding and new ecosystems being set up in African countries that were just not present when we were established in 2015. This bodes well for the next round of innovators seeking funding as well as those investors looking for high growth funding opportunities. Africa Rising indeed.