Sumarie Greybe, co-founder of Naked Insurance
For years, startups in South Africa and the rest of Africa have struggled to raise capital, whether that’s through angel funding, venture capital or bank loans. We are seeing signs that this picture is changing fast with international funds and local investors alike allocating more capital to technology startups that focus on providing innovative solutions to financial exclusion and economic inequality.
Fintech investment especially, is growing in South Africa and the rest of Africa, with the sector attracting a record $3 billion in investment in 2021. To provide some context, global fintech investment hit $91.5 billion last year. Much of that investment is going to companies that focus on financial inclusion and innovative payments solutions. The insurtech sector is still small, but we can expect to see it starting to take off, too.
Venture capital funds and other private sector investors like Naspers Foundry are embracing the imperative of ‘profit with a purpose’. Just like government lenders and multilateral institutions like the IFC, they are investing for social impact. The likes of TymeBank and Yoco, for instance, have attracted funding partly because investors are attracted to their mandate of providing access to financial products to unserved and underserved markets.
It is also encouraging to see the growing international interest in Africa’s technology startup scene. For investors, Africa is a compelling market because there is still so much scope for growth. There are hundreds of millions of people without access to basic financial products, representing a great opportunity for American and European investors to diversify their portfolios and access significant revenues.
Having seen how many parts of Africa leapfrogged richer countries with mobile money and cellular telephony adoption, investors see the continent as a source of future innovation. In Africa, we are forced to innovate to improve affordability and accessibility, which leads to the development of breakthrough business models and products that can be applied throughout the world. Thus, Africa is a market that is hard to ignore, even if there are some concerns that a bubble is forming and that some capital will be withdrawn from the market as interest rates rise.
South Africa is one of the more attractive markers on the continent for international investors because we have a well-developed technology industry, solid telecoms infrastructure and the proven capability to deliver high quality offerings. It’s key for our technology startups to learn from the best practices of international investors and harness their funding, but it’s also important to build local ownership and take advantage of export opportunities.
My co-founders, Alex Thomson and Ernest North, and I had all spent many years in the short-term insurance industry before founding Naked. We were fortunate that people and companies we worked with in the past believed in our vision and our ability to execute, so we were fortunate to secure funding in the early stages of the business.
My advice to other founders who want to raise funding is to develop a clear pitch and business plan that outlines the problem you are solving, how you are solving it and how big the market opportunity is. Then, find people who believe in your vision.