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BFD Expert Voices - Private Credit

BFD Expert Voices

Yoco, a South Africa-based fintech helping small businesses take card and mobile payments, is in talks to raise about $150 million in funding, sources tell Lucinda.

Why it matters: Yoco's funding plans come amid a flurry of African mega-rounds as investors bet that the developing economy is ripe for growth across the fintech sector. 

Context: Before 2021, just eight African startups had raised $100 million or more in a single round. Last year, that number shot up to 14, based on data from Partech.

Details: Yoco itself has been growing fast, doubling its revenue to  $40-$50 million last year, per the sources. 

Founded in 2013, Yoco — like the U.S.'s Block — manages payments and sells portable point-of-sale card machines as well as software for tracking sales, inventory, and staff.

Its rise comes as consumers in its largest market, South Africa, have increasingly adopted card payments over cash in recent years.

Zoom in: Yoco is now looking to be valued at between $700 million and $1 billion, though the sources caution that the fundraising numbers may shift as a lead investor has not yet been decided on.

The talks come eight months after the company raised $83 million Series C round of funding, led by Dragoneer Investment Group. Earlier investors, including Partech and Quona Capital, also joined the round.

Of note: Yoco declined to confirm the fundraise, though co-founder and CEO Katlego Maphai says the company plans to be IPO-ready by 2025.

The big picture: Seeing the massive returns of investments in countries like China and India — and the nose-bleed pricing on deals in the U.S.— many investors honed in on Africa for turbocharged growth last year.

In 2021, funding to African tech companies surged three times over the year before, to $5.2 billion, according to Partech.

Much of the funding has gone to fintech in particular. Africa benefits from heavy mobile usage, but it's still largely cash-first — giving fintech businesses a huge potential market.

Investors like Dragoneer Investment Group (with Yoco), SoftBank (with OPay), and SVB Capital (Chipper Cash) also made their first fintech investments in the continent last year.

Bottom line: Last year was pivotal for the African venture ecosystem. This year may be shaping up to be equally transformative, with early data from Pitchbook showing deals involving U.S. or European investors set to beat last year's total.

1 big thing: Funding Africa's Block 

A new fund is coming to town. Nichole Wischoff, who spent the last five years working at companies like Blend and Built Technologies, is raising a $50 million solo fund to invest in fintech startups, she tells Ryan. 

Why it matters: The number of solo capitalists is on the rise, as we've written before. But a huge gender imbalance remains, particularly in fintech.

Wischoff quickly moved up the ranks in the fintech sector, getting her start as an originations specialist at Citi Community Capital before joining digital lending technology firm Blend. 

She followed that up by working on the Walmart- and Ribbit Capital-backed fintech startup that eventually became ONE.

Most recently, Wischoff served as the VP of Marketplace for construction lending startup Built Technologies.

Over the last year, she's also been investing part-time out of a $4 million Fund I — but "now I'm ready to do it full-time, for real," she says. 

Some of the investments she made out of Fund I include Vesta, Coast Pay, OAK Network, and Inspectify.

Details: For Fund II, she's raising $50 million to invest in early-stage startups — 75% of which will go to traditional fintech firms, with the rest going mostly to vertical SaaS companies.

She plans to write checks between $250,000 and $1 million to invest in seed and pre-seed startups and expects to make 25-35 investments out of the fund — of which 8-10 will be core investments.

Web3 and crypto will not be a huge focus, as she's more interested in trying to fix some of the problems with our existing financial system.

What they're saying: "While everyone is riding this wave of web3, there’s still so much left to be done" in traditional finance, Wischoff says. "Everywhere I look, there’s still paper. There’s still massive inefficiency." 

Of note: Wischoff relocated from San Francisco to Nashville during the pandemic but will continue to invest in New York and the Bay Area.

"When I lived in SF, 60% of my companies were based in New York," she says. "Now I'm 90 minutes on a flight to New York, four hours from SF, and two hours from Miami." 

2. The BFD: One woman's solo venture

Illustration of a woman looking over a pair of sunglasses with a blank check in the reflection. 

Payments apps like Zelle and Venmo make it ultra convenient for consumers to transfer funds. But it's also making it easier for fraudsters to target consumers.

Driving the news: Over the weekend, the New York Times published an article headlined "Fraud is Flourishing on Zelle. The Banks Say It's Not Their Problem" that struck a chord within the fintech community.

Why it matters: While the story focuses on bank-backed Zelle, it's a broader issue for other payments businesses with similar offerings. It also opens up a whole new can of regulatory worms as to who should be held responsible for this new kind of fraud.

Instant payments have become of particular interest for fraudsters, as its speed makes it harder to recover for the financial institutions.

Details: Under the current regulatory framework, consumers who suffer an "unauthorized" funds transfer can get their money back from the financial institution that approved it.

Yes, but: Some fraudsters are convincing users to voluntarily send over their funding — making it in theory an authorized transfer.

Bottom line: The drumbeat of regulation is rising.

Last year, the Consumer Financial Protection Bureau ordered Amazon, Apple, Facebook, Google, PayPal,  Alipay, WeChat Pay, and Block to turn over information in part to look into "fraud and payments made in error."

"[The Electronic Fund Transfer Act] was passed in 1978, when we had slow-moving transfers. If banks want to play in real-time transfers, the onus is on them to have better fraud guards," wrote Reggie Young, product counsel at fintech Lithic, in a tweet Sunday.

3. Fraudsters prey on instant payments

Illustration of piggy bank wearing a robber’s mask

Visa and Mastercard suspend Russia operations (BBC) 

Payments giants Visa and Mastercard have suspended operations in Russia over the invasion of Ukraine. Russian cardholders will still be able to use the cards within the country until their expiration, provided the card was issued inside the country.

Russian banks turn toward China's payments system (WSJ)

Amid sanctions and rebuffs from Visa and Mastercard, Russian banks are turning to China's state-owned UnionPay.

FTX to start European operations (Bloomberg)

FTX says its license from Cyprus will allow it to provide a variety of cryptocurrency products and services across Europe.

4. Credit score

Illustration of scoreboard with a downward line illuminated on one side and an upward line illuminated on the other.

• Immutable, an Australian NFT startup, raised $200m in funding at a $2.5b valuation led by Singapore’s Temasek. Other investors include Mirae Asset, ParaFi Capital, Declaration Partners, and Tencent Holdings. http://axios.link/B8Oa

• CredAvenue, an Indian business credit marketplace, raised $137m in Series B funding at a $1.3b valuation co-led by Insight Partners, B Capital Group and Dragoneer. http://axios.link/c4ys

• AutoFi, an auto financing startup, closed $85m in new funding at a nearly $700m valuation. Investors include Santander Holdings USA, SVB Financial Group, and Crosslink Capital. http://axios.link/1wfl

• Tabby, a Dubai-based BNPL startup, raised $54m in new Series B funding. Sequoia Capital India and STV co-led, and were joined by Arbor Ventures, Mubadala and GFC. http://axios.link/iCBq

• Espresso Systems raised a $32m Series B round led by Greylock Partners and Electric Capital, with participation from Sequoia Capital, Blockchain Capital, and Slow Ventures. http://axios.link/KHFN

• Zeta, a banking and credit card company, raised $30m at a valuation of $1.5b billion from investors including Mastercard. http://axios.link/OaEx

• Social Good Foundation, a Japan-based maker of a cryptocurrency rewards program for shopping, raised $14.2m in Series A funding. Miyako Capital invested. http://axios.link/gWQ7

• 24 Exchange, a Bermuda-based multi-asset trading platform, raised $7m in funding. Morgan Creek Digital, Aspire Financial, and Blackwells Capital invested. http://axios.link/vHQY

5. Deals of the day

• ADDX, a Singapore-based private markets investing platform, named Oi-Yee Choo as CEO. http://axios.link/1mbV

• Erik Oken is stepping down as JPMorgan’s global chair of investment banking to join private equity firm MidOcean Partners, per Bloomberg. http://axios.link/b3QI 

6. It's personnel

7. Memes and mumbles

Good morning, Fintech Deals readers. Happy Monday.

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March 07, 2022

1 big thing: Funding Africa's Block