The fintech-focused investment space in Africa is fairly small, but Flourish Ventures, a global fintech venture capital firm and arm of Omidyar Network, which launched 2 years ago with a $300m war-chest, is changing that for good.
Flourish Ventures recently opened a new office in Nairobi to help its investment team better serve entrepreneurs across Africa led by Efayomi Carr as Principal. Carr previously served as Head of Strategic Finance for Lori, a tech startup that builds cost-saving market infrastructure for the trucking sector in Africa. He joins the firm’s Africa investment team that includes Managing Partner Arjuna Costa and Venture Partner Ameya Upadhyay.
TechMoran caught up with him and this is what he told us:
Flourish Ventures has set up its Africa office in Nairobi. Why now and why Nairobi?
Let me begin by saying that we had already established a presence in Africa, though we did not have anyone permanently stationed on the continent. By the time of my arrival to Nairobi, Flourish had already invested in a number of startups and developed relationships with top venture capital firms with a focus on Africa.
We believe that Africa is at the cutting edge of the next generation of innovations and the continent has always been a priority for us.
Is Flourish Ventures in direct competition with financial institutions for the next great innovation in the fintech sector?
We do not see this as a competition because our main focus is to have an impact beyond just the startups that we are working with. Our focus is on creating a financial system that empowers people and where business models that serve people’s interests succeed over models that exploit them.
That system can only be built when citizens, businesses, investors, policymakers and regulators actively shape it, guided by a set of principles that reflect an understanding of how the financial system works today and how it should work to be fair and serve everybody.
The fintech-focused investment space in Africa is fairly small, with key players that include the International Finance Corporation (IFC), and private entities like Quona Capital, Accion, 4DX and CRE Ventures all working either independently or in collaboration with Flourish Ventures.
What effect has the global pandemic had on Impact Venture Capital firms’ ability to invest in Africa over the past year?
Over the past few years, over half of venture capital deals recorded in Africa involved at least one impact investor. This shows that the desire to make a positive impact in Africa was there before the pandemic.
With the recent downturn in conventional venture capital investments, we can expect to see more impact-focused VCs making moves on the continent. They recognise that they can provide a lifeline to African startups who are in need of funding but are unable to source it from traditional venture capital firms that are gradually consolidating their resources due to the prevailing conditions.
Why is Flourish focused on only African fintech and not the whole broad spectrum of innovation? Is there something special about fintech?
In the last decade, the impact of financial technology (fintech) on Africa’s financial sector has been phenomenal. This has led to the recent national economic development strategies of African countries including very strong components of digital transformation. This will be greatly accelerated due to the impacts of Covid-19 which have pushed us more into the digital space.
The African fintech wave is also being built on mobile phones, whose adoption in the continent accelerated around the turn of the millennium and are now pervasive, allowing fintech innovations to reach the grassroot level. As a key driver of growth in the region, fintech is a viable alternative to traditional banking in urban and rural areas.
The most positive sign that Africa will enjoy a boost in fintech, is the implementation of the African Continental Free Trade Agreement (AfCFTA), which was completed last month. Despite the pandemic, national economic development strategies that encourage economic growth and job creation, have remained ongoing.
What is your prediction for Africa’s fintech sector over the next year?
The pandemic has accelerated broader structural changes that were well underway, such as online and cashless payment platforms. In 2021, we believe that modern tech platforms will continue to help Africans navigate work, commerce and social connections in the digital space. Retail financial services are likely to grow even faster because they have higher user engagement and more granular data than standalone financial providers.
Flourish Ventures and other venture capital firms will make more investments in embedded financial platforms that help farmers and gig economy workers increase and better manage their incomes and financial lives.