Ghanaian Fintech Float Raises $17M Seed To Power Cash Flow For Commerce In Africa
Ghanaian fintech Float raises $17M seed to power cash flow for commerce in Africa
Small businesses in Africa face a significant amount of frustration as a result of cash flow issues. The primary causes of cash flow problems are long payment cycles, which can last up to 90 days after services or products are rendered, and a lack of capital, which affects 85 percent of African small and medium-sized businesses.
The demand for these services has resulted in a significant round of funding for the Ghanaian startup Float, which is addressing these issues for African SMBs in a number of different ways. In order to expand its offerings and geographic reach, the fintech company that provides credit lines to businesses has raised $17 million in funding.
A $7 million equity investment and a $10 million debt investment were made as part of the seed round of financing. While Cauris provided debt financing, Tiger Global and JAM Fund, the investment firm of Tinder co-founder Justin Mateen, co-led the equity portion of the financing. The equity round was also attended by Kinfolk Ventures, Soma Capital, Ingressive Capital, and Magic Fund, among others.
As well as Y Combinator CEO Michael Seibel, Horizon Partners' Sandy Kory, Ramp co-founders Karim Atiyeh and Eric Glyman, mPharma's Gregory Rockson, and Dutchie co-founders Zach Lipson and Ross Lipson, a number of angel investors participated in the round.
Story Behind Establishment of Float
Following the rebranding of the company as Float, CEO Jesse Ghansah founded the company in 2020 with Barima Effah and launched its product in June 2021. The concept for the YC-backed Ghanaian fintech was conceived during the chief executive's tenure at OMG Digital, a media company he founded in 2016 that was also backed by YC at the time of its inception.
"We needed credit and were able to secure an overdraft from a long-standing partner bank with whom we had transacted over $100,000 in the previous 12 months. However, before issuing the ov, the bank required us to deposit 100 percent of the collateral in cash "In a June interview with TechCrunch, the two-time YC founder explained why he chose the term "rdraft."
"For a time, I recollect having to borrow money from loan sharks at exorbitant interest rates, sometimes as high as 20% a month, in order to make payroll. That encouraged me to work on Float to resolve the issues I was having."
It is a similar situation for more than 51 percent of Sub-Saharan Africa's 44 million formal SMBs, which report a need for more finance than they are able to access in order to expand their operations. In order to assist some of these businesses that are having difficulty obtaining financing from traditional banks, Float provides credit.
The company, in addition to providing businesses with flexible credit lines to bridge cash flow gaps, also provides software tools that allow businesses to manage accounts and wallets from a single dashboard, automate bill payment, vendor or supplier payments, and invoice collections, among other things. The company's mission is to serve as a "financial operating system" for small and medium-sized businesses in Africa, according to its website.
In addition to invoice advance, account opening, payment links, budget management, and spend cards, the platform offers the following features:
Aside from that, the company has recently introduced two new features: revenue advances and instant payouts. By offering the latter, Float hopes to encourage small businesses to use its platform to instantly access their revenues rather than relying on payment gateways that can take several days to process. Businesses that have past-due invoices can obtain cash advances through the company's invoice factoring service.
In Ghansah's opinion, all of these characteristics enable different types of credit to be extended to various industries and verticals across the continent, regardless of location.
"The fact that business credit requirements differ significantly from one another presents a significant challenge. Retail credit requirements are significantly different from those of a services business, an agriculture business, a business, a pharmaceutical company, or a medical supply company, for example "The chief executive provided an explanation.
"Because of this, we're researching which credit products are most appropriate for specific verticals. That is the project on which we have been working so far."
Journey so far
In the seven months since its launch, Float has onboarded hundreds of businesses from a variety of industries, including retail and manufacturing, fintech, e-commerce, media, and health.
Over the course of that time period, Float has also spent an additional $10 million on credit and cash advances to businesses. According to the company, the volume of payment transactions (invoices and vendor payments) has increased by a factor of 26.
A number of African fintech startups are vying to become the region's "operating system," including Float. Prospa, Brass, and Sparkle are just a few of the startups that provide financial and cash flow support, as well as software services, to businesses across the country.
Each company asserts that they do not consider the others to be competitors; first and foremost, they believe that the market is large enough for all parties to coexist peacefully in the current environment. Second, their products exude a sense of superiority, despite the fact that they will not publicly admit it.
Float takes pride in providing businesses with access to financial and software services at the same time, which is unique in the industry. Then there's the matter of providing readily accessible, flexible, and short-term working capital in lieu of outright expensive loans.
According to Ghansah, "I believe that one of the ways in which we differentiate ourselves is through the flexibility of our credit, both in terms of speed of access and the speed with which you can draw down on credit." "And then it's flexible in the sense that you can take it out for a day and then repay it the next day, for example."
Ghansah stated during the conference call that Float, which currently operates in Ghana and Nigeria, intends to use the new capital to establish entities in Kenya and South Africa by the second quarter, as soon as it obtains operating licenses in those countries.
As well as these initiatives, the investment will be used to improve the company's cash management platform and to launch new credit products that will be targeted at specific business verticals and industries.
As the company's CEO stated in a statement, "Float set out on a mission to increase cash flow and liquidity for millions of businesses across the continent, enabling them to grow and achieve their full potential."
"In addition, we will use this additional funding to further refine our credit and software products in order to provide the best possible experience for our rapidly expanding customer base. We are overjoyed to have been selected as the preferred growth partner for companies in Africa."
