Payhippo secures a $1 million pre-seed round to fund team expansion and geographic expansion
Payhippo secures a $1 million pre-seed round to fund team expansion and geographic expansion
Payhippo, a Nigerian business financing startup, has raised $1 million in a pre-seed round led by Pan-African venture capital firms Ventures Platform, Future Africa, and Launch Africa. Other investors include Sherpa Ventures, an Africa-focused venture capital firm; Hustle Fund; and Mercy Corps Venture.
The startup intends to use the funding to expand its reach into additional Nigerian cities and to grow its engineering team. Additionally, it intends to hire a Head of Finance to keep up with the company's current growth rate.
Payhippo was founded in January 2020 by Zach Bijesse (CEO), Chioma Okotcha (COO), and Uche Nnadi (CTO). Its mission is to provide financing to African small businesses while also assisting them in building their credit history. The startup claims to have disbursed over 2,600 loans to businesses since its inception and is currently experiencing a 25% year-over-year revenue growth.
Interestingly, despite the fact that the startup began disbursing loans early in 2020, when the pandemic-induced lockdown crippled many businesses — resulting in layoffs, furloughs, and salary cuts that inadvertently resulted in an increase in load defaulters — the startup claims to have a 97 percent repayment rate.
Curious as to how the team accomplished this, Okotcha explains to Techpoint Africa that it was accomplished by ensuring that requesting businesses were not over-financed to the point of insolvency. This is a procedure.
“As a fintech company, the technology component of what we build is critical, as it is what determines how we can access a SME's credit readiness and how much to lend. The technology performs all of this calculation on the backend, handles underwriting, and determines who the customer is, allowing us to provide a loan that is within a safe range,” she explains.
That is how the startup is able to assist businesses in improving their credit scores, as they will not face repayment issues.
Also, Okotcha views Payhippo's repayment plan as quite flexible, as businesses are only required to pay at the end of the loan cycle, rather than in instalments. This means they can use the fund for the purpose for which it was intended before returning the principal and interest.
Businesses can access larger amounts as their credit scores improve, similar to how several collateral-free loan apps work.
In Conclusion
Given the size of Nigeria's informal sector and the fact that MSMEs account for 96 percent of the country's businesses, Payhippo wishes to continue leveraging the country's over 37 million SMEs, aware that funding remains a significant barrier to running any type of business in the country, and this group happens to be more disadvantaged.
