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Local fintech start-ups bag R16m in funding

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The winners of the AlphaCode Incubate initiative.
The winners of the AlphaCode Incubate initiative.

Prospa, a mobile savings wallet for low-income earners, and Nisa Finance, an invoice financing platform, are among the eight local fintech start-ups awarded a total of R16 million in funding by AlphaCode.

AlphaCode is an incubation, acceleration and investment vehicle for early-stage financial services businesses, powered by Rand Merchant Investment (RMI).

The AlphaCode Incubate initiative, in partnership with Merrill Lynch SA and Royal Bafokeng Holdings, identifies South African financial services entrepreneurs with extraordinary ideas and businesses that could impact the financial services industry.

More than 200 start-ups applied to participate; of these, 16 made it to the final pitch evening and eight recipients were selected.

The eight were awarded entrepreneurial packages valued at R2 million each. R1 million is in the form of grant funding and R1 million in development support, which includes mentorship, monthly expert-led sessions, exclusive office space in Sandton, marketing, legal and other business support services, as well as access to the broader RMI network, according to AlphaCode.

In partnership with Bank of America, Merrill Lynch SA and Royal Bafokeng Holdings, AlphaCode Incubate has disbursed R13 million to 15 black-owned businesses over the last three years.

"The programme deals with common challenges that financial services start-ups face," says Dominique Collett, head of AlphaCode and a RMI senior investments executive.

"We want to help take courageous entrepreneurs with seriously disruptive financial services business models to the next level."

All participants are early stage businesses, under two years old and at least 51% owned by black South Africans.

The winning start-ups include ISpani Group, which provides access for insurers to traditionally under-insured communities, through prepaid vouchers sold by a network of spaza shop vendors; Akiba Digital, a gamified mobile app that makes it easier to set and meet savings goals; and SELFsure, an insurtech platform which enables millennials to significantly reduce car insurance premiums by self-insuring part of the risk via peer-to-peer lending.

"We will use the funding to bring on a new staff member, for marketing and for solidifying our product market fit," says Dhanyal Davidson, co-founder of Prospa.

"We attribute the winning to our team being well balanced and having appropriate fintech skills for the job. We also spend a lot of time in the townships to really get an understanding of our customers and their pain points."

As part of the selection process, contestants had just three minutes to pitch their businesses, with a couple of minutes set aside for questions from a panel of judges. In addition to Collett, the judges included Phuti Mahanyele, CEO of Sigma Capital; Raymond Ndlovu, investment executive at Remgro; Nakedi Ramaphakela, finance director at Royal Bafokeng Holdings; and Anthony Knox, MD of Investment Banking at Merrill Lynch SA.

Marc Maasdorp, co-founder of Jamii, a platform that aims to de-risk tenants' rent default, through offering them incentive-based discounts, says: "The funding will be invested into further developing and building our platform and in marketing initiatives to acquire customers.

"Through our platform, which collects data on the tenants' behaviour, we're set on disrupting the largest asset class on the planet to incentivise sustainable cities."

According to the Disrupt Africa Tech Start-ups Funding Report 2017, funding in African tech start-ups surged 51% to reach $195 million in 2017, compared to figures for the same period in 2016.

"The number of African tech start-ups which raised funding hit 159; up from 146 companies in 2016 and 125 in 2015. South Africa, Nigeria and Kenya proved to be the top three destinations for tech investors in 2017, both in terms of numbers of deals and total amount of funding, [although] for the first time since tracking began, the amount of funding secured by Nigerian start-ups overtook SA," noted the report.

Disruptive ideas

Previous AlphaCode Incubate participants include Isazi Consulting, a machine learning company which used the funds to build a data visualisation tool and made a 266% return on investment.

Another beneficiary, Livestock Wealth, has been able to attract a global audience. It joined the programme after having sold 10 cows and has now sold more than 1 400 and attracted additional funding.

"Some previous participants have experienced exponential growth and we have been amazed at the level of traction they have received locally and internationally," adds Collett.

Julie Benadie, regional executive of operations and corporate affairs at Merrill Lynch, explains: "We believe in supporting disruptive ideas so that creative fintech solutions will emerge to address the challenges that South Africa faces. We want South Africa to become a fintech centre of excellence with its already advanced financial services infrastructure."

AlphaCode says it is now seeking additional fintech entrepreneurs for its new Explore programme, in partnership with the Explore Data Science Academy. The programme offers a 12-month data science and business skills programme for 20 aspirant South African fintech entrepreneurs.

"Candidates will go through an intensive six-month data science-training programme, where they will learn how to design a 10X business along with the core digital skills needed to build a fintech organisation. This will be followed by three months of business skills training. Interested fintech entrepreneurs should apply at www.alphacode-explore10x.club by 30 October," notes Collett.

Winners of the AlphaCode Incubate initiative:

Name

Description

Founders

Video link

Akiba Digital

A gamified mobile app making it easier and more rewarding to set, manage and meet savings goals.

Tebogo Mokwena and Kamogelo Kekana

https://bit.ly/2yOjYoX

ISpani Group

Provides access for insurers to traditionally under-insured communities through prepaid vouchers and USSD sold by a network of spaza shop vendors.

Prince Nwadeyi, Khathazile Moroe, Patrick Machekera and Louis Buys

https://bit.ly/2CrgbkE

Jamii

De-risks tenant rent default through offering tenants incentive-based discounts on food and transport and bolt-on retrenchment cover.

Adrian Taylor, Marc Maasdorp and Bartek Dutkowski

https://bit.ly/2ytdc8F

Nisa Finance

An invoice financing platform that enables financiers to issue invoice-backed loans to SMEs quickly and affordably by fully automating the application and invoice verification through ERP system integration.

Thando Hlongwane, Tekane Ledimo and Sinqobile Mashalaba

https://bit.ly/2yptcIW

Pago

A low-cost mobile micro payments platform for the informal sector to enable an inclusive economy by digitising remittances through the use of blockchain technology.

Philip Mngadi and Noel Lynch

https://bit.ly/2S1QKvn

Prospa

A mobile savings wallet for low-income South Africans that makes it easy to save small amounts infrequently using prepaid vouchers.

Dhanyal Davidson and Carl Ngwenya

https://bit.ly/2JbwbJf

SELFsure

Enables millennials to significantly reduce car insurance premiums by self-insuring part of the risk via peer-to-peer lending.

Proud Chitumba, Amos Mugova and Tshepiso Shamane

https://bit.ly/2J6HVfV

Yalu

A self-service credit life insurance platform which replaces a customer's current policy with a more affordable, simpler and rewarding policy.

Nkazi Sokhulu, Tlalane Ntuli, Steve Goeieman and Life Mhlanga

https://bit.ly/2PH87QF

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