Nigeria’s Prospa Secures $ 3.8 Million In Pre-Seed To Offer Small Business Banking And Software Services – TechCrunch
In Nigeria, there are over 40 million microenterprises that are underserved in one form or another in terms of banking services. Although some of these companies have registered bank accounts, gaps exist in the way banks use available data to meet individual business needs.
With banks, present a series of transactions as declarations, that’s all these businesses need. They care less about providing them with information and growth opportunities around their customers and their products.
Fintech startup, Prospa wants to change that and has started tapping into this market. In March, the company was among the 10 participating African startups in the winter bundle of Y Combinator. A few months after graduation, the startup, combining the two worlds of banking and business management tools for micro and small businesses, closed a $ 3.8 million pre-seed round.
Prospa was founded by Frederik Obasi, Chioma Ugo and Rodney Jackson-Cole. As a serial entrepreneur running companies in the tech and media fields, Obasi saw how difficult his company’s banking and operations were in Nigeria.
Banks were only concerned with providing certain financial services, so people like Obasi had to look for software or staff to respond to the operational parts of their business.
For someone who runs a large company with a huge influx of money, it is easy to assign staff or buy software from to delegate Tasks. But it can be expensive and a daunting task for small businesses; that is why most of them struggle.
Sensing an opportunity, Obasi and his team launched Prospa on the assumption that they were going to cheap solve the banking and software needs of these small business owners.
“When I left my last company, I wanted to do something really big and something I knew was wrong inside out. That’s why I started Prospa, ”Obasi told TechCrunch on a call.
The founders built the product between June and September 2019 and entered service in October. Since then, the company has acquired customers stealthily even when they entered YC. Obasi explains that he wanted Prospa to have organic traction devoid of growth driven by hype and noise.
“We like to think really long-term play. We really wanted to really test the hypotheses, build a real business with income, and figure out what we were doing. Then the COVID period came and we started to see enough traction, ”he added.
But when the company started to generate a buzz, the typical description people had of Prospa was “a neobank for small businesses.” During the call, CEO Obasi is quick to dispel this notion. In addition to providing banking services, he says Prospa offers billing tools, inventory management, employee and supplier management, an e-commerce store, and payroll functionality..
“Banking is only a small part of what we do. We know were put in the neobank category, but we consider our product to be 10% banking and 90% software. So the experience is very different from what you would get from a neobank and the use case for Prospa users is quite different, ”he added.
Prospa focuses on the self-employed and entrepreneurs, acting as the “operating system” for their businesses.
Registered bbusiness on the platform has access to an account number and other functionalities provided by Prospa. For unregistered companies, Prospa supports them in the process of formalizing their business and providing bank accounts. However, in the grand scheme of things, this segment is more of a foray into an upsell..
Speaking of traction, Obasi says the company has tens of thousands of businesses and is growing 35% month-over-month. And from a non-banking perspective, Prospa has managed over 150,000 product catalogs while small businesses have sent 360,000 invoices to the platform.
Then the price depends on the turnover of the company. For example, a company with a turnover of 100,000 (~ $ 200) should not pay a subscription fee to Prospa. Corn businesses with more than 100,000 sales pay fees between 3,000 (~ $ 6) and 5,000 (~ $ 10) per month.
Over the past year, African VC has seen incredible numbers from all over the continent at different stages of investing. Prospa’s pre-seed investment, for example, is currently the largest such round in Nigeria and sub-Saharan Africa. In Africa, only the Egyptian fintech Telda raised a more important turn.
Obasi believes that the company’s understanding of the market and what it wants to achieve was the main reason it was able to achieve such a price which he said was almost four times oversubscribed..
Investors in the round include VCs like Global Founders Capital and Liquid 2 Ventures. Global fintech founders like Immad Akhund of Mercury, Karim Atiyeh of Ramp and executives from Teachable, Square, Facebook and Nubank also participated in the round..
Seeing Akhund and Atiyeh on Prospa’s cap table might suggest to some that Prospa was backed because the company is building a replica of these businesses in Nigeria.. Nevertheless, says Obasi, while there are similarities, Prospa doesn’t build a product for startups.
“There isn’t a massive startup ecosystem in the United States where you can essentially grow a billion dollar business only serving YC companies. We don’t have that here. Were really building for the backbone of the economy, which are small and micro enterprises. By talking to investors and being able to build relationships with them, one of the things we made clear is that we are not an American impersonator, ”he said when asked if Prospa could be compared to Mercury and other American startup-focused financial products.
Prospa plans to use its new capital to double and grow with acquisition strategies to get more customers. On top of that, the company plans to hire more talent, especially in products and engineering.