How Untapped Global plans to bring revenue financing model to African startups – TechCrunch

In the developed world, almost anyone can obtain financing to, for example, rent a car. But in an emerging economy like South Africa, the only people who own cars or can even get a car rental are people who already have something to guarantee or a pay stub to work with. As a result, small businesses, especially in Africa, have a financing gap of $5.2 trillion, according to the World Bank.

Untapped Global wanted to rethink this situation by allowing small businesses to use their ongoing income as collateral and enable this by being able to track their assets. So, for example, if an African businessman wanted to buy a water treatment system for a new business, he would normally not be able to afford it. Instead, they could use the Untapped platform as collateral to get a machine, with Untapped taking a cut of the revenue from the water they sell. So now they can start a business and start earning income without going through the traditional process of leasing a machine.

Untapped has now released the public beta version of its platform, which uses real-time data to track the assets and income of entrepreneurs using its platform. The idea is to provide transparency to international investors looking to tap into Africa and other emerging markets. Funded by a $10.3 million debt and equity pre-seed round that closed in March, this platform uses a model called “Smart Asset Financing.” This allows you to finance income-generating assets for entrepreneurs and SMEs in emerging markets. It does this by using IoT of assets such as the network of motorcycles in a fleet or, for example, a Wi-Fi connected “smart” irrigation system.

Therefore, the model assesses the risk of an investment to ensure returns for investors.

It has now financed assets for more than 5,000 entrepreneurs working in sectors such as clean water, solar energy, electric mobility and inclusive financial technology. The company claims to have an annual revenue run rate of $2.5 million.

Jim Chu, CEO and founder of Untapped Global, says that Untapped is riding the wave of digitization happening in Africa and other emerging markets, which now makes this model possible.

Jimchu. Image credits: Untapped Global

“We created Untapped to bring capital to entrepreneurs in markets that are often excluded from funding opportunities, while ensuring transparency for investors… Our data has shown that for every $1 invested, more than $3 of value is created in local economies,” he said. in a sentence.

Excitingly (for the planet), most of the Untapped Global portfolio companies are building climate action solutions, including solar irrigation farms, electric mobility companies, and clean water systems.

Chu says it only takes $300 to start investing in these entrepreneurs, and there are no monthly fees, because the platform shows real-time data on investment impact and activity.

Chu says he started investing in emerging markets about 12 years ago, investing in more than 80 companies in Africa, mostly as an equity investor: “But I kept coming across deals that said ‘Wow, this is a great company, great cash flows. ‘”. , but I would never invest in this company because there were no outlets, and other reasons. Investing in shares would also impose a burden on entrepreneurs.”

So he started doing income-based financing, taking a percentage of future income. But then he started running into companies that were essentially tech companies that had realized that their customers needed some kind of financing built into their product. Most of these companies were hardware companies, using motorcycles, cars, or something similar. But these were also rapidly becoming smart cars, smart motorcycles, smart Wi-Fi systems, smart irrigation systems, you name it, and using IoT.

As a result, Chu hit on revenue-based funding: “We’ll take all of your asset data and use it as a way to manage your company’s performance. In fact, forget all the usual way of doing due diligence and underwriting risk management that banks usually want, like balance sheets etc. Instead, we’d look at, well, how much is a motorcycle going to earn over its lifetime? And how much will he earn over the course of the year? Can we pay off that motorcycle in a year? And so we created this model.”

The platform is now accessible to accredited investors and will be available to retail investors by the end of 2022.

Here is an explanatory video:

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