As African startups continue to grow at an incredible pace and raise funds at a rapid rate, their cap tables will also expand. Many African startups receive VC money mainly from foreign investors. It is therefore imperative that African startups incorporate abroad, particularly in the U.S.Even though the incorporation process is complicated for most founders, it can be dangerous. Some Nigerian startups have been caught issuing preferred shares in Nigerian naira, and then cancelling to issue dollar-denominated SAFEs after they are incorporated in the U.S.These challenges are being tackled by Raise, a startup that builds Africa's Carta. 500 Startups has supported it to scale.Marvin Coleby and Tina Nyamache set out in 2019 to develop a blockchain solution to make it easier to purchase and sell shares in preIPO companies in Africa. They discovered that many companies struggle with equity and liquidity after running multiple iterations. They managed corporate structures in Delaware, Canada and Europe, but they also maintained paper-based subsidiaries throughout Africa.Coleby says that most equity in Africa is still held, tracked, and updated with paper certificates, manual processes, and fragmented databases. This increases transaction costs when it comes to managing subsidiaries or issuing stock options for employees. This increases the cost of entering and exiting positions in public and private companies.Raise was created to assist investors, startups, employees and law firms in managing deals, cap tables, corporate compliance, and other matters.Customers of Raise can automate their due diligence, set valuations and track employee stock vesting. They can also create routine documentation for Nigerian and Kenyan government documents.Raise was launched in 2019 in private beta. Binance Labs was the only investor in its preseed round. Raise was launched in 2020 as a public beta. Customers include Anjarwalla & Khanna (Africa's largest law firm), Bamboo, Workpay, and Mono, and VC firms such as Microtraction and Chrysalis Kapital.Coleby tells TechCrunch that Raise's long-term problem is liquidity.He said that everything we do is to help founders, customers and employees get liquidity by investing in companies. Companies are raising capital, investors are investing, and employees have stock options. There are usually only one or two exits. We build using the Silicon Valley model, where we need to scale up and grow until we achieve a big exit. Our view of liquidity does not have to be this way. Sometimes it can be small amounts of liquidity that investors and employees get over time.This means that Africa's capital markets are extremely ineligible for both private and public companies. It can take several months, if not years, to purchase or sell equity. Raise estimates that over $1 trillion worth of stock in Africa is paper-based, illiquid and priced in inflationary currency.Nigerian stock trading platforms such as Chaka, Bamboo and Trove allow Nigerians to create liquidity locally and internationally. Raise however, aims to create the platform to facilitate more asset classes and investment options.Raise organizes ownership information for African companies and makes it accessible, even though that is still being developed. Similar to Carta, which is a $3 billion company that offers cap table software for U.S. businesses, Raise organizes ownership data for African companies and makes them accessible.Onboarding cap tables, equity data and onboarding cap tables will open up new use cases for Carta as a digital asset platform based on blockchain technology. It plans to be more like Africa's Nasdaq, selling futures, indexes and assets to private companies. Coleby claims that Raise will be an equity engine to process Africa's hundreds of billions of dollars in trade and securities volume.Coleby claims that the number of companies that go live each month is up 60%. It manages around 200 cap tables, with assets in excess of $400 million. Coleby says that the next stage of growth will see Series A and growth-stage companies being added to the platform.The company is currently active in Nigeria, Kenya and other African countries. Coleby said that a seed round was planned to allow the company to expand into these markets and test funding and liquidity operations in the African VC market.Raise is now building a platform that connects and educates investors, employees and founders.
