Millions of small businesses have stayed offline over the past decade. Most of them still use pen and paper or ledgers to store important information.
Some people in Nigeria keep information offhand. Almost nine out of 10 small businesses in the country fail in the first five years because of inefficiencies and errors, which is because they are time-Consuming.
Nigerian startup Kippa has raised $3.2 million in pre-seed funding to improve the life cycle of small businesses with its finance management app.
Berlin-based VC Target Global led the new financing round for the startup. The other VCs are Alter Global and Rally Cap Venture.
A number of angel investors include Babs Ogundeyi, Kuda CEO, Sriram Krishnan, Chris Bouwer, Kyane Kassiri, Edward Suh, and Sajid Rahman.
Small business owners can keep track of their daily income and expense transactions, create invoices and receipts, manage inventory, and generally monitor how their businesses ebb and flow with the help of the app Kippa.
The company says that the app helps merchants keep track of debtors and send automated reminders. The company claims that merchants who use this method are three times more likely to recover their debts.
Most of these features are geared at getting businesses to use the platform, however, the strategy is to introduce credit and other financial services to them.
Kennedy Ekezie tells TechCrunch that there is a cultural difference. Most transactions carried out by small businesses are cash-based, and more than 30% of sales happen on credit. The biggest problem businesses face is the lack of working capital or credit.
We have a unique opportunity to provide financial services to users. The CEO of the company said that most of them use the first B2B app that they use.
We have a unique opportunity to help them accept online digital payments, to provide them with working capital, digital savings and plug them into the financial ecosystems.
Many startups have launched with bold promises this past year, all with different approaches, and some are keen on connecting small businesses with suppliers, others provide banking and software services.
They all converge at one point, which is providing access to credit. Ekezie says that while this is true, Kippa ischoosing to be digitally native, rather than pursuing the digitization of analogue processes that previous players have done. The founder says that sets the company apart.
The introduction of credit and other financial services will see the company make revenue by taking commission fees or interests off of lending or working capital.
Since launching in June, the app has grown an average of 126%. In the past five months, Kippa claims to have recorded more than $300 million in businesses, ranging from small kiosks and street corner shops to local food vendors and high-end merchants using the app.
Target Global invested in the Nigerian market because of the metrics that indicate a strong need for the product. The investment in Kippa will allow it to grow and be the first-choice financial management solution for small businesses in Africa.
Ekezie and his co-founders started a business. Africave, a software talent matching platform, closed last year.
According to Ekezie, they moved on from Africave after recognizing imminent supply constraints that would put a cap on the company's growth.
The CEO said that the founders wanted to solve a problem that was perfect for their strengths. After embarking on a founder-market-fit tour and meeting several small business owners across Nigeria, Kippa was born.
Ekezie said that they saw a lot of them operating very manually using the ledgers, spending one hour or more at the end of the day balancing their books, making mistakes, and complaining of their records being incomplete.
The biggest problem small businesses face is the lack of access to credit or financing. That was an interesting problem to solve.
The team spoke with some of the founding team members of similar players in other emerging markets to understand how they scaled their businesses.
Ekezie believes that he and his team have changed Kippa to fit the needs of businesses in Nigeria. While other players are digitizing processes before anything else, Kippa is solving broader access to finance problems.
One of the largest pre-seed rounds in Nigeria and sub-Saharan Africa will be invested in growing its merchant base, improving its product, scaling the team, and venturing into financial services.
India's Khatabook raises $100 million for its platform for merchants.