Having tripled its user base since the beginning of last year, South African fintech startup Yoco has raised $16-million in Series B funding.
This brings the total investment into the point-of-sale company to $23-million (R322m).
Yoco provides a credit card reader for transactions but last year added touchscreen tablets to give its customers an online platform to manage and sell their products. Since it raised Series A funding in the first quarter of last year, it now has 27,000 merchants on the platform, and is adding about 1,500 a month.
"This round represents a vote of confidence in technology ventures operating in this market, servicing the untapped potential of small businesses," CEO Katlego Maphai told me.
"Only 7% of South African small businesses accept card payments, despite South Africa having a card penetration of 75%," he says.
This round was led by Partech, a venture capital firm based in Silicon Valley, Europe and Africa, with participation from Orange Digital Ventures, Dutch Development Bank FMO, South African-based FutureGrowth and existing Series A investors Quona Capital and Velocity Capital.
The funding, albeit small compared to Silicon Valley or other foreign direct investment, comes at a time when South Africa economy is in a parlous state. Government statistics this week revealed the economy is in a technical recession while a contentious policy from the ruling African National Congress (ANC) to pursue "land expropriation without compensation" has spooked foreign investors.
Read more: How Yoco is making payments go mobile in South Africa.
"The fact that some foreign capital coming into the country is a something very strong," Maphai says. "There is still something strong in this country have to tap into that more."
Yoco will use the investment to build up its users and add more features.
"What is becoming very clear for us in the market is that the demand is there. What we focus on is how do we cost effectively get to these business owners? How do we serve them at scale?"
Maphai thinks the presence of Dutch Development Bank FMO is important for startups in Africa. "This is their first direct fintech investment globally. They are invested in many banks across the continent. Even though they are not leading the round, it’s a massive vote of confidence that we are accessing the same finance that banks are," he told me. "We really want to scale this."
Carl Wazen, a co-founder who is the chief business officer, says Yoco has raised "serious capital for the enablement of small businesses on the continent".
"You struggle to hear good news. But this type of investor and size of the funding is something different. This is not 'more of the same'. We are a player emerging in a space people previously had questions about."
