Investing in African startups: From fintech to insect protein

Pauline Koelbl, founder and managing partner of ShEquity

Pauline Koelbl, founder and managing partner of ShEquity

ShEquity is an early-stage investment firm backing African female entrepreneurs. We speak to founder and managing partner, Pauline Koelbl, about the firm’s investments and business opportunities in sectors ranging from fintech and agribusiness to healthcare.

ShEquity recently backed Nigerian digital banking startup Owoafara. What was the motivation for this investment?

Owoafara’s mission is to unlock financial access for Africa’s underserved population by creating platforms that its partners use to offer savings, loans and transactions to help them grow and earn a better living. Specifically, Owoafara aims to provide a financial inclusion solution for the 65% of people in sub-Saharan Africa living in low-income communities and who lack access to basic financial services. Many informal traders in those communities run profitable but more cash-based businesses, with over 90% of the $2 trillion generated by SMEs done through cash or offline payments.

In the face of competition from other digital banking and lending platforms, why does ShEquity believe that Owoafara will find success in the Nigerian market?

We know that around 58% of the population in Nigeria lacks access to appropriate banking and financial services, and the majority of them are women. The first reason we believe Owoafara will be successful is the team’s track record, which demonstrates the ability to respond to customers’ needs and sustain its growth. Even though Owoafara had not yet received institutional investment at the time of our investment, it had completed US$1.1 million in transactions.

Secondly, the team is locally rooted and understands well the needs of the bigger segment of its customers, women. Some 80% of Owoafara’s current loan book is made up of women.

Thirdly, there are proven statistics that show that most credit scoring models have unconscious biases that don’t favour women. As a female-founded and led company Owoafara’s algorithms are designed to avoid the same biases and provide women with a better chance of obtaining credit. Nigeria is a massive market, and women are the most underserved.

At the end of the day, success depends on how Owoafara will continue to captivate the target customers, and the team’s strategies seem to work well. Owoafara’s strategy leans heavily on closing the gap, especially for women in the informal sector.

In your opinion, what other areas of the fintech industry offer untapped opportunities for start-ups to address?

The untapped opportunities are linked to the last-mile distribution of financial services like health insurance, pensions, and remittances, especially P2P remittances. With regards to the remittances, most of them cut off the last mile because they don’t have access to internet-enabled phones.

Another one of ShEquity’s investees is Ecodudu, a Kenyan company that uses the black soldier fly to produce bio fertiliser and insect protein for animal and fish feed manufacturers. What prompted this investment?

The type of business, the talented team, and the sustainable solutions they are bringing to the market. A circular economy company, Ecodudu aims to feed the future with insect protein. By doing so, they address two issues: access to natural proteins and waste management. On top of providing natural protein, they also produce organic fertilisers at the same time.

Ecodudu’s business model involves working with small-scale farmers and training them to also be a part of the value chain of insect protein production and waste management. The impact of Ecodudu on the environment is outstanding since insect proteins are the best alternative for feed manufacturers who usually use fishmeal. This has great potential to address the overfishing issue. Moreover, Ecodudu is a great example of a business focusing on doing well while doing good, and this is exactly in line with the ShEquity business philosophy.

Could you provide an overview of ShEquity’s investments in the healthcare sector, and the challenges that these start-ups are addressing?

We have invested in two healthcare companies, Medsaf and Wazima Health.

Medsaf focuses on providing accessible, quality medication to the developing world and is currently operating in Nigeria. When it was launched, Medsaf’s primary goal was to address the issue of fake medications. While solving this problem, the team realised that there was a need to support the whole value chain of the healthcare system in Nigeria with quality and affordable medication. Medsaf now bills itself as a “one-stop shop for hospitals, clinics, and diagnostic centres to purchase, manage and track their crucial medication needs with technology“.

Wazima Health provides an integrated tele-health platform for healthcare providers. It provides integrated wraparound smart diagnostics and telemedicine patient and health management software as a service (SaaS) for non-communicable diseases, including point-of-care screening, access to rapid diagnosis, follow-up, referral, monitoring, and support for continuous care. Wazima is currently operating in Nigeria, Ghana, and Mozambique.

Wazima addresses the following challenges:

  • Non-communicable diseases will be the leading cause of death in sub-Saharan Africa by 2030: Conditions like hypertension, diabetes, cancer, respiratory disease, and kidney disease affect an estimated 270 million people in sub-Saharan Africa.
  • Inadequate and inaccessible continuous management: 60% of sub-Saharan Africans affected by non-communicable diseases are either undiagnosed or poorly managed. Lack of follow-up, clear communication, and healthcare contact leads to a poor prognosis and a high death rate.
  • Poor access to medical and support community: Most sub-Saharan Africans have limited or no access to quality support in their healthcare journey. The majority have no health records. They struggle to pay for their healthcare, which is predominantly paid out of pocket.