Unconventional Capital (Uncap) has announced the launch of a Ksh 4.3 billion (€30 million) fund aimed at providing non-dilutive, revenue-based financing to early-stage small and medium-sized enterprises (SMEs) across Africa. This innovative funding initiative offers a more flexible financing option to African businesses that are navigating the challenges associated with the early stages of growth. By focusing on non-dilutive financing, Uncap ensures that SMEs can access capital without relinquishing equity, allowing them to retain full control of their businesses as they scale.
Esther Ndeti, Managing Partner at Uncap, highlighted the critical role that SMEs play in African economies, noting that SMEs account for around 90% of businesses on the continent. Despite their dominance, these enterprises often struggle to raise capital, primarily due to inefficiencies in African capital markets and the limited visibility that small businesses have to potential investors. This funding gap severely hampers the growth potential of many SMEs, leaving them unable to secure the resources they need to expand and drive economic development.
Addressing the SME Financing Gap
The new Ksh 4.3 billion fund is designed to address this financing gap by providing early-stage SMEs with the capital they need to grow. According to Ndeti, Uncap’s objective is to create a more supportive environment for African businesses, particularly those in underserved markets. By offering non-dilutive, revenue-based financing, Uncap aims to provide a sustainable alternative to traditional financing methods, enabling more businesses to thrive and contribute to Africa’s broader economic growth.
“SMEs face numerous challenges in raising capital, which has been a major barrier to their growth. African capital markets have been inefficient in supporting these businesses, and limited visibility to investors compounds the problem,” Ndeti stated. “With this fund, we hope to redefine SME financing across Africa, supporting businesses that are vital to the continent’s development.”
The fund will specifically target high-potential businesses operating in key sectors such as agriculture, trade, logistics, climate resilience, and financial inclusion. These sectors are seen as critical drivers of economic growth and sustainability across Africa, and by supporting businesses within them, Uncap hopes to make a meaningful contribution to the continent’s long-term development goals.
A Track Record of Innovative Financing
Uncap has been at the forefront of alternative financing for African businesses, having supported innovative, non-dilutive funding solutions over the past three years. The new fund represents the next step in Uncap’s efforts to close the capital gap for early-stage SMEs. By offering revenue-based financing, the fund allows businesses to repay investors through a percentage of their future revenue, ensuring that businesses only pay back what they can afford based on their actual performance.
Ndeti emphasized that the goal of the fund is not only to provide more businesses with access to capital but also to set new standards for innovation and inclusion in the SME financing space. “In the end, we want to support more businesses and deepen our impact by addressing the capital gaps that exist for early-stage SMEs. We also aim to set new standards in the industry for innovation and inclusion,” she said.
Collaborations and Tech-Driven Solutions
Uncap is partnering with several key organizations to maximize the impact of the fund. These include SAIS, an ag-tech initiative funded by the German Federal Ministry for Economic Cooperation and Development (BMZ) and implemented by GIZ (Deutsche Gesellschaft für Internationale Zusammenarbeit GmbH), and O-Farms, a circular agriculture program run by Bopinc and funded by the Ikea Foundation. These collaborations are expected to enhance the fund’s ability to support SMEs across different sectors, particularly those with a focus on sustainable and inclusive growth.
In addition to providing financing, Uncap is also leveraging technology to streamline the investment process. The company has separated its financial operations from its proprietary technology platform, Level, which is now a stand-alone SaaS (software-as-a-service) platform designed to simplify investment management for funders and accelerators in Africa. This move will allow Uncap to focus on delivering tailored financing solutions while expanding its tech-driven investment support services.
Global Backing and Vision for the Future
The Ksh 4.3 billion fund has already attracted significant backing from global institutions, including the Bill & Melinda Gates Foundation and the Bayer Foundation. This international support underscores the importance of SME financing in driving sustainable development in Africa and highlights the confidence that global players have in Uncap’s approach.
Under the leadership of Esther Ndeti and Uncap Chief Executive Officer Franziska Reh, the fund is poised to become a critical player in African SME financing. By offering more inclusive and innovative funding solutions, Uncap aims to empower businesses to achieve their full potential and contribute to a more prosperous and sustainable future for Africa.
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