South African payments startup Yoco raises $ 83 million Series C led by Dragoneer – TechCrunch

Small and medium-sized enterprises (SMEs) contribute greatly to the economic success of many countries, particularly those in the developing world. They are the backbone of most economies: globally, SMEs account for around 90% of existing businesses and create more than 50% of jobs.

In South Africa, these companies contribute around a third of the country’s GDP. Last year, the coronavirus pandemic threatened the existence of some of these SMEs, and its effects persist as owners worry about income, sales and cash flow.

Since its launch in 2013, South African fintech I co It has positioned itself as the reference platform for accessing offline payments among merchants in the country. Today, the company announces $ 83 million in Series C funding to scale online and offline offerings and expand into new markets.

Despite South Africa’s high card and mobile penetration rates of over 70%, the country’s SMEs still struggle to accept cards. Yoco’s portable card machines have proven to be excellent at solving this problem; when TechCrunch covered the company Three years ago, after its $ 16 million raise in Series B, it had just over 30,000 merchants using its platform. Now that number has increased fivefold.

As Yoco grew exponentially in supplying offline payments, it created an online offering. After being in beta for a while, the release came just in time a few days after South Africa closed in March last year. In this way, South African merchants could continue to accept payments on the platform.

“We want to offer whatever payment method our merchants need. And we started in the space of payment in person, focusing on terminals, which was where the greatest demand was ”, said the commercial director Carl Wazen saying. “But the pandemic, which had a devastating effect on so many businesses that relied on in-person commerce, accelerated the need for businesses to accept payments online.”

During the height of lockdowns in South Africa, sentiment among SME owners on a -100 to 100 scale fell to an all-time low of -12 in the second quarter of 2020, according to Yoco’s small business pulse monitor. Since then, it has improved after locks were eased, allowing companies to move more freely and continue with payments in person. As a result, Yoco’s online payments represent a minimal part of the transactions made on the platform.

But that does not mean that people are transacting with cash. In fact, the opposite is true, according to Wazen. Wazen says one post-pandemic behavior he noticed was that once the lockdown was lifted, people came back to make in-person payments in an expedited manner because they stopped using cash. “Recent consumer behavior shows a shift away from cash and businesses must adapt quickly to this change. This presents a great opportunity and our mission is to support that transition, ”he added.

Earlier this year, CEO Katlego maphai He said Yoco was looking to expand its services to other aspects of digital payments. It listed mobile money, QR payments, and electronic funds transfer (ETF) as offers in its portfolio. Wazen corroborated this, but did not provide an update on where the company is with these offers. However, he mentioned that the company remains a card-centric payment provider.

Yoco’s strategy as the leading card payment provider in South Africa is to create access and remove barriers to the adoption of digital financial services. The company does this by focusing on product capabilities that Wazen says are the most comprehensive for small and medium-sized businesses. He adds that in terms of presence in the market, Yoco is also the easiest for merchants to access services through different channels without problems.

“We have a brand that is now recognized. This is how we win and it is about staying as focused as possible on that part of the market where, in our opinion, people, like other competitors, are not focused enough ”.

South Africa has more than 6 million small businesses that still transact cash only; this provides a great opportunity for Yoco. According to the company, the number of small businesses that did not have cash increased 300% from March to July 2020. Yoco currently serves 150,000 of these businesses and adds more than 500 merchants per day. The company claims to be processing more than $ 1 billion in card payments per year, and in its six years of existence, it has processed more than $ 2 billion in card payments.

I co

Image credits: I co

Yoco has raised a total of $ 107 million. The company’s Series C investment is the largest of its kind in South Africa and one of the largest for any African fintech (third only after Flutterwave Y Chipper Cash). Wazen also claims that it is the largest of all the small business focused payment platforms in the Middle East and Africa.

Yoco is currently one of the most valuable startups on the continent, and as a fintech startup, it comes as no surprise. The sector continues to dominate venture capital funding for startups in Africa, while its top leaders are attracting investors to the continent for the first time.

In the case of Yoco, it is the leading investor in this round, Dragoneer investment group. The fund has backed fintech giants like Chime, Klarna, Nubank, Mercado Libre, and Square.

Other investors who participated include new investors Breyer Capital, HOF Capital, The Raba Partnership, 4DX Ventures and TO Ventures; and existing investors Partech, Velocity Capital Fintech Ventures, Orange Ventures and Quona Capital. Current and former executives from global tech companies like Coinbase, Revolut, Spotify and Gojek also participated.

“We couldn’t be more excited to partner with the Yoco team,” Christian Jensen, Dragoneer’s co-head of private investments, said in a statement. “At Dragoneer, we are looking for great teams that are building lasting businesses with wonderful economic models, and that is exactly what we have found at Yoco. Customers already love Yoco, and the product roadmap the company is investing in will generate even more value for merchants. While there is huge room for continued growth at the national level, the opportunity for Yoco goes well beyond South Africa. “

There are three main enablers for Yoco’s thriving business, Wazen said. First is the capacity of its products, second is its platform and third is its presence in the market. This investment will be there to accelerate all three. Yoco is moving from a pure payment acceptance game to a complete financial ecosystem on the product side. The platformer will see Yoco continue to integrate and take advantage of regulatory easing vertically, and Yoco is deepening its market presence in South Africa.

While Wazen believes that Yoco has barely scratched the surface in South Africa, it hopes to replicate its growth in other parts of Africa and the Middle East. With more than 100 million SMEs transacting in cash in both regions, Yoco plans to reach at least one million in the next four years.

To achieve this, Yoco will increase its team by 200 people remotely and at its offices in Cape Town and Amsterdam over the next year. The company is also capitalizing on a current trend that has seen African unicorns and sonic horns hire former high-level employees of global companies to scale their own to new heights. While he doesn’t mention names, some of Yoco’s new hires include a former VP of Product at Monzo, a former Director of Product Marketing at Paypal, and a former Director of Communications at Uber. The company has also brought in a new president, Juan Fuentes, the former managing director of fintech unicorn Pagseguro.

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