As startups in Africa continue to grow and raise money at a ridiculous rate, so will their the tops tables expand. Most of the venture capital money for most African startups comes from foreign investors, so it is imperative that African startups are incorporated abroad, especially in the US.
Onboarding processes are quite complicated, and while most founders still get it, they run the risk of messing up their limit tables. For example, some Nigerian startups are guilty of issuing preferred shares in naira and then canceling to issue dollar-denominated SAFE when incorporated in the US.
Raise, a startup building the Africa Charter, is addressing these challenges and has been endorsed by 500 Startups to scale its technology.
In 2019, Marvin Coleby, Tina Nyamache, and Eugene Mutai set out to create a blockchain solution that would make it easier for people to buy and sell shares in pre-IPO companies in Africa. After running several iterations, they found that most companies were still struggling with the concept of capital and liquidity. They spent money managing corporate structures for holding companies in Delaware, Canada, and Europe. but maintained paper-based subsidiaries throughout Africa.
According to Coleby, most of the capital in Africa is still stored, tracked and updated using paper certificates, manual processes and fragmented government databases. This increases transaction costs for managing subsidiaries and issuing stock options for employees. It also inflates the costs of entering and leaving positions in public and private companies.
So they created Raise to help start-ups, investors, employees, and law firms manage agreements, limit tables, and corporate compliance..
On the platform, Raise clients can also automate due diligence, set valuations, track employee stock acquisition, and perform routine documentation for government documents and licenses in Nigeria and Kenya.
When Raise launched in 2019, it was in private beta and was endorsed by Binance Labs, the only investor in its pre-seed round. Since going to a public beta in 2020, Raise has onboarding clients such as Anjarwalla & Khanna, the largest law firm in Africa; the startups Bamboo, Workpay and Mono; and venture capital firms such as Microtraction and Chrysalis Capital.
But the long-term problem that Raise is trying to solve is liquidity, Coleby tells TechCrunch in a call.
“All we do is find a way to make it easier for founders, clients, employees and investors to get liquidity by investing in companies,” he said. “Companies are raising money, people are investing, and employees are getting stock options. But nevertheless, there are only one or two exits from time to time. That’s because we build with the Silicon Valley model where we have to grow, scale until we get a great exit. From our perspective, liquidity doesn’t have to be this way. It can be small amounts of liquidity that employees and investors get over time. “
By this measure, African capital markets for public and private companies are painfully illiquid. It takes several months or years to buy or sell shares, and according to Raise, more than $ 1 trillion of shares in Africa are “illiquid, paper-based and priced in inflationary currencies.”
Nigerian Stock Trading Platforms Like Chaka, Bamboo and Trove help Nigerians create liquidity for assets in the zone Y internationally. But nevertheless, Raise aims to build the platform behind them to optimize more asset classes and investment opportunities.
Although still in the works, Raise organizes data owned by African companies and makes it accessible.. It’s a game similar to the one that Carta, a $ 3 billion company that offers limit table software, makes for American businesses.
Over time, onboarding limit tables and capital data will also open up use cases for Carta to become a blockchain-based digital asset platform.. The plan is to become more like the Nasdaq of Africa for private companies like meYou expect to sell indices, ETFs, futures, and assets to them. Coleby says that in that way, Raise will become a stock engine to process the hundreds of billions of dollars in trade volume and securities from Africa.
Coleby says the number of businesses that are up and running is increasing 60% month over month. The platform manages around 200 limit tables with assets worth more than 400 million dollars. The next phase of growth, according to Coleby, will be the addition of Series A and growth-stage companies to the platform..
The company is active in Nigeria and Kenya. Coleby says a seed round is in the works to continue to grow deeper in those markets and experiment with funding and liquidity deals across the African venture capital space.
Next, Raise is building a marketplace that continues to connect and educate investors, employees, and founders on a platform with their law firms to use trusted and verified data to make deals and issue stock options to employees.