Securing access to financing to digital startups and fast growing small businesses in developing countries ( MFUG Innovation Partners)
6 Dec 2023 11:30h - 13:00h UTC
Knowledge Graph of Debate
Session report
Full session report
Ruzgar Barisik
Ruzgar Barisik is a technology investor and partner at Next Billion Ventures. His investment strategy focuses on delivering strong financial returns while supporting companies that have a high impact on populations, such as households, women, and SMEs. Specializing in technology investments, he primarily invests in technology and technology-enabled companies across emerging markets.
Ruzgar’s investment philosophy is driven by the potential for impact at large scales. He believes that digital tools are essential in accessing the next two to three billion consumers and SMEs. As such, he targets his investments towards local technology companies that serve these populations, particularly in Southeast Asia, the Middle East, Africa, and South America – major population centers. However, he excludes China and Eastern Europe due to the preferences and specialties of the investors.
In addition to his work at Next Billion Ventures, Ruzgar also collaborates with Swiss asset manager Responsibility. He believes that development finance institutions (DFIs) play an important role in attracting more investments. He emphasizes the need for DFIs to be comfortable with taking risks and bringing other investors into the market. Ruzgar advocates for innovation and the use of first loss guarantees and the seal of approval to attract investment in challenging markets.
When it comes to startups, Ruzgar understands that venture capital may not be suitable for every startup at every stage. He advises startups to ensure product-market fit not only for their product but also when approaching investors. Additionally, he mentions that reputable investors rarely withdraw from agreements after signing contracts.
Through his experience and expertise, Ruzgar highlights the importance of technology-enabled businesses that provide essential goods and services to large populations in a commercially sustainable way. He believes that these business models are key drivers of financial inclusion. He also emphasizes the need for alignment between management teams and investors’ impact mandates to achieve successful execution of business models.
In conclusion, Ruzgar Barisik, a technology investor and partner at Next Billion Ventures, focuses on delivering strong financial returns while supporting companies that have a high impact on populations. His investment strategy centers around technology investments in emerging markets and the potential for impact at large scales. He emphasizes the use of digital tools to access untapped markets and the role of DFIs in attracting more investments. Ruzgar’s insights shed light on the importance of product-market fit, alignment between management teams and investors, and reputable investors in the startup and investment landscape.
Atsushi Yamanaka
Atsushi Yamanaka, a Senior Advisor of Digital Transformations at the Office of Science and Technology Innovation and Digital Transformation at Japan International Cooperation Agency (JAICA), plays a key role in promoting digital transformations within the agency. JAICA, as the implementing arm of Japan’s official development assistance, has successfully executed projects in over 115 countries.
During an event, Yamanaka expressed regret for being unable to attend in person and had to participate remotely from Manila. This highlights the challenges faced by individuals trying to connect and engage with global events in the digital age.
Yamanaka argues that startups have the potential to address development issues where governments have limited resources and capabilities. He believes that the private sector, particularly startups, have the technology and ability to create jobs and stimulate economic growth. Moreover, startups can raise their own funds and create sustainable business models, contributing to a country’s overall development.
However, Yamanaka acknowledges that startups in developing countries face significant hurdles, with initial funding being a major challenge. Startups struggle to translate their technical solutions into viable business models and often have difficulty identifying market needs and challenges. Additionally, obtaining the necessary funding, especially in early stages of development, is a daunting task. Yamanaka highlights the need for access to seed capital and mitigating the initial risks faced by startups, suggesting that development agencies like JAICA can play a crucial role in this regard.
To overcome these challenges, Yamanaka emphasizes the importance of collaboration between startups, governments, development partners, and venture capitalists. He encourages startups to engage and lobby their respective governments for support, while also engaging with agencies like JAICA to foster growth. Open innovation challenges and acceleration programs can provide valuable opportunities for such collaborations.
Yamanaka’s insights also highlight the need for a clear growth path for startups and small to medium-sized enterprises (SMEs). Different stages of a startup’s growth require distinct forms of support. Initially, development partners like JAICA can provide assistance, followed by the involvement of venture capitalists and accelerators in subsequent stages.
In conclusion, Yamanaka’s perspective sheds light on the intersection of startups, development agencies, governments, and venture capitalists in addressing development challenges. He advocates for the provision of seed capital, the mitigation of initial risks, and collaborative efforts to create a conducive ecosystem for startup growth. These efforts have the potential to bolster economic growth, create employment opportunities, and contribute to overall sustainable development.
Che Wang
The session on Secure Assessed Financing for Digital Startups and Fast-Growing Small Businesses in Developing Countries aimed to address the challenges faced by digital startups and SMEs in securing financing. The moderator, Qiu from MEFG Innovation Partners, introduced the session as a panel discussion, emphasizing the need for interactivity. Qiu invited participants to share their projects and raise questions during the Q&A session.
The session began with a discussion on the increasing presence of digital startups in developing countries and the potential of their technology and innovation to address development objectives in those regions. The main focus of the discussion was the key challenge of securing assets to finance these startups and SMEs. The panel consisted of investors, entrepreneurs, and government officials who provided their insights on the opportunities and obstacles in developing countries and discussed public-private partnerships in facilitating technical assistance and access to finance.
Two venture capital investors were asked about the geographies they actively invest in within emerging markets and the opportunities they see in those regions. The panelists highlighted the potential of digital startups to facilitate local economies and promote financial inclusion. They recognized the difficulties faced by startups and SMEs in accessing financing and acknowledged the need for innovative solutions.
Two startup founders also shared their experiences in building financial solutions for SMEs, focusing on financial inclusion. They discussed the challenges faced by startups and SMEs in accessing finance and highlighted the importance of technology innovation in addressing the credit gap. The founders discussed how their solutions aimed to tackle the lack of credit information and the difficulties in raising equity.
The panelists discussed the alternative avenues startups can consider in challenging markets and provided advice on financing. They emphasized the importance of collaboration between the public and private sectors in addressing the issue of access to financing. The role of government organizations, such as JICA, in collaborating with digital startups and empowering SMEs through funding and technical collaborations was also highlighted.
The session concluded with a Q&A session, during which participants engaged with the panelists and posed further questions. The panelists expressed their gratitude for the thoughtful questions and encouraged participants to reach out to them for further discussions.
Overall, the session provided valuable insights into the challenges faced by digital startups and SMEs in securing financing in developing countries. It emphasized the opportunities in these regions and the importance of public-private partnerships in addressing the issue. The session aimed to promote knowledge sharing and encourage further dialogue on the topic.
Henda Kwik
FAST, a financial services company, has made significant changes in how businesses operate amidst the pandemic. It started the FASt company itself, aiming to provide financial services to businesses. FAST has expanded across Southeast Asia, starting from Singapore, reflecting its ambition to reach a wider customer base and support economic growth. By digitizing payment methods, FAST has innovatively adapted to the online shift caused by the pandemic, aligning with Sustainable Development Goal 9. Additionally, FAST collaborates with traditional banks like MUFG in Indonesia, promoting financial inclusion for businesses. Its services have also benefited online and street shops, previously reliant on paper-based transactions, providing them with banking services and access to credit. FAST’s focus on building a financial system for SMEs in emerging markets helps bridge the data gap between banks and SMEs, improving access to credit and supporting SDGs 8 and 9. Despite macroeconomic volatility, access to financing remains possible for startups and SMEs, emphasizing the importance of exploring multiple avenues for funding. Caution should be exercised, considering the potential impacts of macroeconomic factors and avoiding over-optimism. FAST utilizes technology in credit assessment, enhancing the creditworthiness of businesses. Information gathering is crucial for understanding creditworthiness, and FAST actively supports this. Innovative approaches like using business platform accounts as collateral and implementing payment systems ensure repayment and increase credit limits, supporting reduced inequalities. overall, FAST’s commitment to digital transformation in banking and its focus on financial inclusion and innovative financial solutions have positively impacted businesses.
Tingting Peng
M.O.V.E. is an African-born global mobility startup that aims to provide financial services to mobility entrepreneurs. The company has successfully expanded its operations to seven countries across Africa, the Middle East, Asia, and Europe. This expansion highlights the company’s growing influence in the global market.
One of M.O.V.E.’s key focuses is the electrification of transportation. Recognising the importance of moving towards cleaner and more sustainable transportation solutions, M.O.V.E. is investing in the ecosystems required to enable and support the electrification of transportation. This demonstrates the company’s commitment to creating a greener future.
In addition to driving environmental change, M.O.V.E. is also dedicated to promoting gender equality. The company recognises transportation as a key economic driver and believes that facilitating access to financial services for female drivers and entrepreneurs can help empower women and contribute to greater gender equality. By developing opportunities for female drivers and entrepreneurs to access financial services throughout their mobility journey, M.O.V.E. is actively working towards this goal.
The lack of credit accessibility in Sub-Saharan Africa is a significant challenge that M.O.V.E. is addressing. This issue has resulted in low car ownership levels and high road fatality rates. By partnering with Uber, M.O.V.E. is able to underwrite customers whom traditional banks are unable to serve. This innovative solution not only increases access to credit but also aims to increase car ownership and reduce road fatalities, addressing two critical issues simultaneously.
M.O.V.E. offers a range of financial services, including vehicle finance, health, and life insurance. Their primary focus is to help customers generate sustainable income through vehicle ownership. This approach allows individuals to earn a living through mobility entrepreneurship while also providing them with the necessary financial protection.
The success and viability of M.O.V.E.’s model outside of Nigeria have been demonstrated through their expansion into South Africa, Ghana, Kenya, and even outside of Africa, like in the UK. This highlights the potential applicability of their services in other countries facing similar challenges related to credit invisibility.
The early-stage ecosystem in Africa and Southeast Asia has witnessed significant growth in pre-seed and seed investments in recent years. However, raising debt financing remains a challenging task for startups. This observation underscores the need for further support and innovation in this area to ensure the sustainability and growth of early-stage ventures.
Moreover, M.O.V.E. understands the importance of maintaining affordable prices and sustainable margins in the face of increasing input costs and inflation. By managing their finances and margins sustainably, the company aims to provide affordable vehicles to customers while ensuring their own growth and profitability.
Leveraging technology, M.O.V.E. assesses creditworthiness by looking at information related to trips and driver performance data. This approach allows them to redefine what constitutes good credit standing, addressing the lack of financing in small businesses. It also demonstrates the potential of technology and alternate data sources in solving financial challenges.
While fintech innovation has brought about significant benefits, it is crucial to strike a balance between innovation and customer protection. M.O.V.E. recognises this and strives to implement customer protection mechanisms and ethical product design to prevent debt traps. This responsible approach ensures the sustainability of their business model and protects customers from falling into financial difficulties.
Furthermore, M.O.V.E.’s founder, Tingting Peng, is an angel investor who supports female founders. She is aware of the funding gap that exists for women and believes in giving them equal opportunities to prove themselves. Tingting also strives to involve more female leaders within the investor group, promoting workplace diversity and gender equality.
Effective communication plays a critical role in securing funds after contracts are signed. It is important to maintain open lines of communication and provide updates to investors to ensure the timely delivery of funds. This ensures smooth fundraising processes and enhances the reputation of investors, which in turn impacts their ability to source future investment opportunities.
In conclusion, M.O.V.E. is a global mobility startup that is making significant strides in providing financial services to mobility entrepreneurs across the globe. Their focus on the electrification of transportation, promotion of gender equality, and addressing credit accessibility challenges in Sub-Saharan Africa showcases their commitment to driving positive change. Through partnerships and a range of financial services, M.O.V.E. is pioneering innovative solutions that empower individuals and create a more sustainable future.
Audience
The panel discussion revolved around investment opportunities in Africa, Asia Pacific, and the MENA region, with each speaker highlighting different aspects and concerns.
One speaker expressed concern about the investment gap for female-led companies and advocated for more intentional investment in female-founded businesses in Africa and emerging markets. They highlighted the noticeable data gap from seed to series A,B,C, and D funding rounds for female-led companies, stating that there are no female-led unicorns in Africa or emerging markets compared to 83 in the US. They emphasised the need for investors to view female founders as more than just SME founders and provide sufficient support for their growth. The speaker, working with the Itrait for Women organisation, is actively involved in advocating for female founders in the Anglophone region.
Another speaker focused on the need for investment in harder markets such as Burundi, Malawi, and Nigeria, as well as in smaller countries like Tonga or Samoa where digital business models do not work well. They discussed the challenges faced in these markets and the potential for investment to create opportunities for decent work and economic growth.
A founder highlighted the importance of capital injection for achieving sustainable profitability in startups. They mentioned encountering different expectations from investors regarding growth and profitability. The founder emphasised that while profitability can be achieved by cutting certain business functions, it may not be sustainable in the long run. They emphasised the need for capital injection during periods of negative profitability for sustainable growth.
The potential of the MENA region and Africa for high growth and low default rates was mentioned. The speakers cited the highest growth rates among all continents and a default rate for financing of less than 1%. The nascent nature of these markets and their high growth potential make them attractive for investment.
There was also a discussion on the decision-making process of investors and bankers. One founder believed that the data points towards investing in the MENA region and Africa, and questioned why bankers may not be fully capitalising on this potential.
Lastly, the audience expressed concern about Venture Capitalists terminating deals even after signing agreements. They sought advice from the speaker to help avoid such pitfalls and ensure the security of the financing process.
Overall, the panel discussion shed light on the investment opportunities and challenges in Africa, Asia Pacific, and the MENA region. The need for intentional investment in female-founded businesses, investment in harder markets, and the importance of capital injection for sustainable profitability were among the key takeaways. The discussion also highlighted the potential of the MENA region and Africa for high growth and low default rates. The audience’s concerns regarding Venture Capitalist termination of deals underscored the need for transparency and security in the financing process.
Moderator
During the conversation, both participants confirm their ability to hear and see each other, establishing clear communication. The speaker acknowledges their visual perception of the other person but notes their limited field of vision, as they are unable to see the audience. They express gratitude for the help provided.
The speaker mentions the arrival of someone, suggesting a new participant joining the conversation. They indicate the need to wait for additional participants before proceeding, possibly planning to call someone outside to notify or invite them to join the ongoing discussion.
The phrases “switch” and “let’s see” imply a potential change in topic or activity, indicating a forthcoming transition in the conversation. The speaker concludes with agreement by affirming “okay.”
Takashi Sano
MEFG Innovation Partners is a leading global corporate venture capital firm that focuses on investing in startups with potential for partnership as a banking group. Over the past five years, they have made investments in more than 40 companies worldwide. With assets under management, MEFG is ranked as the 7th or 8th largest financial group globally.
Takashi Sano, the Chief Investment Officer of MEFG Innovation Partners, strongly supports fostering partnerships with startups and small and medium-sized enterprises (SMEs) on a global scale. He firmly believes in investing in their potential and aims to work together with these companies to achieve mutual growth and success.
MEFG Innovation Partners places heavy emphasis on investing in Asian markets, particularly in Indonesia and India. They recognise the immense potential for growth and development in these regions.
Startups and fintech companies are seen as instrumental in addressing the challenges faced in these markets. They have the ability to provide risk capital and complement the traditional banking groups. By enabling faster movement and innovative solutions, fintech startups can bridge the gaps in the financial industry.
However, SMEs and startups in emerging markets continue to face challenges in accessing finance. The traditional banking sector is often slow-moving and heavily regulated, making it difficult for these businesses to obtain the necessary funding. Additionally, the focus on past profitability and sustainability has led to a reduction in mega-rounds of funding over $100 million.
In discussions about business growth, startups and investors are seen as equal partners. The founders and investors have an equal stake in determining how the business can expand and reach new heights. Seeking equity investments is thus a collaborative process aimed at charting the course for growth.
Institutional backing plays a crucial role in supporting emerging managers operating in underrepresented markets. These managers often face difficulties in raising funds due to their lack of track record or being the first of their kind in a specific market. Small institutional investments can help legitimise these managers and attract further investments.
The gender imbalance in the venture capital sector remains a concern. Increasing female participation is seen as vital to bridge the gap between female founders and smaller emerging markets. The development of female investors who understand these dynamics is essential for fostering gender equality within the sector.
Large institutions are encouraged to take on more risk and invest in emerging markets. By providing stakes in relatively small or emerging markets, these institutions can contribute to the market’s growth and reduce economic inequality.
Understanding potential investors and their investment strategies is crucial for founders seeking financing. Conducting thorough due diligence, research, and dialogue with potential investors can help founders align with investors’ risk profiles and expectations.
Lastly, a balanced approach to financing is emphasised. Equity financing is essential for exponential growth, while debt financing provides stability. Striking a balance between the two can contribute to building a strong and successful company.
Overall, MEFG Innovation Partners and Takashi Sano advocate for fostering partnerships, investing in potential, and supporting the growth of startups and SMEs globally. They recognise the need for collaboration between traditional banking groups, startups, and fintech companies to address challenges and drive sustainable economic growth.
Speakers
AY
Atsushi Yamanaka
Speech speed
151 words per minute
Speech length
2258 words
Speech time
898 secs
A
Audience
Speech speed
169 words per minute
Speech length
1499 words
Speech time
531 secs
CW
Che Wang
Speech speed
153 words per minute
Speech length
1281 words
Speech time
502 secs
HK
Henda Kwik
Speech speed
216 words per minute
Speech length
2827 words
Speech time
785 secs
M
Moderator
Speech speed
61 words per minute
Speech length
125 words
Speech time
123 secs
RB
Ruzgar Barisik
Speech speed
170 words per minute
Speech length
2936 words
Speech time
1034 secs
TS
Takashi Sano
Speech speed
148 words per minute
Speech length
3067 words
Speech time
1242 secs
TP
Tingting Peng
Speech speed
174 words per minute
Speech length
2654 words
Speech time
915 secs
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