Nigerian startup Prospa has raised $3.8 million in a pre-seed round. The funding round comes a few months after it participated in Y combination’s winter program. Participants in the round include venture companies like Global Founders Capital and Liquid 2 Ventures, and Founders of global startups such as Mercury’s Immad Akhund, Karim Atiyeh of Ramp, and Executives from Teachable, Square, Facebook, and Nubank also participated in the round.
With the new funds, Prospa plans to make banking and software services available and affordable to small businesses in Nigeria. In Nigeria, more than 40 million micro-businesses are deprived of services that provide insights and growth opportunities around their customers and products. Although some of these businesses have registered bank accounts, gaps exist in how banks use the data available to serve the needs of each business.
The current situation, as we have it, is that banks are only concerned with providing some financial services, and businesses are left to look for software that they need for the operational parts of their businesses. With macro businesses, this may not pose much of a challenge; a large business with a good inflow of cash can easily assign staff or buy software to delegate tasks, but the opposite is the case with small businesses which struggle to stay afloat. This is what Prospa aims to change.
Founded in 2019 by Frederik Obasi, Chioma Ugo, and Rodney Jackson-Cole, Prospa aims to cheaply solve the needs of small business owners in banking and software. Prospa was developed between June and September 2019 and went live in October. Since its launch, the company has acquired customers in stealth even when they entered YC. Chief Executive Officer and co-founder Frederik Obasi explained that he wanted Prospa to gain propulsion organically, void of the growth driven by hype and media clout. “We really wanted to test the hypotheses, build an actual business with revenue and understand what we were doing. Then the COVID period came and we started seeing enough traction,” he said.
Unlike the notion held by people, Prospa is not just a “neo-bank for small businesses.” Alongside providing banking services, Prospa offers invoicing tools, inventory management, employee and vendor management, an e-commerce store, and payroll features. “Banking is just a little part of what we do. We know we’re put into the neo-bank category, but we see our product as 10percent banking and 90 percent software. So the experience is very much different from what you’d get from a neo-bank and the use case for Prospa users is quite different,” CEO Frederik Obasi said.
Registered businesses on Prospa get access to an account number and other features Prospa provides. For unregistered businesses, Prospa takes them through a process of formalizing their business and providing bank accounts. However, this is just a way to persuade them to register.
This past year, African venture companies have raised impressive amounts of funds at different stages of investment. Prospa’s pre-seed investment is the largest round of its kind in Nigeria and sub-Saharan Africa at the moment. In addition to doubling down and increasing strategies to get more customers, the company plans to hire more talent, especially in product and engineering.