HomeGhanaNorrsken22, Interview With General Partner Ngetha Waithaka

Norrsken22, Interview With General Partner Ngetha Waithaka

Norrsken22 General Partner Ngetha Waithaka

Norrsken22 is venture capital firm focused on investing in African companies. We interviewed General Partner Ngetha Waithaka who replied to our questions about the firm, the investment strategy, the portfolio, and much more.

VCWire: Hi Ngetha, can you please tell us a bit more about you? What’s your background?

I am General Partner at Norrsken22, Africa’s leading tech growth fund, born out of the Norrsken Foundation. We are backed by an international network of tech founders and partner with exceptional entrepreneurs in scaling disruptive businesses. 

My career started in New York, working in investment banking. This was followed by a stint at a growth private equity firm in the US. After spending so much time in America, I was keen to apply my investment skills on the African continent. Upon my return, I joined Actis – a large emerging markets private equity firm based in South Africa. I began working on growth equity deals in Sub-Saharan Africa, and specialised in financial services and consumer investing. Whilst there, my notable investments included Compuscan, the largest independent credit bureau which we sold to Experian; and Fawry, a bill payments company which has gone on to become one of the most successful fintech companies on the continent.

This experience of supporting growing tech businesses helped me to realise that I was keen to move to earlier stage investing. Whilst working at Actis, my colleague Natalie Kolbe and I discovered the work that Niklas Adalberth and Hans Otterling were doing with Norrsken VC. We began our journey with them, alongside another colleague, Lexi Novitske, and raised a $205M growth tech fund to solve the biggest problems on the African continent.

VCWire: Can you introduce your firm?

Norrsken22 provides growth capital and deep strategic value to founders in Africa, while positioning them for international expansion and impact. We believe every investment is a partnership and value-creation goes far beyond just capital. What makes us different as a firm is the experience held within our team. Myself, Natalie and Lexi – alongside Niklas and Hans – have over 15 years of experience investing in tech and the African market more broadly. Our localised approach – where all key decision makers sit in-market – means that we have a keen eye on what is happening where the investments are being made, rather than watching from afar in another financial services hub such as London or San Francisco.

Most importantly, we are able to back companies over time due to our deep pool of capital. Our goal is to become the go-to firm when new companies need their investors to get stuck and get the work done. Our experience gives us a unique understanding of market nuances that can drive future success in a given market within Africa. As a local fund, we can provide support financially in the short- and long term, but crucially our knowledge of local markets gives growing businesses the tools they need to succeed.

Investors in our fund include: Robert Gertsmann, Co-founder, Sinch; Niklas Ostberg, Founder Delivery Hero; Jacob de Geer, Founder of iZettle; and Johan Elvesjo, Co-founder of Tobii – unicorn founders who have built big tech business in Europe. They are able to offer advice on the potential growth of specific markets, and the tools to succeed in growing a company. 

VCWire: Which is your overall strategy?

We work solely in Africa on Series A and above, with initial checks ranging from $5-10mn. We are very patient in supporting African businesses, therefore our goal is to keep a large reserve pool to help companies as they grow. Currently our fund covers four main sectors: FinTech, market enablement, MedTech and EdTech. 

Fintech has the most tech-enabled use cases and opportunity for development, as financial services infrastructure is currently underdeveloped on the African continent. Market enablement is where we see the most disruption, with companies breaking down barriers on how people do trade on the continent. This can include anything from marketplaces to ecommerce solutions or logistics platforms. In MedTech we support healthcare businesses tackling problems using tech enablement, and finally in EdTech we back companies using a technology-first approach to creating and distributing educational materials. 

VCWire: Beyond capital, how do you support startups?  

We want to be the first port of call for everything else a business might need, in addition to provision of capital. We want to be their governance partner; thinking about how to do compliance better internally, how do you shape decision making to ensure that you are reaching the most effective outcome, and how to hire the best talent. It’s important to be a magnet for people, and to remember that you have a crucial role in who joins the business. 

From a CEO perspective, it can be quite lonely. So we answer each and every question that comes up, and we are never judgemental of the struggles any individual entrepreneur might face.

VCWire: Ngetha, in your opinion, how can African businesses improve the CFO stack?

The role of the CFO and the CFO stack might look quite common across the globe, but there’s a lot of local nuance when it comes to a specific job description and the tools required to carry out that role. For example, if you look at how businesses interact on payments and receivables, and the number of payment methods that they accept, there is a lot of variety across geos. In the US and Europe, there is a greater use of card and cheque, whereas in Africa there is a lot more mobile money and cash. This has big implications for how the CFO operates their workflow. We want to make sure that we improve the CFO stack for a very locally nuanced environment – reconciliation, compliance, reporting – all improved taking into account a specific market’s way of operating. 

Equally, problems around the CFO stack are similar across all markets – information is siloed, but CFOs need to paint a bigger picture using all of this information. 

The big thing for Africa is building with the local context in mind from the start. The fragmentation of payments in Africa is on another level than it is in the West. It’s not just the number of different channels you can use in one country, but it’s also how many you can use across multiple countries in Africa. There are also problems around liquidity – access to hard currencies – which is something that the CFO has to build more capability on. 

In Africa, the scale of an SME and the amount of revenue they generate is a lot lower than the average SME in the US, but Africaneconoies are  powered by SMEs. Often you find that they can’t afford the big accounting software with ERP – like Oracle or SAP – and they end up using an assortment of software that is cobbled together. This presents a great opportunity to automate and link the various applications used, and make them affordable for an African context. 

When it comes to building the CFO stack in Africa, we are building in white space – there’s not much you are replacing – apart from super big companies who are already out of reach for the average SME. Therefore you can build something completely different, from the ground up, which is a huge opportunity for new companies growing in this space.

VCWire: What do you like to see in founders?….And what don’t you like to see in them? I mean, is there something which impresses you at a first glance?  

We like founders who are solving for their local context, rather than attempting a copy/paste model that they have taken from elsewhere. They start with the question: how do I solve a challenge for B2B or local customers using my market specific knowledge? They don’t lead with the thought: how can I make X million dollars? 

We also want to see someone who is a big dreamer, to fulfil our venture thesis and associated return. We’re looking for an idea which has an unbound upside. More than anything, we like them to think about how tech can automate traditionally manual processes. 

In our fund, we don’t like asset heavy models, so we prefer founders who are very capital efficient, who are conscious that they are building in a market where capital is no longer in abundance. They use their resources very carefully. We also don’t like ego – which is to say, ego can get in the way of improvement. Founders who are humble enough to know when to iterate on their proposition or product will always be more successful. They ask us questions, let us open doors for them, and know how to accept help. 

Finally ,we like a founder with some edge or insight on the market they are focusing on. Many founders are people who have spent time in a particular market in the past, and seen areas they can be improved using tech. They have a keen eye on early signs that their hypothesis is coming true, and gain more success that has been had in that area in the past. 

VCWire: Please, tell us a bit more about the portfolio. You can list five startups whose paths have made you particularly proud.            

We currently have a great range of companies within our portfolio:

Sabi – a B2B ecommerce marketplace which helps with the fulfilment of goods and services. In Nigeria there are a lot of informal merchants who sell basic consumer goods i.e. flour, oil, fruits and vegetables. Sabi has developed a tech-enabled platform which allows a merchant to source, order and pay for inventory, digitally and conveniently. They no longer need to close shop to restock their stores, and instead they can order their inventory directly from the manufacturers. The tech has meant merchants can stock their store at a lower cost with better convenience; and provides access to useful data on their trading performance, to drive informed business decisions and a wallet to manage finances and purchase everyday items, such as airtime. Sabi generates revenue through commission on orders, embedded finance, SaaS / revenue share with third party services, including lending and agency banking.

Autochek – A used car online marketplace which makes the process of buying a used car much easier. Across the world, the process of buying a used car can be fraught with difficulty. But in Africa, it can be even more complicated as the cars are mostly imported, with no service history. Autocheck helps dealers to work out the value of a car, quality check the car through rigorous inspection, and then digitises that inventory for customers to look for it online. It also facilitates the provision of car finance.

SmileID – an identity verification solution supporting SMEs and large enterprises with electronic Know Your Customer (KYC) checks for onboarding, subsequent transaction authentication and fraud prevention. This could be for users looking to open electronic accounts on the African continent, or for any verification that needs to be done by a tech-enabled user, provided by having integrations into many government ID registries. Beyond onboarding, the needs of Smile customers naturally evolve to include fraud monitoring, authentication for financial transactions, document verification and anti-money laundering (AML). Smile is able to support its customers with a blend of these services via a SaaS offering.

TymeBank – A multi-county licensed digital bank which provides a full suite of financial products to both consumers as well as SMEs in South Africa, revolutionising how people open accounts and interact with banks. Currently, banking in SA is very analogue and provided mostly by the big banks. Tyme is challenger bank using a tech-first approach and has so far amassed close to six million users. Their core offering to consumers is a pay as you use deposit and transaction account and for SMEs is a short term working capital credit product. They earn income from each product including transaction fees, net interest margin on deposits and interest on credit provided.

Shara – Kenyan merchant lending company providing the tech-enabled tool for businesses to be able to lend to their users. They offer a buy now, pay later product. Next, the company is looking to offer banking as a service to its users who want to provide embedded finance wallets to consumers on the African continent. 

VCWire: Which sector/s would you bet 2 cents on in the next five years?  

I think that we’re in a golden age of embedded finance on the African continent. Banks are not leading the charge in terms of innovation, and have left a gap for business to embed financial services products. These businesses are using this opportunity as a competitive advantage to get customers at a lower customer acquisition cost (CAC), increasing their lifetime value. They can also do this at a good margin, compared to what they can earn on their usual provision of goods and services. In a tough credit environment, I think that banks will retreat even further, leaving even greater opportunities for embedded finance providers to step in and really support businesses in delivering financial utility to customers. 

The CFO stack will also see huge growth. The modern CFO needs to be empowered to spend more time on strategic thinking, rather than daily reporting and follow-up. There is a lot of promise in the sector, and I predict that we will see the growth of tools which help CFOs to do most of their repetitive manual tasks a lot quicker and enable them to focus on growing the business. There is huge potential in Africa in particular, where there is a lot of white space to start building Africa-specific solutions from the ground up. 

VCWire

11/03/2024