South African Payments Startup, Yoco Raises $16m Funding for Service Expansion

South African FinTech company, Yoco, has just raised $16 million in its Series B round of funding. The new round of funding was led by Partech, a global investment platform that invests in tech and digital startups.

Very happy to announce @Orange_DV Africa investment in @Yoco_ZA, one of the most innovative tech companies in Africa! Kudos to this amazing team and very excited about the journey ahead! pic.twitter.com/tdvsHh0fc8

— Marième Diop (@MuxMi) September 6, 2018

Five other continental and international investors also participated in the recent funding round. They include Futuregrowth Asset Management (SA), Quona Capital, Orange Digital Ventures, Velocity Capital BV, and FMO (the Dutch Development Bank).

The new round of funding means the five-year-old company has now raised $27.8 million in funding, according to CrunchBase. However, other sources say total funding so far is around $23 million.

What is Yoco?

Yoco is a point-of-sale payments provider for small businesses in South Africa. The company was founded in 2013 by Katlego Maphai (CEO), Carl Wazen (Chief Business Officer), Bradley Wattrus (Chief Financial Officer), and Lungisa Matshoba (Chief Technology Officer).

Despite ATM cards becoming a mainstay in banking services across South Africa, only 7% of businesses in the country accept card payments. This is an obvious underutilization of ATM cards but represented a huge opportunity for the company.

We are excited to announce the 2nd investment of our #PartechAfrica fund: a $16M Series B round in @Yoco_ZA, the South African-based Point of Sale payments provider. Welcome to the Partech family Yoco! 🚀🚀🚀https://t.co/HKcTZd7xT5 pic.twitter.com/2484LokeQ1

— Partech (@PartechPartners) September 6, 2018

To address this issue, Yoco distributes POS machines to merchants all across the country. However, it doesn’t charge merchants any fixed monthly fee for using its devices. But it does extract a percentage on each transaction merchants make.

“It’s quite clear with high card penetration and low acceptance penetration that the demand is there for the product,” Muphai, Yoco’s CEO said.

“There is still a massive opportunity in this market to get more and more business owners onto our platform. We see ourselves as digitizing small and medium enterprises beyond payments and we want to go deeper on the software side.”

Growth And VC Investments

The company has seen much growth over the years, and this has helped it raise quite a lot of funds. It raised $1.7 million in seed funding in 2014 and another $2.4 million from angel investors in 2015.

However, since it raised $3 million in Series A funding from Quona Capital and Velocity Capital in March 2017, a lot has changed; its growth rate since then has been astounding.

Since Q1 2017, the company has tripled its number of merchants. It now adds, on the average, about 1,500 new clients each month. And so far, the startup has distributed over POS devices to over 27,000 merchants all across South Africa.

According to the company though, the new round of funding will help it build up its users and add more features. As part of the deal, Cyril Collon, General Partner at Partech, will join Yoco’s Board.