Less than a year after it signed its first cheque for an African startup, Target Global, a Berlin-based venture capital firm has been named a co-lead in Kuda Bank’s $55 million Series B funding.
The new funding puts Kuda Bank’s valuation at $500 million and pushes the self-styled ‘bank of the free’ halfway to become a unicorn – a company with at least $1 billion valuation. Flutterwave which joined the unicorn club in March only needed one year after closing a $35 million Series B to meet the target. Kuda Bank has closed three funding rounds in less than one year and is likely to activate the unicorn status even earlier than Flutterwave did it.
Meanwhile, the latest investment in the startup is the third cheque Target Global is pending its signature and marks a growing interest in the fintech ecosystem in Nigeria. Target Global’s first-ever cheque to an African startup went to Kuda Bank when it closed a $10 million seed round. The VC also participated in the $25 million Series A funding announced by Kuda Bank in March 2021.
The other investor in the $55 million deal is Valar Ventures, a US-based venture capital firm. Like Target Global, Valar Ventures began its investment journey in African tech startups with Kuda Bank when it led the $25 million Series A round in March 2021. There was also participation from other investors including SBI.
With over €1billion in assets under management, Target Global has a big appetite for fintech startups. Hence, its interest in Nigeria is not a surprise. Many reports have shown that the fintech ecosystem is the most attractive segment of the booming tech ecosystem in the country. Nigeria’s fintech space is also among the top three most thriving fintech ecosystems in Africa.
Target Global would usually invest 70 percent of its funds in Europe, 20 percent in Israel, and 10 percent in ‘opportunistic investments’. Nigeria and other emerging countries constitute ‘opportunistic investments’.
The VC is reputed for investing in early-stage tech companies across Europe and Israel and has a multi-stage approach to the businesses that it backs. Target Global also likes to take the lead or co-leading chair in most of its funding rounds.
The $55 million funding to Kuda Bank takes the valuation of the digital bank to $500 million, putting it in a prime position to become a major competitor in Nigeria and the African fintech market.
Kuda Bank has raised over $91 million since it was founded in 2018, making it one of the most funded fintech companies in Nigeria. The history of its funding began on July 13, 2018, with a €15,000 pre-seed from Startupbootcamp. On September 10, 2019, the new-app-powered bank raised $1.6 million pre-seed from Chris Adelsbach and two other investors.
A year later – November 10, 2020, Kuda Bank announced it has raised $10 million led by Target Global. On March 18, 2021, the digital bank raised $25 million from Valar Ventures, with participation from Target Global.
“We’ve been doing a lot of resource deployment in our operational entity, in Nigeria. But now we are doubling down on the expansion and the idea is to build a strong team for the expansion plans for Kuda,” Babs Ogundeyi, co-founder/CEO of Kuda Bank, told TechCrunch in an interview.
“We still see Nigeria as an important market and don’t want to be distracted so don’t want to disrupt those operations too much. It’s a strong market and competitive. It’s one that we feel we need to have a stronghold on. So, this funding is to invest in expansion and have more experience in the company with relation to expansion,” Ogundeyi said.
Kuda Bank plans to deploy its services in Nigeria where it recently launched its credit business. The digital bank also has a continental ambition; hence, part of the funding would go into creating new footprints in more African countries. Ogundeyi described the plan as building a new take on banking services for every African on the continent. He told BusinessDay this plan had been on since 2019.
Kuda Bank would look to build its existing 1.4 million customer base that has already tapped into new services like credit access. Interestingly, the customer base grew more than 50 percent from 650,000 in March to 1.4 million in August 2021. Kuda Bank said it had disbursed over $2 million (N9bn) in overdrafts to its active customers.
“We felt that Babs and Musty” — Musty Mustapha, the co-founder/CTO — “are ambitious on another level. For them, it was always about building a pan-African bank, not just a Nigerian leader,” said Ricardo Schäfer, the partner at Target.