Companies powering financial services continue to take the leading position in cheque sizes globally. This situation is more pronounced in Africa where fintech startups received about two-thirds of the total $5 billion raised in 2021. The reason for this is not far-fetched: money management and access to optimal financial services are metrics that enunciate sustainable and interconnected societies. This gives fintechs a central position in the development of advanced communities, highlighting their roles as plugs for opportunities and drivers of financial inclusion.
Quona Capital, a venture capital (VC) firm focused on emerging markets, is on a mission to support fintechs building solutions that are impacting users and providing them with core financial solutions. To do this, the VC has pulled together its third fund valued at $332 million, a push above its $250 million target and a significant increase from the $203 million it announced for its second fund in 2020. This brings the total fund raised by the VC to over $745 million
According to Quona, its Fund III investors include leading global asset managers, development finance institutions, investment and commercial banks, insurance companies, foundations, and university endowments.
Founded in 2015 by managing partners Monica Brand Engel, Jonathan Whittle, and Ganesh Rengaswamy, Quona Capital was established as a spin-off from Accion, a global leader in microfinance, to address the growing need for alternatives to traditional financial services.
“Traditional financial services had hit a wall,” Brand Engel said in an interview, speaking on why the company was created. “We needed new approaches that balanced tech and touch in a more nuanced way so that we could achieve our goal of radically improving both access and quality of financial services to the underserved,” she said.
Quona’s investment strategy is an intersection of profitability and impact investment. The VC firm operates in markets such as Africa, Asia, and Latin America, tapping into the burgeoning financial markets in these climes while ensuring that investment solutions are tailored to cater to underserved and financially excluded customers and businesses.
Since its inception, Quona has systematically measured the impact of its investments and contributed to the evolution of the impact investment industry. It was an early adopter of IRIS, a standardised impact metric system developed by the Global Impact Investment Network (GIIN). And according to its latest impact report, the VC firm claims that 80% of the 8.8 million SMEs its portfolio companies have served were previously underserved.
Quona has maintained its impact-fintech play in Africa, investing in startups like South Africa’s Yoco and Lulalend, Kenya’s Wasoko (formerly Sokowatch), Nigeria’s Cowrywise, and Zambia-based Zoona, which was acquired in 2020 by Mukuru.
Despite its strong focus on impact investing, Quona prioritises the profitability of its portfolio companies and will not invest unless a particular startup has achieved product market fit (PMF) within its “zone of impact”. A case study is the Quona-Wasoko story.
Even when Quona was already familiar with Wasoko, a B2B startup powering informal trade in Africa, it waited until Wasoko achieved particular growth metrics before leading its $14 million series-A round. During this waiting period, it nominated Wasoko for the $100,000 the startup received from Catalyst Fund, an early-stage accelerator backing high-growth startups.
Brand Engel, the co-founding MP who leads Quona’s investment in Africa and MENA, expressed confidence in the firm’s investment theses, highlighting the performance of the previous funds as a testament to the prospect of impact investing.
“Since our earliest days, Quona has been dedicated to expanding the frontiers of financial inclusion—investing with conviction in markets and technology-enabled models, improving access and quality of financial services for the masses,” she said in a statement shared with TechCabal.
“Our prior fund performance, robust pipeline of inclusive fintechs, and growing LP interest in our offerings are ringing endorsements of our view on the prospects of impact-oriented venture investing in emerging markets,” Brand Engel added.
With its fintech focus, Quona is proving the possibility of impact investing in high-profit sectors like fintech, as opposed to the widely-accepted notion that impact investing is customised for low-profit-high-impact startups.
