Rali_cap, an early-stage venture capital firm focused on emerging market fintech, has launched a $30 million fund. Last month, the signature, before known as Rally Cap Ventures, it reached its first close of $20 million (its initial target) before increasing the size of the fund, indicating a strong appetite for LPs.
Two-year venture capital fund invests in B2B and API-first fintechs in Africa, Latin America and South Asia at pre-seed and seed stages. A second closure is expected at the end of June.
Rali_cap was first a collective before it was a fund, Hayden Simmons, the general partner who launched the firm in 2020, told TechCrunch in an interview.
As someone who is hands-on, with a decade of experience working for emerging-market fintechs like Migo, Novi and Juvo in partnership and business development roles, Simmons said he saw perspective in aggregating a community of “experts” (first of all traders and angels) to collaborate via Slack on deal sourcing, due diligence and founder support, and investing in emerging market fintechs.
“In this way, we think we could overcome traditional risk models in build value for founders and get more people in the venture capital game,” Simmons told TechCrunch on a call.
Two years later, this group has nearly 240 single LPs. They include executives and managers from fintechs like Wave, Block, MercadoPago, Rappi, Flutterwave, Yoco, Visa, Plaid, Stripe, and Coinbase, and e-commerce platforms like Jumia and Shopify. About 40% are based in the US, while the rest are spread across Africa, Latin America and Southeast Asia, markets where they deployed more than $6 million last year.
But at some point, most collectives with this or a similar strategy try to launch and manage funds (Future Africa and AngelList are a few examples), which is what rali_cap soon found itself doing.
“By the end of 2020, we realized it was too passive a strategy,” Simmons said. “We had this super-engaged community of all these fintech angels, but we decided it made more sense to have our capital, as well as being able to fund the deals that we were looking at as well.”
We have also seen this develop with angel investors who have become prominent solo venture capitalists such as Olumide Soyombo of Voltron Capital and, globally, Elad Gil and Lachy Groom.
Last year, rali_cap raised $2 million, money that has been deployed ever since. And as a fintech-focused company, it made sure that the limited partners in this new $30 million fund come from fintech-friendly companies.. They include Breyer Capital, Propel VC, Better Tomorrow Ventures, FT Partners, Bain Capital, Lateral Capital, some family offices, HNI, and a multi-million dollar cross fund also known for investing in smaller funds.
Rali_cap has supported 12 African startups, 13 Latin American startups and 7 Asian startups. They range from banking as a service and card issuing players to open finance and SME digitization platforms, including Belvo, Mono, Minka, Stitch, Union54, Pomelo, Simetrik, Brick and Abhi. In the meantime, some of rali_cap’s LPs have participated in early and growth stage follow-up rounds of these startups.
“Our whole thesis is that the unitary economics of investing in early-stage B2C fintech in these markets doesn’t make sense yet,” Simmons said, on why rali_cap only invests in B2B fintech platforms.
“So it is still very difficult to create B2C products from multiple markets in Africa targeting a large enough total addressable market (TAM) due to the fragmented nature of the continent. The focus on APIs allows for more efficient expansion within a market because they can grow TAM, help B2C fintechs sign up people in the last mile, unite multiple markets and allow interregional expansion,” he added.
Rali_cap is particular about startups in the big markets of these regions: Nigeria, Egypt and South Africa in Africa; Brazil and Mexico in Latin America; and Pakistan and Bangladesh in South Asia. “But we are always open to exceptions,” Simmons said.
According to partner Kyane Kassiri, rali_cap invests between $200,000 and $500,000. He said the company tends to lead pre-seed deals and take part in seed rounds. Kassiri, who spent a brief stint at Berlin-based venture capital firm Target Global before joining rali_cap earlier this year, had worked closely with Simmons during the duo’s time on Lateral Capital.
With experience at both ends of the spectrum, being an angel investor with Suya Ventures for Target Global, which has over $3 billion AUM, Kassiri believes founders look for two particular groups of investors in their cap table. First is the multi-million dollar AUM VC guy, which can double every round and push you towards the IPO. And second are operators and investors who bring domain expertise and an expansive network of talent and resources, which is rali_cap’s sweet spot.
“Our goal is to help founders by opening LP buffers and a whole community of our LPs to add value and not necessarily take active positions on the board,” he said. “We are here as facilitators to help you go from zero to one. That’s one way we position ourselves.”
Rali_cap executes his collective arm in sidecar. It’s a business execution software for venture capitalists that raised $8.3 million from rali_cap and other backers last month.. The platform’s CEO, Nick Talreja, also wears another hat as legal advisor to rali_cap. Other strategic advisers to the fund include Adia Sowho, CMO of MTN Nigeria; Rob Eloff, General Partner of Lateral Capital; and Sheel Mohnot, General Partner of Better Tomorrow Ventures.
“I’ve been Really amazed to see rali_cap evolve into the strong brand it has become, rooted in its community of leading global fintech players,” said Mohnot, whose firm backs rali_cap as an LP. “Their coverage of emerging markets gives them a holistic perspective on industry trends.“
Rali_cap’s new fund coincides with the introduction of similar funds launched by firms such as Tofino Capital to attract early-stage founders in emerging markets. But from a purely fintech-focused perspective, rali_cap stands out. Last year, fintech accounted for the majority of venture capital funding in these markets (about 60% in Africa, 39% in Latin America, and 25% in Southeast Asia).