Union54, the first startup in Zambia to be backed by Y Combinator, has secured investment from Tiger Global, one of the world’s leading venture capital firms. The VC behemoth led the company’s recently concluded $3 million seed round, which came only two months after it graduated from Y Combinator’s summer batch. Runa Capital, Ace & Company, Todd & Rahul Angel Fund, and Vibe VC, all based in San Francisco, also took part.
Among the angel investors who participated in this round are Babs Ogundeyi, the CEO of Nigerian neobank Kuda; Risana Zitha, managing director of Renaissance Capital; and Gbenga Ajayi, former head of SMB Growth at Wise.
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Union54 intends to use this funding to expand its engineering, product, marketing, and sales teams. The monies will also be used to grow the Zambian company’s regional consumer base.
“The purpose of this funding is to help us find the best of African talent, people who want to work on big problems. The investment helps us to be able to go to them and say, ‘hey, we’re a well-funded company, we’ve got customers using us, we’re earning revenue and this is going to be one of the most important companies to come out of Africa.’’
Why The Investors Invested
Investment in Union54 came mostly because of the recent participation of the startup in the Y Combinator accelerator program this year. This may have partly prompted Tiger Global to invest in Zambia, outside of Nigeria and South Africa, two of Africa’s four most powerful tech ecosystems. The VC had previously made investments in Nigeria’s Jobberman, Cheki and Wakanow, as well as South Africa’s e-commerce company Takealot. As a result, Tiger Global’s seed round investment in Union54 is a huge gain for the southern African country.
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But then the experience of the funding team proved a major decider for the investors. Founders Perseus Mlambo and Alessandra Martini had been tilling at Zazu, where they raised over $2 million as one of Zambia’s most funded startups. Zazu, launched six years ago, was until its pivot into Union54, a challenger bank, and was the company the founders were admitted into the YC Combinator program with.
Union54’s relative traction is also a factor in the latest investment round. Union54’s API sandbox environment now has over 50 companies. Digital banks, post-Series A fintechs, and “businesses formed on the basis of Union54’s availability” are among them. Four businesses are now in full production and are providing virtual cards to their clients. Mlambo estimates that another 30 people will join by the end of the year. According to the CEO, the average time it takes for these companies to commence production and begin issuing is three to nine days. Founder Mlambo also claims that Union54 has already transacted more than Zazu’s volume in less than a month of operation. Flutterwave, an African unicorn, as well as newer startups like Payday and Plumter (cross-border fintechs) and Bitmama, a crypto exchange platform, are also among the startup’s partners.
Andre Bliznyuk, general partner at Runa Capital, said the firm is pleased to support Union54’s efforts to “supercharge the African fintech ecosystem by enabling its customers to effortlessly launch new card-based products and give concrete value to consumers.”
A Look At What The Startup Does
Union54 is an API that allows African software firms to create and manage debit cards without the need for a bank or third-party processor. It was founded by Perseus Mlambo and Alessandra Martini in 2021 following a major pivot from Zazu, a challenger bank.
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Basically, Union54 onboards a fintech firm, and the fintech company uses Union54’s API to issue a single card to an employee. When an employee uses the card to pay for something online, such as a Netflix subscription or a $30 AWS invoice, the fintech earns 1% of the transaction, or $0.30 in this case.
The Zambian startup intends to add value by assisting fintechs in generating considerable interchange money without having to undertake much of the hard work associated with card management.
“Not only are we allowing fintechs to go to market faster than any bank or card issuer could ever dream of doing, but we’re also really showing that our incentives are very much aligned,” said Mlambo. “We only make money when they do and that’s why we’re happy to give a guarantee with that interchange.”
Zambia, according to Mlambo, is a good place to do business. However, he claims that convincing people to relocate to Zambia for work has been difficult, so Union54 has had to rely on remote work (which is now the standard) for the majority of its early years. It now has a small team of ten people spread across Nigeria, Malawi, South Africa, Zambia, and Europe.
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Charles Rapulu Udoh
Charles Rapulu Udoh is a Lagos-based lawyer who has advised startups across Africa on issues such as startup funding (Venture Capital, Debt financing, private equity, angel investing etc), taxation, strategies, etc. He also has special focus on the protection of business or brands’ intellectual property rights ( such as trademark, patent or design) across Africa and other foreign jurisdictions.
He is well versed on issues of ESG (sustainability), media and entertainment law, corporate finance and governance.
He is also an award-winning write