Traction, a fintech startup based in Nigeria, recently secured a $6 million seed round investment. The funding was anchored by two major investors, namely Pan-African investor Ventures Platform and Multiply Partners, with additional participation from P1 Ventures and other investors. The primary purpose of this investment is to support Traction’s merchant solution platform, which caters to micro, small, and medium-sized firms (MSMEs) in Nigeria. These businesses constitute a significant portion of the Nigerian economy, contributing over 60% to GDP growth and playing a crucial role in job creation.
The investment is targeted at addressing the challenges faced by these MSMEs, particularly the lack of access to digital tools and financial services. Many of these businesses operate informally, receiving cash payments and relying on paper-based activities.
Why the Investors Invested
The investors’ decision to invest $6 million in Traction can be attributed to several compelling reasons. In the first place, Traction is targeting a significant and underserved market of MSMEs in Nigeria. With over 39 million such businesses in the country, there is immense potential for growth and market expansion. Moreover, these businesses have a substantial impact on Nigeria’s economic growth and job creation, making them a vital component of the nation’s development. The investors recognize this market’s potential and see Traction as a key player in addressing the financial inclusion needs of these businesses.
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Secondly, Traction’s founders, Mayowa Alli and Dolapo Adejuyigbe, bring valuable expertise and experience to the table. As former McKinsey consultants, they have a deep understanding of the challenges faced by small businesses in Nigeria and have demonstrated their commitment to improving financial services for this segment. The investors have confidence in the founders’ ability to execute their vision and steer the company towards sustainable growth.
Furthermore, Traction’s unique approach to providing an end-to-end digitization solution for merchants sets it apart from many competitors. The platform was designed from the ground up to cater directly to the specific needs of merchants, ensuring a seamless integration of services and enhancing customer stickiness. This strategic approach aligns well with the investors’ vision for the future of fintech in Africa.
Lastly, Traction’s impressive performance and growth metrics played a crucial role in attracting investors. The fintech experienced a 7x increase in revenue and an 8x increase in transactions in the previous year, serving over 70,000 businesses across Nigeria. Additionally, its prudent credit risk management approach, resulting in one of the lowest non-performing loan (NPL) ratios in the industry, showcases the company’s ability to manage risks effectively.
A Look at Traction
Traction was founded in 2020 by Mayowa Alli and Dolapo Adejuyigbe. As former McKinsey consultants with a background in devising financial inclusion initiatives in Nigeria, they identified the struggles faced by micro, small, and medium-sized businesses in accessing suitable financial services from traditional banks. To address this issue, they created Traction, a fintech startup focused on providing a merchant solution platform.
Traction’s platform offers a comprehensive ecosystem of services, including point-of-sale software, POS terminals, virtual accounts, merchant wallets, cash advance loans, savings, and bill payments. The investment is intended to further develop and expand these services, enabling small merchants to digitize their operations, manage accounts efficiently, and gain access to crucial financial tools such as credit and savings.
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The primary markets for Traction are micro, small, and medium-sized businesses in Nigeria. These businesses span various sectors, including food and restaurants, FMCG and grocery chains, fashion, beauty, lifestyle enterprises, electronics stores, and healthcare facilities. Traction aims to empower these merchants by offering them digital payment acceptance, financial services, and operational tools to streamline their businesses.
One of Traction’s key strengths lies in its product proposition for business owners. Unlike some competitors, the platform’s entire system and design were tailored for merchants from day one, ensuring a user-friendly and seamless experience. This strategic decision has allowed Traction to gain significant traction in the market and attract a diverse user base.
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Charles Rapulu Udoh
Charles Rapulu Udoh is a Lagos-based lawyer, who has several years of experience working in Africa’s burgeoning tech startup industry. He has closed multi-million dollar deals bordering on venture capital, private equity, intellectual property (trademark, patent or design, etc.), mergers and acquisitions, in countries such as in the Delaware, New York, UK, Singapore, British Virgin Islands, South Africa, Nigeria etc. He’s also a corporate governance and cross-border data privacy and tax expert.
As an award-winning writer and researcher, he is passionate about telling the African startup story, and is one of the continent’s pioneers in this regard