Nairobi-based startup Kotani Pay has recently secured a substantial $2 million in pre-seed funding. The primary investor leading this funding round is P1 Ventures, with notable participation from DCG/Luno and Flori Ventures. This infusion of capital is intended to support Kotani Pay’s mission to streamline cross-border remittances for underserved populations across Africa.

Why The Investors Invested

Investors committed a substantial $2 million to Kotani Pay for compelling reasons. The startup is addressing a pressing and lucrative issue in the African remittance landscape: the exorbitant transfer fees, sometimes reaching 20% of the transaction value. This challenge is particularly significant, given that remittances make up a substantial portion of some African countries’ GDP, with the World Bank estimating $55 billion flowing into Sub-Saharan Africa this year.

Kotani Pay’s innovative approach of leveraging blockchain technology and stablecoins to reduce these costs aligns perfectly with the growing adoption and interest in cryptocurrencies and blockchain solutions. It presents a practical solution to a real-world problem.

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Furthermore, the startup’s strategic partnerships with key players in the cryptocurrency space, including Yellowcard, DCG, Celo’s Valora, and others, not only lend credibility but also open doors for expansion. Investors appreciate Kotani Pay’s commitment to regulatory compliance and its proactive collaboration with central banks, which mitigates risks associated with evolving crypto regulations.

Moreover, Kotani Pay’s forward-thinking approach, exemplified by plans to introduce new products like Reconset and Money Ledger following the acquisition of Fuhlstack, demonstrates a clear vision for sustainable growth. This multifaceted appeal positions Kotani Pay as a highly attractive investment opportunity for both local and international investors.

A Look at Kotani Pay

Kotani Pay, a Nairobi-based startup, was founded two years ago by co-founders Samuel Kariuki and Macharia. The startup’s core mission is to revolutionize cross-border remittances in Africa through blockchain technology. Its focus is on addressing the formidable challenge of high remittance fees, which can soar as high as 20% of the transaction value.

Kotani Pay’s innovative approach involves leveraging blockchain technology, particularly stablecoins linked to fiat currencies like USD, to facilitate cost-effective international money transfers. The startup has developed middleware that connects blockchains to local payment networks, allowing recipients to convert and utilize stablecoins in local currencies. This innovation is especially valuable in regions with limited internet access, enabling transactions via feature phones using USSD protocols.

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The startup primarily operates as a B2B solution, connecting crypto platforms’ smart contracts with mobile money APIs. Notable partners include Yellowcard, DCG, Celo’s Valora, and other prominent players in the cryptocurrency space. Kotani Pay also offers a solution for converting local currencies into USD, with plans to extend this service to retail users in the future.

Kotani Pay’s ambition extends beyond its current offerings. Following the acquisition of Nigerian startup Fuhlstack, Kotani Pay is poised to introduce new products such as Reconset, a Reconciliation-as-a-Service offering, and Money Ledger, a Ledger-as-a-Service solution. Fuhlstack founder Lemuel Okoli joins Macharia and Samuel Kariuki as Kotani Pay co-founders.

Furthermore, the startup’s operations are already under the watchful eye of regulators, given its potential to affect foreign currency reserves. However, Kotani Pay is proactive in ensuring compliance with regulatory requirements, collaborating with central banks in the regions where it operates. The dynamic regulatory landscape in the cryptocurrency sector is being closely monitored, with optimism regarding positive developments in Africa.

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Kotani Pay has processed $23 million in transfers to date, with an average transaction size of $150,000. Revenue is generated through an interchange fee, typically around 1% of the gross transaction volumes.

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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