Allard Luchsinger is the director for private equity at the Dutch-based venture fund, Velocity Capital Private Equity. The company specialises in fintech early-stage investments. During a recent conversation I taped with him for AfricanTechRoundup.com, Luchsinger shared what motivated his organisation to invest in two African start-ups over the last year.
Velocity acquired interests in the Kenyan mobile commerce and payment technology provider, Cellulant, and the Cape Town-based fintech startup, Yoco.
As we chatted, I was suitably impressed by his nuanced views on how best to go about making sensible investment plays in Africa’s tech ecosystem.
The man inhabits a hands-on role at Velocity, where he’s tasked with supporting all eight of the firm’s portfolio companies - a gig that includes serving as an active board member for the US online brokerage firm, TradeKing, Hong Kong-based online broker 8Securities and the Dutch banking software provider, Five Degrees.
Full circle
Following a successful run as a start-up founder in his own right, Luchsinger joined Velocity Capital in 2011. This after helping to grow the client base of Zecco, a Silicon Valley-based online brokerage firm he co-founded, to more than 250 000 accounts. Things came full circle in 2012, when Zecco merged with a major rival, TradeKing, to form the industry’s sixth largest online broker, TradeKing Group.
While unpacking some of the challenges that he’s encountered in seeking out investible African prospects to fund, Luchsinger indicated that many of the founding teams he’s interacted with have lacked experience in engaging with potential foreign investors, and unfortunately, that’s led to some promising deals falling through.
Read also: LISTEN: Foreign funds to fuel Yoco's expansion
Nevertheless, he maintains that the financial services opportunities presented in African markets regularly trump those he’s seen in other parts of the developing world where, as he puts it, great software solutions typically struggle to pin down genuine problems to solve.
Goals
Velocity essentially backs fintech ventures that fit into one of two categories: 1) Start-ups that are committed to helping banks achieve their digital transformation goals by providing software solutions that will help incumbents remain relevant in a digital-led future - Cellunant certainly fits neatly into that category, and 2) Companies that rely on new business models that will completely re-imagine how financial services are delivered and accessed - Velocity’s investment in Yoco is squarely in line with that focus.
When asked about Velocity’s strategic decision to target early-stage start-ups rather than more established businesses, Luchsinger revealed that it’s all about managing risk.
He reckons that while any viable start-up must have a good business idea, sustained success is most often predicated on a venture having a solid team that excels at execution, and he has found those elements to be trickier to adequately assess in start-ups that have grown past the early-stage phase.
Patience
Particularly interesting is the fact that because Velocity is a venture fund that’s fully-owned by the former oil mogul, Willem Willemstein, Luchsinger and his team have the luxury of being able exercise a fair bit of patience and flexibility in their efforts to add great businesses to their portfolio - a dynamic that one wouldn’t typically associate with most VCs.
By his own admission, Velocity has benefited by not being bound by an inhibitive charter, not being held to stringent timelines, and not having to churn out piles of management reports to pacify investors. It certainly appears that Velocity might be better-positioned than many of the larger VCs currently landing on our shores to land some decent wins on the continent.
Andile Masuku is a broadcaster and entrepreneur based in Johannesburg. He is executive producer at AfricanTechRoundup.com. Follow him on Twitter @MasukuAndile and The African Tech Round-up @africanroundup.