Franziska Reh does not have your typical investor background, if there is such a thing. Brought up in Germany, she spent her teens at Greenpeace, before working at Deutsche Bank in Frankfurt, New York and Russia.
“I later moved to strategy consulting, which I’ve done for a few years with a focus on corporate sustainability and circular economy. After a brief stint at the World Economic Forum in Geneva, I started Uncap,” she told Disrupt Africa.
Launched in 2019, Uncap claims to take a new approach to funding early-stage entrepreneurs, using a remote, data-driven, and largely automated investment selection process. Its solution measures entrepreneurial potential through a series of tests that evaluates skills and behaviours correlated with entrepreneurial success, a highly-automated approach it says allows it to provide funding to thousands of entrepreneurs.
“When we started Uncap we looked at where we see the greatest untapped entrepreneurial potential globally – for us that was and still is Africa. It is also the region where we believe entrepreneurs can have by far the biggest impact on the development of a whole region, if entrepreneurs have the resources to do so,” said Reh.
“We were wondering why it seems we have been talking about the potential Africa has and the missing middle funding gap as a barrier to that for years, and yet nothing is really happening at scale. There are more and more funds targeting early-stage entrepreneurs, which is fantastic, but that is never going to be enough. We are talking about 20 million early-stage entrepreneurs in Sub-Saharan Africa, of which 98 per cent don’t have access, or sufficient access, to funding.”
So Uncap decided to find a different, unconventional approach to think about funding entrepreneurs – an approach that could blend the scale of banks or microfinance with the nature of seed funding, leveraging technology, big data and behavioural science.
“This is how we came to develop our funding platform, that is almost completely automating the whole investment process end-to-end. No interviews, no meetings, no pitchdecks. This way we are able to invest up to US$50,000 into, potentially, hundreds if not thousands of early-stage companies,” said Reh.
“We’ve also innovated our investment model, combining self-liquidating equity with a revenue-sharing model. Everything we do has been fully tailored and built around our target group.”
So far, Uncap has made 58 investments. By the end of the year, it plans to have a portfolio of around four times that size.
“We bet on many of our companies growing over time and buying-back their equity instead of a couple of outliers returning the fund,” said Reh. “We are interested in great founders, no matter which sector they are operating in.”
In the beginning, Uncap’s money came from angel investors as part of its own seed round, which enabled it to finance its first investments from its own balance sheet. Now, it has taken on board a number of HNWIs and private investors as LPs.
“Our focus countries have been Kenya, Uganda, Rwanda and Nigeria but we plan to expand further next year,” said Reh.
All Uncap investees have access to an online dashboard, which provides them with automated health analytics and insights of their financials, as well as a cockpit of their investment progress.
“We are currently working on complementing that with tools to diagnose your current gaps, access to the right resources and support providers as well as hopefully soon, automated connections with follow-on funding,” said Reh.
She said Africa’s funding gap was hardly getting any smaller, so Uncap plans to focus all its efforts on scaling-up the number of its investments.
“We are living in more uncertain times than ever, so you never know, but we do aim to have a portfolio of at least 1,000 companies by the end of next year,” she said.
