South African CA and co-founder of fintech startup Fundrr talks about his country’s evolving startup ecosystem
After Jarred Noche qualified as a CA from South Africa all he wanted to do was to start a business in the US. But the fast-paced life in the Big Apple did not appeal to him. He changed his mind and returned to his country to build a fintech company.
As part of our Finance: 2022 and Beyond series, powered by Qapita - CapTable and ESOP Management Platform, we spoke with Jarred Noche, the Co-founder & CFO of Fundrr, a fintech company helping SMEs in South Africa.
A qualified chartered accountant, Jarred talks about the recent surge of fintech startups in the country, challenges in fundraising and the effects of the COVID-19 pandemic.
Q. What prompted you to start a business in South Africa? How did Fundrr come about?
A. Growing up in Johannesburg, South Africa I have thought I had a flair for entrepreneurship. And I knew that being an accountant would be the best way to go forward since financial accounting is often called the language of business.
That is how I came to be a CA from The South African Institute of Chartered Accountants (SAICA) in 2015.
To be frank I was considering leaving South Africa. I wanted to start something of my own in the US.
However, when I was working at Grant Thornton in New York, the fast-paced city life made me rethink my choices.
I decided to return to my native land to start my entrepreneurial journey.
Around this time, my best friend Idan Jaan came to visit me and showed me and introduced me to the concept of peer-to-peer lending.
Although I had a bit of experience in audit and transaction advisory, credit was outside my area of expertise. I wanted to go all-in with this, hence in July 2017, I left Grant Thornton.
I began my research on credit, peer-to-peer lending, underwriting, different laws and regulations, and everything else necessary for this business.
We quickly realised that entering peer-to-peer lending in the consumer space would require a lot more than we could handle. We would have to get a whole different bunch of licences and understand the intricacies of matching borrowers with lenders.
We decided to pivot and do business finance. Eventually, we launched Fundrr in 2017 and slowly figured out how to do Credit Risk Modeling, business process mapping, and work out affordability criteria.
In June 2018, we did our first disbursement of funds,
We differentiated ourselves in the market by assessing businesses through different types of data; such as Facebook likes, or reviews on Yelp.
At Fundrr, we use this methodology, which allows us to reach a decision that is not solely based on their financials.
This way we can help businesses that banks find unworthy of funds.
We raise money from various debt providers, and then lend that funding at a margin.
We have disbursed to over 150,000,000 Rand to date and aspire to help more SMEs in Africa.
Q. What does the fintech landscape in South Africa look like?
A. The funding gap in South Africa is vast when it comes to small businesses.
Despite that, there has been a surge of fintech startups in the market.
But since there are so many small businesses in South Africa, there will always be enough opportunities to go around for folks like us.
Thus I am pretty confident in the South African fintech landscape.
In the past few years, massive amounts of investments have flowed into this space. A number of companies have even raised close to a billion South African rand ($68 million).
The consumer economy in the country is vast, which creates a lot of demand for these innovative fintech solutions.
Having said that, the talent gap will remain in South Africa for a while as many people relocate to the US or the UK after finishing college. But the opportunities are endless.
Q. Do you see a lot of funds coming into the South African startup ecosystem?
A. The risk appetite of the South African investors is certainly not like investors of Silicon Valley that are ready to write blank checks.
By nature, we are a risk-averse country. However, I have seen a definite increase in venture capital funds.
There are some amazing platforms where even the man on the street can invest in these startups. I have noticed a massive increase in awareness of these types of businesses and investment opportunities.
When it comes to difficulty in raising funds for South African startups, it is certainly better than how it was two or three years ago.
Q. Should CAs and finance professionals take the risk and start up on their own as you did?
A. Starting something of my own was the best decision of my life and it has been extremely rewarding so far.
Entrepreneurship gave me much-needed financial independence and helped me be in charge of my own destiny.
To all the CAs and people in general, if you are considering starting up, I highly recommend you to go after it without hesitation. And even if you fail, just keep pushing because sooner or later it will all come together.
Another reason why starting a business is quite simple, is because of the availability of business ideas.
You can go to Google and there are thousands of them already. Then all it requires is execution.
But you really have to roll up your sleeves and do the work. Take every decision in your stride.
Interestingly, I have also come across finance professionals who have implemented technology in the audit world to facilitate auditing processes or manual audit tasks. They are also changing the fintech landscape.
They are identifying these types of opportunities and coming up with fantastic solutions. A lot of them are also building new products in the consumer lending space, among others.
All in all, everyone who is looking for opportunities in South Africa is making the most of it and I encourage everyone to do so.
Q. How did Covid affect your business and what are your plans and expectations for Fundrr in the current fiscal?
A. Covid was probably one of the toughest periods of my life, both on the professional and personal fronts. All of our clients’ businesses were forced to close their doors and 90 percent of our entire book ended up on payment holiday.
We thought our clients’ businesses would shut down and nothing will go back to its previous normal state. Much to my surprise, they bounced back.
I was genuinely surprised as to how our clients managed to carry on trading or pivot. It was applaudable.
We want to grow 2x in size by the end of 2022 and to achieve that we are taking all the necessary measures, provided no new, crazy strains come into existence.
All the different sectors that got hit by Covid the most such as hospitality, and the manufacturing industry, are slowly opening and we are looking forward to providing our services.
For us at Fundrr, we have big hopes and high expectations for 2022.