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Greycroft enters into blockchain investing with African payments company BitPesa

Greycroft Partners announced it is leading an oversubscribed Series A follow-up round for BitPesa, the largest blockchain payments platform in Africa. BitPesa is also Greycroft’s first foray into investing in blockchain-based companies.

The new funding is a minimum of $3 million but could reach $4 million, and brings the company’s total funding to $10 million. Plug and Play also joins the round as a new investor.

As part of the Series A, Alan Patricof, founder and managing director of Greycroft Partners, will take a role as board observer.

BitPesa, the largest blockchain payments platform in Africa, has reported 25 percent month-on-month growth for nearly two years. The company, which currently operates in Kenya, Nigeria, Uganda and Tanzania, uses blockchain technology to facilitate cross-border payments between businesses in Africa and the rest of the world at a lower cost and in a matter of minutes or hours instead of days or weeks. Business customers now number in the thousands and include Fortune 100 fast-moving consumer goods companies, according to Chief Executive Elizabeth Rossiello.

Alan-Patricof
Alan Patricof

The company, founded in 2013, plans to use the new funding to continue expanding into Europe, the Middle East and the rest of the African continent.

Although this is Greycroft’s first investment in the blockchain, the firm may invest in others in the future, according to Patricof.

“I don’t think in today’s world you can avoid looking into blockchain payments [companies],” he said.

Patricof pointed to Rossiello and BitPesa’s team as one of the main reasons for his firm’s investment.

“To operate in these countries, you need central bank approvals, and [Rossiello] has already gone through the struggle of accomplishing that,” he said. He also pointed to Africa as an opportunity for venture and private equity investing that has grown in recent years. “While it certainly has a lot of technical problems, and I don’t want to pretend that they don’t exist, I think that Africa is a very fertile area.”

In January, the company moved its headquarters to Luxembourg, which has a stronger regulatory and compliance culture, according to Rossiello.

“When you’re dealing with bitcoin and Africa, it’s important to show how compliant you are,” she said.

Rossiello says she saw a surge in investor confidence in August, after a much-anticipated increase to the bitcoin block size limit was implemented successfully, allowing the platform to accommodate more transactions with less backlog.

But there are still limitations to the number of transactions the bitcoin blockchain can accommodate, and Rossiello isn’t ruling out the possibility of adding another cryptocurrency technology. The company uses bitcoin about 80 percent of the time, she said, but has used other crypto currencies, such as ethereum.

“We’re looking for the quickest, safest, cheapest option from one endpoint to another,” she said.

Blockchain technology companies have raised well over $1 billion through initial coin offerings this year, but thus far BitPesa has eschewed an ICO for traditional venture funding. “Rather than looking for the cash, we’re looking for partnerships and connections,” Rossiello said.

And Patricof isn’t planning to navigate a whirlwind ICO with BitPesa in the immediate future.

“Honestly, we have not come to that point yet, but the issue may be ahead of us,” he said. “We’ve got other things taking our attention, but we’re aware of what’s happening.”

Photo of BitPesa Chief Executive Elizabeth Rossiello