Luno Expeditions wants to invest in Africa’s fintech and crypto startups

In August 2022, Nigerian fintech startup, Anchor announced its $1 million pre-seed round raised from investors such as Byld Ventures, Y Combinator, Luno Expeditions, Niche Capital and Mountain Peak Capital.

The start-up provides a bank-as-a-service platform for start-ups that want to enable account creation, savings, issuing cards or onboarding new customers. It is also one of the portfolio companies of Luno Expeditions, the investment arm of Luno, a cryptocurrency exchange launched in March 2022. In addition to Anchor, the firm has also invested in Stitch, Traction Apps, Busha, Cauri Money and Knabu.

CEO, Jocelyn Cheng leads the team’s efforts to support the growing portfolio of fintech and crypto startups. In this episode of Equity Merchants, Cheng shares his experience getting started with venture capital and his thoughts on Africa’s startup ecosystem.

How Jocelyn Cheng got her first job in venture capital

Born to parents who had moved to Canada from Hong Kong, Cheng spent her early years in Canada before moving to the United States for university and starting her career.

After graduating from the University of Pennsylvania with a degree in International Studies, she worked at Goldman Sachs, spending time in the firm’s New York and Buenos Aires offices.

Her interest in emerging markets began in Buenos Aires, and she founded Suyo, a proptech startup in Colombia. Since then, she has worked in and invested in startups across four continents before starting her current role at Luno Expeditions.

Cheng’s first job in venture capital was at the Global Innovation Fund, an early impact investment fund that invests in emerging markets, where she rose to become CEO.

Luno Expeditions investment thesis

Cheng explains how Luno Expeditions primarily invests in fintech and crypto startups across the pre-seed and seed stages, although the parent company has traditionally focused on cryptocurrency.

“We are a global early-stage investor that invests in fintech and crypto entrepreneurs globally on their journey to build the next generation of financial services. We invest at scale across pre-seed and seed stages, spanning startups that build applications across the crypto infrastructure, metaverse, web3 and fintech as well.”

During the March 2022 launch, Cheng revealed that the new fund’s focus on fintech and crypto is due to the intersection of both verticals.

“The reason it’s not just pure crypto is that over the last few years, as operators scaling some of the biggest crypto businesses in the world, we’ve noticed that there’s such a strong intersection between some of the traditional fintech and crypto.” she said in an interview with TechCrunch.

Over a conversation with Techpoint Africa, Cheng shares that Luno believes that cryptocurrencies will revolutionize the financial system. Investing in startups building products in this area will enable them to advance this cause. By combining the strengths and experiences of Luno and Digital Currency Group, Cheng believes that Luno Expeditions can offer fintech and crypto startups significant value.

Betting on crypto companies in Africa is also part of the firm’s strategy to capitalize on the growing use of cryptocurrency in Africa. According to a report by the United Nations Conference on Trade and Development, Kenya, South Africa and Nigeria are the three African countries with the highest cryptocurrency adoption on the continent.

They are also among the top ten countries with high crypto adoption, with 8.5% of the Kenyan population owning cryptocurrencies. In South Africa and Nigeria it is 7.1% and 6.3% respectively.

Tips for startups looking to raise money

Cheng advises startups intending to raise money from investors to ensure they have a strong team. Where the startup’s product is technical, she recommends that they have a solid technical or product background.

Luno Expeditions also fits the founder-market fit, which Cheng describes as the founder(s) having unique insight into the problem they are solving. This insight, she says, can be gained from their professional or lived experiences. Depending on the start-up phase, Luno Expeditions also checks the traction they have had since launch.

Having worked with startups in Africa and startups in more developed markets such as the US and Europe, Cheng points out that startups in Africa tend to have more traction than their European or US counterparts at earlier stages and have more reasonable valuations.

What you should look for when choosing investors

Amid a downturn in venture capital, startup founders may try to accept offers from investors, but Cheng cautions that founders should be careful about the investors they bring to their table. She advises entrepreneurs to find out where the investors get their money and at what stage a fund is.

“I think it’s important to pick the right investor and understand where the investor’s funds are coming from, which will affect how that investor trades. Have they raised a traditional-style fund? If so, what is the life of the fund that will affect the time horizon for the fund?”