Cryptocurrency Kenya’s BitPesa secures more investment from Greycroft to hit $10m total funding By Incubate Africa Posted on September 1, 2017 12 min read 1 0 Bitcoins? Bitcoins? Bitcoin uses peer-to-peer technology to operate with no central authority or banks; managing transactions and the issuing of bitcoins is carried out collectively by the network. Through many of its unique properties, Bitcoin allows exciting uses that could not be covered by any previous payment system. BitPesa has received follow-up funding to its Series A led by Greycroft Partners, the venture capital firm with experience investing in payment companies such as Venmo and Braintree. The Luxembourg-based startup, which was founded in 2013 and has now raised $10 million to date, received an additional new investor, Plug and Play, while the majority of existing shareholders also topped up. Previous investors include Draper Associates and blockchain-focused venture funds Blockchain Capital, Pantera Capital and Digital Currency Group. This follow-on financing comes after BitPesa raised $2.5 million in January. “We had had a year of huge growth, and the growth just continued into the spring,” said chief executive officer Elizabeth Rossiello. A year ago, the company was handling trade volumes of $1 million a month, and it now manages $10 million a month, with 25% month-over-month growth. Its team has roughly doubled in the last year to almost 40. “I chose to invest in BitPesa because I was extremely impressed by Elizabeth personally and her whole command of the industry,” said Greycroft founder and managing director Alan Patricof. “I meet a lot of entrepreneurs and she had unique understanding of what she wanted to accomplish and the kind of company she wanted to build and how she was going to do it.” BitPesa enables companies to easily, quickly and cheaply make payments to and from Africa, as well as within Africa. “Some of the most exciting growth we’ve seen has been pan-African, [in which we come] in between two African currencies where most the other payment providers or banks don’t service. So you would not see an African-African currency pair very often, even if it’s a neighboring country — and that’s something that’s been really exciting to share with most of our customers,” said Rossiello. Their clients include small, mid-sized and some of the largest African companies, particularly in the industries of travel, ecommerce, digital advertising and marketing and other digital businesses. BitPesa charges a percentage-based transaction fee that’s about a third of what such companies would pay using traditional payment services, while completing the transactions in an hour compared to days or weeks. What makes the speed and low cost possible is the Bitcoin blockchain on the backend — the company exchanges local currency for bitcoins, moves the money on the Bitcoin blockchain, which processes a new block of transactions every ten minutes, and then cashes out in another fiat currency. While Bitcoin has surged to all-time highs this year, nearly quintupling since January 1, the cryptocurrency has also faced a number of challenges, including an internal civil war between the developers and the so-called miners who run the network that resulted in a split that created a second currency called Bitcoin Cash. While the price recently reached another high after a technical upgrade on the network buoyed optimism, it could face yet another split come November. Despite these problems, Rossiello said, “We’ve experimented with other currencies and we’re open to using them, but we’ve found Bitcoin to be the most liquid to date.” BitPesa moved its headquarters from the Cayman Islands to Luxembourg earlier this year. “It’s been important for us to have a presence in Europe in both Francophone and Anglophone Europe as well as in Africa,” she said. Many customers are moving money in and out of Africa, in addition to within Africa. In addition to continuing its expansion to Europe, the Middle East and Africa, the company is also planning a pilot in trade finance, an area fraught with inefficiencies, high cost and frustration. For instance, if a Nigerian rice importer needs to pay a Vietnamese rice company, that Vietnamese rice company’s bank in Singapore may reject all transactions and letters of credit from Nigerian banks. That could require the Nigerian importer to come up with $300,000 upfront to pay for rice it hasn’t sold yet. Traditionally, the importer might go to the World Bank’s International Finance Corporation, but obtaining a letter of credit there could take weeks, and the wire transfer itself could also take a week, whereas BitPesa can make the payment within the hour. “At any time, these institutions have thousands of wires being crisscrossed around the world, some being canceled, some lacking paperwork and lacking information,” said Rossiello. “And the whole process is heavy on paper and delayed payments, and by working with us, we can make the payments much easier and act as brokers.” Greycroft’s Patricof has worked in Africa, having traveled there with the Millennium Challenge Corporation, a United States foreign aid agency. Greycroft has also invested in another Africa-focused company, Flutterwave, whose work is complementary to BitPesa’s. “It’s been great to partner with the Greycroft team which has dug so deep and gotten to know our market and plus has such a payment pedigree,” said Rossiello.