Nigerian FinTech Clevawhich focuses on creating a banking platform for African individuals and businesses to receive international payments by opening accounts in US dollars, has raised $1.5 million in seed funding.
The round was led by 1984 Ventures, a San Francisco-based early-stage venture capital firm. Other participants in the round include Raba Partnership, Byld Ventures, FirstCheck Africa, and several angel investors.
Aaron Michael, partner at 1984 Ventures, expressed his support for the Cleva founders, Tolu Alabi And Philip Appelnoting that their product provides a way for Africans to overcome the challenges of hyperinflation, which he described as a tremendous opportunity. “The team is uniquely qualified to tackle this problem given its experience building banking products at Stripe and robust platforms at AWS. The impressive early growth is a testament to the team’s unique ability to execute across Africa and the US.
Y Combinator also participated in Cleva’s seed round as the fintech begins its participation in the accelerator’s winter 2024 batch this month. The popular accelerator program has previously supported African startups that help freelancers and remote workers on the continent open US bank accounts to receive payments, savings and exchange currencies, such as Gray Finance and Elevate (formerly Bloom).
CEO Alabi, in an interview with TechCrunch, explained the rationale behind launching the platform in August despite the competitive landscape with other platforms like Techstars-backed Geegpay and Payday.
First, it underscored the persistent challenges Africans continue to face in obtaining international payment for their skills and products, a pain point that the two founders identified through first-hand experience and extensive research. They estimate that the market for facilitating payments for remote workers and freelancers in Africa represents an $18 billion opportunity.
Another critical factor is founder-market fit. Both founders have a strong relationship with the African market. Born and raised in Nigeria, they moved to the United States on a college scholarship, where Abel attended MIT while Alabi later went to business school at Stanford University. Notably, they bring valuable technical and product experience from their roles at major tech companies, including Amazon, Stripe, AWS, and Twilio.
“Then there is the market opportunity,” Olabi noted in the interview. “The problem we are trying to solve, which is enabling people to receive international payments, is neither a Nigerian problem nor an African problem. It is a global problem. People in Latin America, Asia and even Canada need to get dollars for their work and service. We are starting with Nigeria because we know the market and it is also a market.” Big. But we feel, because of our backgrounds, that we are very well placed to solve this problem on a global scale.
Cleva initially launched its services for Nigerians, allowing users to open accounts in US dollars, and setup requires a bank verification number (BVN) and a government-issued ID. (It is worth noting that while Cleva exclusively offers accounts in USD, other players offer accounts in GBP and EUR.) In the four months since its launch, the Delaware and Lagos-based fintech company has facilitated the opening of accounts in the US for “thousands”. of Nigerians, processing over $1 million in monthly payments while seeing 100% monthly revenue growth, according to the CEO.
As Alabi explained, fintech differentiates itself from the competition in two key areas: customer experience and business model. “We believe in going above and beyond so that our customers have a great experience. That’s the feedback we get from customers. They know that when they email us or reach out to our customer support, it won’t take a week or two.
Meanwhile, the YC-backed startup, which generates revenue when users swap and exchange their money (in US dollar accounts) for local currency (in naira at the moment), also charges a 0.9% fee on deposits into customers’ US dollar accounts. Notably, Cleva caps fees at $20, setting it apart from competitors who often apply an uncapped 1% fee regardless of the amount received.
Looking to the future, Cleva has several upcoming products on its way to diversify revenue streams, including U.S. dollar cards and savings in U.S. assets, CTO Abel said in the interview. Cleva, which has had to overcome common challenges facing fintech companies in its category, such as finding the right banking partner and talent, will soon target Africans in the diaspora. To that end, other upcoming products, according to its website, include allowing users to create professional invoices and send US dollars globally, Entering a competitive remittance category where platforms like Flutterwave’s Send, Chipper Cash, Lemfi and Afriex are active.
The total addressable market for fintech focused on freelancers and African diaspora is poised for sustainable growth. This trend is fueled by a globalizing world, as more young Africans improve their skills and export their talents to meet the growing demand for skilled individuals. “In the long term, we are open to Cleva evolving from just a product service to being a platform for issuing APIs to do a range of other things that help us distribute services across other African countries or around the world,” Abel said. More details on Cleva’s future roadmap.