Planet42, a South African startup founded in 2017, has raised $2.4 million in funding to accelerate its growth. The startup which started in 2017 as CarGet was designed to offer access to personal cars. The seed round was led by Change Ventures, followed by other private investors including Martin Villig of Bolt, Ragnar Sass of Pipedrive, Marko Virkebau of MeetFrank, Kristjan Vilous of Katana MRP, and many other companies from Estonia.
Using an automated scoring algorithm, the startup processes client applications based on credit bureau, affordability, and alternative data. The service is targeted largely at the underbanked customers. When an application is made by a client, Planet42 will analyze it to validate the customer’s documents before purchasing the car and renting it to the customer.
According to Disrupt Africa, Planet42 has delivered about 2000 vehicles to clients this way, and the company witnessed eight-fold increase last year.
Eerik Oja, co-founder and the CEO of Planet42 said the startup was developed from the need for personal cars in South Africa, especially for low and middle income earners.
“Having a personal vehicle is a necessity in South Africa, as public transport is underdeveloped while ride-hailing is prohibitively expensive for most. A family car can be a lifesaver, but banks focus on newer, expensive vehicles and only approve 15 percent of car financing applicants. This leaves few alternatives to lower and middle income households.
“We see a huge need for people to improve their standard of living with better mobility, but there is a lack of options in the market to service them. More than 24 million people are credit impaired or have no access to finance in South Africa – that’s well over half of the adult population,” he said.
Oja added that Planet42 is looking to expand beyond the shores of South Africa to other emerging markets with potential of growth as it intends to introduce motorcycles to its fleets soon.
“We want to help people across the world commute with ease, earn and feel secure. No one deserves to be deprived of the opportunities, something as basic as a personal vehicle brings,” he said.
It has been a less progressive year for African startups compared to 2019, but many have been securing the bag of seed funds despite the economic strains stemming from COVID-19 pandemic. In the Q1 of 2019, African startups raised $186.09 million in total.
The Q1 of 2020 has seen African startups suffer a decline of 57% when compared to the same quarter in 2019. The total funding for Q1 2020 amounted to $245.13 million, from 86 announced deals, including funding from accelerators, incubators, grants and prize monies.
In 2019, African startups raised a total of $1.34 billion according to WeeTracker. Nigeria led the investments with $663.24 million, followed by Kenya and South Africa. But Nigeria and Kenya accounted for $1.09 billion (81.49%) of the venture capital raised in Africa.
There was a record of $136.58 million raised in the month February 2020, which offered hope of a better year. But the month of March ushered in with COVID-19 and shattered the hope, as it accounted for just 7 percent of the funding raised in the first quarter.
Investors have been treading cautiously since the outbreak of coronavirus and that has affected the growth of startups in the African continent.
Venture platform founder, Kola Aina told WeeTracker that investors are observing the trends before they make a move, and it is slowing everything down.
“COVID-19 has significantly slowed down fundraising activities globally, so it’s safe to say African startups are also affected by this trend, as a significant percentage of investments come from international VCs. Investors are currently re-evaluating how and where they allocate capital,” he said.
Aina added that African startups should not be in expectation of improvement any time soon, due to the global economic disruption caused by coronavirus.
But Benjamin Fernandes, founder and CEO of Tanzanian fintech NALA said all hope is not lost.
“Funding hasn’t necessarily dried up. For us at NALA, for example, we have had an increase in inbound requests for funding. People know our metrics. So I think people are looking to increase their investment in some companies,” he said.
The uncertainties of the global health crisis has apparently pushed fundraising to the edge and planted seeds of doubt in many investors, but some startups in Africa are still attracting seed funds.
Ralt Ojsaar, partner at Change Ventures echoed the sentiment of Fernandes. He said they invested in Planet42 because they saw a global potential in the startup.
“There are multiple markets in Latin-America, Africa and South-East Asia with similar pain points – poor public transport, limited access to credit, and long commutes. Fintech has the potential to make a huge positive impact on how people get from A to B in these places, and we are proud to back Planet42 in making it a reality,” he said.