Approximately 160 million individuals who were originally born in Africa have chosen to reside outside the continent. Education and employment have acted as pivotal factors in their departure. Nonetheless, a shared aspect among them is the necessity to remit funds to their friends or family back home.
In 2022, their collective contributions amounted to $95 billion for the African economy. Nevertheless, the process of transferring these funds is not without its challenges. Although widely utilized, financial establishments such as Western Union and MoneyGram are not the sole choices available, leaving an opportunity for new contenders to enter the arena.
Back in 2020, Ridwan Olalere and Rian Cochran, previously employed by the Chinese-owned fintech OPay, introduced LemFi to simplify the money transfer process for immigrants.
Ridwan Olalere, who had prior experience at companies like Flutterwave and Uber, explained that their motivation for launching LemFi stemmed from their desire to address challenges they had encountered at OPay. Among the issues they recognized was the difficulty of conducting cross-border payments within the continent. Additionally, they found the prospect of facilitating payments from Western countries to be an equally appealing problem to tackle.
LemFi provided immigrants with a versatile account capable of handling, transferring, and receiving funds in both their home country’s currency and the currency of their host country. Additionally, users can send money to over 30 different countries.
Today, the startup unveiled a Series A funding round of $33 million, spearheaded by Left Lane Capital. Global Founders Capital, Zrosk, Y Combinator, and Olive Tree are joining this round as investors.
Since its inception in 2020, the startup obtained an IMTO license in Nigeria and successfully finalized the acquisition of Rightcard Payment Services in the UK. This acquisition has empowered LemFi to facilitate larger transaction sums and offer enhanced security for user funds. Conversely, the IMTO license ensures the direct processing of remittances to Nigerian bank accounts, eliminating the need for intermediaries. In June, the company also expanded its services to Kenya and underwent a name change from “Lemonade Finance” to “LemFi.”
Explaining the rationale behind the rebrand, Cochran elaborated that upon the startup’s launch, the founders were conscious of the widespread popularity of the name “Lemonade,” and they foresaw the potential for encountering trademark or copyright challenges from pre-existing brands.
Despite securing a substantial funding round during reduced global venture capital activity, Olalere and Cochran acknowledge that the process was arduous and protracted, spanning a significant portion of a year.
“VCs are now more precise in their investment choices. They deliberate extensively and have the luxury of time to make well-informed decisions. In the past, it used to be a matter of ‘Join or decline, we’re closing in two weeks.’ Adding to these factors, being a financial services firm means the lead investor must conduct thorough due diligence. This can extend the timeline considerably,” Cochran explained.
As a component of the deal, Matthew Miller, Principal at Left Lane Capital, will take a seat on LemFi’s Board of Directors
“LemFi has displayed a methodical and strategic approach in obtaining licenses and establishing a resilient network of financial institution collaborators to streamline cross-border payments for immigrants. We are enthusiastic about aiding LemFi as it broadens its array of products to cater to a wider range of immigrant communities on a global scale,” he remarked.
The treatment of Africans by global financial institutions has been extensively documented. While PayPal permits Africans to open accounts, withdrawals are not allowed. This circumstance significantly influenced LemFi’s development, as Olalere elucidates. Their focus has been devising ways to onboard Africans who frequently encounter barriers within the global financial framework while safeguarding their partners from potential risks – a prominent challenge they faced.
With their operations expanding to encompass more countries, Cochran emphasized that understanding and navigating diverse regulatory prerequisites have constituted a pivotal learning curve for the team.
Though declining to disclose the precise extent of their growth or the particular terms of the acquisition, the co-founders elucidated that the scale of the funding round indicates their substantial progress. These funds will be channeled towards propelling product development, expansion efforts, and the possibility of future acquisitions.