Though finance technology startups are having a moment when it comes to decreased venture capital deals and layoffs, Quona Capital, a venture capital firm that invests in emerging markets that accelerate financial inclusion, has found the appetite is still there for fintechs.
The firm had its final close on $332 million in capital commitments for its Fund III, which invests in companies in Latin America, India, Southeast Asia, Africa and the Middle East. Notable exits from its first fund were IndiaMart, which went public in 2019, and Coins.ph, which was acquired, also in 2019, by Gojek.
The commitments for Fund III exceed the $250 million target Quona was initially shooting for and brings the firm’s aggregate committed capital to over $745 million, co-founding managing partner Monica Brand Engel told ZebethMedia. She started Quona Capital in 2015 with Jonathan Whittle and Ganesh Rengaswamy.
“We got very lucky in that the digital thesis about bringing technology to help affordability, also helps connectivity in a world where we’re more remote, where things are constructed, and we have been very successful,” she added. “So even fundraising is evidence of the results and Fund III being a $332 million fund.”
Brand Engel, who leads Quona’s investments in Africa and the Middle East regions, said the fund’s investors include a majority of existing investors from sectors like global asset managers, insurance companies, investment and commercial banks, university endowments, foundations, family offices and development finance institutions. It also includes 20 new investors, the firm said.
While speaking with the LPs during the fundraising, she noted that one of their main concerns was investment into emerging markets: how risky it is and how it is being affected by current events, for example the Russia/Ukraine war and the governmental instability in the United Kingdom.
“People realize you’re not immune to macro instabilities,” Brand Engel said. “There is an attractiveness of emerging markets, though, and the pent-up demand for basic goods and services that early adopters can adapt with technology.”
She noted that the driver for starting the new fund is that financial inclusion “is a huge, powerful lever for impact” for a movement that started with Accion in microfinance and is now having a 2.0 moment with new innovative approaches from startups that are “radically improving access and quality of financial services,” for example, embedded finance or the connecting of financial services with other business models where those services become “the engine to drive growth.”
One of the other areas she feels Quona Capital’s thesis “shines” is by being what the firm calls “global local” with offices in over 10 countries.
“Part of our value proposition is that we have people who are very much embedded in the local market who speak a language, who were born there and have had children there,” Brand Engel said.
Quona Capital funds have made more than 65 investments, and will make 25 to 30 new and follow-on investments from the third fund. While the firm has shied away a bit from consumer finance, it has gone all-in on business-to-business, she added.
Some of the first six investments from the new funding have gone into companies including Egyptian financial super app Khazna, MoHash, a decentralized finance protocol, Pillow, which wants to make cryptocurrency saving and investing easier, and nocnoc, helping global sellers connect with marketplaces in Latin America.
“We call ourselves an authentic impact investor that is focused on numbers, KPIs and building real business models so that they are profitable and impactful in a way that’s kind of bottoms-up,” Brand Engel added. “Also, the notion that we are operators and have started, scaled and exited financial services and technology companies gives us a really important perspective. Not only do we have empathy because we’ve been entrepreneurs ourselves, but I’m Latina and the daughter of immigrants, and we are building something that really reflects reality.”