How AI is Reshaping Small Business Lending in Africa

0:00The SaaS CFO: Greetings, everyone. I'm excited to welcome Elana Laichena, founder and CEO of Flow Intelligence. Elana, welcome to the show. Thanks so much for having me. Yeah, great to have you here. Looking forward to the conversation, especially a different region of the world here. But first, tell us a little bit about yourself. Yeah, sure. So I'm originally from the U.S., as you may be able to hear with my accent, but I've spent the last 11 years in Kenya. I moved here with my husband, who's Kenyan, in 2015 and worked for a startup for a year and then saw an opportunity to start my own business, which was called Acacia Innovations.

0:35It makes an alternative to firewood from sugarcane waste, which we sold to schools and to industries. And that's really where the inspiration for my current company started, because our customers had very long credit periods, anywhere from three to four months. And no banks would give me financing, despite having a viable business that was turning over money. And so, yeah, I started to think there must be a better way to do this. So that business, I exited last year to a local investor in Kenya. But in the meantime, I decided to step back from being CEO about five years ago and get some more experience and learn, particularly more from the funder side.

1:17So I did a couple of years at Open Capital, which advised a lot of impact investors and so on. And then I joined a venture capital firm and venture studio Delta 40, where I was the managing director for Kenya. And then really saw this working capital problem as pervasive across all of our portfolio companies. When the AI revolution started to come in, I started to think a lot about how AI could help. And that's really what then led me into Float. Okay.

1:46The SaaS CFO: So the entrepreneur side and then into the venture world and then busted out of that. Now starting another company. So love that. Let's talk about Float. Yeah, tell us, provide kind of the 30-second version of what Float does. Yeah, definitely. Float is a financial intelligence platform to transform messy data from startups and small businesses in Africa into investor-ready insights and financial metrics. So we ingest either bank statements, M-PESA or mobile money statements, or if businesses already have an ERP, we can connect to the ERP through API. So we're set up with QuickBooks, Soho, Odoo, and Xero, and basically then can either generate a cash-based profit and loss statement if a business doesn't have one, or to go through the information, see where there might be discrepancies, and then generate key investor metrics on the back of that.

2:41So basically, businesses get an investor-ready dashboard that then we can use to kind of do the first stage of lending decisions. And we are lending on our own balance sheet right now, but really using that as a way to train our model, improve our product, and then eventually be able to really offer this tool to other investors and lenders and to be more of the software that sits in the middle.

3:06The SaaS CFO: Yeah, I love that. So taking all this kind of, you say raw data, putting it in, making it investor ready and just founder ready to operate the business. So do you have any verticals or targets or what's your ideal customer profile for this product? Yeah, we're focused on climate smart sectors, which is pretty broad. So it can be agriculture and food companies that are supporting smallholder farmers. It can be any green manufacturing business, solar installers and distributors, and then electric mobility as well. Okay. And when I first saw the climate focus, I was like, that seemed like a narrow market, but yeah, there's a lot within that.

3:45The SaaS CFO: And is this something where, obviously based on your previous experience, where you're in this vertical, do you see it expanding beyond this? Or do you think that there's the big market that we've got to solve first for this? Yeah, I think for sure, as we are focusing on the software, it's relevant to any vertical. In terms of our own direct lending, climate companies is what myself and my team have a lot of experience with. We're starting there, starting with what we know, and then can add in more sectors over time. And then you mentioned your experience of trouble getting financing. So customers before your solution, was it just, hey, we've just got to bootstrap this, we have no options?

4:26The SaaS CFO: or what were customers trying to do before you created Flow? Yeah, it's exciting. Some are bootstrapping. A lot are using equity to finance working capital, which is actually the most expensive way to finance working capital by actually selling your company so you can fulfill orders. There's some that have gotten various kind of impact-based loans and so on, but that's just a very long process that can take 6 to 12 months. Companies will end up kind of missing opportunities. when they really need financing. Okay. And then just one more ICB question here. And is there a sweet spot as far as, say, the size of these companies that you're after?

5:05The SaaS CFO: Do they have to have a minimum revenue level? Or what's that scope of company size? Yeah, we're looking ideally at companies doing a turnover of about$100 ,000 in a year, up to, I'd say, the low$1 million to$2 million. Beyond that, they usually have other pools of capital available to them. But yeah, starting with businesses that have gotten somewhere and then helping them grow to the point where they could attract more conventional lenders. Okay. Yeah, interesting. And then how fast is this market evolving? And I know you say you're Kenya-based. Is this a relatively new type of solution in that market or do you have other competitors?

5:45The SaaS CFO: Or is this, yeah, how is it evolving there? Yeah, I would say, I mean, you met competitors in a couple lenses. I think a lot of people have done this type of digital lending to micro businesses. So picture like a fruit and vegetable seller on the side of the road or someone operating like buying and selling liquor or whatever it is. And that I think is a bit simpler. You're pricing the interest very high or getting donors to cover it. And then you're just assuming a very high level default. Or you have more like impact based investors that are targeting maybe the similar size of business that I am.

6:19But again, that takes six to 12 months because it's very like manual due diligence. It's a lot about just getting to know the founder and do you trust the founder and not as data driven. So we haven't seen someone really do exactly what we're trying to do, where we're trying to really automate it as much as we can, make it a very quick process as long as the business provides us with the data that we're asking for, then we can turn around alone in the same business week.

6:44The SaaS CFO: Okay. Okay. Pretty fast with that data ingestion, which is nice. And then I'm curious, finding prospects right now, like what's working in your go-to-market motion? Tell us a little bit how you find customers. Yeah, so we've been getting referrals from a lot of VC investors and incubators and accelerators that help businesses fundraise. A great source for the start was our partnership with Delta 40, where a number of businesses had applied to Delta 40 and they were viable, like impactful small businesses, but just not a fit for venture capital because venture capital is like very niche. You have to be hyper scalable and unique and all these things.

7:23So we've gotten a few referrals that way. We've gotten some from other transaction advisors or incubators or all these programs that businesses go to when they're fundraising. That's been the starting point.

7:36The SaaS CFO: Okay. Yeah. Interesting. And then pricing is this traditional kind of term loan financing, but so yeah. How do you make money through this business model? Yeah, it's basically like a revolving line of credit. So we place, we say per month, but really it's per day. So as long as the business needs the facility, then we're charging interest every day, but recoup that once they are able to repay and they can repay any amount as they want. And then the interest is only applied on the balance. So yeah, basically raising money, marking it up to cover the risk and the other services. And And oftentimes, because we lend in local currency and most money comes in USD, a lot of investors won't kind of take the risk of going to local currency as well.

8:19That's kind of one of the value that we can add.

8:21The SaaS CFO: Yeah, yeah, interesting. And earlier you mentioned lending off your own balance sheet. And you had, it looks like, a pre-seed round, the amount undisclosed. Was that pre-seed to help fund the balance sheet or just fund the company in general? Yeah, both. So it gave us runway to operate for about 18 months and then also some capital to lend. Particularly as part of that, we got a grant and we got a loan. So that's enough to get started. And then we'll still be raising more to grow that loan book to the point where we have a good data set so that we can really draw some learnings from. And then I want to understand the chronology of the company.

9:01The SaaS CFO: When did you found the company? so i've been working on it for about a year and a half since 2025 but a nice thing about working in a venture studio is you get to test and experiment and pilot within the venture studio model so we registered the business actually earlier this year okay and was the round the precede right from the beginning or did you start operating a little bit and then raise the round Yeah, we were lucky to pretty much raise the round at the beginning. These things take time. I think even coming from the venture capital world, I thought it'd be a little easier, but still going from being IC approved to having money in the bank still took a few months.

9:43I would say, yeah, we were doing those things in parallel, starting operations and trying to walk in the money.

9:49The SaaS CFO: Yeah, that was going to ask that. You had that venture experience and then starting the company. So yeah, were there, you mentioned, maybe a little harder than you thought or different than you thought. So any lessons learned, either from both sides of the table in that round that you said, yeah, maybe it was a little more than I thought, even though I came from that world? Yeah. I guess dealing with investors that came in almost at the same time who have different requirements, different structures that they want and so on. It was both great to have multiple investors at once, but I think that was like one thing then I underestimated how complicated that would be.

10:29The SaaS CFO: Yeah, yeah, interesting. Getting everyone then to work together. Yeah, you probably knew the Delta 40 model, but maybe not the other investors. So, yeah, interesting. And then so pretty early innings here. So is there a number of metrics that best explains what's happening in your business right now? Yeah, I would say looking at our pipeline of companies, We have about 200 companies that are qualified or eligible, and that's an estimated financing demand of about$7 million. So looking at, yeah, the demand is there, really. Yeah, that's great. Always love to build more pipeline. And then one question, what about comfort levels around default rates?

11:13The SaaS CFO: Is there any target that you go after there? And I know it's early in fine-tuning your models and the data ingestion, but any target there? Yeah, so we're trying to do better than the banks, for sure. And the bank in Kenya, I think right now, default rates can be around 15%. And there's data from other sources like DFI is up a much lower rate of even 3 % to 5%. So we're looking at more of 5%, I think, would be a realistic target for defaults. We know it won't be zero, but we're hoping much better data that we can bring it down. Okay. And then you've, again, experienced on both sides of the table starting a company, exiting venture capital experience, now starting a company again.

11:55The SaaS CFO: Any surprises this go around or it's happening as you thought it would happen as you build the company? Definitely always things to learn. I think something that, I don't know if it was a surprise, but because I think it was true. I've seen all early stage companies go through this. I think in Africa, the expectations for where a company should be at a pre-seed round are so high versus Silicon Valley. You hear people raising millions of dollars off of a pitch deck, and that just doesn't really happen. I think I was about as close to it as you can be, that I was able to raise with not much more than MVP.

12:31And that is honestly pretty unique. I feel very fortunate because you hear so many, there's so many articles. It's not just anecdotal, it's really data-driven that pre-seed financing is really drying up in Africa and people want, they say they're early stage investors, but then want to see an MRR of at least 25 ,000 to 50 ,000 USD. And so, yeah, I found it very interesting that investors, even in this world of AI, it feels like now would be time to take big bets, but I think a lot of investors are taking a wait-and-see approach.

13:03The SaaS CFO: Yeah, no, that's interesting. And then this is a bit of a hot seat question, a hard one maybe, but thinking about this market and say three years from now, where do you think this is going? Do you think it'll be more capital efficient, more options for lending for the small businesses? Any thoughts of where you think the market will go? I hope it would give more options to small businesses. I I think what we've seen pre-float is almost going in the other direction. Capital's really consolidated around a few winners. There's been some really bigger ticket deals for asset financing and solar or electric vehicles.

13:40But yeah, again, it's just like who's giving these businesses a chance to start, especially businesses with African founders who aren't coming in with their own capital or friends and family that they can call on to get their first$100 ,000.

13:53The SaaS CFO: Yeah, hopefully the market will just be a little bit easier down the road. Alana, appreciate the time today sharing your journey. Just a few stats and figures before we wrap up. So you're founded, is it safe to say, then 2025 founded Float? Yeah, that's all it 20. Okay. And then do you have a headquarters location or is it virtual? Yeah, we're in Nairobi, Kenya. We have a physical. Okay, perfect. And what's your current staff or employee count? We have 10 people between our credit and tech teams. Okay. And then the precede round was undisclosed. Are you disclosing how much you raised with that or keeping that secret?

14:29I think share like an aggregate at 550 ,000 USD, which yeah, goes further in Kenya, I'd say. Oh, sure.

14:36The SaaS CFO: Yeah. Okay. All right. Perfect. Great. Appreciate the time today. If listeners would like to learn more, where should we send them online? Yeah. Check out our website at float.africa or we are on LinkedIn at floatintelligence. All right. Perfect. Check out float.africa. We'll put that in the show notes. And Alana, appreciate your time and sharing your journey today. Yeah, thanks so much. I appreciate it. Thanks. All right. Take care. All right.