School Management and Affordable Financing with Allpro
Announcing our investment in Allpro!
140 Character Pitch
Allpro underwrites risk and provides capital to schools using data gathered from its fee payment and school management software
Website
Team
Henry Nnalue, CEO and Co-founder. He has 6 years experience in developing software solutions. He holds a diploma in Securities and Exchange and also a Bsc in Computer Science from the University of Uyo Nigeria. He has been building edtech products for the past 5 years.
Angela Essien, COO & Co-Founder. She formerly worked as a network engineer at Ettetronics Nigeria Limited. She was co-founder at Klipboard (an edtech company). She had previously taught in various schools to fully understand the challenges they face. She holds a B.Sc in computer science from the University of Uyo.
How we first met
I met Henry before we launched Microtraction. He was working on Klipboard, which was a basic school management software (SMS). I wasn’t so keen on the SMS idea mainly because I felt the market itself was extremely fragmented with a lot of players in the space. When Henry moved to Lagos, he told me of his idea to make credit affordable and accessible to schools using data gathered from a school’s management software. This became more interesting as it meant turning previous competitors into potential partners and of course having a much more viable distribution channel for his product. I encouraged him to apply for funding via our website, this took a bit of convincing, but he eventually applied with Allpro.
Problem
The Education sector in Africa has the highest number of SMEs and is chronically underfunded. In Nigeria, over 35% of all SMEs are in the education sector, only 12% of school owners have access to loans. Currently, Small and Medium sized school owners find it extremely difficult to obtain loans from traditional banks mostly because of the following;
- Revenue collections are done by cash therefore making it difficult to track income.
- Keeping digital and proper accounts record is almost non existent in these schools.
- It’s difficult for banks to underwrite credit risk of schools due to low visibility into the schools financial books.
This negatively affects the growth and management of schools leading to a poor and underdeveloped education infrastructure. We believe education is a fundamental right for everyone and key to the future of Africa. Inadequate education stagnates socio-economic development on the continent.
Solution
Allpro is building an end-to-end lending platform for schools in Nigeria. Their solution underwrites credit risks for lenders while making access to credit easy for various stakeholders in the school ecosystem (school owners, parents and teachers). With Allpro, school owners don’t only enjoy the benefits of having a functioning school management system solution, but they don’t have to worry about the difficulty in accessing capital for infrastructure development and cash flow financing. On the other hand, parents can now pay for their children’s school fees with ease, save towards it, or pay with a low interest microloan.
Market
What made us excited about the market
Africa devotes 5% of total GDP i.e. $1.5 trillion to Education. There is also a $528B Credit Gap for African SMEs, with the largest percentage falling in education. In Nigeria alone, the SME lending market is estimated to reach $100 Billion.
In Nigeria, a lack of investments in Public schools by the Government and a growing Middle class has led to an increase in enrolments into private schools. There are currently 40,000+ private schools in Nigeria with an estimated annual revenue collection of $1 Billion.
The Team
Why we believe in/backed this team
Two things struck us about the Allpro team. First, Henry & Angela have a very good sense of strategy. Very early on, they were thinking differently from the other teams offering similar products i.e. School Management Software. They were able to think holistically and nail down a strategy that had not been executed before, which was quite exciting. The founders also made a courageous decision to invest and sign an exclusive partnership with SchoolCompass, and this deal gives them direct access to 2,000+ school owners in Nigeria.
Secondly, the team is extremely frugal and capital efficient. Their burn rate was and is still low, relative to progress. Henry and Angela both care about being ramen-profitable whilst still trying to grow fast.
Being great at product and strategy gives a team optionality. I’m confident that as the market evolves, the Allpro team would be resourceful enough to change and move with the market and if they stay frugal, watch their burn rate, this further increase their chances of survival and winning the market space.
Product
The base product itself is an easy to use SMS that makes school management more efficient, this includes digitised records and results as well as an omni-channel fee payment solution that allows school owner collect fees, send remainders and track payments. Allpro further differentiates itself from other alternatives by offering schools, teachers & parents’ easy access to affordable credit
Companies like Paylater and Branch use consumer data to underwrite credit risk, Allpro does something similar but for SMEs starting with schools. School data like number of new admissions, number of students and performance of students, frequency of fee payments and the like are used to underwrite the credit risk of the school, qualified schools are then connected with lending partners who provide financing for schools. They have also built APIs and SDKs that other SMS providers can integrate directly into their own solution and start offering affordable credit to their customers.
Competition
The SMS market is highly fragmented with small resellers or software shops having between 10–15 schools on average with the largest provider estimated to have 300 schools i.e. no single company has more than 1% of the current market size of 40,000+ schools.
Although Allpro has it’s own SMS solution, they are non-competitive with existing players as they focus on the fee payment & credit stack in School Management Software and look to collaborate with existing providers, they also plan to sell/license their SMS to resellers at a cheaper rate than what is currently offered in the market today by foreign companies.
Finally, their investment and exclusive partnership with SchoolCompass gives them direct access to 1,700+ school owners & decision makers in Nigeria. This gives them tremendous distribution leverage, allowing them to potentially capture 4.25% of the market with very low and scalable acquisition costs.
Traction
What we cared about when we invested in Allpro was the product strategy and if the founders could execute on the product vision. We get excited about an opportunity when there’s an overlap between the founders’ product vision, their ability to execute on that vision and our investment thesis.
Although they had micro traction when they applied last year, we were more concerned about their underwriting technology, nailing distribution in a cost-effective way and getting access to credit. Once we were confident about being able to help them with those risk areas, investing made sense to us.
Today they are in 30+ schools, with a waiting list of over 90 schools. Have processed $1.4m in fee payments and have north of 12,000 students on the platform
Conclusion
It will be interesting to see how Allpro scales. Will they scale horizontally? i.e going into other sectors like Healthcare, Agriculture and so on or will they provide other value-added services within the education system by scaling vertically. However, in the short term, their focus would be on nailing distribution and improving their product offering so they can drive faster adoption with schools.
We believe that education is one of the best investments we can make today to address some of the biggest challenges of tomorrow.
At Microtraction, our long-term mission is to accelerate Africa’s transition to a sustainable and developed economy. We do this by investing in entrepreneurs who leverage technology, capital and innovation to try and solve some of the largest problems on the continent. If you are working on solving one of these problems, we should talk!
Thanks to Dayo Koleowo and Adaobi Adibe for reading drafts of this.
Until Next time….
Semper Fi,
YB
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