The $5.2 Trillion VC Blindspot

Untapped Global
Untapped Insights
Published in
5 min readJul 19, 2021


By Jim Chu

Small businesses are the driving force of every economy

This article was first published on Untapped Global.

From 2018–2019, venture capital (VC) tech investments in Africa grew 74% from $1.16B to $2.02B, according to Partech’s Venture Report. Anecdotally, VC deal-making on the continent is brisk, with hotspots such as Lagos, Cape Town, and Nairobi gaining momentum. Even prominent Silicon Valley investors are shining spotlights on the opportunity in Africa. I’ve gulped this kool-aid, too. I’ve been increasing my share of equity bets in fin-tech, agri-tech, clean-tech, and health-tech startups in Africa and other emerging markets in the last years, and can attest first-hand to the quality of entrepreneurs and market potential.

This money being invested in Africa will drive innovation and wealth creation, and many once-poor countries will lift themselves out of poverty on the wave of universal mobile money and the incorruptibility of cryptocurrencies. We will cultivate the next Google from Africa and life will be all good, right?

Wait. Not so fast. It’s a common mistake to assume what works in one place is the best solution for another. And, because “vanilla” and “easy-to-describe” are easier to sell to investors, we cut and paste the same investment models from the US and Europe and tell ourselves it’s the best solution for frontier markets. While we’re busy looking for the unicorn Uber of Africa, we may be overlooking some of the biggest untapped opportunities. What if the next Google doesn’t look anything like Google?

Bridging The Gap

According to a 2017 World Bank study, the financing gap among small- and medium-sized businesses (SMEs) in developing countries is $5.2T, of which $3.9T is in the global south. Venture capital works well with asset-light, hyper-growth businesses, but it doesn’t fit the needs of most of the businesses in Africa, which are often asset- / equipment-heavy and don’t have the same 100x growth potential. The best outcomes are usually modest returns for patient investors while the worst are capable founders contorting their business models to go after elusive venture checks and making unrealistic promises. The certain outcome is that a small number get funded and achieve outsized success and wealth, while thousands of other businesses struggle to find even modest amounts of capital to grow.

Many see the problem, but most lending solutions fail to generate sufficient returns — and even fewer are able to scale. Commercial banks use conventional approaches to manage risk that come with high administrative costs, which only very large loans can cover. Microfinance institutions serve the smallest borrowers but revert to conventional lending to service anything larger than a few hundred dollars. All this means that financing the $5.2T “missing middle” is expensive, hard-to-scale, and high risk. Working capital, CAPEX financing, and trade finance remain the biggest obstacles for businesses in frontier markets, and few avenues are available to the SMEs that make up the majority of the economic activity in frontier markets.

But the game is changing. The last two decades of rapid digitization in developing economies and the plummeting cost of networked devices have created a transformative opportunity for reaching SMEs. Data from the sea of digital transactions is making it easier to assess the credit risk of those without even a formal address. Embedded financing is everywhere, with solutions ranging from pay-as-you-go (PAYGO) solar products to water filtration systems that allow consumers to pay by the liter. Embedded financing makes expensive items affordable, and for SMEs, it means that they can take on assets that help them make more money and then use that extra profit to pay back the financing.

We have a historic opportunity to ride the wave of digitization, and bridge the financing gap for SMEs in frontier markets: a $5.2T untapped market that just needs the right kind of financing to explode.

The Promise Of Smart Asset Financing

To help realize this opportunity, we at Untapped Global are accelerating the adoption of alternative, data-driven, “smart” financing models. We have developed an investment platform and capital facility for Smart Asset Financing™, i.e. lending to businesses through connected assets, and using real-time data and digital payments to ensure repayment. Because it takes a different approach to managing risk, the Smart Asset Financing model is safer, more transparent, and further reaching, while offering more liquidity and better returns for investors. We don’t just look at balance sheets, ask for 150% collateral, and lend to those who already have capital like traditional players. Instead, we look at the business case behind the asset generating revenue and lend against the future digital revenue stream of that asset.

Over 70% of the economy in Sub-Saharan Africa is informal — merchants, motorcycle taxi drivers, water vendors — with an overwhelming majority of transactions being decentralized and peer-to-peer. Digitization is increasingly capturing these transactions, “formalizing” them. We designed Smart Asset Financing to realize the potential of this fast-growing, untapped market.

And we know it works. We finance hundreds of entrepreneurs and see payback rates above 95%. Now we’re expanding Smart Asset Financing to bring more capital to more companies and entrepreneurs that have the technology, assets, and know-how to scale their operations, but need the right capital to do it. We’ve developed a technology stack and investment platform dedicated to Smart Asset Financing for companies across many sectors, including water infrastructure, energy, and mobility in frontier markets such as Kenya, Mali, Uganda, and South Africa. Smart Asset Financing can help Africa leapfrog an entire stage of development, and go from analog peer-to-peer to decentralized and digitized peer-to-peer much more smoothly and quickly than we in the US and Europe could ever imagine.

Building A Better World Through Investing

Unlocking $5.2T of financial and human potential is exciting. But the opportunity goes beyond “upside.” It’s about creating an economic playing field where even the little guys and gals can win. Will investing in the next app in Silicon Valley make a difference? Will the world be a better place with more tech billionaires, or with more opportunity for small businesses? Finding ways to finance innovation and SMEs in booming, rapidly-digitizing frontier markets will lead to a more equitable future, which means less conflict and more people and resources to solve our common challenges.

Recently, I opened bank accounts with my twin 11-year-old daughters, Lexi and Tali. After asking me to help them buy a new mouse and iPad game with their new debit cards, they asked how they could invest their money to make more and “how can I invest to help people?” I’m dedicating the remainder of my life to answering that question.



Untapped Global
Untapped Insights

Untapped creates opportunity by connecting frontier market innovators to global investors.