A clutch of the world’s largest consumer products and food companies are joining Budweiser’s parent company Anheuser-Busch InBev in backing an investment program to support early stage companies focused on making supply chains more sustainable.
The Earth Day-timed announcement comes as companies and consumers confront the failure of recycling programs to adequately address the problems associated with plastic waste — and broader issues around the contributions of consumer behavior and industrial production and distribution to the current climate emergency.
The AB InBev program, called the 100+ Accelerator, launched in 2018 with the goal to solve supply chain challenges in water stewardship, the circular economy, sustainable agriculture and climate action, the company said. These are problems that the alcohol manufacturer’s new partners — Colgate-Palmolive; Coca-Cola; and Unilever are also intimately familiar with.
Since the launch of the accelerator and investment program, AB InBev has backed 36 companies in 16 countries, according to a statement. Those startups have gone on to raise more than $200 million in follow on financing.
The accelerator program creates funding for pilot programs and offers opportunities for early stage companies to consult with executive management at the world’s top consumer brands.
Since the program’s launch, AB InBev has worked with startups to pilot returnable packaging programs; implement new cleaning technologies to reduce water and energy use in Colombian brewing operations; provide insurance to small farms in Africa and South America; collect more waste in Brazil; recycle electric vehicle batteries in China; and upcycle grains waste from the brewing process to create new, nutrient rich food sources.
As pressures from outside investors and regulators mount, companies are beginning to shift their attention to focus on ways to make their industrial processes more sustainable.
These kinds of collaborative initiatives among major corporations, which are long overdue, have the potential to make a significant contribution to reducing the environmental footprint of business, but it depends on the depth of the commitment and the speed at which these businesses are willing to deploy solutions beyond a few small pilot programs.
Applications for the latest cohort will be due by May 31, 2021.
Johannesburg-based investment company Founders Factory Africa (FFA) today announced a partnership with Small Foundation that will see it select 18 agritech startups for an acceleration and incubation program.
Small Foundation is a Dublin-based philanthropic organization that focuses on the rural and agriculture sector in sub-Saharan Africa. With this partnership, Small Foundation is making an undisclosed investment in FFA to build and scale agritech startups on the continent.
“The partnership stands to make a significant impact across the continent by supporting agritech startups who can innovate and improve the delivery of a range of services to smallholder farmers and micro, small and medium-sized enterprises in the agricultural sector,” an excerpt in a statement read.
According to the South African-based venture development and investment company founded by Roo Rogers and Alina Truhina, early-stage founders will need to apply to join the Founders Factory Africa Venture Scale or Venture Build portfolios. These startups will have access to funding between $100,000 to $250,000 and hands-on technical support.
This is a change from when the company launched in 2018. FFA is an extension of the Founders Factory organisation that has invested in more than 130 companies globally. In 2018, FFA launched its first vertical in fintech when it partnered with the continent’s largest bank, Standard Bank, to invest in fintech startups. Some of the startups include Bwala, LipaLater, MVXchange and OkHi.
The following year, it took on a second investor in South African healthcare company Netcare Group and, via the partnership, invested in health-tech startups like RxAll, Redbird and Wellahealth.
Last year when we reported this partnership, startups in FFA’s Venture Scale accelerator program received a £30,000 cash investment and £220,000 in support services. Those in the Venture Build program received £60,000 cash and £100,000 toward support.
For this third partnership, Truhina says FFA will be investing a total of $300,000 in cash and hands-on support for companies in its Venture Scale program. However, startups in Venture Build will be receiving up to $250,000 in funding.
The Venture Scale program involves providing support for existing startups operating in seed to pre-Series A stages. On the other hand, the Venture Build program is for founders wanting to launch a startup in Africa, who may or may not have a concept or an idea.
Currently, there are 23 companies across FFA’s Scale and Build portfolios. These startups, mainly from Ghana, Kenya, Nigeria and South Africa, have collectively raised more than $7 million during and after the program. Truhina says FFA plans to increase this number to nearly 90 startups in total by 2024.
“We will build, scale and invest in 88 startups with current FFA investors (Standard Bank, Netcare and Small Foundation) until 2024. We plan to continue to take on new investors and continue to work on the continent indefinitely,” she said.
While FFA is dedicating a fund for agritech startups, it has invested in other startups with agritech solutions for instance Nigeria’s Foodlocker. The company forecasts foodstuff demand through machine learning and helps buyers procure goods from smallholder farmers. But despite this proposition, FFA classifies the startup as a fintech investment.
“Foodlocker was a company we selected and invested in under our Fintech portfolio, as the startup has a financial component. With Small Foundation, we are setting up a new dedicated agritech sector,” said Truhina. Small Foundation joins Standard Bank and Netcare in the peculiarity of assistance offered to FFA portfolio startups. From sector expertise and footprint across the continent to access to clients, POCs and pilots, these investors are trying to fill in the gap in sectors ripe for exponential growth.
But though fintech has caught on well with both local and international investors, the same cannot be said for health tech and agritech. According to Briter Bridges, fintech accounted for 31% of the total $1.3 billion raised by African startups. Health-tech startups accounted for 9%, while agritech startups represented just 7%.
Small Foundation wants to improve this number in its own little way, and concurrently has a plan to “end extreme poverty in sub-Saharan Africa by 2030.” Conor Brosnan, the CEO and chair of the foundation, holds that tackling the sector’s biggest issues with the FFA will bring the company toward achieving this objective.
“This is a pivotal time to invest in the growing area of agritech in Africa, which has transformative potential for local livelihoods. We are excited to see FFA’s highly skilled teamwork with immensely talented African entrepreneurs to deliver scaled solutions to some of the biggest challenges faced by the sector,” he said.
In three years, Founders Factory Africa has managed to enlist the services and finances of three influential partners. Yet, it has 55 more startups to invest in before 2024, so we should expect an increased investment activity and more partnerships to fund startups in other sectors.
The firm also has fresh capital in the works for its portfolio companies as it advances, though. It’s in the process of raising a $35 million “Africa Seed Fund” which will exist alongside FFA and execute follow-on capital in some portfolio companies.
Here’s another edition of “Dear Sophie,” the advice column that answers immigration-related questions about working at technology companies.
“Your questions are vital to the spread of knowledge that allows people all over the world to rise above borders and pursue their dreams,” says Sophie Alcorn, a Silicon Valley immigration attorney. “Whether you’re in people ops, a founder or seeking a job in Silicon Valley, I would love to answer your questions in my next column.”
Extra Crunch members receive access to weekly “Dear Sophie” columns; use promo code ALCORN to purchase a one- or two-year subscription for 50% off.
I’m a female entrepreneur who created my first startup a few months ago.
Once my startup gets off the ground — and as COVID-19 gets under control — I’d like to visit the United States to test the market and meet with investors. Which visas would allow me to do that?
—Noteworthy in Nairobi
Congratulations on founding your startup! There are many ways to engage with the U.S. startup ecosystem, and you can start now, even before you physically come to the United States.
I recommend doing some research into the programs and resources offered to entrepreneurs like you through the U.S. Embassy and Consulates near you in your home country. I recently interviewed Lilly Wahl-Tuco, a foreign service officer who has worked for the U.S. Department of State for 15 years, on my podcast.
Wahl-Tuco discussed some of the State Department resources — including programs, competitions and grants — made available by U.S. embassies and consulates for entrepreneurs living in the area.
Image Credits: Joanna Buniak / Sophie Alcorn (opens in a new window)
Serving as the first Environment, Science, Technology and Health (ESTH) officer at the U.S. Embassy in Bosnia and Herzegovina in 2015, Wahl-Tuco was tasked with energizing the entrepreneurs of Bosnia. After she traveled around the country, visiting every incubator and meeting several entrepreneurs, Wahl-Tuco said she was surprised that most of the people she talked with didn’t know about the resources that the U.S. government offers through its embassies.
She recommends that entrepreneurs reach out, network and do online research to figure out what’s offered in their country or even if other foreign embassies offer resources and programs aimed at entrepreneurs.
Wahl-Tuco also suggested that entrepreneurs reach out to their local U.S. Embassy. For example, you can contact the U.S. Embassy in Kenya to find out if you can discuss your startup and business plan with an ESTH officer (if there is one) or someone else there. Connecting with embassy staff can open up many opportunities.
For a continent with such stark inequality, Africa has seen limited innovation to increase access to healthcare and reduce healthcare delivery costs. Over the years, there has been continued investment in traditional care models despite the overwhelming evidence of inefficiency and escalating costs. The pandemic also laid these problems bare, exposing the vulnerabilities of the continent’s healthcare system.
Health tech startup Quro Medical is trying to scale alternative models for African healthcare starting from its home country, South Africa. The company, which provides services to manage ill patients in the comfort of their homes, is emerging from stealth to announce the close of its $1.1 million round. The round was led by Kenya-based Enza Capital and South African VC firm Mohau Equity Partners.
Quro Medical was founded by Dr Vuyane Mhlomi, Zikho Pali and Rob Cornish in 2018. CEO Mhlomi understood the pressing need for South African healthcare innovation from his own experience before and after he became a doctor.
It is known that hospitals in Africa experience excessive demands, which places strain on bed capacity. At the same time, it hinders effective patient treatment and recovery. Raised in Cape Town by his parents, Mhlomi experienced this firsthand. His parents suffered from chronic health conditions and he had to spend hours in clinics and hospitals waiting to see doctors.
Later, an opportunity to study medicine took him to the University of Oxford. Upon completion, he returned to South Africa where he knew the problem he faced previously was one to solve, hence Quro Medical.
“We were connected by our belief that the private healthcare sector can and should be doing more to shoulder the burden of healthcare provision in this country and on the continent generally,” Mhlomi told TechCrunch. “These escalating costs are the primary barrier to accessing healthcare in the private sector, leaving an overwhelming burden on our public health system.”
The CEO argues that acute patient care at home leads to better clinical outcomes and improved patient experience. This is the principle on which Quro Medical is established. In the long run, it wants to build the largest virtual hospital ward in Africa, with superior clinical outcomes to conventional care at a lower cost.
Unlike hospitals, getting healthcare at home can feel safer, which is an extra proposition for Quro Medical. According to COO Pali, apart from hospitals’ high costs, patients are at risk of getting hospital-acquired infections. But while it might appear that Quro Medical is offering the same old traditional home care with a mix of telemedicine service, that’s not precisely the case. Pali says the company incorporates clinical data and remote healthcare monitoring to provide real-time, data-driven clinical interventions. “We are focused on saving lives and enhancing patient care. The technology is the enabler, making all of this possible,” adds Mhlomi.
Patients are admitted into the company’s care in lieu of a general ward hospital admission. Then Quro Medical makes revenue from filing a claim with medical aid and insurance companies paid via reimbursement. The healthtech startup also collects out-of-pocket payments from patients.
The pandemic reinforced the company’s importance in offering remote patient monitoring services, a significant aspect of its business that garnered a check from Enza Capital.
“As our collective healthcare systems struggle to care for patients beyond the walls of a hospital, which we’ve seen exacerbated with the onset of the COVID-19 pandemic, remote patient monitoring and healthcare delivery will undoubtedly form a core part of the lasting solution,” said Mike Mompi, partner and CEO at the firm.
Nevertheless, this period has seen health tech startups offering out-of-hospital services struggle to have their services reimbursed. So how has Quro fared? Pretty well, apparently. The company claims to successfully convert most of its major medical schemes (health insurance) in South Africa as clients. They account for more than 90% of the total medical scheme market in the country.
Quro Medical has grown to work with about 150 doctors. Mhlomi believes his company is a first mover in Africa, meaning that he expects other players’ arrival in line with the trends in other markets. The company that has grown to work with 150 doctors now has plans to accelerate its hospital-at-home services and scale its operations across the country to meet its growing client base’s demands. It also wants to attract and retain talent and extend into other African markets.
Speaking on the investment for Mohau Equity Partners, CEO Dr Penny Moumakwa said, “We are very excited to be invested in Quro, they are a dynamic management team, building out a global medical solution, that will showcase the ability of entrepreneurs on the African continent in advanced digital healthcare.”
Since ride-hailing companies like Uber and Bolt disrupted the transportation industry, one of the thorns on their sides has been traffic congestion and pollution. Research has shown that trips from ride-hailing cars have more emissions than those from personal cars.
To reduce their carbon footprint and solve the latter problem, both companies have floated the idea of ridesharing and other transportation models, like bike and scooter-sharing services. They also have toyed with integrating public transportation scheduling and providing drivers with incentives to switch to electric cars. However, these models have found little or no success.
So in 2018, Lyft decided to go a step further by promising to attain carbon neutrality. According to The Atlantic, the company planned to execute this by purchasing carbon credits from 3Degrees, a sustainability company based in San Francisco.
In 2019, Lyft said it had eliminated the amount of carbon that would take 2.4 million acres of trees to remove in a single year. It achieved this by purchasing 2,062,500 metric tons of carbon offsets, but the company reverted to its old ways in 2020.
But while the program made Lyft rides carbon neutral, it was an expensive process. The company claimed that net emissions from its rides would still increase in the long run. So Lyft promised to offer rides only in electric vehicles by 2030. This is the same with most car companies worldwide, each promising to attain carbon neutrality via electric cars in the future.
However, Planet, a car company based in South Africa wants to achieve carbon neutrality now, not later. But Planet42 isn’t a ride-hailing company. It offers a car subscription product that buys second-hand cars from dealerships and rents to customers via a subscription model.
Founded by Marten Orgna and Eerik Oja, Planet42 targets individuals in emerging markets but has a presence only in Africa. The company has bought nearly 3,000 cars in South Africa and plans to increase this number to 100,000 in the next few years — and 1 million cars globally by 2025.
So despite not being a ride-hailing company and having a huge positive social impact because it gives cars to people who otherwise would not have them, there is a limited negative environmental impact Planet42 has due to the emissions produced by its cars.
While most car companies seem lethargic toward becoming carbon neutral, Planet42, studying how it indirectly contributes to emissions, decided to act last year.
“Few people would argue that becoming carbon neutral is not a worthwhile goal, but it seemed to us that the world is not moving towards carbon neutrality fast enough,” Oja told TechCrunch. “So instead of introducing a vacuous grand plan of becoming carbon neutral by 2040 or something like that, we decided to become carbon neutral now.”
Image Credits: Planet42
Because there are hardly any electric vehicles in Africa for mass consumption and planting trees can be costly, how has the company gone about it?
Before helping Lyft embark on its tree-planting project, 3Degrees engaged in a couple of wind farms and captured greenhouse gases from landfill projects. Planet42 chose to neutralize its carbon emission through the former; however, it works with local companies in South Africa to reach this.
Its first project is a wind farm in Northern Cape, South Africa; with the money from carbon offset credits, Planet42 has been able to finance the farm for months. The power produced from wind turbines offsets other, more harmful energy production methods like burning coal and supporting a low carbon global economy.
“We are offsetting this negative impact by investing into carbon offset projects in the markets we operate in. To put it another way, the investments we make into carbon neutrality represent a self-imposed tax. We are leading by example and hope that companies in Africa and beyond will follow us.”
When the company, which has raised $20 million in debt and equity, first launched, attaining carbon neutrality wasn’t even an afterthought. But now, not only is it certified as a carbon-neutral company by Natural Capital Partners, its investors feel enthused about the project.
Oja says what’s next for the company will be to achieve carbon neutrality via electric cars ultimately. However, that might be a reach. The adoption of electric vehicles in Africa faces additional problems different from what the U.S., Europe and even other emerging markets face. Top of mind is the dire power situation where unreliable power supply is provided at high electricity prices. Then there is a general lack of tax incentives, subsidies and policies, and the sole fact that they are too expensive for the average African car owner.
For instance, there are more than a million electric vehicles on U.S. roads and over 317,000 on U.K. roads. In South Africa — Planet42’s main market and Africa’s top electric car market, this number is just about 1,000. So, until electric cars become mainstream, wind farms will remain vital to the company’s carbon-neutral efforts.
“Ideally, what we could be doing is for our cars to be electric, and that’s what we’re planning for the future. When we do that, there wouldn’t be any need for offsets on a day to day side but we’re not there right now. Everyone understands that ultimately electric cars will be ideal; however, that future is not now and we need to act right now,” the CEO said.
Small businesses in Africa need digital banking services including plenty of credit. Although these businesses drive economic growth and contribute up to one-third of the continent’s GDP, they are often financially excluded from credit and other financial services due to their size and informality.
One such company tackling this challenge in the eastern part of Africa is Ugandan fintech startup Numida. And today, the company is announcing the close of its $2.3 million seed round.
Mina Shahid, Catherine Denis and Ben Best founded Numida in 2017 and capitalized on the opportunity to build one of East Africa’s first digital fintechs targeting semi-formal micro and small businesses. Typically, these businesses access credit from family, loan sharks and informal money lenders that offer poorly designed consumer credit. They can also get loans from a traditional microfinance institution, although with ridiculous interest rates.
But the founders didn’t set out to offer credit to businesses when they first started. An initial pilot in 2016 was centered around a bookkeeping tool that enabled traditional microfinance institutions (MFIs) to provide unsecured credit to semi-formal businesses.
“One of the major reasons why financial institutions don’t give loans to these businesses is because they don’t have good financial track records and cash flow history,” Shahid said to TechCrunch. “That was the problem we set out to solve — to create the mechanisms to get that cashflow data and present it in a form that can be used and incorporated into the underwriting processes.”
The founders thought that these microfinance institutions would begin to use the data obtained from months of bookkeeping to serve these businesses. But they didn’t envisage what happened after nine months. Shahid stated that even though the MFIs claimed to love the data that Numida could bring out, they were unwilling to adjust their underwriting practices. In turn, they rejected all Numida’s customers who applied for loans on the platform because they lacked collateral.
“So we thought among ourselves that if our mission is to unlock access to resources that these mom and pop shops need in order to grow their businesses, we’re not going to do that by partnering with these traditional MFIs; we had to do that ourselves,” he continued.
Via a proprietary credit score, Numida offers risk-based pricing on an applicant’s first loan. After that, businesses can access unsecured working capital loans of up to $3,500 in less than two hours, according to the company.
Numida business owners
From May 2017, when it pivoted to September 2019, Numida kept its outstanding portfolio very small and iterated on its underwriting process and credit risk algorithm. After making several iterations, the company went full on to the market in October 2019, and the CEO says the company has grown 6x in lending volumes.
To date, it has provided more than $2 million in unsecured credit to 3,000 micro and small businesses in Uganda, disbursing around $250,000 per month. This is with outstanding collections, repayment rates and client retention, the CEO added.
Although the consumer digital lending space in East Africa has seen an abundance of transactions in recent years, the same cannot be said for startups targeting the micro and small business segment. As one of the few facing this segment, the business has faced issues around getting relevant data to improve its model but doesn’t collate data it thinks isn’t necessary (social media activities, SMS or mobile money transactions) for the sake of aggregating data.
“We look at the business fundamentals, the cash flow of the business, and some demographic data about the applicants. We’ve had to build our own data set because there are no readily available cashflow data on semi-formal, micro and small businesses in Africa,” remarked Shadid.
Its underwriting model was built off 15,000 loans, which took a long time to execute, and this timing puts some strain on how fast it can onboard customers and serve them. However, the pandemic helped in accelerating this model, and with this new investment, Numida is poised to grow further.
Pan-African payments company MFS Africa led the seed round. There was also participation from firms like DRK Foundation, Equilibria Capital and Segal Family Foundation alongside angel investors.
The last time MFS Africa was in the news regarding an investment dates back to June 2020, when it acquired Ugandan fintech startup Beyonic for an undisclosed amount.
Numida is another Ugandan fintech, and a similar play might be in the cards. According to Shahid, the most obvious acquisition path for any successful lending startup to small businesses in Africa is a payments platform. His reason? Because credit is one of the core financial products that will create loyalty and retention to a specific payments platform.
He adds that MFS is a strategic investor in Numida and not the typical VC. He sees the Pan-African company as owning infrastructure, which his company can ride on as a solid foundation for scale. “That’s an opportunity we see in the future. We were concerned about scaling across the continent and who would be the best partner for this. We thought MFS has a lot of expertise and footprint on the continent that will allow us to scale moving forward.”
With this new financing, Numida plans to expand aggressively in Uganda and pilot in a new market, preferably in West Africa. There are some parallels between Uganda and Ghana, Numida’s primary choice in the region. They both have similar mobile money penetration, issues with traditional financial service providers and similar businesses that Shahid says make an enticing market. Per plans, Numida will introduce additional financial services like payments, micro-insurance and deposits to its customers.
The crypto industry as a whole has seen a momentous year of growth, heavily spurred on by the entrance of institutional investors adopting bitcoin due to its store of value properties. The 2020 spike bitcoin experienced was also accelerated by its global adoption as the number of global cryptocurrency users surpassed 100 million in Q3 2020.
For Luno, a U.K.-based crypto company founded by Marcus Swanepoel and Timothy Stranex in 2013, it grew to 6 million customers from January 2020 to January 2021. However, that number has since gone up to 7 million. Today the company, headquartered in London, has nearly 400 employees across London, South Africa, Malaysia, Indonesia, Nigeria and Singapore, with customers in 40 countries globally.
According to CEO Swanepoel, Luno’s numbers have been increasing month-on-month over the last seven years. However, this is the first time it is observing an acceleration of this magnitude.
There are a couple of reasons for Luno’s surge in numbers (like any other crypto exchange startup). Generally, despite talks of bitcoin being used in everyday life by crypto enthusiasts and interests from institutional entrants like BNY Mellon, Mastercard and Tesla, it is a long shot before becoming mainstream.
For now, crypto mainly serves investment purposes. This singular factor has particularly made it very popular with Africans — a demographic that has been a major part of Luno’s growth and the huge traction it is witnessing.
Last year, the company surveyed the markets in which it currently operates. It featured 15,000 respondents from South Africa, U.K., France, Italy, Indonesia, Malaysia and Nigeria; the answers helped Luno understand how the pandemic influenced attitudes towards the current financial system. According to the survey, 54% of Africans were ready to adopt a single global digital currency, compared to 41% for Asia and 35% for Europe.
Africa’s dominance also shows in its numbers. Out of the 7 million customers it has globally, 4.7 million people are in Africa. This number was 2.3 million in January 2020. Luno’s app installs across the continent have increased by 271% within this time frame, and trading volumes skyrocketed 12x, from $555 million to $7 billion. For context, Luno did $8.3 billion in total trading volume.
But a large part of this growth is down to Luno’s early play in the market. Over the last few years, infrastructure in parts of the world that could not previously support the crypto market has improved substantially. Luno has played a vital role as one of the first platforms to improve the crypto marketplace experience by including local currencies. It also helped to lay the groundwork for educating people on digital currencies.
“The last time bitcoin went up as it did during the past year was in 2017 and 2018, and it was mostly driven by retail, but it was still very difficult to buy crypto. There were trust issues; it would take days to get your account verified and even set up a wallet,” Swanepoel told TechCrunch. “Now, over the last three years, companies like ours, especially in Africa, have built up this infrastructure, KYCs, new payment methods, customer experience and support. The experience is much better and education levels are a lot higher. To me, I think that’s played a large role in crypto adoption in the continent.”
In September last year, Luno got acquired by Digital Currency Group (DCG), an investment firm that builds, buys and invests in blockchain companies. Some of its portfolio companies include Coindesk, Genesis and Grayscale Investments. Before acquiring Luno, BCG first invested in the company’s seed round in 2014. Then last year, Swanepoel said he saw the opportunity to take Luno to a larger scale after noticing the immense growth and adoption on its platform.
“The first five to six years for us was on a small scale and now, we want to go big. So it helps to have a global platform like DCG to do it from because they have large amounts of capital and are committed to investing in Africa as well as outside the continent,” he remarked.
The CEO adds that DCG has more visibility on the crypto industry and trends. The acquisition was simply for Luno to leverage DCG’s insights and stay ahead of the curve, which looks to have paid off. Since the acquisition, Luno has seen the number of active users increase by 167%. As of January, the average user held more than $7,000 in their wallet, up 56% from December 2020.
Nothing lasts forever, but if the crypto market bull run is anything to go by, crypto isn’t the fad people once thought it was. In Q1 2021, companies like Coinbase (going public Wednesday) and Robinhood experienced monster numbers showing strong growth projections. For Luno, it expects to continue growing exponentially, a trajectory that sets the company on track to reach 1 billion customers by 2030.
Hello and welcome back to Equity, TechCrunch’s venture capital-focused podcast where we unpack the numbers behind the headlines.
This is Equity Monday, our weekly kickoff that tracks the latest private market news, talks about the coming week, digs into some recent funding rounds and mulls over a larger theme or narrative from the private markets. You can follow the show on Twitter here and myself here. It is good to be back!
There was a lot to get through, so, in order that we discussed the topics on the show, here’s our rundown:
Don’t forget that Coinbase is listing this week, yeah? Chat soon!
Africa’s fintech space has gained proper attention over the past few years in investments but it is not news that startups still battle with offering high-quality products. However, they seem to be doing quite well compared with traditional banks that face challenges like legacy cost structures and a major lack of operational efficiency.
Appzone is a fintech software provider. It is one of the few companies that builds proprietary solutions for these financial institutions and their banking and payments services. Today, the company is announcing that it has closed $10 million in Series A investment.
Typically, African financial institutions rely on using foreign technology solutions to solve their problems. But issues around pricing, flexibility to innovate, and a lack of local tech support always come up. This is where Appzone has found its sweet spot. The company based in Lagos, Nigeria, was founded by Emeka Emetarom, Obi Emetarom, and Wale Onawunmi in 2008.
Appzone clearly plays a different game from other African fintechs. One clear differentiator is that the company functions as an enabler (at payment rails and the core infrastructure) within banking and payments.
It commenced as a services firm to provide commercial banks with custom software development services. In 2011, the company launched its first core banking product targeting microfinance institutions. The following year, Appzone launched its first product (branchless banking) for commercial banks. It went live with its mobile and internet banking service in 2016 and launched an instant card issuance product in 2017. In 2020, the company launched services catered to end-to-end automation of lending operations for banks and blockchain switching.
“We started Appzone with the intention to build out innovative local solutions for banking and payments on the continent,” CEO Obi Emetarom told TechCrunch. “The focus was to leverage our ability as an enabler to create proprietary technology for both segments.”
Image Credits: Appzone
Appzone platforms are used by 18 commercial banks and over 450 microfinance banks in Africa. Together, they amass a yearly transaction value and yearly loan disbursement of $2 billion and $300million.
Since its inception, the Google for Startups Accelerator alumnus claims to have led Africa’s fintech sector in some global firsts from the continent. First, the company says it created the world’s first decentralised payment processing network. Second, the first core banking and omnichannel software on the cloud. Third, the first multi-bank direct debit service based on single global mandates.
Emetarom likes to describe Appzone as a fintech product ecosystem with an emphasis on proprietary technology. So far, we’ve touched on two layers of this ecosystem—the digital core banking service providing software that runs financial institutions’ entire operations and interbank processing, which integrates these institutions into a decentralized network powered by blockchain.
Coinciding with this investment is the introduction and scaling of a third layer that focuses on end-user applications. Appzone, having built both banking and fintech layers, wants to connect individuals and businesses to their services. This is where most new-age fintech startups operate, and although Appzone is coming late to the party, it has a bit of an edge, the CEO believes.
“Most of these companies operating in end-user applications have to depend on services from core banking and interbank processing to be able to get their own offerings out there. For us, I think we have an advantage in terms of costs and flexibility because we are already operating in both layers,” Emeratom said in relation to what he thinks of competition.
The company is coming out to blitz scale its products and services after working in stealth mode for more than a decade. One way it wants to carry this out will be to take its pan-African expansion sternly even though a large part of its 450 clients are based in Nigeria. Other countries with a presence include the Democratic Republic of Congo, Ghana, Gambia, Guinea, Tanzania, and Senegal. Before now, Appzone lacked the resources to push into these markets aggressively even though they showed promise. But having closed its Series A, the plan is to drive growth in these countries and expand across more African countries.
Another means Appzone plans to achieve scale is by growing its engineering team — a department it takes pride in. These engineers make up half of Appzone’s 150 employees and there are plans to double down on this number. Like most Nigerian startups these days, Appzone is big on senior engineers. Still, while it might present a problem to other companies, Emetarom says the company has no issue training promising junior talent to grow in expertise.
“Our proprietary tech allows us to innovate at a fraction of a cost, and they are built by essentially the best local talent available. Because those systems are really complex and the level of innovation required is on another level, we literally seek out the to 1% of talent in Nigeria,” he remarked. “We know that even though the expertise isn’t there, we can accelerate acquiring that expertise when we train the very best talents. The more we train our engineers, the faster they grow in terms of expertise, and they will be able to deliver at the same level of world-class quality we expect.“
Obi Emetarom (Co-founder and CEO, Appzone)
Back to the round, a noteworthy event is that most investors who took part are based in Nigeria despite its size. CardinalStone Capital Advisers, a Lagos-based investment firm, led the Series A investment. Other investors based in the country include V8 Capital, Constant Capital, and Itanna Capital Ventures. New York-based but Africa-focused firm Lateral Investment Partners also participated.
Before now, Appzone closed a $2 million from South African Business Connexion (BCX) in 2014. Four years later, it raised $2.5 million in convertible debt and bought back shares from BCX in the process. But overall, the company says it has raised $15 million in equity funding.
Speaking on the investment, Yomi Jemibewon, the co-founder and managing director of Cardinal Stone Capital Advisers, said the firm’s investment in Appzone is further proof of Africa’s potential as the future hub of world-class technology.
“Appzone is building a disruptive fintech ecosystem that will be the backbone of Africa’s finance industry with products across payments, infrastructure and software as a service. The impact of Appzone’s work is multifold — the company’s products deepen financial inclusion across the continent whilst providing best-fit and low-cost solutions to financial institutions. Its emphasis on premium talent also helps stem brain drain, rewarding Africa’s best brains with best in class employment opportunities,” he added.
Appzone’s funding continues the fast-paced investment activities witnessed by Africa’s fintech space after a slow January. In the last two months, more than eight fintech startups have secured million-dollar rounds. This includes very large rounds by South African digital bank TymeBank ($109 million) in February and African payments company, Flutterwave ($170 million) in March.
In a circular released by Nigeria’s capital market regulator SEC today, investment platforms providing access to foreign securities might be treading on dangerous grounds.
According to the SEC regulations that have just been brought to light, these platforms are trading foreign securities not registered in the country and have been warned to stop doing so. Capital market operators in partnership with them have also been warned to renege on providing brokerage services for foreign securities.
Over the past three years, Robinhood-esque platforms like Bamboo, Trove, Chaka and Rise have sprung forth in the Nigerian fintech space. They offer Nigerians access to stocks, bonds and other securities in both local and international markets. These platforms have grown in popularity among the middle class and provide a haven to protect earnings from naira devaluations.
That said, there’s a vast difference in how they operate when compared to Robinhood. In addition to being a trading app, Robinhood offers online brokerages (introducing and clearing) and also zero commission trading. Nigerian investment platforms do not, and while any trading platform can get a brokerage license in the U.S., it can be a Herculean task to obtain one in Nigeria. This is where capital market operators (local and foreign brokerage firms in this case) come into play, forming strategic partnerships with these companies so Nigerians can access both local and foreign fractional securities.
After a series of regulatory onslaught from different government bodies on tech startups last year, the SEC followed suit in December. It singled out Chaka, one of the platforms and accused it of selling and advertising stocks. The regulator’s definition of the alleged offence was that Chaka “engaged in investment activities, including providing a platform for purchasing shares in foreign companies such as Google, Amazon, and Alibaba, outside the Commission’s regulatory purview and without requisite registration.”
The company’s CEO, Tosin Osibodu, denied any wrongdoing, and since the turn of the year, not much has been heard from the SEC and Chaka regarding this matter until the release of today’s circular. Unsurprisingly, the regulator continued from where it left off, only this time, all investment platforms including brokerage firms — not just Chaka — are involved. SEC’s subtle directive is to stop selling, issuing or offering for sale any foreign securities not listed on any exchange registered in Nigeria.
What this inherently means from now on is that investment platforms will have their work cut out and might only offer individuals access to only local stocks and securities. This affects the business models of these startups. And the core value they provide, which is to help Nigerians store monetary value and hedge against naira devaluation is at the threat of being wiped out.
Here’s the information released by the regulator as seen on its website:
The attention of the Securities and Exchange Commission (the Commission) has been drawn to the existence of several providers of online investment and trading platforms which purportedly facilitate direct access of the investing public in the Federal Republic of Nigeria to securities of foreign companies listed on Securities Exchanges registered in other jurisdictions. These platforms also claim to be operating in partnership with Capital Market operators (CMOs) registered with the Commission.
The Commission categorically states that by the provisions of Sections 67-70 of the Investments and Securities Act (ISA), 2007 and Rules 414 & 415 of the SEC Rules and Regulations, only foreign securities listed on any Exchange registered in Nigeria may be issued, sold or offered for sale or subscription to the Nigerian public. Accordingly, CMOs who work in concert with the referenced online platforms are hereby notified of the Commission’s position and advised to desist henceforth.
The Commission enjoins the investing public to seek clarification as may be required via its established channels of communication on investment products advertised through conventional or online mediums.
This is a developing story. More to follow…
While Nigeria and Kenya have been at the forefront of African fintech innovation, activities in Egypt are beginning to shape up nicely. Right now, Egypt is home to a burgeoning fintech startup ecosystem, and today, one of its biggest players, Paymob announced that it has completed an $18.5 million Series A round.
In July 2020, Paymob raised $3.5 million as its first tranche of Series A investment. An additional $15 million was raised from the same investors led by Dubai-based VC firm Global Ventures. Other investors include Egyptian investment fund A15 and Dutch development bank FMO.
The total raise of $18.5 million is the largest Series A round in Egypt yet and one of the largest equity rounds in North Africa.
“We are delighted to lead this momentous fintech fundraise in the region. Paymob has a perfect combination of high-quality technology, product customers increasingly cannot do without, and an outstanding management team, “Basil Moftah, general partner at Global Ventures, said of the investment. “Their market opportunity is also huge; Egypt’s transformation to a cashless society is being enabled by the unique products Paymob has built.”
Paymob was founded in 2015 by Alain El Hajj, Islam Shawky, and Mostafa El Menessy. The platform helps online and offline merchants to accept payments from their customers via several products and solutions. It offers a payment gateway that merchants can plugin into their sites or mobile application using its APIs. For offline merchants, Paymob has a POS solution where they can receive in-store card payments.
The company also has a payment links feature where merchants share links with their customers to receive payments that are received using mobile wallets. And according to the company, 85% of mobile wallets transactions carried out in Egypt is processed by its infrastructure. It also claims to be the largest payment facilitator in the country.
Asides from Egypt, Paymob is also present in Kenya, Pakistan, and Palestine. CEO Shawky says the company has plans to expand into more Sub-Saharan African countries. However, that will come after focusing on the Gulf Cooperation Council (GCC) to gain a large market share.
Regional expansion (with an imminent entry into Saudi Arabia this year) is one of Paymob’s objectives following this raise. Per a statement released by the company, it will also use the investments to expand its merchant network, meet increasing demand, and improve product offerings.
The pandemic presented one of the best opportunities for fintechs all over the world to achieve massive growth. For Paymob, it claims to have grown its monthly revenue over 5x last year. The company also recorded a total payment volume of more than $5 billion from over 35,000 local and international merchants like Swvl, LG, Breadfast, and Tradeline.
This growth allowed the fintech company to raise the second tranche of investment after closing just $3.5 million initially. Shawky told TechCrunch that the deal materialized after the company’s investors and management witnessed an “unprecedented growth” driven by the pandemic “in addition to the new initiatives launched by regulators, which encouraged them to increase their investment to meet our increasing demand.
As earlier iterated, fintech is on the rise in Egypt with startups like Moneyfellows, NowPay, Raseedi, Flick providing lending, payments, wealth and personal finance management services, etc.
The Egyptian fintech ecosystem also got a major boost when incumbent fintech Fawry became a publicly-traded unicorn for the first time. Since launching in 2007, Fawry has been the largest online payment platform in the country and offers a variety of services ranging from mobile wallet to banking services. Will Fawry’s longstanding presence pose a challenge to Paymob’s quest to become a dominant fintech as well? Shawky doesn’t think so.
“Paymob’s major competitor is cash. With only a small percentage of the economy operating in digital forms, we believe the opportunity of truly transforming cash into digital is yet to be unlocked,” he said.
The venture capital scene in the North African tech ecosystem will be absolutely buzzing right now with the announcement of two large VC funds in the space of two days. Today, Algebra Ventures, an Egyptian VC firm, announced that it has launched its $90 million second fund.
Four years ago, Algebra Ventures closed its first fund of $54 million, and with this announcement, the firm hopes to have raised a total of $144 million when the second fund closes (with first close by Q3 2021). If achieved, Algebra will most likely have the largest indigenous fund from North Africa and arguably in Africa.
According to the managing partners — Tarek Assaad and Karim Hussein, the first fund was an Egyptian-focused fund. Still, the firm made some selective investments in a few companies outside the country. The second fund will be similar — Egypt first, Egypt focused, but allocating investments in East and West Africa, North Africa and the Middle East.
Assaad and Hussein launched the firm in 2016 as one of Egypt’s first independent venture capital funds. It wasn’t easy to start one at the time, and it took the partners two years to close the first fund.
“Raising a venture capital fund in Egypt in 2016, in all honesty, was a pain. There was no venture capital to speak of back then,” Assaad told TechCrunch. “The high-flying startups back then were raising between $1 million and $2 million. We decided to take the bull by the horn and raise from very established LPs.”
These LPs include Cisco, the European Commission, Egyptian-American Enterprise Fund (EAEF), European Bank for Reconstruction and Development (EBRD), International Finance Corporation (IFC) and private family offices. From the first fund, Algebra backed 21 startups in Egypt and MENA, and according to the firm, six of its most established companies are valued at over $350 million and collectively generate more than $150 million in annual revenue. It hopes to back 31 startups from the second fund.
Algebra says it’s sector-agnostic but has a focus on fintech, logistics, health tech and agritech. Although the firm has invested in startups in seed and Series B stages, Algebra is known to be an investor in startups looking to raise Series A investments.
Another appealing proposition from Algebra lies in the fact that it owns an in-house team focused on talent acquisition — in operations, marketing, finance, engineering, etc., for portfolio companies.
The firm’s ticket size remains unchanged from the first fund and will continue to cut checks ranging from $500,000 to $2 million. However, some aspects as to how the firm handles operations might change according to the partners.
“One of the lessons learned in our first fund is that we see that there are more interesting opportunities and great entrepreneurs in the seed stage. And given that we’re more on the ground in Egypt, sometimes we wait for them to mature to Series A. But going forward, we might need to build relationships with those we find exceptional at the seed level and also expand our participation on the Series B level, too,” Hussein said on how the firm will act going forward.
Karim Hussein (Managing partner, Algebra Ventures)
Hussein adds that the company will also be doubling down on its talent acquisition network. Typically, Algebra helps portfolio companies hire C-level executives, and while it plans to continue doing so, the firm might adopt a startup studio model — pairing some professionals to start a company that eventually gets Algebra’s backing and support.
The reason behind this stems from the next set of companies Algebra will be looking to invest in. According to Hussein, the partners at Algebra have studied successful businesses in other emerging markets for some time and want to identify parallels in North Africa where the firm can invest.
“In cases where the firm can’t find those opportunities, we may spur some of those in the network to start building those businesses and capture those opportunities,” he remarked.
Before Algebra, Hussein has been involved with building some successful tech companies in the U.S. Primarily an engineer after bagging both bachelors and doctorate degrees from Carnegie Mellon University and MIT, respectively, he ventured into the world of startup investing and entrepreneurship after working for a consulting company in the dot-com era.
He would go on to start Riskclick, a software company known for its commercial insurance applications. The founders sold the company to Skywire before Oracle acquired the company to become part of its suite of insurance services. After some time at WebMD, Hussein returned to Egypt and began mentoring startups as an angel investor. Alongside other angel investors, he co-founded Cairo Angels, an angel investor network in Egypt, in 2013.
“There was a massive gap in the market. We were putting in a bit of small angel money to these businesses but there were no VCs to take them to the next level. So I met up with Tarek and Ziad Mokhtar, and the rest is Algebra,” he said.
Assaad is also an engineer. He obtained his bachelors in Egypt before switching careers by going to Stanford Graduate School of Business. He continued on that path working for some Bay Area companies before his return to Egypt. On his return, he became a managing partner at Ideavelopers, a VC firm operating a $50 million fund since 2009. The firm has had a couple of good success stories, the most notable being fintech startup Fawry. Fawry is now a publicly traded billion-dollar company and Assaad was responsible for the investment which realized a $100 million exit for Ideavelopers in 2015.
Tarek Assaad (Managing partner, Algebra Ventures)
With Algebra, both partners are pioneering local investments in the region. Some of its portfolio companies are the most well-known companies on the continent — health tech startup Yodawy; social commerce platform Brimore; logistics startup Trella; ride-hailing and super app Halan; food discovery and ordering platform Elmenus; fintech startup, Khazna; and others.
The firm’s latest raise and $144 million capital amount is one of the largest funds dedicated to African startups. Other large Africa-focused funds include the $71 million fund recently closed by another Egyptian firm, Sawari Ventures; Partech’s $143 million fund; Novastar Ventures’ $200 million fund; and the $71 million Tide Africa Fund by TLcom Capital.
These funds have been very pivotal to the growth of the African tech ecosystem in terms of funding. Last year, African startups raised almost $1.5 billion from both local and international investors, according to varying reports. This number was just half a billion dollars six years ago.
However, regardless of the period — 2015 or 2021 — African VC investments have always been largely dominated by foreign investors. But VC firms like Algebra Ventures are showing that local investors can cumulatively raise nine-figure funds or attempt to do so. Obviously, this will provide more startups with more funds and pave the way for indigenous and local VCs to at least increase their participation to nearly equal levels when compared to international investors.
Egyptian-based VC firm Sawari Ventures has closed its $71 million fund for North Africa’s rapidly growing startup ecosystem.
The firm first announced its fund in 2018, when it closed an initial $35 million (which subsequently increased to $41 million) in hopes to close at $70 million, per Menabytes. The investors in the first tranche included CDC (which forked over $12 million), European Investment Bank, Proparco and the Dutch Good Growth Fund.
Having closed an additional $30 million, Sawari Ventures’ total raise is $1 million more than its original target. And it has added a range of new backers that includes Banque Misr, Banque du Caire, Ekuity, Misr Insurance Group, National Bank of Egypt and Suez Canal Bank.
Ahmed El Alfi, Hany Al-Sonbaty and Wael Amin launched Sawari Ventures in 2010. Before venturing into the world of venture capital, El Alfi and Al-Sonbaty were investment professionals in the Egyptian tech space for more than two decades. Amin, meanwhile, was a founder of a tech company called ITWorx that made notable acquisitions in the Egyptian tech ecosystem.
In addition to Egypt, Sawari Ventures focuses on Morocco and Tunisia. For the firm, these three countries represent one of the best investment opportunities around given the mismatch between the capital available (amounts and variation at every stage) and the market opportunity. They also share common traits such as language, culture, business, governance norms and market dynamics, making it easier for cross-border cooperation.
Since launching the firm over 10 years ago, Sawari claims to have invested in more than 30 companies, mostly in Egypt. Some of these companies include ride-hailing service SWVL, software startup Instabug, and AI chat-based personal assistant Elves, but its sweet spots are the hardware, education, healthcare, cleantech and fintech sectors.
“We try to cast a wide net given that, in essence, this is a transformative moment in emerging markets tech with the rapid digitization of the underlying economy,” a company spokesperson told TechCrunch. “So as expected, we’re seeing a great deal flow in the digitization of financial services, health care and education technologies. Also, given the engineering talent, there are unique opportunities in SaaS products, semiconductors and IoT.”
Sawari Ventures invests in growth-stage companies, in particular. But it also operates Flat6Labs, a seed VC firm akin to an accelerator that has been used to perform its seed investments since establishing both Cairo and Tunis offices in 2011 and 2016.
Image Credits: Sawari Ventures
Sawari says 10% of the now-closed investments will be earmarked for seed-stage companies as investments through Flat6Labs Cairo and Tunis. Flat6Labs Cairo will seed between 80 to 100 companies and offer follow-on investments to between 30 and 40. Flat6Labs Tunisia will seed 60 to 70 companies and offer follow-on investments for 30 to 40. The remaining 90% will be used to invest in 20 to 25 growth-stage companies across Egypt, Tunisia and Morocco, with a median investment range of $2 million to $3 million.
The investment range is a continuation of how Sawari typically cut checks for portfolio startups since closing the first tranche three years ago. The firm said it has invested between $1 million and $4 million in Elves, Brantu, and ExpandCart, Almentor, SWVL and MoneyFellows, among others.
“The Egypt-based fund is a privately held fund regulated by the Financial Regulatory Authority of Egypt (FRA), which allowed us to attract capital from top-tier local financial institutions to co-invest with foreign capital from international development financial institutions, doubling our allocation to invest in Egyptian high-growth companies to $68 million,” El Alfi said in a statement.
“Our aim is to create exceptional returns through investing in knowledge-driven companies, which have the potential of bringing transformational changes to the Egyptian economy. The fund will support local companies with dedicated capital, in addition to quality expertise from our seasoned and specialized team, and the value-add of our investors.”
Mastercard will invest $100 million in Airtel Africa’s mobile money business, two firms said today, just two weeks after TPG’s Rise Fund also backed the telecommunications firm’s unit.
The London-headquartered firm said it was taking a minority stake in Airtel Africa’s mobile money business. The deal valued Airtel Mobile Commerce at $2.65 billion, the two firms said in a press statement Thursday.
New investment comes as Airtel Africa looks to monetize its mobile money business — one of the key fintech players in the continent that offers mobile wallet transactions, merchant and commercial payments, loans, virtual credit cards and support for overseas transfers — by selling up to 25% stake and “list this business within four years,” said Raghunath Mandava, CEO of Airtel Africa, in a statement.
“We are significantly strengthening our existing strategic relationship with Mastercard to help us both realise the full potential from the substantial opportunity to improve financial inclusion across our countries of operation. The combination of our extensive customer base and distribution platforms and Mastercard’s products and services, innovation and know how, mean we can together accelerate demand and drive growth in financial services for the benefit of all our customers and markets,” he added.
Airtel Africa and Mastercard are no strangers. The two firms announced in 2019 that they had partnered to serve 100 million Airtel Africa mobile phone users in 14 African nations using the payments firm’s network.
This is a developing story. More to follow…
Two weeks ago, TPG’s Rise Fund invested $200 million in Airtel Mobile Commerce BV (AMC BV) — the mobile money business of London-listed telecom Airtel Africa. After closing the deal, the Bharti Airtel subsidiary noted that it was still in discussions to give up more minority stake (25% of the issued share capital) to more potential investors.
Today, it has announced another investor — global payments provider Mastercard in a deal that will see Airtel Africa receive an additional $100 million for its mobile money business.
From the statement released, Airtel Africa and Mastercard have “extended commercial agreements and signed a new commercial framework which will deepen their partnerships across numerous geographies and areas including card issuance, payment gateway, payment processing, merchant acceptance and remittance solutions, amongst others.”
AMC BV’s $2.65 billion valuation on a cash and debt-free basis remains unchanged from the last time. This means TPG’s Rise Fund and Mastercard will own 7.55% and 3.775.% stake respectively upon the completion of their deals. For Mastercard, the transaction will close in two tranches — $75 million invested at first close (which will be finalized in the next four months), and $50 million to be invested at the second close.
By selling off a minority stake in the mobile money business to The Rise Fund, Mastercard and other potential investors, the telecom operator believes it can raise enough cash to monetize its mobile money business and pursue a possible listing in four years.
In addition to receiving investments from TPG’s Rise Fund and Mastercard, Airtel Africa has begun selling off some assets as well. Last week, the company sold 1,424 telecommunications towers companies in Madagascar and Malawi to Helios Towers for $119 million. Both Helios and Airtel Africa also agreed to trade tower assets in Chad and Gabon, although the details remain undisclosed.
These efforts are geared towards the company’s pursuit of strategic asset monetisation, investment opportunities, and, ultimately, debt reduction.
“With today’s announcement, we are pleased to welcome Mastercard as an investor in our mobile money business, joining The Rise Fund, which we announced two weeks ago,” CEO of Airtel Africa, Raghunath Mandava said of the investment. “This is a continuation of our strategy to increase the minority shareholding in our mobile money business with the further intention to list this business within four years. We are significantly strengthening our existing strategic relationship with Mastercard to help us realise the full potential from the substantial opportunity to improve financial inclusion across our countries of operation.”
According to a McKinsey report, the total number of mobile money services worldwide was 282 in 2017, with more than half of those operating in sub-Saharan Africa.
In 2020, these numbers increased significantly, but the ratio remained similar. In 96 countries, there are 310 live mobile money services, according to a GSMA report. Out of that number, 171 are from Africa, while 157 are in sub-Saharan Africa.
In Tanzania, mobile money services can be relatively difficult to use due to unstable internet and high service fees. Benjamin Fernandes noticed this as a national television host while building a mobile money service to enable people to pay for TV subscriptions in East Africa back in 2011.
Six years later, he would start his own mobile money and wallet aggregator, NALA, to solve these issues. Its first mobile application allowed users to make mobile money payments and utilize mobile banking without an internet connection. The business grew to 250,000 users in over a year after its official launch.
Last year, the WorldBank predicted a sharp decline of international remittances to Africa. But even though Africa is still the most expensive region to send money to with averages of 10.6% in transaction fees, the opposite happened. There was an increase in remittance activity on the continent.
Kenya, for instance, had its highest-ever inbound remittance at $3 billion, while WorldRemit acquired Sendwave in August 2020 for $500 million and Mama Money claimed to have grown 500% within the year.
NALA also noticed an uptick in remittance requests where 1 in 7 users wanted to receive money internationally. This happened despite not being in that business at the time. It’s not hard to see why: Presently, over 70% of money sent to Sub-Saharan Africa is transacted through physical stores. When many over-the-counter services were suspended or limited due to coronavirus restrictions, people were left with expensive, unreliable or hard-to-access alternatives.
Combined with the increasing trend for digital-first financial services and listening to some users’ requests, NALA began testing international money transfers in August 2020 to facilitate payments from the U.K. to Kenya, Uganda and Tanzania. By building a multi-currency ledger where people can send money from the U.K. to Tanzania and back to the U.K., Fernandes says NALA can build a Wise for Africa.
“I believe international payments are only 1% built today. Until you can send money both ways seamlessly, our work isn’t done,” Fernandes told TechCrunch. “We believe African markets should be ‘sender’ markets, too; there is a lot of trade happening with other countries, and most of the money is sent via costly bank wires or at physical stores. It doesn’t need to be this way; it’s time for something better.”
Various platforms are trying to achieve this, but none specifically targets the East African region. That is NALA’s play, according to the CEO. “This is where we see a big advantage for us. We are local, we understand mobile money, we built bill payments on our previous product, and this is an extension of that,” he added.
Benjamin Fernandes (CEO, Nala)
Since graduating as the first East African company from Y Combinator in 2019, NALA has brought other interesting investors on board to support its mission. The most notable is Accel, which has been kept under wraps for some time. The VC firm rarely makes deals on the continent and has only invested in NALA and Egypt’s Instabug. Other backers include NYCA Partners and angel investors like Shamir Karkal (co-founder of Simple), Peeyush Ranjan (former Flipkart CTO and current head of Google Payments), and Thomas Stafford (DST Global).
NALA also enlisted the services of Nicolas Esteves, who was the VP of engineering at Osper and had a stint at Monzo to become the company’s CTO which, according to Fernandes, will considerably improve the company’s chances of achieving its goal. “When we brought someone of his calibre on our team, it just opened up the doors of what we could accomplish because he has built multi-currency ledgers across different large companies.”
For now, though, the company will be rolling out a beta product next month for U.K.-based customers sending money to Kenya and Uganda (Tanzania will come later). The company claims that the service will support instant payments to all major mobile money accounts and says it is closing some banking partnerships that will allow it to facilitate money transfers from East Africa to the U.K.
Ugandan technology-enabled asset finance company Tugende today announced that it has closed $3.6 million in a Series A extension round.
The investment, which, according to the company, was agreed on and structured in 2020, follows the $6.3 million raised in November 2020 and led by Toyota Tsusho investment fund Mobility 54. This brings Tugende’s total Series A financing to $9.9 million.
San Francisco and Paris-based VC firm, Partech led the round. Enza Capital participated, alongside some unnamed angel investors.
Michael Wilkerson founded Tugende in 2012. The company uses asset finance, technology and a customer support model to help micro, small and medium-sized enterprises own income-generating assets.
While primarily based in East Africa, the company wants to tackle the $331 billion credit gap facing these businesses across Africa. Its core product is for motorcycle riders in Kenya and Uganda, with a lease-to-own or hire-purchase package. These riders get some training, medical and life insurance, safety equipment and hands-on support from their first use of the motorcycle to owning it.
Between 2006 and 2010, CEO Wilkerson, then a journalist and researcher, spent a great deal of time using motorcycles (Boda bodas) for quick and flexible transport. It was such an effective means for transport for him that he built a large contact list of “go-to” boda boda riders he would call for rides when need be. This was long before ride-hailing made its way to East Africa.
Michael Wilkerson (Tugende CEO). Image Credits: Tugende
These boda boda riders earned enough to pay motorcycle rent and survive, but not enough to build significant savings. While the little amounts they paid for rent could actually service a loan, traditional banks either required significant collateral or very high down payments.
So in 2010, Wilkerson launched Own Your Own Boda, a for-profit enterprise to put these riders on a path toward owning their motorcycles. They began informally with handwritten contracts, but progressed into using technology to scale the solution from 2013 when it rebranded to Tugende.
Once boda boda riders get on board, they can double their take-home profit from $5 per day to $10 per day after becoming owners, the CEO claims.
“With an average household of five people, this can really transform the lives of our client and their families. Besides just increased daily profit, ownership of an asset is also wealth in itself,” Wilkerson told TechCrunch. “Some clients sell the fully owned motorcycle and use that lump sum of capital to make other investments while coming back to Tugende for a new lease, which is affordable from their daily cash flow.”
In addition to motorcycle taxis, Tugende has broadened the productive assets it finances to boat engines, cars, equipment for retail shops, refrigerators and other income-generating equipment. The company is also currently piloting financing for e-mobility assets.
Image Credits: Tugende
The pivot to using technology in 2013 allowed Tugende to move fully to digital payments, build its own interoperable payment gateway in 2017 and launch an in-house credit score in 2019 to allow clients to see how they are performing.
Talking about clients, Tugende currently has more than 43,000 across Kenya and Uganda. Out of that number, 16,000 have achieved full ownership of at least one asset.
Last year was a challenging one for the company, as the pandemic disrupted some of its activities; excluding 2020, Tugende has doubled in team size year-on-year. The company currently has more than 520 employees, with 20 branches in Uganda and four in Kenya.
While the pandemic presented challenges that the company has since maneuvered, it also brought a new investor in Partech. “Last year, in the middle of the pandemic, we decided to invest in Tugende”, said Tidjane Deme, partner at the firm that invested in 82 startups across 24 countries in 2020. “Tugende combines technology and strong operations to aid millions of professionals to grow their businesses and drive economies forward. We will support Michael and his team to build up the tech platform, fine-tune the model and expand in new markets.”
Over the years, Tugende’s demand has come mainly via word of mouth, a strategy Wilkinson says the company has struggled to keep up with. That’s the purpose of the new investment — to provide supply for growing demand. Also, the investment will support the closure of new debt capital to fuel Tugende’s strong portfolio growth in Uganda and Kenya.
Because of the nature of its business, Tugende needs a steady influx of debt capital. Since its inception, it has raised more than $20 million from debt partners like Partners Group Impact Investments and the U.S. Development Finance Corporation.
So why opt for equity financing this time when it mostly thrives on debt capital? Wilkinson says with the company’s long waiting list of new clients, Tugende has been trying to close new capital fast enough to keep up with this demand.
You see, most lenders require a minimum equity cushion, and even though Tugende has been net income positive for most of the last five years through 2019, its internally generated equity couldn’t anchor enough debt to meet its word of mouth client demand. Now, when you add the company’s goals to grow in new geographies and new asset products, the reason for this equity financing is apparently clear.
“Debt is Tugende’s fuel for growth. But good equity financing is like upgrading the engine, getting a top-notch mechanic and driving coach thrown in on top to help you handle the speed,” Wilkinson added.
There is also the need for balance sheet strength, leading to more capital runway with larger and better-priced debt deals. Besides, there is the multiplier effect of having hands-on equity support.
Unlike many digital or digitally-enabled lenders, Wilkinson says Tugende’s prime focus on long-term value, not today’s credit transaction alone, is what will keep customers in the Tugende ecosystem in the coming years.
“We are particularly enthused by the team’s innovative application of technology, which incorporates a range of social considerations to build a new type of credit score, and which will increase access to capital across a range of African markets where entrepreneurs currently have a limited credit history or access to collateral,” said Mike Mompi, partner at Enza Capital of the investment.
Nigeria remains a largely cash-dominated country. There are over 100 million adult Nigerians, of which more than half have little or no access to financial services.
Today, Bankly, a Nigerian fintech startup digitizing cash for the unbanked, announced that it has closed a $2 million seed round. Founded by Tomilola Adejana and Fredrick Adams in 2018, Bankly is digitizing the informal thrift collections system known with different names such as esusu or ajo in Nigeria.
In the absence of a banking system nearby or a disregard for one, the unbanked resort to these traditional systems because they work completely offline. The system allows them to collate and save cash with a thrift collector responsible for disbursing funds when due.
However, there are issues around this system. First is the security issues that arise when the thrift collector goes missing with the money or is feared dead, leaving no clue where the savings are kept. There’s also limited access where members cannot consistently save if absent from a particular location. The third is the lack of customer data since most don’t have an online banking presence.
What Bankly has done is to digitize their whole process of collating money and allow these unbanked people to save using online and offline methods.
Over the past 18 months, the company has been building out its distribution and agent networks. Here, customers can deposit and withdraw cash with a Bankly agent anytime. This solves the issue of access as there are thousands of agents in these cash-dependent communities.
When the information of this new set of customers is collected and saved on its platform, Bankly starts to build engaging communities where these people can collectively save their income with the agents. Slowly, an online banking presence is built for them.
With most of their money in a bank and little or no cash to buy airtime or make payments, they would frequently opt to access these services online via their mobile phones.
Image Credits: Bankly
Onboarding these new set of customers means they get to save and transact more over time. This opens up access to credit and with more value created, there’s a new set of banked people, which leads to financial inclusion in the long run.
“The first phase is building agent networks which is good but that’s not the goal,” CEO Adejana said to TechCrunch. “Just in the same way mobile inclusion happened, you need to then focus on acquiring customers who, after transferring cash to their mobile accounts, use it to buy airtime or make payments. We call that the three-phase process. The distribution first, then focusing on the consumer, after that full digitization. This is how we reach financial inclusion.”
With its insights into customer behaviour and transactions, Bankly also provides “data-as-a-service” to other service providers to offer tailored products and services to Nigeria’s informal sector.
Bankly operates like a traditional bank but with fewer assets, revenue, customers and operational costs. But because it doesn’t spend a lot in acquiring customers and building physical presences, it can pass on those cost savings to customers as interests and still make decent margins.
Agents on the platform also take commissions for any transaction a customer makes through them. This time last year, the company had a little over 2,000 agents across the country. Now, that number has grown to 15,000.
The company still plans to add more agents with the new investment received. To increase its 35,000 customer base in cash-dependent communities, Bankly will also provide direct-to-consumer products in the coming months.
L-R: Fredrick Adams (CPO) and Tomilola Adejana (CEO)
In Bankly’s three years of operation, Adejana cites finding the right partners, talent, and most importantly, the right investors as challenges that the company has faced. Due to the nature of Bankly’s business, Adejana didn’t accept some of the investments offered to the company and only let in investors who aligned with the company’s plans for the unbanked.
“We’ve had to be patient to make sure that we were talking to people who deeply understand the problem and are passionate about solving it and are not about getting returns as soon as possible,” she said.
“Given our over twenty years experience in Nigeria’s fintech industry and previous exits, we strongly believe that Bankly understands the nuanced needs of this market — not to mention the team, strategy, and technology — to succeed in bringing affordable financial services to the unbanked. We are delighted to participate in this financing round as Bankly moves into its next growth stage,” Idris Alubankudi Saliu, partner at Vault said.
Bankly aims to grow its customer base to 2 million unbanked Nigerians over the next three years. The goal is to support the Central Bank of Nigeria’s National Financial Inclusion Strategy of increasing the number of banked Nigerians from 60% to 80% by 2020. A year on, that strategy is yet to be actualized. But Adejana says Bankly is working with these regulators towards a more realistic target of 2025.
“We’re thrilled to have closed this milestone fundraise and to have such seasoned fintech investors who understand the market join us on this journey to bank Nigeria’s unbanked. Now we have built the agent network and are poised to serve customers directly via offline and online channels. Partnerships, collaboration, and a deep understanding of the needs of the unbanked will be vital to our success,” said Adejana.
Before Bankly, the CEO was an investment banker but it was during her masters’ program in Sydney she got into the world of fintech. After returning to Nigeria, Adejana worked on a product that offered loans to small businesses, then later joined Accion Venture Lab, a program focused on products that foster financial inclusivity. It was there Bankly started.
The product has caught on well. And while there are lots of fintech products in the Nigerian market pitching to reach the unbanked, Bankly remains one of the very few that can boldly stake a claim to that.
To truly attain financial inclusion in Nigeria, Adejana believes the onus lies with the fintechs to have long-term views just as the telcos and fast-moving customer goods did in the past. This increases the pie of customers fintechs can serve instead of taking a slice of an existing one. “For financial services to reach the last mile, it has to be distributed the same way fast-moving consumer goods are distributed,” she added.
In Africa, Y Combinator is known to be a major backer of most of the continent’s well-known startups.
Two of the most talked-about in the last two quarters — Flutterwave and Paystack — are YC-backed. Their successes (Flutterwave’s billion-dollar valuation and Paystack’s rare exit to Stripe) have greatly increased YC’s appeal in the eyes of founders on the continent with local investors clamoring to get their portfolio into the accelerator.
Unlike last year where Y Combinator held its Demo Day, both winter and summer in two days, it’s a single day for this Winter 2021 batch.
This is the accelerator’s third online demo day, its second all-virtual class and remote pitch session following its decision to go fully remote from the previous batch (Summer 2020).
A total of 319 companies pitched today from 41 countries drawing attention from more than 2,400 investors. However, only ten African startups pitched and similar to other batches; most of them are fintechs.
Other startups offer e-commerce fulfillment, edtech and B2B food marketplace services. Five startups represent Nigeria; three are from Egypt, and one from the Ivory Coast and Kenya. Here they are building.
Most of the gig workers in Egypt are unbanked, and it’s difficult for digital platforms to pay them for their services. The traditional method would be to use cash or third-party institutions.
Founded by Omar Ekram, Dayra is trying to solve this via an API. With its platform, Egyptian businesses can offer financial services including loans to unbanked workers and customers in the country.
While there has been a huge profusion of financial services that have emerged in recent years in Africa, there’s still a huge underserved gap in Francophone Africa. In fact, less than 25% of the population is banked.
Djamo acts as a challenger bank and offers banking solutions to break into this huge untapped market and help with financial inclusion in the region. Hassan Bourgi and Regis Bamba founded the Ivorian startup.
In African public schools, the student-teacher ratio can be as high as 50:1. This doesn’t aid effective learning. Other options like private schools can be costly.
Kidato, an edtech startup founded by Sam Gichuru, have classes with student-teacher ratios at 5:1. They also offer the same international curriculum as private schools in the country but collect much lower fees.
It takes days and sometimes weeks to send money from the U.S. to Nigeria and most African countries. There’s also the problem with expensive fees.
Flux, a Nigerian remittance startup, is using crypto to tackle this. Via an application and from a wallet, people can convert fiat into crypto and send it to the wallets of people in other countries who convert back to fiat if they choose. The startup was founded by Ben Eluan, Osezele Orukpe, and Israel Akintunde.
Financial stress plays a major role as a top distraction for employees. NowPay, a startup founded by Sabry Abuelenien and Mostafa Ashour, bridges that gap and provides several benefits for employers that choose to address this area of employee wellness proactively.
The company enables corporates to offer salary advances to employees. It also improves savings, spending, budgeting, and borrowing for employees by building products that tackle every vertical.
Due to the proliferation of financial services in Africa, it has become extremely difficult for banks and fintechs to combine users’ data from multiple points and make sense of it.
By streamlining various data in a single API, Mono helps companies and third-party developers retrieve vital information like account statements, real-time balance, historical transactions, income, expense, and account owner identification. Abdul Hassan and Prakhar Singh founded the company.
In the U.S. or the U.K, you can set up a business account in minutes but it can take hours and days in Nigeria. And most of this is still executed offline and on paper.
Prospa is a neobank for microbusinesses in Nigeria founded by Frederik Obasi and Rodney Jackson-Cole. It helps these businesses make international payments to more than 10 countries including China, Kenya, the U.K., and the U.S.
When merchants launch their e-commerce businesses, they can easily manage the end-to-end operations in the early stages. But as they begin to grow, managing their own operations can become difficult.
This is a burden for most businesses in Egypt and Flextock, a startup founded by Mohamed Mossaad and Enas Siam, solves it by providing an end to end fulfilment service. They manage a business inventory, pick, pack and ship orders while providing real-time visibility and insights into their products.
For some individuals and merchants, shipping can be a painstaking process. To operate efficiently, they partner with one or more service providers or build their delivery operations themselves.
Sendbox describes itself as a “fulfillment by Amazon for African merchants.” The company provides shipping, escrow payments, among other services, to social commerce merchants in Nigeria. Emotu Balogun and Olusegun Afolahan founded the company.
For small and mid-sized restaurants in Nigeria and most of Africa, food procurement can be a complex process to manage.
Founded by Tunde Kara, Olumide Fayankin, Gatumi Aliyu, and Wale Oyepeju, Vendease solves this problem by building a marketplace that allows restaurants to buy directly from farms and food manufacturers.
For patients and healthcare professionals to properly track and manage illnesses especially chronic ones, healthcare needs to be decentralized. It also needs to be more convenient, with a patient’s health information able to follow them wherever they go.
Redbird, a Ghanaian healthtech startup that allows easy access to convenient testing and ensures that doctors and patients can view the details of those test results at any time, announced today that it has raised a $1.5 million seed investment.
Investors who participated in the round include Johnson & Johnson Foundation, Newton Partners (via the Imperial Venture Fund), and Founders Factory Africa. This brings the company’s total amount raised to date to $2.5 million.
The healthtech company was launched in 2018 by Patrick Beattie, Andrew Quao and Edward Grandstaff. As a founding scientist at a medical diagnostics startup in Boston, Beattie’s job was to develop new rapid diagnostic tests. During his time at Accra in 2016, he met Quao, a trained pharmacist in Ghana at a hackathon whereupon talking found out that their interests in medical testing overlapped.
Beattie says to TechCrunch that while he saw many exciting new tests in development in the US, he didn’t see the same in Ghana. Quao, who is familiar with how Ghanaians use pharmacies as their primary healthcare point, felt perturbed that these pharmacies weren’t doing more than transactional purchases.
They both settled that pharmacies in Ghana needed to imbibe the world of medical testing. Although both didn’t have a tech background, they realized technology was necessary to execute this. So, they enlisted the help of Grandstaff to be CTO of Redbird while Beattie and Quao became CEO and COO, respectively.
L-R: Patrick Beattie (CEO), Andrew Quao (COO), and Edward Grandstaff (CTO)
Redbird enables pharmacies in Ghana to add rapid diagnostic testing for 10 different health conditions to their pharmacy services. These tests include anaemia, blood sugar, blood pressure, BMI, cholesterol, Hepatitis B, malaria, typhoid, prostate cancer screening, and pregnancy.
Also, Redbird provides pharmacies with the necessary equipment, supplies and software to make this possible. The software — Redbird Health Monitoring — is networked across all partner pharmacies and enables patients to build medical testing records after going through 5-minute medical tests offered through these pharmacies.
Rather than employing a SaaS model that Beattie says is not well appreciated by its customers, Redbird’s revenue model is based on the supply of disposable test strips.
“Pharmacies who partner with Redbird gain access to the software and all the ways Redbird supports our partners for free as long as they purchase the consumables through us. This aligns our revenue with their success, which is aligned with patient usage,” said the CEO.
This model is being used with over over 360 pharmacies in Ghana, mainly in Accra and Kumasi. It was half this number in 2019, and Redbird was able to double this number despite the pandemic. These pharmacies have recorded over 125,000 tests in the past three years from more than 35,000 patients registered on the platform.
Redbird will use the seed investment to grow its operations within Ghana and expand to new markets that remain undisclosed.
In 2018, Redbird participated in the Alchemist Accelerator just a few months before launch. It was the second African startup after fellow Ghanaian startup mPharma to take part in the six-month-long program. The company also got into Founders Factory Africa last year April.
According to Beattie, most of the disease burden Africans might experience in the future will be chronic diseases. For instance, diabetes is projected to grow by 156% over the next 25 years. This is why he sees decentralized, digitized healthcare as the next leapfrog opportunity for sub-Saharan Africa.
“Chronic disease is exploding and with it, patients require much more frequent interaction with the healthcare system. The burden of chronic disease will make a health system that is highly centralized impossible,” he said. “Like previous leapfrog events, this momentum is happening all over the world, not just in Africa. Still, the state of the current infrastructure means that healthcare systems here will be forced to innovate and adapt before health systems elsewhere are forced to, and therein lies the opportunity,” he said.
But while the promise of technology and data is exciting, it’s important to realize that healthtech only provides value if it matches patient behaviors and preferences. It doesn’t really matter what amazing improvements you can realize with data if you can’t build the data asset and offer a service that patients actually value.
Beattie knows this all too well and says Redbird respects these preferences. For him, the next course of action will be to play a larger role in the world’s developing ecosystem where healthcare systems build decentralised networks and move closer to the average patient.
This decentralised approach is what attracted U.S. and South African early-stage VC firm Newtown Partners to cut a check. Speaking on behalf of the firm, Llew Claasen, the managing partner, had this to say.
“We’re excited about Redbird’s decentralised business model that enables rapid diagnostic testing at the point of primary care in local community pharmacies. Redbird’s digital health record platform has the potential to drive significant value to the broader healthcare value chain and is a vital step toward improving healthcare outcomes in Africa. We look forward to supporting the team as they prove out their business model and scale across the African continent.”