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Yesterday — January 20th 2020Your RSS feeds

Catalyst Fund gets $15M from JP Morgan, UK Aid to back 30 EM fintech startups

By Jake Bright

The Catalyst Fund has gained $15 million in new support from JP Morgan and UK Aid and will back 30 fintech startups in Africa, Asia, and Latin America over the next three years.

The Boston based accelerator provides mentorship and non-equity funding to early-stage tech ventures focused on driving financial inclusion in emerging and frontier markets.

That means connecting people who may not have access to basic financial services — like a bank account, credit or lending options — to those products.

Catalyst Fund will choose an annual cohort of 10 fintech startups in five designated countries: Kenya, Nigeria, South Africa, India and Mexico. Those selected will gain grant-funds and go through a six-month accelerator program. The details of that and how to apply are found here.

“We’re offering grants of up to $100,000 to early-stage companies, plus venture building support…and really…putting these companies on a path to product market fit,” Catalyst Fund Director Maelis Carraro told TechCrunch.

Program participants gain exposure to the fund’s investor networks and investor advisory committee, that include Accion and 500 Startups. With the $15 million Catalyst Fund will also make some additions to its network of global partners that support the accelerator program. Names will be forthcoming, but Carraro, was able to disclose that India’s Yes Bank and University of Cambridge are among them.

Catalyst fund has already accelerated 25 startups through its program. Companies, such as African payments venture ChipperCash and SokoWatch — an East African B2B e-commerce startup for informal retailers — have gone on to raise seven-figure rounds and expand to new markets.

Those are kinds of business moves Catalyst Fund aims to spur with its program. The accelerator was founded in 2016, backed by JP Morgan and the Bill & Melinda Gates Foundation.

Catalyst Fund is now supported and managed by Rockefeller Philanthropy Advisors and global tech consulting firm BFA.

African fintech startups have dominated the accelerator’s startups, comprising 56% of the portfolio into 2019.

That trend continued with Catalyst Fund’s most recent cohort, where five of six fintech ventures — Pesakit, Kwara, Cowrywise, Meerkat and Spoon — are African and one, agtech credit startup Farmart, operates in India.

The draw to Africa is because the continent demonstrates some of the greatest need for Catalyst Fund’s financial inclusion mission.

By several estimates, Africa is home to the largest share of the world’s unbanked population and has a sizable number of underbanked consumers and SMEs.

Roughly 66% of Sub-Saharan Africa’s 1 billion people don’t have a bank account, according to World Bank data.

Collectively, these numbers have led to the bulk of Africa’s VC funding going to thousands of fintech startups attempting to scale finance solutions on the continent.

Digital finance in Africa has also caught the attention of notable outside names. Twitter/Square CEO Jack Dorsey recently took an interest in Africa’s cryptocurrency potential and Wall Street giant Goldman Sachs has invested in fintech related startups on the continent.

This lends to the question of JP Morgan’s interests vis-a-vis Catalyst Fund and Africa’s financial sector.

For now, JP Morgan doesn’t have plans to invest directly in Africa startups and is taking a long-view in its support of the accelerator, according to Colleen Briggs — JP Morgan’s Head of Community Innovation

“We find financial health and financial inclusion is a…cornerstone for inclusive growth…For us if you care about a stable economy, you have to start with financial inclusion,” said Briggs, who also oversees the Catalyst Fund.

This take aligns with JP Morgan’s 2019 announcement of a $125 million, philanthropic, five-year global commitment to improve financial health in the U.S. and globally.

More recently, JP Morgan Chase posted some of the strongest financial results on Wall Street, with Q4 profits of $2.9 billion. It’ll be worth following if the company shifts any of its income-generating prowess to business and venture funding activities in Catalyst Fund markets like Nigeria, India and Mexico.

Before yesterdayYour RSS feeds

Trucks VC general partner Reilly Brennan is coming to TC Sessions: Mobility

By Kirsten Korosec

The future of transportation industry is bursting at the seams with startups aiming to bring everything from flying cars and autonomous vehicles to delivery bots and even more efficient freight to roads.

One investor who is right at the center of this is Reilly Brennan, founding general partner of Trucks VC, a seed-stage venture capital fund for entrepreneurs changing the future of transportation.

TechCrunch is excited to announce that Brennan will join us on stage for TC Sessions: Mobility.

In case you missed last year’s event, TC Sessions: Mobility is a one-day conference that brings together the best and brightest engineers, investors, founders and technologists to talk about transportation and what is coming on the horizon. The event will be held May 14, 2020 in the California Theater in San Jose, Calif.

Brennan is known as much for his popular FoT newsletter as his investments, which include May Mobility, Nauto, nuTonomy, Joby Aviation, Skip and Roadster.

Stay tuned to see who we’ll announce next.

And … $250 Early-Bird tickets are now on sale — save $100 on tickets before prices go up on April 9; book today.

Students, you can grab your tickets for just $50 here.

Bolt raises €50M in venture debt from the EU to expand its ride-hailing business

By Ingrid Lunden

Bolt, the billion-dollar startup out of Estonia that’s building a ride-hailing, scooter and food delivery business across Europe and Africa, has picked up a tranche of funding in its bid to take on Uber and the rest in the world of on-demand transportation.

The company has picked up €50 million (about $56 million) from the European Investment Bank to continue developing its technology and safety features, as well as to expand newer areas of its business, such as food delivery and personal transport like e-scooters.

With this latest money, Bolt has raised more than €250 million in funding since opening for business in 2013, and as of its last equity round in July 2019 (when it raised $67 million), it was valued at over $1 billion, which Bolt has confirmed to me remains the valuation here.

Bolt further said that its service now has more than 30 million users in 150 cities and 35 countries and is profitable in two-thirds of its markets.

The timing of the last equity round, and the company’s ambitious growth plans, could well mean it will be raising more equity funding again soon. Bolt’s existing backers include the Chinese ride-hailing giant Didi, Creandum, G Squared and Daimler (which owns a ride-hailing competitor, Free Now — formerly called MyTaxi).

“Bolt is a good example of European excellence in tech and innovation. As you say, to stand still is to go backwards, and Bolt is never standing still,” said EIB’s vice president, Alexander Stubb, in a statement. “The Bank is very happy to support the company in improving its services, as well as allowing it to branch out into new service fields. In other words, we’re fully on board!”

The EIB is the nonprofit, long-term lending arm of the European Union, and this financing in the form of a quasi-equity facility.

Also known as venture debt, the financing is structured as a loan, where repayment terms are based on a percentage of future revenue streams, and ownership is not diluted. The funding is backed in turn by the European Fund for Strategic Investments, as part of a bigger strategy to boost investment in promising companies, and specifically riskier startups, in the tech industry. It expects to make and spur some €458.8 billion in investments across 1 million startups and SMEs as part of this plan.

Opting for a “quasi-equity” loan instead of a straight equity or debt investment is attractive to Bolt for a couple of reasons. One is the fact that the funding comes without ownership dilution. Two is the endorsement and support of the EU itself, in a market category where tech disruptors have been known to run afoul of regulators and lawmakers, in part because of the ubiquity and nature of the transportation/mobility industry.

“Mobility is one of the areas where Europe will really benefit from a local champion who shares the values of European consumers and regulators,” said Martin Villig, the co-founder of Bolt (whose brother Markus is the CEO), in a statement. “Therefore, we are thrilled to have the European Investment Bank join the ranks of Bolt’s backers as this enables us to move faster towards serving many more people in Europe.”

(Butting heads with authorities is something that Bolt is no stranger to: It tried to enter the lucrative London taxi market through a backdoor to bypass the waiting time to get a license. It really didn’t work, and the company had to wait another 21 months to come to London doing it by the book. In its first six months of operation in London, the company has picked up 1.5 million customers.)

While private VCs account for the majority of startup funding, backing from government groups is an interesting and strategic route for tech companies that are making waves in large industries that sit adjacent to technology. Before it was acquired by PayPal, IZettle also picked up a round of funding from the EIB specifically to invest in its AI R&D. Navya, the self-driving bus and shuttle startup, has also raised money from the EIB in the past, as has MariaDB.

One of the big issues with on-demand transportation companies has been their safety record, a huge area of focus given the potential scale and ubiquity of a transportation or mobility service. Indeed, this is at the center of Uber’s latest scuffle in Europe, where London’s transport regulator has rejected a license renewal for the company over concerns about Uber’s safety record. (Uber is appealing; while it does, it’s business as usual.)

So it’s no surprise that with this funding, Bolt says that it will be specifically using the money to develop technology to “improve the safety, reliability and sustainability of its services while maintaining the high efficiency of the company’s operations.”

Bolt is one of a group of companies that have been hatched out of Estonia, which has worked to position itself as a leader in Europe’s tech industry as part of its own economic regeneration in the decades after existing as part of the Soviet Union (it formally left in 1990). The EIB has invested around €830 million in Estonian projects in the last five years.

“Estonia is as the forefront of digital transformation in Europe,” said Paolo Gentiloni, European Commissioner for the Economy, in a statement. “I am proud that Europe, through the Investment Plan, supports Estonian platform Bolt’s research and development strategy to create innovative and safe services that will enhance urban mobility.”

Felix Capital closes $300M fund to double down on DTC, break into fintech and make late-stage deals

By Ingrid Lunden

To kick off 2020, one of Europe’s newer — and more successful — investment firms has closed a fresh, oversubscribed fund, one sign that VC in the region will continue to run strong in the year ahead after startups across Europe raised between $35 billion and $36 billion in 2019.

Felix Capital, the London VC founded by Frederic Court that was one of the earlier firms to identify and invest in the trend of direct-to-consumer businesses, has raised $300 million, money that it plans to use to continue investing in creative and consumer startups and platform plays as well as begin to tap into a newer area, fintech — specifically startups that are focused on consumer finance. 

Felix up to now has focused mostly on earlier-stage investments — it now has $600 million under management and 32 companies in its portfolio in eight countries — based across both Europe and the US. Court said in an interview that a portion of this fund will now also go into later, growth rounds, both for companies that Felix has been backing for some time as well as newer faces.

As with the focus of the investments, the make-up of the fund itself has a strong European current: the majority of the LPs are European, Court noted. Although Asia is something it would like to tackle more in the future both as a market for its current portfolio and as an investment opportunity, he added, the firm has yet to invest into the region or substantially raise money from it.

Felix made its debut in 2015, founded by Court after a strong run at Advent Capital where he was involved in a number of big exits. While Court had been a strong player in enterprise software, Felix was a step-change for him into more of a primary focus on consumer startups focused on fashion, lifestyle and creative pursuits.

That has over the years included investing in companies like the breakout high-fashion marketplace Farfetch (which he started to back when still at Advent and is now public), Gwyneth Paltrow’s GOOP, the jewellery startup Mejuri, trend-watching HighSnobiety, and fitness startup Peloton (which has also IPO’d).

It’s not an altogether easygoing, vanilla list of cool stuff. Peloton and GOOP have had been mightily doused in snarky and sharky sentiments; and sometimes it even seems as if the brands themselves own and cultivate that image. As the saying goes, there’s no such thing as bad press, I guess.

Although it wasn’t something especially articulated in startup land at the time of Felix’s launch, what the firm was honing in on was a rising category of direct-to-consumer startups, essentially all in the area of e-commerce and building brands and businesses that were bypassing traditional retailers and retail channels to develop primary relationships with consumers through newer digital channels such as social media, messaging and email (alongside their own DTC websites). 

This is not Felix’s sole focus, with investments into a range of platform businesses like corporate travel site TravelPerk, Amazon -backed food delivery juggernaut Deliveroo and Moonbug (a platform for children’s entertainment content); and increasingly later stage rounds (for example it was part of a $104 million round at TravelPerk; a $70 million round for marketplace-building service Mirakl; and $23 million for Mejuri.

Court’s track record prior to Felix, and the success of the current firm to date, are two likely reasons why this latest fund was oversubscribed, and why Court says it wants to further spread its wings into a wider range of areas and investment stages.

The interest in consumer finance is not such a large step away from these areas, when you consider that they are just the other side of the coin from e-commerce: saving money versus spending money.

“We see this as our prism of opportunity,” said Court. “Just as we had the intuition that there was a space for investors looking at [DTC]… we now think there is enough evidence that there is demand from consumers for new ways of dealing with money and personal finance.”

The firm has from the start operated with a board of advisors who also invest money through Felix while also holding down day jobs.

They include the likes of executives from eBay, Facebook, and more. David Marcus –who Court backed when he built payments company Zong and eventually sold it to eBay before he went on to become a major mover and shaker at Facebook and is now has the possibly Sisyphean task of building Calibra — is on the list, but that has not translated into Felix dabbling in cryptocurrency.

“We are watching cryptocurrency, but if you take a Felix stance on the area, it’s only had one amazing brand so far, bitcoin,” said Court. “The rest, for a consumer, is very difficult to understand and access. It’s still really early, but I’ve got no doubt that there will be some things emerging, particularly around the idea of ‘invisible money.'”

Uber and Postmates claim gig worker bill AB-5 is unconstitutional in new lawsuit

By Catherine Shu

Postmates and Uber have filed a complaint in California federal district court, alleging that a bill limiting how companies can label workers as independent contractors is unconstitutional. The complaint, which includes two gig workers as co-plaintiffs, was filed in U.S. District Court on Monday, days before Assembly Bill 5 (AB-5) is due to go into effect on January 1. It asks for a preliminary injunction against AB-5 while the lawsuit is under consideration.

The complaint argues that AB-5 violates several clauses in the U.S. and California constitutions, including equal protection because of how it classifies gig workers for ridesharing and on-demand delivery companies compared to the exemptions it grants to workers who do “substantively identical work” in more than 20 other industries.

AB-5 was authored by Assemblywoman Lorena Gonzalez, a Democrat representing the 80th Assembly District in southern California and signed into law in September by Governor Gavin Newsom. It is intended to uphold the ruling in Dynamex Operations West Inc. v Superior Court of Los Angeles, a landmark 2018 decision by the California Supreme Court about how employees and independent contractors should be classified, and ensure that gig economy workers are entitled to benefits like minimum wage, health insurance and workers’ compensation.

But the suit’s opponents, which includes tech companies whose business models rely on the gig economy, as well as groups of gig workers and freelance journalists, argue that it restricts their work opportunities and ability to earn money.

In addition to Uber and Postmates, the complaints’ plaintiffs also include Lydia Olson and Miguel Perez, drivers for on-demand companies. In a post on Postmates’ blog, Perez wrote that he joined the suit because AB-5 “is threatening the freedom and flexibility I have relied on in recent years to support my family.”

A statement from Postmates said “AB5 is a blunt instrument, which is why lawmakers exempted 24 industries, seemingly at random, from its requirements.”

The company added that it does not want to be exempted from AB-5 or reverse the Dynamex standard, but “call for industry and labor talks with the California legislature to modernize a robust safety net designed specifically for the needs of on-demand workers, that establishes a new portable benefits model, creates earnings, guarantees higher than minimum wage, and gives all workers both the strong voice they need and flexibility they demand—a framework not currently contemplated under state and federal law.”

As proof that AB-5 violates the equal protection clause, the complaint argues that “the vast majority of the statute is a list of exemptions that carve out of the statutory scope dozens of occupations, including direct salespeople, travel agents, grant writers, construction truck drivers, commercial fisherman, and many more. There is no rhyme or reason to these nonsensical exemptions, and some are so ill-defined or entirely undefined that it is impossible to discern what they include or exclude.”

The complaint also alleges that AB-5 violates due process by preventing people from choosing to work for gig companies, and the contracts clause, because mandating companies like Uber and Postmates to reclassify contractors as employees will either invalidate or substantially change their existing contracts.

In a statement about the lawsuit, Gonzalez said “the one clear thing we know about Uber is they will do anything to try to exempt themselves from state regulations that make us all safer and their driver employees self-sufficient. In the meantime, Uber chief executives will continue to become billionaires while too many of their drivers are forced to sleep in their cars.”

The lawsuit follows several efforts to stop or limit AB-5. In October, a group of drivers for Lyft, Uber and DoorDash announced they had submitted a California ballet initiative for the November 2020 ballot in response to AB-5. The measure, which received substantial financial support from those companies, seeks to enable drivers and couriers to continue to be independent contractors while guaranteeing benefits like a minimum wage, expenses, healthcare and insurances.

Earlier this month, several organizations representing freelancer writers filed a lawsuit in federal court in Los Angeles alleging AB-5 places unconstitutional restrictions on free speech, the day after Vox Media announced it will cut hundreds of freelance positions in California as it prepares for the bill.

In the shadow of Amazon and Microsoft, Seattle startups are having a moment

By Kate Clark

Venture capital investment exploded across a number of geographies in 2019 despite the constant threat of an economic downturn.

San Francisco, of course, remains the startup epicenter of the world, shutting out all other geographies when it comes to capital invested. Still, other regions continue to grow, raking in more capital this year than ever.

In Utah, a new hotbed for startups, companies like Weave, Divvy and MX Technology raised a collective $370 million from private market investors. In the Northeast, New York City experienced record-breaking deal volume with median deal sizes climbing steadily. Boston is closing out the decade with at least 10 deals larger than $100 million announced this year alone. And in the lovely Pacific Northwest, home to tech heavyweights Amazon and Microsoft, Seattle is experiencing an uptick in VC interest in what could be a sign the town is finally reaching its full potential.

Seattle startups raised a total of $3.5 billion in VC funding across roughly 375 deals this year, according to data collected by PitchBook. That’s up from $3 billion in 2018 across 346 deals and a meager $1.7 billion in 2017 across 348 deals. Much of Seattle’s recent growth can be attributed to a few fast-growing businesses.

Convoy, the digital freight network that connects truckers with shippers, closed a $400 million round last month bringing its valuation to $2.75 billion. The deal was remarkable for a number of reasons. Firstly, it was the largest venture round for a Seattle-based company in a decade, PitchBook claims. And it pushed Convoy to the top of the list of the most valuable companies in the city, surpassing OfferUp, which raised a sizable Series D in 2018 at a $1.4 billion valuation.

Convoy has managed to attract a slew of high-profile investors, including Amazon’s Jeff Bezos, Salesforce CEO Marc Benioff and even U2’s Bono and the Edge. Since it was founded in 2015, the business has raised a total of more than $668 million.

Remitly, another Seattle-headquartered business, has helped bolster Seattle’s startup ecosystem. The fintech company focused on international money transfer raised a $135 million Series E led by Generation Investment Management, and $85 million in debt from Barclays, Bridge Bank, Goldman Sachs and Silicon Valley Bank earlier this year. Owl Rock Capital, Princeville Global,  Prudential Financial, Schroder & Co Bank AG and Top Tier Capital Partners, and previous investors DN Capital, Naspers’ PayU and Stripes Group also participated in the equity round, which valued Remitly at nearly $1 billion.

Up-and-coming startups, including co-working space provider The Riveter, real estate business Modus and same-day delivery service Dolly, have recently attracted investment too.

A number of other factors have contributed to Seattle’s long-awaited rise in venture activity. Top-performing companies like Stripe, Airbnb and Dropbox have established engineering offices in Seattle, as has Uber, Twitter, Facebook, Disney and many others. This, of course, has attracted copious engineers, a key ingredient to building a successful tech hub. Plus, the pipeline of engineers provided by the nearby University of Washington (shout-out to my alma mater) means there’s no shortage of brainiacs.

There’s long been plenty of smart people in Seattle, mostly working at Microsoft and Amazon, however. The issue has been a shortage of entrepreneurs, or those willing to exit a well-paying gig in favor of a risky venture. Fortunately for Seattle venture capitalists, new efforts have been made to entice corporate workers to the startup universe. Pioneer Square Labs, which I profiled earlier this year, is a prime example of this movement. On a mission to champion Seattle’s unique entrepreneurial DNA, Pioneer Square Labs cropped up in 2015 to create, launch and fund technology companies headquartered in the Pacific Northwest.

Boundless CEO Xiao Wang at TechCrunch Disrupt 2017

Operating under the startup studio model, PSL’s team of former founders and venture capitalists, including Rover and Mighty AI founder Greg Gottesman, collaborate to craft and incubate startup ideas, then recruit a founding CEO from their network of entrepreneurs to lead the business. Seattle is home to two of the most valuable businesses in the world, but it has not created as many founders as anticipated. PSL hopes that by removing some of the risk, it can encourage prospective founders, like Boundless CEO Xiao Wang, a former senior product manager at Amazon, to build.

“The studio model lends itself really well to people who are 99% there, thinking ‘damn, I want to start a company,’ ” PSL co-founder Ben Gilbert said in March. “These are people that are incredible entrepreneurs but if not for the studio as a catalyst, they may not have [left].”

Boundless is one of several successful PSL spin-outs. The business, which helps families navigate the convoluted green card process, raised a $7.8 million Series A led by Foundry Group earlier this year, with participation from existing investors Trilogy Equity Partners, PSL, Two Sigma Ventures and Founders’ Co-Op.

Years-old institutional funds like Seattle’s Madrona Venture Group have done their part to bolster the Seattle startup community too. Madrona raised a $100 million Acceleration Fund earlier this year, and although it plans to look beyond its backyard for its newest deals, the firm continues to be one of the largest supporters of Pacific Northwest upstarts. Founded in 1995, Madrona’s portfolio includes Amazon, Mighty AI, UiPath, Branch and more.

Voyager Capital, another Seattle-based VC, also raised another $100 million this year to invest in the PNW. Maveron, a venture capital fund co-founded by Starbucks mastermind Howard Schultz, closed on another $180 million to invest in early-stage consumer startups in May. And new efforts like Flying Fish Partners have been busy deploying capital to promising local companies.

There’s a lot more to say about all this. Like the growing role of deep-pocketed angel investors in Seattle have in expanding the startup ecosystem, or the non-local investors, like Silicon Valley’s best, who’ve funneled cash into Seattle’s talent. In short, Seattle deal activity is finally climbing thanks to top talent, new accelerator models and several refueled venture funds. Now we wait to see how the Seattle startup community leverages this growth period and what startups emerge on top.

GetYourGuide widens its horizons, will expand its Originals short tours into day trips and more

By Ingrid Lunden

GetYourGuide has made a name for itself as the startup that helped the stale idea of guided tours for travellers on its head. Tapping into the generation of consumers who think of travel not just as going somewhere, but having an “experience” (and, ideally, recording it for Insta-posterity), it has built a marketplace to connect them with people who will help guarantee that this is what they will get. It’s a concept that has helped it sell more than 25 million tickets, hit a $1 billion valuation, and raise hundreds of millions of dollars in VC funding.

And the startup has grown quite a lot since passing the 25 million mark in May. “We’ve had 40 million travelers over the last 12 months. We’re the market leader in every European geography. We’re #2 in the U.S. and about to become #1,” co-founder and CEO Johannes Reck said at TechCrunch Disrupt Berlin.

Now GetYourGuide is taking the next step in its strategy to expand its touchpoints with users, and grow and diversify its business in the process. The company is expanding its “Originals” business — its own in-house tour operation — into one-day tours and other longer journeys, with the aim of hitting 1 million sales of Originals this year. It will kick off the effort with a small number — between five and 10 — one-day tours in different exotic locations. Examples will include “dune-bashing in Dubai,” glacier excursions from Reykjavik, and trips to Bali’s “most instagrammable hidden spots.”

GetYourGuide Originals have been working well. “We’ve had tremendous success, we have an average score of 4.8 [out of 5] compared to 4.4 for the other marketplace activities,” Reck said. Originals have a 40% higher repeat rate than other activities.

“And we’re now extending it to day trips. For those who are not familiar with the travel experience, day trip is the single biggest vertical inside of experiences,” Reck said.

Originals was launched a year and a half ago as a way for GetYourGuide to build its own tours — which it kicked off first with shorter walking tours — as a complement to the marketplace where it offers travellers a way of discovering and purchasing places on tours organised by third parties. Today it offers 23 different Originals in 17 cities like Paris, London, Berlin and Rome.

Up to now, GYG has sold some 200,000 places on its Originals tours — which is actually a tiny proportion of business, when you consider that the number of tours booked through the platform has passed 25 million.

The startup likes to describe its own Orignals as “like Netflix Originals, but in the real world!” And that analogy is true in a couple of ways. Not only does it give GYG more curatorial control on what is actually part of the tour, where it’s run, who guides it and more; but it gives the company potentially a bigger margin when it comes to making money off the effort, and means it does not have to negotiate with third parties on revenue share and other business details.

That’s, of course, not considering the challenges of scaling in this way.

Adding in more Originals and extending to transportation to get to the destination (and potentially staying overnight at some point) will mean taking on costs and organizational efforts, and risks, around more operational segments: making sure vehicles are safe and working, that hotels have clean sheets (and rooms), and more. More things can go wrong, and customers will have many more reasons to complain (or praise). It will be one of those moments when the startup will have to rethink what it’s core competency is, and whether it can deliver on that.

On the other side, if it works, GYG will diversify its the business while finding new revenue streams. But the strategy to grow Originals is a logical next step for other reasons, too.

The most important of these is probably competition: GYG may have been the pioneer of hipster travel experiences, but today it is by no means the only company focusing on this segment. Companies like Airbnb and TripAdvisor have tacked on tours and “Experiences” as a complement to their own offerings, as ways of extending their own consumer touchpoints beyond, respectively, booking a place to say or finding a cool place that popular with locals, or figure out what attractions to see.

Get Your Guide needs to find ways of keeping existing and new users returning to its own platform, rather than simply tacking on its tour packages while organising other aspects of their vacation.

The other is that, as Get Your Guide continues to break ground on changing the conversation around travel, building its own content rather than relying on others to fulfil its vision will become ever more essential, and paves the way for how the company will approach adding ever more components into the chain between your home and your destination.

Apply to the pitch-off at TC Sessions: Robotics+AI 2020

By Lauren Simonds

Mark your calendars and dust off your public-speaking skills. This year, there’s an exciting new opportunity at TC Sessions: Robotics + AI, which returns to UC Berkeley on March 3, 2020. We’ve added a pitch-off specifically for early-stage startups focused on AI or robotics.

You heard right. In addition to a full day packed with speakers, breakout sessions and Q&As featuring the top names, leading minds and creative makers in robotics and AI, we’re upping the ante. We’ll choose 10 startups to pitch at a private event the night before the show opens. Here’s how it works.

The first step: Apply to the pitch-off by February 1. TechCrunch editors will review all applications and select 10 startups to participate. We’ll notify the founders by February 15 — you’ll have plenty of time to hone your pitch.

You’ll deliver your pitch at a private event, and your audience will consist of TechCrunch editors, main-stage speakers and industry experts. Our panel of VC judges will choose five teams as finalists, and they will pitch the next day on the main stage at TC Sessions: Robotics + AI.

Talk about an unprecedented opportunity. Place your startup in front of the influential movers and shakers of these two world-changing industries — and get video coverage on TechCrunch, too. We expect attendance to meet or exceed last year’s, when 1,500 people attended the show and tens of thousands followed along online.

Oh, and here’s one more pitch-off perk. Each of the 10 startup team finalists will receive two free tickets to attend TC Sessions: Robotics + AI 2020 the next day.

TC Sessions: Robotics + AI 2020 takes place on March 3. Apply to the pitch-off here by February 1. Don’t want to pitch? That’s fine — but don’t miss this epic day-long event dedicated to exploring the latest technology, trends and investment strategies in robotics and AI. Get your early-bird ticket here and save $100. We’ll see you in Berkeley!

Is your company interested in sponsoring or exhibiting at TC Sessions: Robotics & AI 2020? Contact our sponsorship sales team by filling out this form.

Slack’s share price and the future of direct listings

By Alex Wilhelm

Hello and welcome back to our regular morning look at private companies, public markets and the grey space in between. Today we’re starting off with a venture capital Q&A, a quick look at Slack’s share price stability and some thoughts on direct listings and their possible future frequency.

Bu before we do, I wanted to ask for help. As we look at startups and IPOs and the impact that public companies have on young tech companies, I want to make sure that I’m touching on the right topics.

So, email me with thoughts and complaints. During December I’m going to riff and then settle a bit on format and topics as 2020 starts.

With that, let’s begin.

Piva’s $250M energy fund

Petronas (Petroliam Nasional Berhad) is a Malaysian state energy company best for sponsoring Lewis Hamilton’s Formula One team, but the oil giant is drilling deeper into the startup world. The company announced a $350 million corporate venture fund in October, creatively named “Petronas Corporate Venture Capital.”

Now, Petronas is back at it, putting up the capital for a new $250 million fund announced today called Piva. The fund will operate independently from the main corporation, even as the energy giant exists as its sole limited partner (LP).

I was curious about the dollar amount and the goals of the new fund so I got in touch. Here’s a condensed and edited set of questions and answers to help better describe what all that oil money may buy:

TechCrunch: Why is Piva’s first fund $250 million, and not, say, larger? 

Piva: This is the ideal size for our first fund; not too small which would allow us to make too few deals, not too large that would force us to only focus on growth-stage deals. It provides us with the right amount of capital needed to back 15-20 companies we’re expecting to invest, given the size of the team that we have in mind. We expect to invest $5-$10 million per company initially, and $20-30 million overtime, in companies creating breakthrough technologies, services and solutions in the industrial and energy sectors.

Is Piva’s goal to help fund strategic partners for Petronas, or strategic acquisitions?

We have the freedom and independence to invest in any company that meets our investment criteria though we’re always looking for ways to introduce our portfolio to Petronas and its global partners. Therefore, we are not required to invest for strategic reasons and certainly can’t control who ultimately becomes the acquirer of our portfolio companies.

Having said that, we are looking to leverage our partner Petronas to help create value for our portfolio companies, and similarly looking to leverage our portfolio companies to create strategic value to Petronas. We view that as a win-win-win. And like any VC fund, the goal of the fund in to make strong financial returns for investors.

The rest of the interview, including notes on Piva’s views on battery tech, continues at the end of this post.

Slack’s new stability

Slack’s direct listening was a key moment in the startup world in 2019. By eschewing a traditional IPO, Slack helped stamp direct listings as the cooler way to go public. In the wake of its debut, Asana and Airbnb are also considering direct listings, for example.

But while Slack’s direct listing went well, its share price has since suffered. After receiving a reference price of $26 and reaching an all-time high of $42, Slack is worth a little over $21 today.

But notably, the slide that the company’s shares took through summer into fall has arrested. And, after its recent earnings report, Slack managed to stay in its $20 to $23 per share range, more or less. So, we now know what Slack is actually worth: about $11.7 billion.

That’s far more than its final private round’s post-money valuation, mind, which put a $7.1 billion price tag on the corporate chat company.

For Slack, finding its value must be a relief. Especially as its new trading band values it north of $10 billion. Call it an inverse Dropbox.

The question now becomes if Slack’s market repricing is considered a positive (the company found price stability sans traditional banker support) or negative (it’s worth less than its reference price and suffered a public fall in value) for direct listings overall.

Direct listings

Sticking on the direct listing point I wonder if they are going to see as much of a place in the 2020 IPO market as many expect. Summarizing market sentiment (based on what I’ve read, and investors and founders that I’ve spoken with), there’s optimism that the stock market will see more direct listings in the future than the past, as they are — putatively — better mechanisms for pricing companies when they go public while reducing value capture by banks.

San Diego-based Founders First Capital Partners gets $100 million for revenue-based fund

By Jonathan Shieber

Founders First Capital Partners, an accelerator and investment firm which provides revenue-based financing to businesses led by “underrepresented entrepreneurs” operating in underserved markets, has received a $100 million commitment to expand its operations.

The San Diego-based investor raised the debt financing from Community Investment Management, a large debt-focused impact investment fund.

The revenue-based financing model is a new one that several startups are beginning to explore as a way to take non-dilutive capital for early stage businesses that might not qualify for traditional bank loans.

Companies like the new media startup, The Prepared, which offers tips on disaster preparedness, used revenue financing as a way to get its own business off the ground. And other companies are turning to the financing method too, according to investors from Lighter Capital.

At Founders First Capital Partners, the new financing will expand its lending operations to companies that are already generating between $1 million and $5 million in annual revenue.

The new program is set to launch in January 2020, expanding the firm’s footprint as a financial services firm for minority and other underrepresented founders, the company said in a statement.

The firm focuses on businesses led by people of color, women, and military veterans and concentrates on entrepreneurs whose business operate in low and middle-income communities outside of the traditional funding networks of Silicon Valley and New York, the company said.

It also operates an accelerator program for entrepreneurs that meet the same criteria.

“Founders First is very pleased to have secured such significant funding that allows us to expand our efforts to businesses that are led by underrepresented founders or those that serve underrepresented communities,” said Kim Folsom, co-founder and chief executive of Founders First, in a statement.

Revenue-based financing can in some cases be a better option for service-based, social impact companies, according to Jacob Haar, a managing partner with CIM, who previously worked at Minlam Investment Managemet, a hedge fund working in the micro-finance space.

Both microfinance and revenue-based financing come with risks — particularly around the rates that these lenders can charge for their financing.

But it is a unique opportunity to open up founders to additional types of financing models.

“CIM is excited to partner with Founders First to expand revenue-based financing to support underserved and underrepresented small business founders, including people of color, women, LGBTQ, and military veterans as well as small businesses located in low to moderate income areas,” Haar said in a statement. “We have found revenue-based financing to be a compelling alternative to venture capital and fixed payment loans as a forward-looking and structurally flexible investment to support business growth.  We believe that Founders First’s unique advisory and revenue-based investment platform enables underrepresented small businesses to overcome systematic bias and achieve their potential.”

How Airbnb handles discrimination claims

By Megan Rose Dickey

When disability rights lawyer Haben Girma, who is blind and deaf, booked an apartment in London via Airbnb last month, she says the host cancelled her reservation after she disclosed that her guide dog would be joining her.

Prior to the cancellation, Girma and the host, Kirk Truman, had a lengthy exchange over the course of about a week-and-a-half in which Girma explained her situation, as well as educated the host about Airbnb’s non-discrimination policy that protects both her and her guide dog, the Americans with Disabilities Act and the Equality Act in the U.K., she told TechCrunch.

Despite this discussion, which TechCrunch has read and reviewed, Truman continued to express concern, saying, “I think my freeholder would be really unhappy with me if he found out that I had somebody stay in the flat with a dog/guide dog.”

The discussion continued, with Truman saying that “it should all be fine.” In the same message, he added that, had he “known when you first requested to book about you bringing your guide dog, I would’ve spoken to you about all we’ve discussed before proceeding with the booking.”

But ultimately, a couple of weeks later, Truman canceled Girma’s reservation. He justified the cancellation by saying the property would be undergoing some work during her scheduled stay, according to the conversation reviewed by TechCrunch. However, Girma says when her friend tried to book the same dates at that property five days later, Truman accepted the reservation.

When reached for comment about why Truman accepted her friend’s reservation for those same dates, Truman told TechCrunch via email his property has a leak and that the repairs are supposed to happen this coming weekend (November 23-24), which is when Girma was originally scheduled to stay at his flat.

“These dates were changed to this week by the contractor but then again changed to this coming weekend and are likely to be delayed into next week,” Truman said. “I should also add, that I also had to cancel another booking due to the issues with the leak as it happened again quite recently.”

It was when Girma found out Truman accepted her friend’s reservation for the same dates that she reached out to Airbnb. The company expressed remorse and told Girma that it would review the situation to determine if Truman deserved a warning, account suspension or permanent removal from the platform.

“For privacy reasons we can’t share what will happen after the review, but we want you to know that we are committed to fighting discrimination and ensuring that the Airbnb community is open and accessible to everyone,” an Airbnb customer service representative named Matt wrote to her in a message reviewed by TechCrunch.

But Girma took issue with the fact that Airbnb said it would keep the resolution of the review process quiet.

“Telling victims of discrimination that the result of the review process is private contributes to guests feeling like the platform is not safe,” Girma told TechCrunch via email. “We want to know if the company decides to protect discriminatory hosts. The company needs to be transparent with victims of discrimination.”

Girma proceeded to engage in a discussion with Airbnb, in which the company continued to say that its privacy policy prohibited it from communicating the results of the investigation to her. Airbnb offered to help her find a new place to stay, but Girma said she was not interested.

“I’m interested in whether or not Airbnb will take action, and I’m deeply disappointed that the company has chosen not to tell me what will be done in this incident,” Girma wrote to Airbnb.

In response, Airbnb reiterated that it would not disclose what actions it took with Truman. About one week later, however, Airbnb changed its course and let her know that the company took the route of host education. Additionally, Airbnb said Truman was now aware that future violations could result in his removal from the Airbnb platform.

But Girma said she had already gone out of her way to educate the host about Airbnb’s policy, as well as the ADA and the U.K.’s Equality Act.

“He knew it would be against your policy, and still canceled my reservation,” Girma wrote to Airbnb. “He claimed it was because the flat would have construction during my dates. My nondisabled friend then applied to stay at the flat for the exact same dates, and Kirk immediately accepted my friend’s reservation. All of this is in the records I sent to you.”

Girma then expressed dismay that Airbnb had chosen not to remove Truman and asked the company to reconsider. Shortly after sending that message, Girma got in touch with TechCrunch.

Following an inquiry from TechCrunch, Airbnb said it would suspend Truman for 30 days:

“To use our platform, Airbnb community members must commit to treat all fellow members of this community, regardless of disability, race, religion, national origin, sex, gender identity, sexual orientation or age, with respect, and without judgment or bias. We have suspended this host and sincerely thank Haben both for reporting this incident and for her past work to help Airbnb’s team better serve the disability community.”

In determining what action to take, Airbnb concluded that what Truman did fell into the category of discriminatory impact versus discriminatory intent. So, if a host calls the guest the N-word, that’s discriminatory intent and impact, which would result in immediate removal from the platform. Discriminatory impact, according to Airbnb, is how it sees this situation between Girma and the host. Airbnb’s theory is that Truman is not irredeemable and can learn from this situation. And, if he doesn’t, then he may be removed entirely.

“I understand the implication yes, though this was not why Haben’s booking was cancelled in the first place,” Truman told TechCrunch. “I have written to Airbnb to appeal against this decision as I feel there appears to have been a misunderstanding.”

Airbnb has since notified Girma of the resolution, which entails the aforementioned 30-day suspension, as well as a re-education of its policies. However, she says this is a “gentle” punishment.

“Responding to violations by educating hosts again and again creates a culture where hosts know they can get away with discrimination,” Girma said. “And if they are extremely unlucky the worst that will happen is a thirty-day suspension.”

Even more alarming, Girma said, is that Airbnb told her the company has instructed Truman that any similar violation “may result” in his removal.

“Airbnb cannot even commit to removing Kirk if he does this again,” she said. “I’m deeply concerned about the lack of enforcement.”

Airbnb has since offered Girma money to cover her costs of seeking accommodation elsewhere, but she says she does not plan to accept any compensation.

What Girma would prefer, she told TechCrunch, is for Airbnb to commit to making the complaint process transparent to victims, strictly enforce the accessibility policy and remove hosts who violate it.

“The company has thousands and thousands of hosts; why is Airbnb so intent on protecting a host that knowingly violated policies and discriminated against a disabled guest?” Girma wondered. “Airbnb has a systemic enforcement problem. Knowingly violating Airbnb policy apparently won’t even get hosts removed from the platform. Airbnb policy is to not tell victims of discrimination the results of complaint reviews. How will guests ever feel safe using Airbnb when we know hosts that violate Airbnb’s own policies stay on the platform?”

Airbnb has long faced issues with discrimination. In 2016, the company announced product and policy changes aimed at eradicating racist behavior. That included a new non-discrimination policy and a mandatory community commitment to treat fellow platform members with respect and without judgment and bias.

It’s worth noting Airbnb has also made some positive changes on the accessibility front. Last March, it added accessibility filters to make it easier for people with disabilities to find accessible travel accommodations, such as places with step-free entry and entryways that are wide enough to accommodate a wheelchair.

But despite Airbnb’s attempts to educate hosts and create a platform that fosters inclusivity, it’s clear that not all hosts are on board, which is still resulting in discrimination. If you’ve experienced discrimination on Airbnb, please get in touch with me at megan@techcrunch.com.

Elavon to acquire Sage Pay, a gateway that competes with Stripe, PayPal and Adyen, for $300M

By Ingrid Lunden

E-commerce continues to gain momentum — a trend we’ll see played out in the next two months of holiday shopping — and with that comes more consolidation. Today, Elavon, the payments company that is a subsidiary of US Bancorp, announced that it will acquire Sage Pay, one of the bigger payment processors in the UK and Ireland serving small and medium businesses.

Sage Pay’s owner Sage Group said the deal is being done for £232 million in cash (or $300 million at today’s currency rates).

Elavon is active in 10 countries and says it’s the fourth-largest merchant acquirer in Europe, competing against the likes of  Global Payments, Vantiv, FIS, Ingenico, Verifone, Stripe, Chase, MasterCard and Visa. The deal is still subject to regulatory approval (both by the Federal Reserve in the US and the Central Bank of Ireland), and if all proceeds, the deal is expected to close in Q2 of 2020.

The acquisition points to a bigger trend underway in e-commerce. The market is very fragmented, not just in terms of the companies who sell goods online but also (and perhaps especially) in terms of the companies that manage the complexities at the back end.

In keeping with that, Sage Pay has a lot of competitors in its specific area of taking and managing the payments process for online retailers and others taking transactions online or via mobile apps. They include some of the same competitors as Elavon’s: newer entrants like Stripe, Adyen, and PayPal (all of which have extensive businesses covering many countries and are each larger than Sage, valued in the billions rather than hundreds of millions of dollars), but also smaller operations like GoCardless as well as more established companies like WorldPay.

This deal is a mark of the consolidation that’s been taking place to gain better economies of scale in a market where individual transactions generally generate incremental revenues.

Sage Pay, in that context, was a relatively small player. It 2018 revenues were £41 million, but it is profitable, with an operating profit of £15 million, and Sage said it expects “to report a statutory profit on disposal of approximately £180 million on completion.”

The deal comes on the heels of Sage Group — which is publicly traded — confirming reports in September that it was looking for strategic alternatives for the payments business. Sage Group for the last couple of years has been divesting payments and banking assets to focus more on accounting, people and payroll software, which it sells through an SaaS model.

“Our vision of becoming a great SaaS company for customers and colleagues alike means we will continue to focus on serving small and medium sized customers with subscription software solutions for Accounting & Financials and People & Payroll,” said Steve Hare, Sage’s CEO, in a statement. “Payments and banking services remain an integral part of Sage’s value proposition and we will deliver them through our growing network of partnerships, including Elavon.”

Elavon, as the consolidator here, was itself acquired by US Bancorp way back in 2001 for $2.1 billion. Currently it is active in 10 countries, but in that same vein of consolidation to improve economies of scale on the technical side, and to aggregate more incremental transactions on the financial side, Elavon’s main objective is to increase its overall share of the e-commerce market in Europe. specifically by expanding with Sage Pay further into the UK and Ireland.

“We are a customer-focused company that is helping businesses succeed in a global marketplace that is changing rapidly,” said Hannah Fitzsimons, president and general manager of Elavon Merchant Services, Europe. “This acquisition brings tremendous talent and leading technology to Elavon, which can be leveraged across the European market.”

Opera’s Africa fintech startup OPay gains $120M from Chinese investors

By Jake Bright

Africa-focused fintech startup OPay has raised a $120 million Series B round backed by Chinese investors.

Located in Lagos and founded by consumer internet company Opera, OPay will use the funds to scale in Nigeria and expand its payments product to Kenya, Ghana and South Africa — Opera’s CFO Frode Jacobsen confirmed to TechCrunch.

Series B investors included Meituan-Dianping, GaoRong, Source Code Capital, Softbank Asia, BAI, Redpoint, IDG Capital, Sequoia China and GSR Ventures.

OPay’s $120 million round comes after the startup raised $50 million in June. It also follows Visa’s $200 million investment in Nigerian fintech company Interswitch and a $40 million raise by Lagos-based payments startup PalmPay — led by China’s Transsion.

There are a couple of quick takeaways. Nigeria has become the epicenter for fintech VC and expansion in Africa. And Chinese investors have made an unmistakable pivot to African tech.

Opera’s activity on the continent represents both trends. The Norway-based, Chinese-owned (majority) company founded OPay in 2018 on the popularity of its internet search engine.

Opera’s web-browser has ranked No. 2 in usage in Africa, after Chrome, the last four years.

The company has built a hefty suite of internet-based commercial products in Nigeria around OPay’s financial utility. These include motorcycle ride-hail app ORide, OFood delivery service and OLeads SME marketing and advertising vertical.

“OPay will facilitate the people in Nigeria, Ghana, South Africa, Kenya and other African countries with the best fintech ecosystem. We see ourselves as a key contributor to…helping local businesses…thrive from…digital business models,” Opera CEO and OPay Chairman Yahui Zhou, said in a statement.

Opera CFO Frode Jacobsen shed additional light on how OPay will deploy the $120 million across Opera’s Africa network. OPay looks to capture volume around bill payments and airtime purchases, but not necessarily as priority.  “That’s not something you do every day. We want to focus our services on things that have high-frequency usage,” said Jacobsen.

Those include transportation services, food services and other types of daily activities, he explained. Jacobsen also noted OPay will use the $120 million to enter more countries in Africa than those disclosed.

Since its Series A raise, OPay in Nigeria has scaled to 140,000 active agents and $10 million in daily transaction volume, according to company stats.

Beyond standing out as another huge funding round, OPay’s $120 million VC raise has significance for Africa’s tech ecosystem on multiple levels.

It marks 2019 as the year Chinese investors went all in on the continent’s startup scene. OPay, PalmPay and East African trucking logistics company Lori Systems have raised a combined $240 million from 15 different Chinese actors in a span of months.

OPay’s funding and expansion plans are also a harbinger for fierce, cross-border fintech competition in Africa’s digital finance space. Parallel events to watch for include Interswitch’s imminent IPO, e-commerce venture Jumia’s shift to digital finance and WhatsApp’s likely entry in African payments.

The continent’s 1.2 billion people represent the largest share of the world’s unbanked and underbanked population — which makes fintech Africa’s most promising digital sector. But it’s becoming a notably crowded sector, where startup attrition and failure will certainly come into play.

And not to be overlooked is how OPay’s capital raise moves Opera toward becoming a multi-service commercial internet platform in Africa.

This places OPay and its Opera-supported suite of products on a competitive footing with other ride-hail, food delivery and payments startups across the continent. That means inevitable competition between Opera and Africa’s largest multi-service internet company, Jumia.

 

Google to offer checking accounts in partnership with banks starting next year

By Darrell Etherington

Google is the latest big tech company to make a move into banking and personal financial services: The company is gearing up to offer checking accounts to consumers, as first reported by The Wall Street Journal, starting as early as next year. Google is calling the project “Cache,” and it’ll partner with banks and credit unions to offer the checking accounts, with the banks handling all financial and compliance activities related to the accounts.

Google’s Caesar Sengupta spoke to the WSJ about the new initiative, and Sengupta made clear that Google will be seeking to put its financial institution partners much more front-and-center for its customers than other tech companies have perhaps done with their financial products. Apple works with Goldman Sachs on its Apple Card credit product, for instance, but the credit card is definitely pretend primarily as an Apple product.

So why even bother getting into this game if it’s leaving a lot of the actual banking to traditional financial institutions? Well, Google obviously stands to gain a lot of valuable information and insight on customer behavior with access to their checking account, which for many is a good picture of overall day-to-day financial life. Google says it’s also intending to offer product advantages for both consumers and banks, including things like loyalty programs, on top of the basic financial services. It’s also still considering whether or not it’ll charge service fees, per Segupta – not doing so would definitely be and advantage over most existing checking accounts available.

Google already offers Google Pay, and its Google Wallet product has hosted some features beyond simple payments tracking, including the ability to send money between individuals. Meanwhile, rivals including Apple have also introducing payment products, and Apple of course recently expanded into the credit market with Apple Card. Facebook also introduced its own digital payment product earlier this week, and earlier this year announced its intent to build its own digital currency called ‘Libra’ along with partners.

The initial financial partners that Google is working with include Citigroup and Stanford Federal Credit Union, and their motivation per the WSJ piece appears to be seeking out and attracting younger and more digital-savvy customers who are increasingly looking to handle more of their lives through online tools. Per Sengupta’s comments, they’ll also benefit from Google’s ability to work with large sets of data and turn those into value-add products, but the Google exec also said the tech company doesn’t sue Google Pay data for advertising, nor does it share that data with advertisers. Still, convincing people to give Google access to this potentially sensitive area of their lives might be an uphill battle, especially given the current political and social climate around big tech.

PalmPay launches in Nigeria on $40M round led by China’s Transsion

By Jake Bright

Africa focused payment startup PalmPay has launched in Nigeria after raising a $40 million seed-round led by Chinese mobile-phone maker Transsion.

The investment came via Transsion’s Tecno subsidiary, with participation from China’s NetEase and Taiwanese wireless comms hardware firm Mediatek a Transsion spokesperson confirmed to TechCrunch.

PalmPay had piloted its mobile fintech offering in Nigeria since July, before going live today at a launch in Lagos.

The startup aims to become Africa’s largest financial services platform, according to a statement. 

As part of the investment, PalmPay enters a strategic partnership with mobile brands Tecno, Infinix, and Itel that includes pre-installation of the startup’s app on 20 million phones in 2020.

The UK headquartered venture — that was also founded with Chinese seed investment — offers a package of mobile based financial services, including no fee payment options, bill pay, rewards programs, and discounted airtime.

In Nigeria, PalmPay will offer 10% cashback on airtime purchases and bank transfer rates as low as 10 Naira ($.02).

In addition to Nigeria, PalmPay will use the $40 million seed funding to grow its financial services business in Ghana. The payments startup has plans to expand to additional countries in 2020, PalmPay CEO Greg Reeve told TechCrunch on a call.

PalmPay received its approval from the Nigerian Central Bank as a licensed mobile money operator in July. During its pilot phase, the payments venture registered 100,000 users and processed 1 million transactions, according to a company spokesperson.

With its payments focus, the startup enters Africa’s most promising digital sector, but also one that has become notably competitive and crowded  — particularly in the continent’s largest economy and most populous nation of Nigeria. 

By a number of estimates, Africa’s 1.2 billion people represent the largest share of the world’s unbanked and underbanked population.

An improving smartphone and mobile-connectivity profile for Africa (see GSMA) turns this scenario into an opportunity for mobile-based financial products.

That’s why hundreds of startups are descending on Africa’s fintech space, looking to offer scalable solutions for the continent’s financial needs. By stats offered WeeTracker, fintech now receives the bulk of VC capital and deal-flow to African startups.

Nigeria has multiple new digital-payments entrants — see Chippercash — and several firmly rooted later stage fintech players, such as Paga and recently confirmed unicorn Interswitch.

PalmPay CEO Greg Reeves believes the company can compete in Nigeria and across Africa based on several strategic advantages. A big one is the startup’s support from Transsion and partnership with Tecno.

Transsion Tecno Store Africa“On channel and access, we’re going to be pre-installed on all Tecno phones. Your’e gonna find us in the Tecno stores and outlets. So we get an immediate channel and leg up in any market we operate in,” said Reeve.

Tecno’s owner and PalmPay’s lead investor, Transsion, is the largest seller of smartphones in Africa and maintains a manufacturing facility in Ethiopia. The company raised nearly $400 million in a Shanghai IPO in September and plans to spend roughly $300 million of that on new R&D and manufacturing capabilities in Africa and globally.

In addition to Transsion’s support and network, Reeves names PalmPay’s partnership with Visa . “We signed a strategic alliance with Visa so now I can deliver Visa products on top of my wallet, link my wallet to Visa products and give access to someone who’s completely unbanked to the whole of the Visa network,” he said.

Another strategic advantage PalmPay may have as a newcomer in Africa’s fintech space is Reeve’s leadership experience. He comes to the CEO position after serving as Vodaphone’s global head of M-Pesa — one of the world’s most recognized mobile-money products. Reeve was also a GM for Millicom‘s fintech products across Africa and Latin America.

“I’ve had my fingers in mobile financial services for the last 10 years,” he said.

Reeve confirmed that PalmPay has local teams (and is hiring) in Nigeria and Ghana.

With the company’s launch and $40 million raise — which is potentially the largest seed-round for an Africa focused startup in 2019 — PalmPay’s bid to gain digital payment market share is on.

The Transsion led investment also serves as a big bold marker for China’s pivot to African tech in 2019. It follows several big moves by Chinese actors in the continent’s digital space.

These include Opera’s $50 million investment in multiple online verticals in Nigeria and a major investment by Chinese investors in trucking logistics startup Lori Systems this week.

Chaka opens up global investing to Africa’s most populous nation

By Jake Bright

Fintech startup Chaka aims to open up online investing to Africa’s most populous nation, Nigeria.

The seed-stage company recently went live with its mobile-based platform that offers Nigerians stock trading in more than 40 countries.

Chaka positions itself as a passport to local and global investing. The startup has created an API and interface that allows Nigerians with a bank account (and who meet KYC requirements) to create trading accounts to purchase global blue chip and local Nigerian stocks.

Investors can get started with as little as 1,000 Naira, or $10, to create a local and global wallet to trade, according to Chaka founder and CEO Tosin Osibodu.

The platform has partnerships with two brokers to facilitate stock purchases: Citi Investment Capital and U.S.-based DriveWealth.

“Embedded in our offer is the ability to buy on the local stock market…we make it more seamless than usual, and assets…from this whole universe outside the continent,” said Osibodu.

The Nigerian Stock Exchange has been upgrading its platform to digitize and accommodate more listings. It has a five-year partnership with NASDAQ and Airtel Africa listed on the NSE in July. 

On the Chaka’s addressable market, “Our outlook is that within Nigeria…between one and two million people are strongly in the market for this product,” Osibodu said.

Tosin Osibodu

Chaka looks to offer more than stocks. “Our product road-map includes not just equities, but other investment products people are interested in — mutual funds, fixed income products, and eventually even cryptocurrencies — so that really expands our bounds,” said Osibodu.

Chaka’s fee structure is 100 Naira (or 3%) for local trades and $4.00 for global trades.

To mitigate the FX risk of the often volatile Nigerian Naira, the startup converts locally to dollars and funds client trades in USD. Chaka agrees to intra-day forward rates at 9am each day and locks them in until 2pm for transactional activity on its platform, according to Osibodu

Chaka hasn’t disclosed amounts, but confirms its has received pre-seed funding from Nigerian founder and investor Iyinoluwa Aboyeji, aka E.

The startup is in a unique position in African fintech. The sector receives the bulk of the continent’s VC (according WeeTracker), but most of it is directed toward P2P payments startups — versus personal investment platforms.

An alum of U-Penn and Dartmouth, Chaka’s founder got the idea to form the venture, in part, due to challenges attempting to access well-known trading platforms, such as E-Trade.

“I tried to open these accounts and whenever I…disclosed I was Nigerian very shortly after those accounts were closed or denied,” said Osibodu. 

For decades, Nigeria has been known as an originating country for online fraud, commonly referred to as 419 scams. This is something for which the country’s legitimate business operators pay an undue reputational cost, according to Osibodu. 

In recent years, Nigeria has also become a magnet for legitimate business in Africa. The country has the continent’s leading movie and entertainment industry and has emerged as a hotspot for startup formation and VC activity.

Chaka backer Iyinoluwa Aboyeji, who confirmed his investment in the company to TechCrunch, believes progressive trends in Nigeria will open up a new investor class.

In addition to Aboyeji, Chaka has also received seed-funds from Microtraction, a Lagos-located early-stage investment shop founded by Yele Bademosi and supported by Y Combinator CEO Michael Seibel.

Chaka allows for API integrations and has a developer team. The company has created an automated customer verification process. “It sounds trivial compared to the American market, but it’s a bit of a first in Nigeria,” said CEO Tosin Osibodu.

On Chaka’s long-game, “The grand mission of the company is to reduce capital market access barriers,” according to Osibodu.

“With a two to five million customer base — and a $40 to $200 ARPU — on the really conservative end that’s a $100 million revenue opportunity,” he said.

 

Pan-African e-tailer Jumia grows 3Q revenue, e-payments and losses

By Jake Bright

Pan-African e-commerce startup Jumia released its third-quarter financial results today.

The numbers and presentation reflected some of the same past trends, with a dash of new, and nary a mention of a declining share price.

The results

Jumia — with online goods and service verticals in 14 countries — posted third-quarter revenue growth of 19% (€40 million) and increased its active customer base 56% to 5.5 million from 3.5 million over the same period a year ago.

Jumia’s Gross Merchandise Value (GMV) — the total amount of goods sold over the period — grew by 39% to €275 million. The online retailer nearly doubled its orders from 3.6 million in Q3 2018 to 7 million in Q3 2019.

Jumia also saw growth in its JumiaPay digital finance product, with total payment volume growing 95% to €32 million in Q3 2019 from €16.4 million in Q3 2018.

This is significant, as the company has committed to generate more revenues from digital payment products and offer JumiaPay as a standalone service across Africa.

The overall pattern of growing revenues and customers YoY has been consistent for Jumia.

But so too have the company’s losses, which widened 34% in 3Q 2019 to €54.6 million, compared to €40.6 million. Negative EBITDA increased 26% to €45.4 million from €35.8 over the same period in 2018.

Jumia pegged a large part of the spike in losses to an increase in fulfillment expenses due to more cross-border goods transactions (with higher shipping costs) on its platform in 3Q 2019.

What’s new

Jumia introduced some new methodologies and measures for its results. “We believe the most relevant monetization metrics for us are market-based revenue and gross profit,” Jumia Group CFO Antoine Maillet-Mezeray explained on the call.

“We don’t see revenue as a meaningful metric to assess the monetization of our business as it is impacted by shifts in the revenue mix between first party and marketplace,” he said.

If and when Jumia does get into the black, I suspect revenue will shift back as key.

On its path to profitability, Jumia CEO Sacha Poignonnec reaffirmed the company’s commitment to generate more revenue from higher margin (straight through) products, such as JumiaPay and Jumia’s classified business, over cost-intensive (and logistically complicated) online goods sales.

“We are focused on driving the adoption and penetration of Jumia pay within our own ecosystem,” he said — meaning across Jumia’s existing buyer-seller universe.

Since its founding in 2012, the company has been forced to adapt to slower digital payments integration in its core Nigeria and allow cash-on-delivery payments, which are costly and more problematic than digital processing.

Poignonnec highlighted Jumia’s commitment to build a financial services marketplace (and revenues) from consumers and partners using JumiaPay and JumiaLending for products such as loans, third-party credit-scoring and insurance, he explained. This has led to Jumia moving into working-capital services for vendors on its platform.

On the movement of online goods, Jumia highlighted the expansion of its JumiaMall service, which offers brands — such as L’Oreal, Samsung and Unliver — more tailored selling options on its website around shipping, product positioning and consumer data analytics.

Jumia also shared info on product mix and diversification, which showed strong upward trends in digital services, the sale of consumer electronics and beauty products.

Share price

Surprisingly absent from Jumia’s earnings call and the subsequent Q&A was any discussion of the company’s share price.

Today’s reporting was slightly more anticipated, given Jumia has faced a short-seller assault, sales scandal and significant market-cap drop since its April IPO on the NYSE.

The online retailer gained investor confidence out of the gate, more than doubling its $14.50 opening share price after the IPO.

That lasted until May, when Jumia’s stock came under attack from short-seller Andrew Left, whose firm Citron Research issued a report accusing the company of fraud. That prompted several securities-related lawsuits against Jumia.

The company’s share price plummeted 43% — from $49 to $26 — the week Left released his short-sell claims.

Then on its second-quarter earnings call in August, Jumia offered greater detail on the fraud perpetrated by some employees and agents of its JForce sales program. 

The company declared the matter closed, but Jumia’s stock price plummeted more after the August earnings call (and sales-fraud disclosure), and has lingered in the $6 range for weeks.

That’s 50% below the company’s IPO opening in April and 80% below its high.

Jumia can offer new metrics to evaluate its performance, but the simplest measure — the ability to generate revenues in excess of costs to turn a profit — will still apply.

The sooner Jumia can go in that direction the faster it can revive its share price and investor confidence.

Nigeria’s Interswitch confirms $1B valuation after Visa investment

By Jake Bright

Nigerian digital payments firm Interswitch confirmed today it has reached unicorn status after Visa acquired a minority equity stake in the firm.

“The investment makes Interswitch one of the most valuable African fintech businesses with a valuation of $1 billion,” Interswitch said in a release to TechCrunch.

The Visa investment could create the first of two market distinctions for Interswitch — as it shouldn’t change the Lagos based company’s plans to go public.

“An IPO is still very much in the cards; likely sometime in the first half of 2020,” a source with knowledge of the situation told TechCrunch on background.

Interswitch did not reveal the amount of Visa’s investment and would not confirm Sky News reporting Monday that pegged it at $200 million for 20%.

Whatever the exact number, Interswitch’s confirmation of a $1 billion valuation marks another milestone in African tech.

Only one VC backed startup, turned later-stage company on the continent — e-commerce venture Jumia — has generated enough revenue and capital to achieve a ten-figure valuation.

For the near to medium-term, Interswitch could stand as Africa’s sole tech-unicorn, since Jumia’s volatile share-price and declining market-cap since an April IPO have dropped the company’s worth below $1 billion (for now).

Founded in 2002 by Mitchell Elegbe, Interswitch pioneered the infrastructure to digitize Nigeria’s then predominantly paper-ledger and cash-based economy.

The company now provides much of rails for Nigeria’s online banking system that serves Africa’s largest economy and population. Interswitch offers a number of personal and business finance products, including its Verve payment cards and Quickteller payment app.

Interswitch Quickteller

From its home-base of Nigeria Interswitch has expanded its physical presence to Uganda, Gambia and Kenya .

Interswitch also sells its products in 23 African countries and launched a partnership in August for its Verve cardholders to make payments on Discover’s global network.

Visa and Interswitch are touting the equity investment as a strategic collaboration between the two companies, without a lot of detail on what that will mean.

“The partnership will create an instant acceptance network across Africa to benefit consumers and merchants,” was the characterization offered in a press release.

Verve Times Square Interswitch

Interswitch’s imminent IPO has been delayed for several years. CEO and founder Mitchell Elegbe told TechCrunch, “a dual-listing on the London and Lagos stock exchange is an option on the table,” in a January 2016 call.

In subsequent years, Elegbe and other Interswitch executives named Nigeria’s recession as a reason for the delay.

A number stories have surfaced, including Bloomberg News reporting in July, that the company was poised to go public on the LSE.

TechCrunch’s source close to the matter offered the latest indication that Interswitch will list on a major exchange by mid-2020.

With possible exits for backers Helios Investment Partners, TA Investments and IFC, Interswitch’s unicorn status and pending IPO could create more momentum for startup investment in Africa. VC to the continent has grown significantly over the last 5 years, but stands at just over $1 billion annually, per Partech numbers.

Interswitch could also be in a stronger position to offer more capital directly to the continent’s fintech startups by reviving its ePayment Growth Fund. The venture arm made two investments in 2015, but then went largely quiet.

 

 

 

 

Every startup is a bank — or wants to be

By Kate Clark

Hello and welcome back to Equity, TechCrunch’s venture capital-focused podcast, where we unpack the numbers behind the headlines.

This week we did something just a little bit new. Kate was in studio at TechCrunch’s SF HQ. Alex was in his dork cave in Providence. And we had a guest in the studio as well. We’ve done similar setups before, but never with video all around. So, welcome to a slightly new chapter in Equity’s production history (all praise to Chris for making it work, video will be out today on TechCrunch’s YouTube page).

Our guest this week was the excellent Sarah Smith from Bain Capital Ventures. Before she turned to writing checks, Smith worked for both Quora and Facebook. Her fun fact? She’s an avid and competitive player of board games.

First up we dug into one of Kate’s latest, a piece looking at the influencer space, venture investments into it and what’s next for the power of the Instagram-famous. She highlights startups like Influence, Cameo, Karat and more.

Next up, Deserve raised $50 million from Goldman Sachs, making the round something that was worth touching on. Later, Alex spoke with the company’s CEO and picked up more context, but what matters for today is that Deserve is doubling-down on its credit card fintech service, not doing what other companies that handle money are up to — namely, trying to become neobanks at high speed.

Speaking of which, why is every fintech or finservices startup becoming a bank? Partially because they can, partially because it can be lucrative and partially because, we found out, it’s a way to juice customers that they’ve already paid to acquire. Want to make your CAC expenses look more efficient? Stretch out that LTV!

And then we spent a minute on Uber’s results, which proved better than expected but wound up being poorly received.

Glad you guys came back for another episode, we’ll see you soon.

Equity drops every Friday at 6:00 am PT, so subscribe to us on Apple PodcastsOvercastSpotify and all the casts.

WeWork-owned Meetup confirms restructuring, layoffs

By Kate Clark

WeWork’s efforts to cut costs following the ouster of its chief executive officer and a delayed initial public offering looks to be impacting its subsidiaries. Meetup, which WeWork acquired for a reported $200 million in 2017, announced a round of layoffs this morning, TechCrunch has learned.

The company, which helps people foster in-person connections by facilitating events across the globe, has shed as much as 25% of its workforce, most of which were employees of the company’s engineering department, sources tell TechCrunch.

Meetup’s top priority is building the best possible product for our community of more than 44 million members around the world,” a representative of the company said in a statement provided to TechCrunch. “Today we made some organizational changes with that goal in mind, including restructuring across some of our departments.”

The news follows WeWork’s own well-documented attempts at restructuring its high-loss business. Late last month, SoftBank provided the over-valued co-working business a much-needed lifeline in the form of a $5 billion loan, a $3 billion tender offer and another $1.5 billion in equity funding, according to The Wall Street Journal. That’s in addition to the billions already invested by the Japanese telecom giant, which now owns a roughly 80% stake. SoftBank’s mountain of cash had previously valued WeWork at an eye-popping $47 billion; the latest investment package, however, valued the company at just $8 billion. 

Understandably, WeWork’s new leadership (former vice chairman Sebastian Gunningham and former president and chief operating officer Artie Minson are serving as co-CEOs) seem to be hyper-focused on its new cost-cutting strategy. Multiple reports have indicated the business is weighing sales of several of its subsidiaries, including Meetup, Managed by Q and Conductor. We’ve asked Meetup whether its parent company enforced the staff cuts and will update this story if we hear back.

As for WeWork, it must make a concerted effort to boost its balance sheet in the next few months if it plans to stay committed to a 2020 IPO. The company initially revealed its IPO prospectus in August, disclosing revenue north of $1.5 billion in the six months ending June 30 on losses of $904.6 million. Shortly after, its co-founder and former CEO Adam Neumann’s misbehaviors were published in a number of incriminating stories by The Wall Street Journal and other outlets. Neumann’s trashed reputation coupled with WeWork’s mounting losses forced the company to replace its founding CEO and shelve its IPO, which would have been the second-largest offering of 2019 behind only Uber.

Meetup, founded in 2002, was one of the first IRL social networks. Today’s cuts are not the first since WeWork came into the picture, according to earlier reporting by Gizmodo. Meetup shed roughly 10% of its staff amid negotiations for the acquisition and underwent cultural changes as managers pushed for growth and “more aggressiveness in the workplace.”

The future of Meetup is unclear. WeWork may move forward with a sale of the business or pressure its own cost-cutting measures on the company. In a recent email to Meetup members, CEO David Siegel wrote that he appreciated the recent outpouring of support from the community, as it became apparent the company was in a precarious position because of its owner.

“As you may be aware, there has been significant news about our parent company, WeWork, and what this means for the future of Meetup,” Siegel wrote. “As Meetup’s CEO, I want to personally tell you we’re as committed as ever to bringing people together in person. 

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