Kenya’s Ajua acquires WayaWaya to consolidate consumer experience play in African SMEs

Kenyan consumer experience platform for businesses in Africa, Ajua today announced that it has acquired WayaWaya, a Kenya-based AI and ML messaging and payments company.

WayaWaya’s customers and partners include the likes of I&M Bank, Interswitch and MTN. The company offers a range of services, from digital banking and payment services to financial services APIs and payment bots.

According to Ajua, the acquisition is primarily focused on WayaWaya’s payments bots system known as Janja. The platform, which has customers like Airtel, Ezee Money, Housing Finance Company of Kenya (HF Group), enables borderless banking and payments across apps and social media platforms. Teddy Ogallo, the entrepreneur who founded WayaWaya, joins Ajua as VP of Product APIs and Integrations.

Per Crunchbase, WayaWaya has just raised $75,000. Although the two companies did not disclose the financial details of the acquisition, Ajua is expected to have paid 10 times more than WayaWaya’s total raise.

Ajua, formerly mSurvey, was founded in 2012 by Kenfield Griffith. The company is solving a consumer data problem for African businesses to understand their business better and drive growth.

“There’s a lot of commerce happening on the continent and Ajua wants companies to move from transaction numbers to the customers behind such transaction,” Griffith told TechCrunch. “Imagine if we knew what drove consumer habits for businesses. I mean, that’s a huge exponential curve for African businesses.”

Teddy Ogallo (Founder, WayaWaya) & Kenfield Griffith (CEO, Ajua)

Teddy Ogallo (Founder, WayaWaya) & Kenfield Griffith (CEO, Ajua)

Nigeria’s SME market alone is valued at $220 billion annually. And while businesses, mostly big enterprises, can afford customer communication tools, a large segment of small businesses are being left out. Ajua’s play is to use data and analytics to connect companies with their customers in real time. “We’ve taken what makes enterprise customers successful, and we’re capturing it in a simple format so SMEs can have the same tools,” Griffith added

Since most consumer behavior for these SMEs happens offline, Ajua gives businesses unique USSD codes to receive payments, get feedback and offer discounts to their customers. It is one of the products Ajua has launched over the years for customer feedback at the point of service to businesses that cumulatively have over 45 million customers.

The company’s partners and clients also include Coca-Cola, FBNQuest, GoodLife Pharmacy, Java House, Safaricom, Standard Chartered and Total.

As an intelligent messaging bot, Janja is used by individuals and businesses across WhatsApp, Facebook Messenger and Telegram to automate customer support and make cross-border payments. So, Janja’s integration into Ajua’s product stack will close much of the acquirer’s customer experience loop by automating responses and giving customers what they want, when they want it.

This acquisition comes a month after Ajua announced that it partnered with telecom operator MTN Nigeria to launch a customer management product for Nigerian businesses. The product called MTN EnGauge carries the same features present in Ajua but, in this case, is tailored solely for businesses using the MTN network. The roll-out is expected to generate more data for Ajua’s thousands of users. It will also be upgraded to incorporate Janja and other services.

In hindsight, it appears Ajua could have created a product like Janja in-house due to its vast experience in the consumer experience space. However, the company chose an acquisition and Griffith gave two reasons why — building a similar product would have taken a long time and Ogallo seemed to know Janja’s business and operations so well, it just made sense to get him on board. 

“Teddy was going the same direction we’re going. We just thought to acquire WayaWaya instead and make a really good company out of both products attempting to solve the same problem. To me, it’s all about solving the problem together rather than going alone,” said the CEO. 

On why he accepted the acquisition, Ogallo, who now has a new role, noted that Ajua’s ability to scale customer service and experience and also help businesses was one reason and earned admiration from him. “Seeing how WayaWaya’s technology can complement Ajua’s innovative products and services, and help scale and monetize businesses, is an exciting opportunity for us, and we are happy that our teams will be collaborating to build something unique for the continent,” he added

This is a solid infrastructure play from Ajua coming from a founder who is a massive advocate of acquisition and consolidation. Griffith believes that the two are strategies for a speedier route to new markets and channels in Africa

I think there are lots of ways we can build the ecosystem. There are lots of young talent building stuff, and they don’t have access to capital to get to the next stage. The question is if they want to race to the finish line or take off time and get acquired. I think there’s a huge opportunity in Africa if you want to solve complex problems by acquisition.”

There has been an uptick in local acquisitions in Africa from startups within a single country and between two countries in the past three years. For the former, Nigerian recruitment platform Jobberman’s acquisition of NGCareers last year comes to mind. And there are pan-African instances like Lagos-based hub CcHub’s acquisition of iHub, its Nairobi counterpart; Ethiopian software provider Apposit sell-off to Nigerian fintech Paga; and Johannesburg-based fintech MFS Africa acquiring Uganda’s Beyonic.

The common theme among the acquisitions (and most African acquisitions) is their undisclosed sums. For Ajua, Griffith cited regulatory issues as one reason why the company is keeping the figure under wraps.

Since launching nine years ago, Ajua has raised a total of $3.5 million, according to Crunchbase. Given the nature of this acquisition and partnership with MTN, the company might set sights on another fundraise to scale aggressively into Nigeria (a market it entered in 2019) and other African countries.

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Nigeria’s IROKO plans to go public on the London Stock Exchange AIM in 2022

IROKO, a Nigerian-based media company, could file to go public in the next 12 months on the London Stock Exchange (LSE) Alternative Investment Market.

Founded by Jason Njoku and Bastian Gotter in 2011, IROKO boasts the largest online catalog of Nollywood film content globally.

According to this report, the media company will raise between $20 million and $30 million valuing the company at $80 million to $100 million

In October 2019, Njoku hinted that the company was going public either on the London Stock Exchange or a local exchange on the continent. However, the CEO kept mute about the whole process the following year due to how tumultuous it was for the company.

In 2020, the company had plans to increase its average revenue per user (ARPU) in Africa for its video-on-demand service, iROKOtv, from $7-8 to $20-25. Through the first four months of the year, it seemed IROKO was set to achieve that. But amid pandemic-induced lockdown fears, consumer discretionary spending reduced in Nigeria and other African markets. What followed was a 70% drop in subscription numbers, and in May, 28% of the company’s staff went on unpaid leave. But unlike the numbers iROKOtv local markets put up, its international subscribers grew 200% during the lockdown, hitting a $25-30 ARPU range.

However, more bad news came in August when the CEO announced that the company was laying off 150 people. Njoku cited the naira devaluation, regulatory onslaught by the country’s broadcast regulator, and a reduced outbound marketing team as reasons behind this decision.

With the company spending $300,000 or more every month on growth, it decided to halt any scaling efforts on the continent. IROKO instead focused on its international market, primarily the U.S and the U.K where it has been able to execute a 150% price increase from $25 per year to $60 per year. Njoku said to this decision set the company straight leaving it in a stronger cash position than it had been for years.

“The costs of pursuing Africa growth is what was really resized dramatically. We were so focused on defending Africa and basically ended up doing nothing. Zero marketing or anything to drive that,” he told TechCrunch. “We pulled back to focus on where our economics actually makes sense. Our international business organically grew double-digit in 2020 and we expect it to continue this way for the foreseeable future.”

IROKO isn’t entirely giving up on the African market, instead, think of it in stealth mode. Due to its dominance over the past eight years as one of the strongest independent SVOD companies in Africa, it is hard not to see the company in pole position to benefit from any improvements made on the continent.

That said, IROKO makes 80% of its revenue outside Africa and listing on a foreign exchange will help consolidate its efforts. For Njoku, the Nigerian Stock Exchange or other local exchanges do not have a history of listing early-stage tech companies; therefore, the London Stock Exchange makes more sense in the short term.

IROKO is also seeking a market cap of about $100 million, which is small for the primary market. This is why the media company is choosing to list on the Alternative Investment Market (AIM) of the LSE. A sub-market of the LSE, the AIM is built specifically for small-cap companies. Still, there are plans in the future for IROKO to progress to the main market as its valuation grows — something U.K sports betting company, GVC and online fashion retailer, ASOS have done in the past.

Most companies when going public, tend to raise more money than their private equity days. But it’s quite different with IROKO. The company which secured around $30 million in total with its last priced round (Series E) in January 2016, plans to raise less or a similar amount when going public in 2022. In what seems like a down round, I asked Njoku why the company isn’t planning to raise more?

“We don’t need more. To be honest, $10 million to $15 million will be for corporate development; the rest will be secondaries for shareholders. As a private company, IROKO’s valuation was never priced above $70 million so anything in our target range wouldn’t be a down round at all,” he said. “Especially if you consider in that time we exited ROK for close to the total amount of capital we raised for IROKO; we have returned $11 million to early investors and shareholders already. We still have material capital left from the ROK-Canal+ acquisition coming in every 6 months until 2023.”

When IROKO sold ROK Studios to Vivendi-owned Canal+ in July 2019, the terms of the deal remained undisclosed. But from the CEO’s statement, an estimate of the acquisition could be around $30 million. What’s particularly impressive is that the proceeds from the deal likely sustained the company through a rough patch in 2020 and might well do so after its IPO in 2022

Joining IROKO in plans to go public within the next two years is Interswitch, a Nigerian-based payments company valued at $1 billion. But unlike Interswitch, which was founded in 2002, IROKO has been operating for just 10 years. Within that time, the only internet company to have gone public is Jumia, and it did so after seven years. IROKO is expected to achieve this feat in its 11th year of operation and Njoku, who holds an 18% stake in the company, believes it’s enough time to take the next step.

“What we can achieve in private, we can equally achieve as a public company. We will likely open up the IPO to our loyal members too so they can capture the value too, which I am super excited about. One thing about IROKO is that we have always been pioneers and we’re okay being super experimental. I plan to open-source the entire process so any other African company coming behind — if we’re successful — will benefit from our experience,” he said of the journey ahead. 

#entertainment, #exit, #fundings-exits, #interswitch, #iroko, #jumia, #nigeria, #tc

African fintech startup Chipper Cash raises $30M backed by Jeff Bezos

African cross-border fintech startup Chipper Cash has raised a $30 million Series B funding round led by Ribbit Capital with participation of Bezos Expeditions — the personal VC fund of Amazon CEO Jeff Bezos.

Chipper Cash was founded in San Francisco in 2018 by Ugandan Ham Serunjogi and Ghanaian Maijid Moujaled. The company offers mobile-based, no fee, P2P payment services in seven countries: Ghana, Uganda, Nigeria, Tanzania, Rwanda, South Africa and Kenya.

Parallel to its P2P app, the startup also runs Chipper Checkout — a merchant-focused, fee-based payment product that generates the revenue to support Chipper Cash’s free mobile-money business. The company has scaled to 3 million users on its platform and processes an average of 80,000 transactions daily. In June 2020, Chipper Cash reached a monthly payments value of $100 million, according to CEO Ham Serunjogi .

As part of the Series B raise, the startup plans to expand its products and geographic scope. On the product side, that entails offering more business payment solutions, crypto-currency trading options, and investment services.

“We’ll always be a P2P financial transfer platform at our core. But we’ve had demand from our users to offer other value services…like purchasing cryptocurrency assets and making investments in stocks,” Serunjogi told TechCrunch on a call.

Image Credits: Chipper Cash

Chipper Cash has added beta dropdowns on its website and app to buy and sell Bitcoin and invest in U.S. stocks from Africa — the latter through a partnership with U.S. financial services company DriveWealth.

“We’ll launch [the stock product] in Nigeria first so Nigerians have the option to buy fractional stocks — Tesla shares, Apple shares or Amazon shares and others — through our app. We’ll expand into other countries thereafter,” said Serunjogi.

On the business financial services side, the startup plans to offer more API payments solutions. “We’ve been getting a lot of requests from people on our P2P platform, who also have business enterprises, to be able to collect payments for sale of goods,” explained Serunjogi.

Chipper Cash also plans to use its Series B financing for additional country expansion, which the company will announce by the end of 2021.

Jeff Bezos’s backing of Chipper Cash follows a recent string of events that has elevated the visibility of Africa’s startup scene. Over the past decade, the continent’s tech ecosystem has been one of the fastest growing in the world by year year-over-year expansion in venture capital and startup formation, concentrated in countries such as Nigeria, Kenya, and South Africa.

Africa Top VC Markets 2019

Image Credits: TechCrunch/Bryce Durbin

Bringing Africa’s large unbanked population and underbanked consumers and SMEs online has factored prominently. Roughly 66% of Sub-Saharan Africa’s 1 billion people don’t have a bank account, according to World Bank data.

As such, fintech has become Africa’s highest-funded tech sector, receiving the bulk of an estimated $2 billion in VC that went to startups in 2019. Even with the rapid venture funding growth over the last decade, Africa’s tech scene had been performance light, with only one known unicorn (e-commerce venture Jumia) a handful of exits, and no major public share offerings. That changed last year.

In April 2019, Jumia — backed by investors including Goldman Sachs and Mastercard — went public in an NYSE IPO. Later in the year, Nigerian fintech company Interswitch achieved unicorn status after a $200 million investment by Visa.

This year, Network International purchased East African payments startup DPO for $288 million and in August WorldRemit acquired Africa focused remittance company Sendwave for $500 million.

One of the more significant liquidity events in African tech occurred last month, when Stripe acquired Nigerian payment gateway startup Paystack for a reported $200 million.

In an email to TechCrunch, a spokesperson for Bezos Expeditions confirmed the fund’s investment in Chipper Cash, but declined to comment on further plans to back African startups. Per Crunchbase data, the investment would be the first in Africa for the fund. It’s worth noting Bezos Expeditions is not connected to Jeff Bezo’s hallmark business venture, Amazon.

For Chipper Cash, the $30 million Series B raise caps an event-filled two years for the San Francisco-based payments company and founders Ham Serunjogi and Maijid Moujaled. The two came to America for academics, met in Iowa while studying at Grinnell College and ventured out to Silicon Valley for stints in big tech: Facebook for Serunjogi and Flickr and Yahoo! for Moujaled.

Chipper Cash founders Ham Serunjogi (R) and Maijid Moujaled; Image Credits: Chipper Cash

The startup call beckoned and after launching Chipper Cash in 2018, the duo convinced 500 Startups and Liquid 2 Ventures — co-founded by American football legend Joe Montana — to back their company with seed funds. The startup expanded into Nigeria and Southern Africa in 2019, entered a payments partnership with Visa in April and raised a $13.8 million Series A in June.

Chipper Cash founder Ham Serunjogi believes the backing of his company by a notable tech figure, such as Jeff Bezos (the world’s richest person), has benefits beyond his venture.

“It’s a big deal when a world class investor like Bezos or Ribbit goes out of their sweet spot to a new area where they previously haven’t done investments,” he said. “Ultimately, the winner of those things happening is the African tech ecosystem overall, as it will bring more investment from firms of that caliber to African startups.”

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Interswitch to revive its Africa venture fund, CEO confirms

Pan-African fintech company Interswitch plans to fire up its corporate venture arm again—according to CEO Mitchell Elegbe—who spoke at TechCrunch Disrupt on Wednesday.

The Nigerian founder didn’t offer much new on the Lagos-based firm’s expected IPO, but he did reveal Interswitch will revive investments in African startups.

Founded by Elegbe in 2002, Interswitch pioneered the infrastructure to digitize Nigeria’s then predominantly cash-based economy. The company now provides much of the rails for Nigeria’s online banking system that serves Africa’s largest economy and population of 200 million people. Interswitch has expanded to offer personal and business payment products in 23 Africa countries.

The fintech firm achieved unicorn status in 2019 after a $200 million equity investment by Visa gave it a $1 billion valuation.

Reviving venture investing

Interswitch, which is well beyond startup phase, launched a $10 million venture arm in 2015 that has been dormant since 2016, after it acquired Vanso—a Nigerian fintech security company.

But Interswitch will soon be back in the business of making startup bets and acquisitions, according to Elegbe. “We’ve just certified a team and the plan is to begin to make those kinds of investments again.”

He offered a glimpse into the new fund’s focus. “This time around we want to make financial investments and also leverage the network that Interswitch has and put that at the disposal of these companies,” Elegbe told TechCrunch.

“We’ll be very selective in the companies we invest in. They should be companies that Interswitch clearly as an entity can add value to. They should be companies that help accelerate growth by the virtue of what we do and the customers that we have,” he said.

Recent venture events in African tech have likely pressed Interswitch to get back in the investing arena. As an ecosystem, VC on the continent has increased (roughly) by a factor of four over last five years, to around $2 billion in 2019. But most of that has come from single-entity investment funds, while corporate venture funding (and tech M&A activity) has remained light. That’s shifted over the last several months and the entire uptick has occurred in African fintech around entities that could be viewed as Interswitch competitors.

In July, Dubai’s Network International acquired Kenya -based payment mobile payment processing company DPO for $288 million. Shortly after the acquisition, DPO’s CEO Eran Feinstein said the company would pursue more African acquisitions on its own. In June, another mobile-money payment processor, MFS Africa, acquired digital finance company Beyonic. And in August, South Africa’s Standard Bank—Africa’s largest by assets and lending—acquired a stake in fintech security firm TradeSafe.

Since the rise of Safaricom’s dominant M-Pesa mobile money product in Kenya, fintech in Africa has become infinitely larger and more competitive. The sector has hundreds of startups and now receives nearly 50% of all VC investment on the continent.

The opportunity investors and founders are chasing is bringing Africa’s large unbanked population and underbanked consumers and SMEs online. Roughly 66% of Sub-Saharan Africa’s 1 billion people don’t have a bank account, according to World Bank data, and mobile-based finance platforms have presented the best use-cases to shift that across the region.

Interswitch has established itself as a leader in the Africa’s digital finance race. But it’s hard to envision how it can maintain or extend that role without an active venture arm that invests in and acquires innovative, young fintech startups.

No news on IPO

Elegbe had less to offer on Interswitch’s long-anticipated IPO. Asked if the company still planned to list publicly, he offered up a non-answer answer. “At this point in time we’re focused on growing the business and creating value for our customers and that is the our primary focus.”

When pressed “yes or no” on whether an IPO was still a possibility Elegbe confirmed it was. “We have private equity investors and at some point in the life of the business they want exits.” he said. “When it is time for them to exit there are various options on the table and an IPO is an option.”

There’s been talk of an Interswitch IPO for years. In 2016, Elegbe told TechCrunch a dual-listing on the Lagos and London Stock Exchanges was possible. Then word came through other Interswitch channels that it was delayed due to recession and currency volatility in Nigeria in 2017. In November 2019, a source with knowledge of the situation told TechCrunch on background, “an IPO is still very much in the cards; likely sometime in the first half of 2020.” Then came the Covid-19 crisis and the accompanying global economic slump, which may have delayed Interswitch’s IPO plans yet again.

If and when the company goes public, it would be a major event for Nigerian and African fintech. No VC backed fintech firm on the continent has listed globally. Exits for Interswitch’s investors would likely attract to Nigeria and broader Africa more VC from major funds—many of whom remain on the fence about startup opportunities on the continent.

Focus on Africa

On global product expansion, Interswitch plans to maintain an African focus for now, Elegbe explained. “There are enough opportunities for Interswitch on the continent. We’d like to be in as many African countries as possible…and position Interswitch as the (financial) gateway to the continent,” he said.

Elegbe explained the company would continue to work through alliances with major financial services firms to open up global financial access for its African client base. In August 2019, Interswitch launched a partnership that allows its Verve cardholders to make payments on Discover’s global network.

CEO Mitchell Elegbe concluded his Disrupt session with some perspective on balancing the stigmas and possibilities of doing business in Nigeria. Over recent years the country has shifted to become an unofficial hub for big tech expansion, VC investment, and startup formation in Africa. But Nigeria continues to have a difficult operating environment with regard to infrastructure and is often associated with political corruption and instability in its Northeast region due to the Boko Haram insurgency.

“Nigeria has a very large population and a very large market. We have lots of challenges that need to be solved, but it makes sense to me that lots of money is finding its way to Nigeria because the opportunity is there,” he said.

Elegbe’s advice to tech investors considering the country, “Don’t take a short-termist view. There are good people on the ground doing fantastic work—honest people who want to make impact. You need to  seek those people out.”

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Interswitch CEO Mitchell Elegbe to discuss African fintech at TechCrunch Disrupt

The CEO of Pan-African fintech unicorn, Mitchell Elegbe, is set to speak at TechCrunch Disrupt 2020 on September 16. He founded the company in Lagos in 2002 to connect Nigeria’s — then — largely disconnected banking system.

Over the next decade plus, Interswitch accelerated the adoption of digital payments across Africa and now stands as one of the continent’s rare fintech unicorns. The company is poised to list on a global exchange, which would also create Africa’s next big tech IPO.

At Disrupt 2020, TechCrunch will seek Elegbe’s perspective on the continent’s fintech scene, Interswitch’s venture plans, and the economic impact of Covid-19 on African startups. This year’s event is 100% virtual, making it possible for anyone with an internet connection to sign in and learn more about Elegbe’s company and digital innovation in Africa.

If you’re a VC or founder in London, Bangalore or San Francisco, you’ll likely interact with some part of Africa’s tech landscape for the first time — or more — in the near future. When measured by monetary values, the continent’s tech ecosystem is small by Shenzhen or Silicon Valley standards.

But when you look at year-over-year expansion in venture capital, startup formation and tech hubs, it’s one of the fastest-growing tech markets in the world.

Bringing the continent’s large unbanked population and underbanked consumers and SMEs online has factored prominently. Roughly 66% of Sub-Saharan Africa’s 1 billion people don’t have a bank account, according to World Bank data.

As such, fintech has become Africa’s highest funded tech sector, receiving the bulk of an estimated $2 billion in VC that went to startups in 2019.

Africa Top VC Markets 2019

Image Credits: TechCrunch

Interswitch became a pioneer of building the infrastructure to digitize finance on the continent. The company pre-dates the rise of mobile money in Kenya through Safaricom’s M-Pesa product, which is one of Africa’s most recognized fintech use-cases. 

Interswitch’s path from startup to unicorn traces back to the vision of CEO Mitchell Elegbe, who was a Nigerian electrical engineering graduate before founding the firm in 2002. The company has since produced a run of product innovation and expansion, starting in Nigeria. Interswitch created the first electronic switch whereby Nigerian financial institutions could communicate and operate ATMs and point of sales operations. The company now provides much of the rails for Nigeria’s online banking system.

Interswitch has since moved into high-volume personal and business finance, with its Verve payment cards and Quickteller payment app. The fintech firm (now well beyond startup phase) has also shaped a Pan-African and global reach — selling its products in 23 African countries with a physical presence in Uganda, Gambia and Kenya . In August 2019, Interswitch launched a partnership that allows its Verve cardholders to make payments on Discover’s global network.

Interswitch Quickteller

Image Credits: Interswitch

Interswitch also launched a venture arm in 2015 called its global ePayment Growth Fund. Another milestone came in November 2019 when Interswitch achieved a $1 billion unicorn valuation after Visa took a reported $200 million minority stake in the company. Other Interswitch backers include IFC and Helios Investment Partners.

The company’s Nigerian origins and operations have become more significant as Nigeria is now Africa’s most populous nation and largest economy. The West African country has become the continent’s unofficial tech hub and fintech capital. Nigerian startups now raise the majority of Africa’s annual VC haul, according to a study by Partech.

Heading into 2020, the momentum was there and the pieces were falling in place for Interswitch to mark that next big achievement — an IPO. Where that listing stands for the firm, particularly in the wake of the Covid-19 crisis, is one of many topics TechCrunch is excited to discuss with CEO Mitchell Elegbe at Disrupt 2020.

The event runs from September 14 through September 18 and (as mentioned) is 100% virtual this year, making it possible for anyone from London to Lagos to sign in. Get your front row seat to see Mitchell Elegbe live with a Disrupt Digital Pro Pass or a Digital Startup Alley Exhibitor Package. We’re excited to see you there.

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Why COVID-19 could delay Interswitch, Africa’s next big IPO

The economic effects of COVID-19 could delay Africa’s next big IPO — that of Nigerian fintech unicorn Interswitch.

If so, it wouldn’t be the first time the Lagos-based payments company’s plans for going public were postponed; the tech world has been anticipating Interswitch’s stock market debut since 2016.

For the continent’s innovation ecosystem, there’s a lot riding on the digital finance company’s IPO. After e-commerce venture Jumia, it would become only the second listing of a VC-backed African tech company on a major exchange. And Interswitch’s stock market debut — when it occurs — could bring more investor attention and less controversy to the region’s startup scene.

What is Interswitch?

TechCrunch reached out to Interswitch on the window for listing, but the company declined to comment. The tech firm’s path from startup to IPO aspirant traces back to the vision of founder Mitchell Elegbe, a Nigerian electrical engineering graduate whose entire career has pretty much been Interswitch.

Africa’s tech scene is still fairly young, but it does have a timeline with several definitive points. An early one would be the success of mobile money in East Africa, with the launch of Safaricom’s M-Pesa in 2007. Another is the notable wave of VC-backed startups and founders that launched around 2010.

Interswitch CEO Mitchell Elegbe (Photo Credits: Interswitch)

With Interswtich, Elegbe pre-dated both by a number of years, founding his fintech company back in 2002 to connect Nigeria’s largely disconnected banking system. The firm became a pioneer of the infrastructure to digitize Nigeria’s economy.

Interswitch created the first electronic switch whereby Nigerian financial institutions could communicate and thereby operate ATMs and point of sales operations. The company now provides much of the rails for Nigeria’s online banking system.

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In Nigeria PalmPay waives fees and creates ₦100M COVID-19 payout fund

Africa focused payment startup PalmPay will waive transfer fees in Nigeria and offer direct payouts to customers who have contracted COVID-19 in the West African country.

The venture — that launched in 2019 backed by China’s Transsion —  has created the PalmPay Support Fund. The initiative will start with 100 million Naira (≈ $300K) and offer individual payments of 100,000 Naira (≈ $250) to PalmPay customers who have contracted the coronavirus.

The startup will expand the fund’s value by providing a matching gift per customer transaction for at least on month. PalmPay will also extend the fund to offer grants to organizations working on coronavirus mitigation and assistance efforts in Nigeria.

On the structure of the initiative — and adding a matching function — PalmPay aims to create interactivity with its clients on coronavirus relief efforts. “We want to provide relief…and get our customers feeling that they’re adding something to it as well,” PalmPay CEO Greg Reeve told TechCrunch on a call.

The company has created a page on its app for applications and funds dispersal. PalmPay is working with Nigeria’s Center for Disease Control on a verification process to confirm those who apply have tested positive for COVID-19, according to Reeve.

Image Credits: PalmPay

PalmPay’s initiative comes as COVID-19 has hit Africa’s largest economies and the continent’s fintech platforms have been mobilized as tools to stem the spread.

Early in March, Africa’s coronavirus numbers by country were in the single digits, but by mid-month those numbers had spiked, leading the World Health Organization’s Regional Director Dr Matshidiso Moeti to sound an alarm.

By WHO stats Tuesday there were 14,922 COVID-19 cases in Africa and 702 confirmed virus related deaths, up from 345 cases and 7 deaths on March 18.

Countries such as South Africa, Kenya and Nigeria — which happen to be Africa’s top tech hubs — have imposed social distancing and lockdown practices.

Governments and startups on the continent have also turned to measures to shift a greater volume of financial transactions to digital payments and away from cash — which the World Health Organization flagged as a conduit for the coronavirus.

It’s an option facilitated by the boom in fintech that’s occurred in Africa over the last decade. By several estimates, the continent is home to the largest share of the world’s unbanked population and has a sizable number of underbanked consumers and SMEs.

But because of that opportunity, fintech startups now receive the majority of VC funding annually in Africa, according to recent data.

Increasingly, Nigeria has become the focal point for digital finance development on the continent, boasting Africa’s largest economy and population (200 million).

The country 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 launched in Nigeria last year on the back of one of Africa’s largest 2019 seed-rounds — $40 million led by Transsion. In addition to a lot of capital, the investment came with an additional competitive advantage for the startup. Through its Tecno brand, Transsion is the largest seller of smartphones in Africa and PalmPay now comes preinstalled on all Tecno devices.

Image Credits: Jake Bright

While PalmPay reamins in the race to capture fintech market share in Nigeria, for now the startup looks to weather the COVID-19 crisis in the country. Like most of Nigeria — and much of the world — PalmPay’s staff are on lockdown and working from home, according to the company’s CEO.

Commercial times in the country could be tough into the next year. Nigeria has already seen a reduction in economic activity as a result of COVID-19, and as a major oil producer, the country will face an additional economic blow due to the drop in demand the pandemic has dealt to petroleum markets.

A trend that could come out of the crisis that benefits fintech players, according to PalmPay CEO Greg Reeve, is greater digital finance adoption in Nigeria. In the past, the country has shown a cash-is-king reluctance by parts of the population to use mobile payments and lagged Africa’s digital finance leaders Kenya and South Africa.

The current health crisis could shift consumer habits in Nigeria, according to Reeve. “We’ve seen an increased use in our service, whilst people aren’t able to move around,” he said.

“There is a natural uptake right now for services like mobile money and I think when people start to use it, they’ll continue to use it when the COVID-19 ceases.”

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Visa partners with Paga on payments and fintech for Africa and abroad

Visa has entered a partnership with Nigeria based startup Paga on payments and technology.

Founded in Lagos, Paga scaled its fintech business in West Africa, before targeting expansion in Ethiopia and Mexico.

The startup has created a multi-channel network for over 14 million customers in Nigeria to transfer money, pay-bills and buy things digitally through its mobile-app or 24,840 agents.

The new arrangement allows Paga account holders to transact on Visa’s global network. It will also see both companies work together on tech.

The collaboration reflects a strategy of the American financial services giant to expand in Africa working with the continent’s top startups.

Visa’s partnership with Paga doesn’t include investment in the startup, but it is expected to drive larger payment volumes for both companies — and Visa’s priorities in Africa.

“We want to digitize cash, that’s a strategic priority for us. We want to expand merchant access to payment acceptance and we want to drive financial inclusion,” said Otto Williams, Visa’s Head of Strategic Partnerships, Fintech and Ventures for Africa.

The Paga-Visa arrangement will bring new merchant options to Paga’s network.

“Based on the partnership we’re going to launch QR codes and NFC [payments] into the market in Nigeria — alternative ways of receiving payments than bringing out a physical card,” said Oviosu.

Tayo Oviosu

Visa and Paga’s engineering teams have already started working together, according to Oviosu, and Paga expects to roll-out these new options in Nigeria sometime in second-quarter 2020.

The startup is pivoting toward becoming less of a Nigeria-centered company and more an emerging markets fintech platform. In January, Paga acquired Ethiopian software development company Apposit, on plans to launch in the East African country.  After Nigeria, Ethiopia has Africa’s second-largest population of 114 million.

Paga has also opened an office in Mexico and will launch its payments products there this year.

“There are several very large countries around the world in Africa, Latin America, Asia where these [financial inclusion] problems still exist. So our strategy is not an African strategy…We want to go where these problems exist in a large way and build a global payments business,” Oviosu told Techcrunch in January.

The Visa-Paga partnership comes as fintech has become Africa’s best funded startup sector — according to latest VC reporting — with thousands of ventures vying to scale digital-finance products to the continent’s unbanked and underbanked consumers and SMEs.

As a company, Visa maintains multiple partnerships with Africa’s largest banks, but collaborating with the continent’s VC backed fintech ventures has taken center-stage. This was confirmed in Visa’s recent 2020 Investor Day presentation, which dedicated several slides to its strategy of “partnering with leading African players” in the startup ecosystem.

The global financial services company has entered into collaborations with several African fintech ventures, such as B2B payments company Flutterwave and South African startup Yoco, which is focused on enterprise payments services and hardware for SMEs.

Visa has also jumped into the venture funding realm in African fintech. In 2019 Nigerian financial services company Interswitch reached a $1 billion valuation and unicorn status after Visa acquired a minority equity stake.

Visa’s Otto Williams, who has taken a lead on the company’s Africa strategy, noted non-equity collaborations will remain the primary focus — though those could lead to VC down the road.

“If we have a commercial partnership in place that creates the right…investment thesis…you know those strategic partnerships inform venture investments,” Williams said.

Of course, Visa’s isn’t the only American financial services firm backing African tech companies. In 2019, its rival Mastercard invested $50 million in Pan-African e-commerce venture Jumia. The two are working together on developing fintech services across Jumia’s customer network.

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Did African startups raise $496M, $1B or $2B in 2019?

Five years ago, it was hard to come by any formal numbers for annual VC investment in Africa. These days the challenge is choosing which number to follow.

That’s the case with three venture funding studies for Africa that turned up varied results.

The numbers and variance

Investment stats released by media outlet Disrupt Africa, data-base WeeTracker and Africa focused fund Partech have left some people scratching their heads.

From high to low, Partech pegged total 2019 VC for African startups at $2 billion, compared to WeeTracker’s $1.3 billion estimate and Disrupt Africa’s $496 million.

That’s a fairly substantial spread of $1.5 billion between the assessments. The variance filtered down to country VC valuations, though it was a little less sharp.

Africa VC markets 2019Partech and WeeTracker shared the same top-three countries for 2019 VC investment in Africa — Nigeria, Kenya, and Egypt — but with hundred-million dollar differences.

Disrupt Africa came up with a different lead market for startup investment on the continent — Kenya — though its $149 million estimate for the East African country was some $500 million lower than Partech and WeeTracker’s VC leader, Nigeria.

So what accounts for the big deviations? TechCrunch spoke to each organization (and reviewed the reports) and found the contrasting stats derive from different methodologies — namely defining what constitutes a startup and an African startup.

Partech’s larger overall VC valuation for the continent comes from broader parameters for companies and quantifying investment.

“We do not limit the definition of startups by age of the incorporation or size of funds raised,” Partech General Partner Tidjane Deme told TechCrunch.

This led the fund, for example, to include Visa’s $200 million investment in Nigerian financial-services company Interswitch . The corporate round was certainly tech-related, though few would classify Interswitch — which launched in 2002, acquires companies, and has a venture fund — as a startup.

Partech’s higher annual VC value for Africa’s startups could also connect to tallying confidential investment data.

“We…collect and analyze undisclosed deals, accessing more detailed information thanks to our relationships within the ecosystem,” the fund’s report disclosed.

WeeTracker’s methodology also included data on undisclosed startup investments and opened up the count to funding sources beyond VC.

“Debt/loans, grants/awards/prizes/non-equity assistance, crowdfunding, [and] ICOs are included,” WeeTracker clarified in a methodology note.

Disrupt Africa used a more conservative approach across companies and investment. “We are a bit more narrow on what we consider a startup to be,” the site’s co-founder Tom Jackson told TechCrunch.

“In the clearest scenario, an African startup would be headquartered in Africa, founded by an African, and have Africa as its primary market,” Disrupt Africa’s report stated  — though Jackson noted all these factors don’t always align.

“Disrupt Africa tackles this issue on a case-by-case basis,” he said.

Partech was more liberal in its definition of an African startup, including investment for tech-companies that count Africa as their primary market, but not insisting they be incorporated or operate HQs on the continent.

Andela FoundersThat opened up inclusion of large 2019 rounds to Africa focused, New York headquartered tech-talent accelerator Andela and investment to Opera’s verticals, such as OPay in Nigeria.

In addition to following a more conservative definition of African startup, Disrupt Africa’s report was more particular to early-stage ventures. The site’s report primarily counted investment for companies founded within the last five years and excluded “spin-offs of corporates or any other large entity…that [has]…developed past the point of being a startup.”

Commonalities across reports

For all the differences on annual VC counts for Africa, there were some common threads across WeeTracker, Partech, and Disrupt Africa’s investment reports.

The first was the rise of Nigeria — which has Africa’s largest population and economy — as the top destination for startup investment on the continent.

The second was the prominence of fintech as the most funded startup sector across Africa, gaining 54% of all VC in Partech’s report and $678 million of the $1.3 billion to startups in WeeTracker’s study.

VC inequality

An unfortunate commonality in each report was the preponderance of startup investment going to English speaking Africa. No francophone country made it into the the top five in any of the three reports. Only Senegal registered on Partech’s country-list, with a small $16 million in VC in 2019.

The Dakar Angel Network launched last year to bridge the resource gap for startups in French-speaking African countries.

Final sum

There may not be a right or wrong stat for annual investment to African startups, just three reports with different methodologies that capture unique snapshots.

Partech and WeeTracker offer a broader view of multiple types of financial support flowing to tech companies operating in Africa. Disrupt Africa’s assessment is more specific to a standard definition of VC going to startups founded and operating in Africa.

Three reports with varying numbers on the continent’s startup investment is an upgrade to what was available not so long ago: little to no formal data on VC in Africa.

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