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

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

That’s the case for 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 year 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 VC 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 going to tech companies operating in Africa. Disrupt Africa’s assessment is more specific to a standard definition of VC going to startups originating and operating in Africa.

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

Nigeria is becoming Africa’s unofficial tech capital

Africa has one of the world’s fastest growing tech markets and Nigeria is becoming its unofficial capital.

While the West African nation is commonly associated with negative cliches around corruption and terrorism — which persist as serious problems, and influenced the Trump administration’s recent restrictions on Nigerian immigration to the U.S.

Even so, there’s more to the country than Boko Haram or fictitious princes with inheritances.

Nigeria has become a magnet for VC, a hotbed for startup formation and a strategic entry point for Silicon Valley. As a frontier market, there is certainly a volatility to the country’s political and economic trajectory. The nation teeters back and forth between its stereotypical basket-case status and getting its act together to become Africa’s unrivaled superpower.

The upside of that pendulum is why — despite its problems — so much American, Chinese and African tech capital is gravitating to Nigeria.

Demographics

“Whatever you think of Africa, you can’t ignore the numbers,” Africa’s richest man Aliko Dangote told me in 2015, noting that demographics are creating an imperative for global businesses to enter the continent.

Africa Roundup: Nigerian fintech gets $360M, mints unicorn, draws Chinese VC

November 2019 could mark when Nigeria (arguably) became Africa’s unofficial capital for fintech investment and digital finance startups.

The month saw $360 million invested in Nigerian focused payment ventures. That is equivalent to roughly one-third of all the startup VC raised for the entire continent in 2018, according to Partech stats.

A notable trend-within-the-trend is that more than half — or $170 million — of the funding to Nigerian fintech ventures in November came from Chinese investors. This marks a pivot in China’s engagement with Africa to tech. We’ll get to that.

Before the big Chinese backed rounds, one of Nigeria’s earliest fintech companies, Interswitch, confirmed its $1 billion valuation after Visa took a minority stake in the company. Interswitch would not disclose the amount to TechCrunch, but Sky News reporting pegged it at $200 million for 20%.

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 the tech-wiring 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.

The financial services firm has expanded its physical presence to Uganda, Gambia and Kenya . The Nigerian company also sells its products in 23 African countries and launched a partnership in August for Verve cardholders to make payments on Discover’s global network.

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

One point TechCrunch did lock down is Interswitch’s (long-awaited) and imminent IPO. A source close to the matter said the company will list on a major exchange by mid-2020.

For the near to medium-term, Interswitch could stand as Africa’s sole tech-unicorn, as e-commerce venture Jumia’s volatile share-price and declining market-cap — since an April IPO — have dropped the company’s valuation below $1 billion.

Circling back to China, November was the month that signaled Chinese actors are all in on African tech.

In two separate rounds, Chinese investors put $220 million into OPay and PalmPay — two fledgling startups with plans to scale in Nigeria and the broader continent.

PalmPay, a consumer oriented payments product, went live last month with a $40 million seed-round (one of the largest in Africa in 2019) led by Africa’s biggest mobile-phone seller — China’s Transsion.

The startup was upfront about its ambitions, stating its goals to become “Africa’s largest financial services platform,” in a company release.

To that end, PalmPay conveniently entered a strategic partnership with its lead investor. The startup’s payment app will come pre-installed on Transsion’s mobile device brands, such as Tecno, in Africa — for an estimated reach of 20 million phones.

PalmPay also launched in Ghana in November and its UK and Africa based CEO, Greg Reeve, confirmed plans to expand to additional African countries in 2020.

OPay’s $120 million Series B was announced several days after the PalmPay news and came only months after the mobile-based fintech venture raised $50 million.

Founded by Chinese owned consumer internet company Opera — and backed by 9 Chinese investors — OPay is the payment utility for a suite of Opera developed internet based commercial products in Nigeria. These include ride-hail apps ORide and OCar and food delivery service OFood.

With its latest Series A, OPay announced it would expand in Kenya, South Africa, and Ghana.

Though it wasn’t fintech, Chinese investors also backed a (reported) $30 million Series B for East African trucking logistics company Lori Systems in November.

With OPay, PalmPay, and Lori Systems, startups in Africa have raised a combined $240 million from 15 Chinese investors in a span of months.

There are a number of things to note and watch out for here, as TechCrunch reporting has illuminated (and will continue to do in follow-on coverage).

These moves mark a next chapter in China’s engagement in Africa and could raise some new issues. Hereto, the country’s interaction with Africa’s tech ecosystem has been relatively light compared to China’s deal-making on infrastructure and commodities.

There continues to be plenty of debate (and critique) of China’s role in Africa. This new digital-phase will certainly add a fresh component to all that. One thing to track will be data-privacy and national-security concerns that may emerge around Chinese actors investing heavily in African mobile consumer platforms.

We’ve seen lines (allegedly) blur on these matters between Chinese state and private-sector actors with companies such as Huawei.

As OPera and PalmPay expand, they may need to do some reassuring of African regulators as countries (such as Kenya) establish more formal consumer protection protocols for digital platforms.

One more thing to follow on OPay’s funding and planned expansion is the extent to which it puts Opera (and its entire suite of consumer internet products) in competition with multiple actors in Africa’s startup ecosystem. Opera’s Africa ventures could go head to head with Uber, Jumia, and M-Pesa — the mobile money-product that put Kenya out front on digital finance in Africa before Nigeria.

Shifting back to American engagement in African tech, Twitter and Square CEO Jack Dorsey was on the continent in November. No sooner than he’d finished his first trip, Dorsey announced plans to move to Africa in 2020, for 3 to 6 months, saying on Twitter “Africa will define the future (especially the bitcoin one!).”

We still don’t know much about what this last trip — or his future foray — mean in terms of concrete partnerships, investment, or market moves in Africa from Dorsey and his companies.

He visited Nigeria, Ghana, South Africa and Ethiopia and met with leaders at Nigeria’s CcHub (Bosun Tijani), Ethiopia’s Ice Addis (Markos Lemming), and did some meetings with fintech founders in Lagos (Paga’s Tayo Oviosu).

I know most of the organizations and people Dorsey talked to pretty well and nothing has shaken out yet in terms of partnership or investment news from his recent trip.

On what could come out of Dorsey’s 2020 move to Africa, per his tweet and news highlighted in this roundup, a good bet would be it will have something to with fintech and Square.

More Africa-related stories @TechCrunch

African tech around the ‘net

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

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 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 (majority) owned 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 ever 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 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.