Afridigest Week in Review: A dragon appears, a new unicorn is near
+The rise of African insurtech +SPACs in Africa +Mega mobile money +Hype isn't always helpful +Speedy fundraises +The international expansion playbook +BNPL +Fintechs at Scale +More
The Afridigest Week in Review is a must-read weekly recap for Africa-focused founders, executives, and investors, as well as interested observers.
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Week 30 2021
📰 Deal of the week
NEW UNICORN ON THE HORIZON?
Yoco, the leading mobile points of sale (mPOS) company in South Africa, raised an $83M Series C led by Dragoneer Investment Group.
Also participating were, among others, Breyer Capital, HOF Capital, The Raba Partnership, 4DX Ventures, and TO Ventures; as well as existing investors Partech, Velocity Capital Fintech Ventures, Orange Ventures, and Quona Capital.
Founded in 2013 by Katlego Maphai, Bradley Wattrus, Carl Wazen, and Lungisa Matshoba, Yoco offers a point of sale card reader & proprietary software that allows merchants to accept card payments; its least expensive reader sells for ~$27 and merchants pay fees of 2.6% — 2.95% per transaction. Yoco serves over 150,000 SMEs across South Africa, and processes over $1B in card payments annually.
💡 Why it’s the deal of the week: Series C rounds don’t happen every day on the continent. Rumored to be underway since at least the end of May, this round is the largest ever raised by a South African payments company, and the third-largest Series C for any African fintech, behind unicorns 🦄 Flutterwave and Chipper Cash. Dragoneer’s 🐉 involvement is also significant — see below.
⛏️ Go deeper:
Use of funds: Traditionally focused on moving merchants away from cash to card acceptance, Yoco will use the investment to broaden its product capabilities to offer a “full financial ecosystem,” while deepening its presence in South Africa and expanding internationally — it plans to serve over 1M merchants within the next four years.
A harbinger of what’s to come: This is the first investment in Africa for Dragoneer Investment Group, the San-Francisco-based, growth-oriented investor; its previous fintech investments include Square, Chime, Nubank, Mercado Libre, and Klarna. Other investments include Alibaba, Atlassian, Datadog, Slack, Spotify, and Uber.
This is arguably a huge vote of confidence in the African ecosystem and is yet another signal that smart money increasingly regards early-stage opportunities on the continent as among the most attractive globally.
Hear the Yoco story firsthand:
🔦 Other deals
OTHER BIG DEALS
Mandrolli, a South African electric vehicle startup co-founded by Nelson Mandela’s first grandchild announced a $9B commitment from the African Diaspora Central Bank
Swvl, an Egyptian mass transit/shared mobility platform, entered into a merger agreement with special-purpose acquisition company Queen’s Gambit Growth Capital that would see it listed on NASDAQ at a valuation of $1.5B — the transaction is expected to close in Q4 (at which time it’ll likely be deal of the week)
Airtel Mobile Commerce, the mobile money holding company of telco Airtel Africa, raised $200M from the Qatar Investment Authority at a valuation of $2.65B
Nawy, an Egyptian prop-tech startup, raised a seven-figure seed round led by the Sawiris family office, with participation from Hatem Dowidar, CEO of Etisalat Group, and others
PayQin, a digital wallet focused on Francophone West Africa, raised a ~$360K seed round
Saweblia, a Moroccan home services platform, raised a ~$340K round led by CDG Invest
CreditFins, an Egyptian financial wellness platform, raised an undisclosed pre-seed round led by Flat6Labs, AUC Angels, TA Telecom Holding & others
Nigeria’s Wallets Africa took a stake in Nigeria’s Owotutu Microfinance Bank to “help digitise [Owotutu]’s offerings”
📚 Reads of the Week
HYPE: PERCEPTION > REALITY
I’m an admirer of Benchmark’s Sarah Tavel. Here she takes a look at how hype affects B2C companies.
“Hype creates the aura that something is bigger, more important, and more inevitable than it actually is. In this way, it acts like a subsidy on engagement in a consumer social network...but with an important difference: unlike economic subsidies, the hype subsidy is not in your control.”
🥇 “The Hype Subsidy – Why Early Hype is Dangerous in Consumer Social” by Sarah Tavel
Footwork Capital’s NBT breaks down the current fundraising landscape.
“In my eleven years in venture capital, I've never experienced a market that's moving as quickly as it is at present. And in conversations with fellow investors, it seems we all feel the same way. Founders are going out to raise a new round, and within weeks, if not days, have multiple term sheets. So what's driving this speed? There are of course benefits to founders and investors for rounds to move faster. But what are the costs?”
“How fast is too fast?” by Nikhil Basu Trivedi
ON WORLD DOMINATION
Greenhouse, an Asia-focused market entry provider, wrote this thoughtful market expansion playbook that includes key considerations, pitfalls, and case studies.
“Many Southeast Asian startups expand across the region in an attempt to push their valuation. Valuations are a combination of many variables, and the number of markets where you have a presence is secondary to your traction, product, and unit economics. Adding another country would result in trade-offs. It's hard getting product-market-fit; it's harder when you have another market you need to manage. ”
“Go-to-Market Strategies: The Ultimate Playbook for Startup Expansion to International Markets” by the Greenhouse team
🔮 Trend Watching
AFRICANS DON’T BUY INSURANCE?
This week South Africa’s Pineapple raised ~$5.5M and last week South Africa’s Ctrl raised ~$2.3M; earlier this month, Egypt’s Amenli was selected into Y Combinator’s S21 batch. And earlier this year, Kenya’s AiCare, Mali’s OKO, Nigeria’s Curacel, Botswana’s AlphaDirect, Kenya’s Pula, and others attracted venture funding.
Insurtech is starting to heat up across the continent...
It’s worth noting that McKinsey wrote last year: “levels of insurance penetration in Africa are half the world average measured as a percentage of GDP, and premiums per capita are 11-fold lower than the world average. This points to significant scope for growth.”
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📚 Quick Hits
FOR YOUR READING PLEASURE — TODAY’S THEME IS SQUARE’S $29B ACQUISITION OF AFTERPAY
The Fintech Revolution — a great industry analysis report from Jackie Reses, Head of Square’s lending unit, and Michael Gilroy, GP at Coatue
Buy Now Pay Later — a timely report on the BNPL sector from FT Partners
Afterpay — a throwback investment case study from Hayden Capital (PDF)
Job Opportunities of the Week
The IFC's venture capital arm, the Disruptive Technologies and Funds Group, is hiring a Lagos-based Associate Investment Officer, Venture Capital.
FINCA Ventures, an early-stage impact investing fund, is hiring a Lagos-based Investment Director.
To submit a job opportunity to be featured here, email: email@example.com
Visual of the week
WHAT’S THE BEST MEASURE OF SCALE?
According to the Wheeler Institute at London Business School, only 37 fintech companies operating in Africa have reached scale — Africa Fintech: Scale Prevalence
Note that, according to the authors, ‘scaled’ here means at least 2 of the following 4 are true: the company has over 200 employees; has raised $15M or more total funding; generates $20M or more annual revenue; and/or has either +75k B2B customers or 1M users.
🕵️♀️ In case you missed it
NEWS & ANNOUNCEMENTS
Ifunanya Ezeani, Director of Global Clients at OPay, and Adedeji Olowe, CEO at Trium Networks, provide an overview of the fintech regulatory landscape in Nigeria in ‘Is regulatory license repurposing the engine of the fintech revolution in Nigeria?’
“The power of tech for finance is evolving so fast that there now exists a significant gap between what’s possible (fintech) and what’s permissible (licensing). This has led to the war between regulation and innovation. Who’s going to win?”
The Economist asks “[Nigerian] fintech is booming, despite a weak economy. Can that last?” (The Economist)
Journalist Tom Jackson explores ‘Why Ghana’s tech scene was booming even before Twitter and Dorsey moved in’' (Disrupt Africa)
Journalist Daniel Adeyemi sheds light on ‘The dawn of Ghana’s tech ecosystem’ (TechCabal)
Journalist Richie Santosdiaz provides an overview of ‘The fintech landscape of South Africa’ (The Fintech Times)
Journalist Tomiwa Onaleye explores ‘Why funding into African AI startups remains poor despite a global boom’ (Technext)
Journalist Chimgozirim Nwokom writes ‘How early-stage venture firm LoftyInc Capital Management invests in African startups’ (Techpoint)
🗣️ A final word
WHAT I’M THINKING ABOUT
I really like hearing from you, dear reader, and thanks to everyone who’s reached out. Don’t hesitate to reply to this email or send me a message with your thoughts — at times you really help clarify my thinking and I appreciate it.
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