Afridigest Week in Review: An African fintech exit 🤩
+A quiet week for deals +Blitzscaling or blitzfailing? +Another one for Reliance Jio +Contrarianism +Safaricom's story +Android in Africa +Much more
The Afridigest Week in Review is a must-read weekly business & innovation recap for founders, operators, and investors in African markets, as well as interested observers.
Welcome back! Some quick news for you:
• Since Week 26’s digest, I published this unfinished article on Nigeria’s OPay — it’ll be finished by Friday. Thanks for your patience.
If you’re new, welcome 🙌 — you’ll receive 2 weekly Afridigest emails: this weekly digest (every Monday at 11:30ish Lagos time) and an original essay (every Saturday at 7pm Lagos time). For past essays and digests, visit the archive.
If you like this newsletter, do me a favor: subscribe & share it with your networks. Thanks! 🏆
Week 27 2020
📰 Deal of the week
WHERE ARE THE EXITS
Pan-African mobile money gateway MFS Africa acquired Beyonic, a largely East Africa-focused provider of domestic payments and collections services for SMEs. MFS Africa connects more than 200 million mobile wallets via API, and the deal will boost MFS Africa’s SME reach. The transaction value was undisclosed.
💡 Why it’s the deal of the week: The MFS/Beyonic transaction represents a 4-5x exit for Beyonic’s investors in an environment where exits have been relatively uncommon to date. As the most recent reminder of the possibility of exits in the region, the deal will serve as a beacon for optimists — at least until the next one (which may come sooner than later).
⛏️ Go deeper:
“Beyonic and MFS Africa have cheered each other on for the past seven years. During this time, the companies have grown to become respected and trusted digital payment brands, thought leaders, and pioneers. It isn’t often that one finds the sort of alignment of vision and culture that exists between Beyonic and MFS Africa.” — Beyonic Founder & Chairman, Luke Kyohere
“Beyonic’s investors all made a solid ROI, and I’m excited to be added into a growing list of exits in sub-Saharan Africa. There are many more to come.” — Beyonic Co-Founder, Dan Kleinbaum
Beyonic only has 17 employees
The acquisition rationale via FT Partners:
🤝 Other deals
The first week of the second half of the year started off with a whimper for early-stage VC deals. No fundraising of this type was announced, suggesting perhaps that deals near the finish line were pulled forward into Q2. (There were several big ticket growth-stage private equity deals that took place, however those are typically not covered in this newsletter.)
BLITZSCALING OR BLITZFAILING?
Reid Hoffman makes the claim that “blitzscaling — pursuing rapid growth by prioritizing speed over efficiency in the face of uncertainty — is the primary way to turn startups into world-changing companies.” The term certainly applies to OPay, the Chinese-owned super app operating in Nigeria. The company, at its core a provider of payments & financial services, raised $170 million from marquee Chinese investors in 2019 and subsequently pursued a growth-over-everything strategy, launching heavily subsidized transportation and food verticals across various cities in the second half of 2019.
In February 2020 however, the company got dealt a regulatory blow as the government in Lagos State (its largest market) banned motorcycle taxis (arguably its most successful non-payments vertical) from operating in the State’s major commercial areas. This week OPay announced an official change in its approach: the suspension of its transport (& presumably food) operations in order to focus on payments & e-commerce.
This brings to mind the quote from Tim O’Reilly’s critique of Silicon Valley's obsession with monopoly: “Blitzscaling isn’t really a recipe for success but rather survivorship bias masquerading as a strategy.”
However, while some pundits see this as the end of OPay, the reality is probably more nuanced. (As mentioned, a fuller analysis on OPay will be completed in short order.)
🌏 Asia Read of the Week
AN INDIAN GIANT ATTRACTS INTEL’S ATTENTION
Dealmaking mixes art and science, and Reliance Jio’s Mukesh Ambani seems to have mastered it. Despite the notion that Reliance Jio had finished its investment spree a few weeks ago, a new deal was announced last week — the 12th in 11 weeks. This makes ~$15.7B raised in exchange for 25.09% of the Indian giant.
“The announcement today comes weeks after Mukesh Ambani, who controls Reliance Industries — the parent firm of Jio Platforms — suggested that Saudi Arabia’s PIF $1.5 billion investment on June 18 in his digital unit had marked the ‘end of Jio Platforms' current phase of induction of financial partners.’”
💡 “Intel to invest $253.5 million in India’s Reliance Jio Platforms” by Manish Singh
⚔️ Strategy Read of the Week
CONTRARIANISM IS SIMPLE BUT NOT EASY
Much of the world’s progress is due to contrarians, argue Founders Fund’s Keith Rabois and NFX’s James Currier. In this article, they break down the contrarian mental models behind PayPal, Square, Yelp, and more.
“Great founders do not study rules so they can follow them. They master the rules so they can break them. Underlying their vision are mental models that get at the key question: Which patterns do you violate, and why? … Being a contrarian is easy. The challenge is being a contrarian and being right.”
🥇 “How Contrarians Think: The Early Days of Square, Yelp & PayPal” by James Currier
YOUR SUPPORT MATTERS
IF YOU FIND THIS NEWSLETTER VALUABLE, SUPPORT IT WITH A CONTRIBUTION OF ANY SIZE
Podcasts of the Week
“M-Pesa is part of this shift to digital cash that’s happening globally and it’s sort of another example of how payments in Africa is ahead of payments in the West. These things have been happening in Africa since 2007… and the US is just catching up with Venmo and peer to peer transaction services that have existed in East Africa for the longest time.”
Roberta Annan, Founder & Managing Partner of Annan Capital Partners and Managing Partner of the €100 million Impact Fund for African Creatives visited Akaego Okoye’s African Business Stories podcast. (Annan discusses her journey and one key theme is the importance of networking and social capital.)
“You come to a system where it’s based on relationships and who you know, and that is a very different dynamic altogether … I realized that it’s not about merit anymore, it’s based on relationships and you need to build social capital here. Initially, I rebelled…but Africa doesn’t work like that … [but] above all this, if you execute and deliver, people start respecting you.”
Job Opportunities of the Week
Sokowatch is looking for a Global Head of Product based in Kenya, Tanzania, Rwanda, or Uganda
Sokowatch is a B2B e-commerce procurement platform that recently raised a $14M Series A
Eidu is looking for a Growth Manager in Nigeria
Eidu is a social edtech startup that has experienced rapid growth in Kenya and is now expanding to Nigeria
To submit a job opportunity to be featured here, email: firstname.lastname@example.org
Visual of the week
AFRICAN INTERNET USERS ARE RIGHTFULLY DATA-CONSCIOUS
From Visualcapitalist’s What Does 1GB of Mobile Data Cost in Every Country? (Note that these are absolute figures, and it may be more relevant to consider data availability relative to income levels.)
🕵️♀️ In case you missed it
Nala Money engineer Timothy Asiimwe writes about the challenges Android developers in Africa face with certain OEMs
“Android OEMs are free to build new apps and services to diversify their revenues but they cannot be referee and player at the same time.”
Yannick Lefang, Gebeya’s CFO, shares 5 lessons learned from raising its $2M seed round just before COVID-19
“If you are an African entrepreneur trying to raise, the odds are stacked against you.”
Aircall Co-Founder & COO Jonathan Anguelov shares 4 lessons learned from raising a $65M Series C during a pandemic
“We do not know what’s going to happen to the market in the coming months. The potential downsides of not having cash are too high [and] we like our new investors … reason enough to make the mental shift and put ego (and dilution) aside.”
Former Cash App product lead Ayo Omojola writes about selecting the right problem and riding the right waves
“Operating in a large and growing market is a force multiplier on your efforts; you can be average on execution and still land in a pretty good place.”
Kima Ventures Managing Partner Jean de La Rochebrochard offers an inside look at Kima Ventures, the angel investment arm of French billionaire Xavier Niel
“In 2010, when Kima Ventures started, it was about investing all over the world in any sector and nationality…[Now we] focus on funding French founders in tech almost exclusively, all over the world.”
Craft Ventures Co-Founder David Sacks (PayPal’s first COO) introduces the idea of an operating cadence and how to avoid organizational chaos resulting from rapid growth
“Ironically, the better the startup is doing, the more chaos there is. This is one of the few startup problems that growth doesn’t solve — in fact, it’s caused by growth.”
NEWS & ANNOUNCEMENTS
Andela does what it said it would: close offices, go remote and open its network to external developers (See Week 19’s Digest)
Disrupt Africa speaks with Digame Investment’s Nnena Nkongho about the need for diversity in Africa-focused VC firms
Techpoint offers a look at the executives behind one of Africa’s leading fintech startups
Village Capital released The State of Financial Health Startups in the Middle East & North Africa
The Innovation Law Club Africa released its June 2020 Fintech Nucleus (PDF)
Nigerian lending & payments startup Carbon released its 2019 financials
Kenya’s Blue Consulting hosted a masterclass from Atlantica Ventures’ Juliana Rotich on managing distributed teams, remote work, and the future of work in Africa (starts at 11:52)
GSMA’s Max Cuvellier spoke with KaiOS’s Tim Metz about identifying big problems and solving them through tech:
Initialized Capital co-founder Garry Tan explained Postel's Law and its application to designing products:
🕵️♂️🐤 In case you missed it - Twitter edition
JUMP IN THE CONVERSATION ON TWITTER
Victor Asemota ponders whether Africans perceive African tech companies as less competent than foreign ones in this thread:
Emeka Okoye reacts to the MIT Tech Review article ‘Why venture capital doesn’t build the things we really need’ in this thread:This post is everything I have been saying over the years: 1. We can't code our way out of poverty in Africa. We can't build infrastructure with code. 2. Silicon Valley do not poses answers to Africa's problems. Silicon Valley Hugging Disorder (SVHD) blinds folks from seeing /1
MIT Technology Review @techreviewIn the United States, 75% of venture capital goes to software. Some 5 to 10% goes to biotech. The other sliver goes to everything else—transportation, sanitation, health care. No wonder the pandemic has exposed venture capital’s broader failures. https://t.co/aiiWuSaiqY
James Agada compares startup & SME performance in this tweet that generated a variety of responses:
Ebot Tabi suggests African entrepreneurs should have no shame in copying pre-existing solutions in this tweet that foreshadowed JioMeet’s copying of Zoom:
Oleg Guryanov shares an informative thread & article about the CTO role at early-stage startup:
🗣️ A final word
WHAT I’M THINKING ABOUT
Oh, one more thing: how did you like today’s digest?