Afridigest Week in Review: The continued rise of neobanks across Africa

+Guide to startup debt raises +The Flutterwave saga continues +Mobile phone affordability +Central Bank decisions in Nigeria & Egypt +The perils of paygo +The universe of fintech infrastructure +More

Emeka Ajene

Apr 18

The Afridigest Week in Review is a must-read weekly recap for Africa-focused founders, executives, and investors, as well as interested observers. Share it liberally. 😊

Welcome back, friends! The most clicked link from last week was Michael Kimani’s piece on what’s happening in web3 across Africa. With that said, let’s get into Week 15. And thanks in advance for sharing this with your networks. 🙏🏽

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Week 15 2022: April 10-16

📰 Deal of the Week

CREDIT-LED NEOBANK

Umba, an emerging markets digital bank founded by Irish entrepreneurs with operations mostly in Nigeria & Kenya, raised a $15M Series A. The round was led by Costanoa Ventures, with participation from Dublin’s ACT Ventures, Lux Capital, Palm Drive Capital, Banana Capital, Streamlined Ventures, Monzo co-founder Tom Blomfield, several Nubank executives, and others.

Like Brazil’s Nubank, Umba operates a credit-led neobank model. Although it offers users free bank accounts, interbank and peer-to-peer transfers, and bill payments (with cashback), it generates the vast majority of its revenues from lending where it typically charges consumers 10% monthly interest.

💡 Why it’s the deal of the week: As discussed briefly in ‘Key trends & themes to look for across Africa in 2022,’ one of the trends we’re watching for this year is the continued rise of (specialist & generalist) neobanks/digital banks across the continent. With this fundraise and the pace of growth the company has experienced over the last year or so, Umba cements itself firmly among the list of neobanks to watch across Africa.

⛏️ Go deeper:

Traction: According to Co-Founder & CEO Tiernan Kennedy, the company is experiencing a ~34% compound average monthly growth rate, and “what that really means is that [we’re] doubling revenues every three months.” In terms of publicly verifiable numbers, since launching in Nigeria in January 2021, the company has reached over 1 million installs on the Google Play Store.
Competitive landscape & keys to success: “The thing is that the services that are out there today just aren’t that good. It’s not great for the consumer, but it provides a real opportunity to come in and provide a better service… [We’re] building the core banking system from the ground up, all in-house technology, while focus[ing] on the customer and what they want to do… Now we have a lot more funding to really go after our existing markets and getting into new sectors, serving our customers in different ways, and then looking at new markets also.” — Co-Founder & CEO Tiernan Kennedy,
Costanoa connection: Palo Alto’s Costanoa Ventures co-led Nigerian KYC and digital identity verification platform Smile Identity’s July 2021 Series A; Smile Identity is a significant Umba partner and made the intro.

“It’s good to get someone already so well versed in the market…we’re all really excited.” — Co-Founder & CEO Tiernan Kennedy
- Read: Why Costanoa invested
A look back: Watch the 2021 Betaworks Studio interview, ‘How Tiernan Kennedy is Changing Banking in Africa with Umba’

🔦 Other deals

OTHER FUNDRAISES ACROSS THE CONTINENT

Pylon, an Egyptian smart-metering-as-a-service & infrastructure management platform for water and electricity companies, raised a $19M (mixed debt & equity) seed round led by Endure Capital, with participation from Cathexis Ventures, LoftyInc, Khawarizmi Ventures, and others — The startup, which is apparently profitable and grew revenues by 3.5x in 2021, currently operates in Egypt and the Philippines, with plans to expand further into Africa, Latin America, and SE Asia in 2022
Biocertica, a South African direct-to-consumer genetic testing platform and digital biobank, announced a $1.6M seed round — "We've got about 20 percent of the round already secured," said Founder Gert van Wyk earlier this month
Sprints, an Egyptian software engineering school that offers guaranteed hiring to successful, raised a $1.2M seed round led by Alexandria Angels Network, with participation from AUC Angels, Cubit Ventures, Challenge Fund, EdVentures, Falak Start-ups, Cairo Angels, participating members of MED Angels, and others — In two years, the company has delivered 20,000 ‘learning experiences’
Simpu, a Nigerian B2B SaaS customer engagement platform, raised a $1M pre-seed — Since coming out of closed beta in November 2021, Simpu has achieved over $80K in revenues
Nessiam, a Moroccan lingerie-focused e-commerce fashion platform, raised a ~$305K (3M MAD) seed round from CDG Invest, the CDG Group’s investment arm, as part of its 212 Founders program
The following companies are participating in Techstars:
- Techstars Berlin Spring 2022:
  - Melanin Kapital, a German/Kenyan investment marketplace connecting MSMEs in Africa with international investors
- Techstars NYC Class of Spring 2022:
  - Torche, a Nigerian platform offering fingerprint payments via biometric POS terminals
  - Vesti, a Nigerian neobank targeting Africans migrating to North America and other developed countries
  - Voyance, a Nigerian B2B no-code data infrastructure platform
Rology, an Egyptian on-demand teleradiology platform, raised an undisclosed pre-Series A from Egypt Ventures, Sequence Ventures, Waseel, Tawaref, Viktoria Ventures, HIM Angels, AAIC, DAI, Cubit Ventures, and others — The startup announced a previous pre-Series A fundraise of $860K in Week 38 2020
BetDemand, a Nigerian DeFi-powered no loss betting platform, raised an undisclosed amount from Thrive Africa Comunity — BetDemand has onboarded over 3,000 beta users since its November 2021 launch and has processed over $500K in bets within 5 months of launch

DEBT

Asaak, a Ugandan mobility-focused tech-enabled asset financing platform, secured debt financing of up to $20M from Cauris — Asaak previously announced a $30M mixed debt & equity pre-Series Around in January, but gave very few details on the debt portion at the time; while not conclusive, it’s likely that the financing from Cauris is part of the previously announced pre-Series A (if you have any helpful info here, please share)

VC FUNDRAISING

The IFC has pledged $15M into Algebra Ventures’ $90M second fund, Algebra Fund II — IFC co-anchored Algebra’s first fund (of $54M) with a $10M investment; the Algebra Ventures Fund I portfolio includes Trella, Halan, and elmenus, and AV’s Fund II will have the mandate to invest into East and West Africa as well

📚 Quick Hits

FOR YOUR READING PLEASURE

16 things to know about raising debt for startups — Andreessen Horowitz partners Nathan Yoon and Melissa Wasser: “Raising debt is an important financial tool for startups, and… as more and more companies become fintech companies, debt, and in particular asset-backed debt, can provide a critical vehicle for embedding financial products that can be financed”
Make cents: The universe of fintech infrastructure — Interesting market map from Redpoint’s Medha Agarwal on the companies “provid[ing] the pick-and-shovel building blocks that power fintech use cases, for fintechs and non-fintechs alike”
7 secrets to form a great customer advisory board — Insight Partners MD Whit Bouck: “Advisory boards are incredibly useful to get insight in a meaningful way from a relatively small group of people, who act as a proxy for your broader customer base/target market. When done right, they are of very strategic value, can create momentum, and provide you with a set of trusted advisors who will tell it to you straight.”
Scaling from $1 to $10 million ARR — Interesting read from Bessemer on growing and scaling SaaS companies: “[Four] key elements characterize a business with strong growth potential. 1) Product: strong resonance with your ideal customer profile (ICP), with early signs of a platform; 2) Go-to-market strategy: a repeatable, scalable sales motion with strong customer success; 3) Finance: strategic prioritization of investment to drive growth endurance and capital efficiency; 4) Team: a full bench of functional experts who complement the founding team’s expertise.”

Bonus:

Success and failure at Pebble — An interesting post-mortem from Eric Migicovsky, founder of the category-creating Pebble smartwatch: “Startup founder lesson learned: Never forget to define and talk about your long term vision for the future. When things are going well, it’s easy to get caught up in growth. But you need this to carry your company through hard times.”
Tesla-backed startup made cheap power a debt burden for the world’s poorest — A worthwhile longread from Bloomberg on the dark side of PAYGo solar: “Since solar pay-as-you-go, or paygo, was introduced almost a decade ago, it has been hailed as the answer to the elusive challenge of bringing electricity to hundreds of millions of people currently off the grid in Africa, Asia, and Latin America. … But the reality has fallen far short of its promise… ‘It’s a learning process for the companies and the development world...But they shouldn’t be learning their lessons at the expense of the poor.’”
Money is about to enter a new era of competition — Cornell Professor Eswar Prahad: “What will the world of money look like in five or 10 years’ time? We could envision a world where many people hold digital wallets with a mix of money in traditional bank accounts, stablecoins managed by private companies, and perhaps one or more CBDCs, moving them around depending on global conditions. Then again, no one knows how well stablecoins and CBDCs will coexist…However it plays out, the digital-currency revolution is going to have implications for the international monetary system.”

🙈 Visual of the week

MOBILE PHONE AFFORDABILITY AS % OF MONTHLY GDP PER CAPITA

“Although internet-enabled mobile phones have become more affordable in Africa and throughout the developing world, entry-level mobile phones remain relatively more expensive in sub-Saharan Africa than any other low- and middle-income country region. Despite the lingering high cost of internet-enabled mobile phones in sub-Saharan Africa, their cost, as a percentage of monthly GDP per capita, has decreased one-third since 2016.”

Source: Foresight Africa’s Top priorities for the continent in 2022 report (PDF). Underlying data from the GSMA’s State of mobile internet connectivity 2021 report.

🕵️‍♀️ In case you missed it

NEWS & ANNOUNCEMENTS

ESSAYS/REPORTS

Abdul-Karim Mohamed, Acumen’s Head of Education East Africa, writes ‘What can African EdTech ventures learn from Netflix and Spotify's struggles in Africa?’
Sheeran Amod, RecoMed Founder & CEO writes for the Mail & Guardian, ‘A healthcare revolution lurks in the metaverse’
Researcher & PhD candidate Tin Hinane El Kadi writes the paper ‘How Huawei’s localization in North Africa delivered mixed returns’ (PDF) for the Carnegie Endowment for International Peace
Timothy Motte writes ‘Ecosystem deep dive #23: Ghana — quiet but coming up’

PODCASTS

Farzam Ehsani, Founder/CEO of CEO of South African cryptocurrency exchange VALR, appeared on the POWER Business show
Femi Kuti, Co-Founder & CEO of Nigerian healthtech platform Reliance Health, appeared on the Chini ya Maji Media podcast
Taita Ngetich, Co-Founder of Kenya’s Synnefa, discussed agtech in Africa with Hope Ditlhakanyane and Rajiv Daya on Founders Factory Africa’s The African Pre-seed podcast

THE ONGOING FLUTTERWAVE SAGA

Flutterwave: The African unicorn built on quicksand (West Africa Weekly)
Flutterwave’s CEO is under scrutiny over allegations of financial misconduct (Quartz)
Investors say Flutterwave’s governance issues demand an intervention (Quartz)
In the wake of explosive accusations against Africa’s most valuable startup, Flutterwave co-founder speaks (TechCabal)
Tweets (direct & indirect):

INTERVIEWS/PROFILES

🗣️ Community Corner and Opportunities

I see you, friends!

Michael Famoroti and the team at Stears are working with the United Nations Development Programme (UNDP) to carry out a study on digital trade in Africa — if you’re the owner or on the senior management team of an African business, please complete this survey and share within your networks
Work alongside Peter Orth, Farah Safwat, and the 4DX Ventures team — they’re hiring a Cairo-based Investment Analyst
Join Matt Schaar, Ashley Lewis, and the Accion Venture Lab team — they’re hiring a Lagos- or Nairobi-based Africa Investment Officer
Congrats to Ireti Oluwagbemi and Victoria Crandall on the official launch of No Filter PR

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— Emeka

Afridigest