Afridigest Week in Review: MFS — Money feels sublime

+Flat is the new up +Cash is still King +The Amazon of Africa is Amazon after all +Investor tweets of the week +An Afridigest survey for you to complete

Emeka Ajene

Jun 20

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 24 2022: June 12-18

📰 Deal of the Week

MOBILE FINANCIAL SERVICES / MONEY FEELS SUBLIME

MFS Africa, the pan-African fintech player that headlined last week’s newsletter thanks to its notable $34M acquisition, announced a $100M Series C extension round.

About MFS Africa: Headquartered in Johannesburg, South Africa, MFS is a pan-African digital payments gateway that connects over 320 million mobile money wallets across 35+ African countries.

About the fundraise: The Series C extension round, a mixture of equity and debt, was led by private equity firm Admaius Capital, with participation from new investors Vitruvian Partners and AXA IM Alts, and existing investors, AfricInvest FIVE and CommerzVentures. The unspecified debt portion was provided by Stanbic IBTC Bank Nigeria and Symbiotic.

The original Series C: This extension round brings the company’s Series C round to $200M; the initial $100M ($70M equity/$30M debt) Series C was announced in November 2021 with Lendable, Norsad, and others providing the debt portion.

Personalities:

Dare Okoudjou, MFS Africa Founder & CEO
Marlon Chigwende, Admaius Capital Partners Managing Partner

In the CEO’s words: The round will help “accelerate MFS Africa’s expansion plans across Africa, its integration into the global digital payment ecosystem, its expansion into Asia …, and its ambitious growth plans for … [its] network of merchants and agents in Nigeria and beyond.

We have done something pretty unorthodox which is to do 2 major M&As in two difficult markets… For now, it’s going to be more about how do we integrate into one company and make sure we realize synergy.”

Recent MFS acquisitions: MFS acquired Oklahoma’s Global Technology Partners (GTP) for $34M last week, Nigerian agent network Capricorn Digital/Baxi in 2021 — these are the acquisitions the CEO is referring to in the preceding quote — Ugandan SME-focused digital payments platform Beyonic in 2020, and international airtime top-up provider Sochitel in 2016.

Trivia: This is Vitruvian Partners’ first investment in Africa.

🔦 Other deals

OTHER FUNDRAISES ACROSS THE CONTINENT

Virridy, an American/Kenyan developer of technologies for monitoring and managing water, energy, and agricultural resources, raised a $5.5M Series A led by Accord Capital, with participation from FHI 360, Cleo Capital, Reverent Rock, Save Earth, VertueLab, and others — Virridy’s solutions are currently in use in Kenya, Nigeria, Rwanda, Uganda, Ethiopia, and Sierra Leone, and the company plans to use a portion of the proceeds to further expand its offerings across Africa
Khazenly, an Egyptian on-demand warehousing and fulfillment platform, raised a $2.5M seed round co-led by Arzan VC and Shorooq Partners, with participation from Camel Ventures, Averroes Ventures, and others
Kuunda, a South African B2B2C embedded fintech provider specializing in liquidity solutions for the informal sector, announced a $2.25M seed round led by Accion Venture Lab, with participation from FINCA Ventures, Future Africa, Greenhouse Capital, Kepple Africa Ventures, Launch Africa, Magic Fund, Mercy Corps Ventures and Seedstars
- Pair with: Mercy Corps Venture’s Why we invested in Kuunda
DXwand, an Egyptian conversational AI platform, raised a $1M pre-Series A led by Huashan Capital, with participation from SOSV and others
Jumba, a Kenyan B2B construction technology platform, raised a $1M pre-seed led by Enza Capital, with participation from Seedstars International Ventures, Chandaria Capital, Future Africa, Logos Ventures, First Check Africa, and others
Veend, a Nigerian provider of digital lending infrastructure, raised a $330K pre-seed from Magic Fund, The Oak Capital, Future Africa, Berrywood Capital, and others
Boyot, an Egyptian rent collection & property management SaaS platform, raised an undisclosed ‘six-figure’ pre-seed round led by a Kuwait-based real estate firm
Entersekt, a South African device identity & customer authentication solutions provider, announced that it raised an undisclosed amount from South African private equity PAPE Fund 3 — This follows Accel-KKR’s December 2021 investment in the company
Tugende, a Ugandan tech-enabled asset-financing platform, announced that it raised an undisclosed amount in a pre-Series B round in March led by Partech, with participation from existing investors Mobility 54, Enza Capital, and Global Partnerships, new investor Women’s World Banking Capital, and others
AfriBlocks, a Zimbabwean/pan-African freelancer marketplace connecting African service providers to the global market, raised an undisclosed amount from Adaverse — The investment is part of AfriBlocks’ apparently ongoing pre-seed round; AfriBlocks’ offers is an escrow payment system that leverages blockchain technology
CredPal, a Nigerian BNPL installment payment platform, raised an undisclosed amount from the Cairo Angels Syndicate Fund (CASF)
T40 Technologies, a Nigerian mobility-tech solutions provider, raised an undisclosed amount in a pre-seed round led by Reflect Ventures, with participation from Startup Wise Guys, Roselake Ventures, and others
Vetwork, an Egyptian e-commerce marketplace connecting pet owners with pet care service providers, raised an undisclosed amount in a bridge round from Alexandria Angel Network, Nestlé Purina, and others

ADJACENT FUNDRAISES

Save your Wardrobe, a British fashiontech startup with Tunisian founders and a Tunis-based tech team, raised $3M from undisclosed investors — The company is focused on the European market

M&A

JaSure, a South African digital insurance platform, was acquired for an undisclosed amount by leading South African insurer Santam — JaSure previously sold a 51% stake to Santam in 2020; the outright acquisition offers Santam the opportunity “to leverage the existing and powerful client experience and younger market reach of JaSure, while maximizing the Santam efficiencies and wider distribution capability,” according to Santam’s executive head of C&P insurance
Fatura, an Egyptian B2B e-commerce marketplace, was acquired for an undisclosed amount in cash and stock by Tanmeyah — Tanmeyah is Egypt’s leading provider of microfinance solutions; Tanmeyah’s CEO said, “We see a huge financing gap in the B2B segment and, by joining forces, we will be able to power digital lending and cover more sectors in Egypt.”

VC FUNDS

Launch Africa, Africa’s most active early-stage VC, announced that it closed Fund 1 at $36.3M — So far, it’s invested over $24M in portfolio companies that include Nigerian neobank Kuda and Kenyan B2B e-commerce retail platform MarketForce; Fund 1 was launched in July 2020, achieved a first close in September 2020, and a final close in March 2022.
The Norrsken22 Africa Fund will receive “up to” $15M from the US International Development Finance Corporation

OTHER FINANCING

Dutch entrepreneurial development bank, FMO announced that it’s considering a $5M investment in Lendable’s MSME FinTech Credit Fund I to help attract additional investors and reach the targeted size of $100M

🔎 News in the noise

FLAT IS THE NEW UP?

“The extension is the most popular fundraising round today,” wrote Redpoint’s Tom Tunguz on Friday.

And as various parties across the African startup ecosystem debate the impact of the global market downturn (Ctrl+F “market downturn” in Week 23’s Week in Review), one signal to watch for is the rise of extension & bridge rounds.

In just the last two weeks, we’ve seen MFS Africa’s Series C extension, Klasha’s seed extension, Franc’s seed extension, and Vetwork’s bridge round.

One can’t predict the future, but it’s clear that there are certainly interesting times ahead.

Worth noting here is Bloomberg’s Wednesday article about the “flight to quality” and “exit [from African markets] of foreign investors” who contributed ~80% of the capital raised across the ecosystem in 2021.

One interesting quote therein came from Afridigest big homie and Rennaissance Capital fintech director Adesoji Solanke:

“If you need to do a down round, do it. If you need to raise debt, do it. If you need to resize the team and refocus your spend, do it. If you had acquisition offers on the table from better-funded companies, reconsider them. If you need to pull back from some countries or pull back some products, do it.”

And similarly, while Bullpen Capital doesn't seem to have made any investments in Africa-focused companies to date (so YMMV), the firm’s Paul Martino shared this on Wednesday as well:

“Take the extra capital if it’s available at slightly better terms than the last round or the same terms. You may even consider raising capital in a down round and at a lower valuation than your previous round. And, depending on the circumstances you may be evaluating the trade-offs between additional dilution from a new fundraising and the risk your company runs out of cash.”

‘Interesting times ahead’ may be an understatement, however, a common refrain in my own conversations echoes what Wasoko’s Daniel Yu told African Business in Week 23: “early-stage funding will not see the same pullback.”

In any case, your humble author’s crystal ball is broken and I invite your feedback on this subject: Whatsapp, Twitter DM, email

Take the 2-minute Afridigest reader connection survey ⬇

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📚 Quick hits

FOR YOUR READING PLEASURE

Operating well: what I learned at Stripe — Sam Gerstenzang former Stripe product lead shares a variety of interesting operational insights: “Operating well is a state, not an outcome.”
Don’t confuse strategy with lofty goals — London Business School professor Constantinos Markides writes for HBR about communicating strategy effectively: “Strategy is…a set of hard-to-reverse choices; explaining what these choices are and why they were made is what strategy communication should be.”
The importance of CAC payback in today’s market environment — “Over the last few years, LTV/CAC has become the gold standard metric…Somewhere along the way, the concept of CAC payback got lost, but it has huge implications on a company’s ability to scale efficiently.”

Bonus:

Y Combinator: The institute of innovation — The Generalist’s Mario Gabriele shared a deep-dive on YC with a few sentences particularly relevant to the African context: “Africa’s rise is visible in the latest batch…In W22, American companies made up just 49%; up to 2017, they regularly tipped 80%. We should expect this trend to continue, given the unique value YC can bring to international founders. Though other investors may be able to provide more localized expertise, none can manifest a Silicon Valley network so instantly.”
- Recall that YC may be Africa’s default seed fund…
  iyin.eth @iaboyeji
  The challenge now is how early are they willing to go. YC is Africa's default seed fund. If you aren't earlier than them in a deal most of the best dealflow will be priced past you and proceed straight to the Tiger Globals of this world..
  January 24th 2022
  7 Retweets40 Likes

🙈 Visual of the week

CASH IS STILL KING IN MUCH OF THE WORLD

Did you know: Pundits have periodically put forth, perhaps glibly, that the function of fintech in the West is largely to 'unbank the banked.' But across growth markets in Latin America, Southeast Asia, and Africa, there's still a huge opportunity for fintechs & digital financial services providers to 'bank the unbanked.'

Be smart: According to a somewhat controversial 2021 study from British research platform Merchant Machine, three of the world's top ten most unbanked countries are in Africa — Morocco, Egypt, and Nigeria. And the African continent overall has the world's largest share of unbanked individuals according to the World Bank.

Big picture: Controversial study or not, the real concentration of unbanked individuals in the region is contributing to Africa’s fintech boom. Across the continent, a variety of fintech innovators and their stakeholders are salivating over the opportunity not only to boost financial inclusion but also to earn an outsized commercial return by providing some of the basic services that banks traditionally provide — holding assets safely, offering risk-managed ways to grow wealth, helping customers transfer value, lending, etc. — and doing so with largely mobile-first offerings that can often boast lower costs, increased speed and convenience, and better overall experiences for customers.

Source: Statistica. Merchant Machine/Global Finance.

A version of this section first appeared on the Afridigest LinkedIn page — follow Afridigest on LinkedIn and join 3300+ global professionals getting smarter about Africa’s innovation economy week after week.

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🌍 The 'Amazon of Africa' is ... Amazon?

E-COMMERCE ESCAPADES

Inno | Gubevu @JustGubevu

@balaakumar You bloody fool, there’s no Amazon in Africa. Idiot.

Your feedback on this section/format is requested: Whatsapp, Twitter DM, email.

🕵️‍♀️ In case you missed it

NEWS & ANNOUNCEMENTS

PODCASTS

Gbenro Dara, Founder/CEO of Nigerian insurtech Octamile, joins the InsurTech Business Series
The Afrobility team discusses classifieds platform OLX and their African entry & exit
Richmond Bassey, Co-Founder/CEO of Nigerian digital investment platform Bamboo, joins the Chini ya Maji podcast

INTERVIEWS/PROFILES

🐤 Tweets of the Week

This week we focus on investor tweets.

Founder Collective’s Eric Paley shared a quick thought on ownership, dilution, and exits. (FC’s Africa portfolio includes Andela and uLesson.)
Eric Paley @epaley
It’s possible to sell a startup for $1B and make less than someone who sells theirs for $100M. Exit value is a vanity metric.
June 17th 2022
82 Retweets765 Likes

FirstCheck’s Eloho Omame shared fundraising advice for new Africa-focused GPs
Eloho Omame 🇳🇬 @ElohoGM
When you’re focused on a non-traditional segment, as an emerging manager in Africa, I genuinely think you’re better off raising $10M in 3-6 mos, deploying in 2 yrs, then raising say 3x that, than spending 3-5 yrs chasing $100M+. Your time, track record and psyche will thank you.
June 16th 2022
3 Retweets21 Likes

More advice, this time for founders from Future Africa’s Iyin Aboyeji
iyin.eth @iaboyeji
If you are a tech startup that was founded and raised money in this boom there is a conversation you need to have with your leadership team this week given the market environment. It is a tough conversation about refocusing on your core business and cutting back any distractions
June 16th 2022
41 Retweets153 Likes
DFS Labs’ Stephen Deng spotlights an upcoming trend to watch
Stephen @mrstephendeng
We're going to see a wave of B2B companies with sector specialization on the continent in an era of unit-economic sensitive verticalization. - End-to-end product maps including fintech - Sector expertise key - Atoms-based value chains that will overwhelm software-only teams
June 15th 2022
15 Retweets47 Likes
And rali_cap’s Kyane Kassiri shares some market data from the current environment
Kyane “Omowale” Kassiri @kyanekassiri
We did deals at $2.5m, $3m, $3.5m & $5m valuations lately. Nature is healing. We're bullish on the current opportunity at pre-seed. Markets will recover and prices will rise again. In the meantime, our LPs (mostly VCs) will fuel up our winners. Convenient set-up and lucky timing.
Bilal Zuberi @bznotes
Fear is keeping some VCs away from new investments. Not a time to be fearful. But to do real work, find great companies at even greater price points. And invest with long term conviction.
June 13th 2022
4 Retweets30 Likes

🗣️ Community Corner & Opportunities

⭐ Afridigest has thousands of driven and intellectually curious readers like you across the world — and furthering our mission means connecting you to each other, you can help by completing this quick survey
Congrats to Ismael Belkhayat on Chari’s Disrupter of the Year award
The Factor[e] Venture Studio team is all set up in Kenya and looking for Co-Founders to launch energy and agritech ventures
Future Africa is accepting applications for its Young Graduate Fellow Internship — a 6-month program to introduce early-career professionals to VC
Yinka Adegoke and the Rest of World team are planning a July event in Nairobi — sign up here

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