Afridigest Week in Review: Millions for micro-payments

+The Mercury Bank saga +A flurry of deals in Egypt +New developments in Wave's Benin & Togo expansion +More M&A +Femtech finds its way +VC Fund math

Emeka Ajene

Mar 7

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 the ‘Consumer Technology Trends 2022' report from Heartcore. And ICYMI: on Saturday, we published a recap of last month’s key developments & trends,'A fantastic February for tech startups in Africa.' With that said, let’s get into Week 9.

If you’re new, welcome 🙌🏽 — you’ll receive a weekly digest like this one every Monday and, generally (but not always), an original essay/article on Saturdays. For past essays and digests, visit the archive.

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Week 9 2022: Feb 27 - March 5

Money — Credit: *Ukraine’s* *Dmitry Krasakov*

📰 Deal of the Week

SHRIMPS NOT WHALES

M-KOPA, a Kenyan pay-as-you-go (PAYG) asset financing platform known initially for solar energy systems, raised a $75M equity round co-led by Generation Investment Management and Broadscale Group, with participation from the CDC Group, LGT, Lightrock, LocalGlobe’s Latitude Fund and HEPCO Capital Management.

The company currently operates in four African countries. In Kenya and Uganda, it offers financing for smartphones, solar lighting, and home electronics, as well as cash loans and health insurance. And in Nigeria and Ghana, it currently only offers smartphone financing. To obtain a smartphone from M-KOPA that costs, say, $100, a customer may pay a deposit of $20-$30 upfront then micro-payments of between $0.30-$1 daily.

💡 Why it’s the deal of the week: Despite the perception of the company as a solar provider in its early days (when it was known as M-KOPA Solar), the company has always been about credit. The work kopa itself means “to borrow” in Swahili and as early as 2015, company leaders including co-founder Nick Hughes said publicly that “if you boil it down, what we are is a finance company.”

In many ways, this deal serves as a coming of age, or a coming out, for the company as a fintech platform; it also underscores a theme we’ve highlighted before — the fact that, across African markets, “the appetite for credit is virtually unlimited.” As a bonus, M-KOPA’s micro-payment focus brings to mind a favorite Jack Ma quote, “Nobody makes money out of catching whales, people make money out of catching shrimp.”

⛏️ Go deeper:

PAYG vs. BNPL: What’s the difference? Well, B2C BNPL providers often run credit checks on customers and disqualify those who lack certain prerequisites (e.g., a credit history, bank accounts, guarantors, transaction history on a specific platform). M-KOPA’s PAYG solution, on the other hand, is more inclusive as in most cases a valid ID and payment of a small deposit payment is sufficient to qualify.
Traction: Since its 2012 commercial launch, M-KOPA has provided over $600 million in financing to over 2 million customers via over 10,000 sales agents, but things have accelerated since it began offering smartphone PAYG financing in Kenya two years ago.

While it took the company roughly eight years to acquire the first one million customers, it took only 18 months to acquire the second million. And the company says Ghana, its newest market, is growing twice as fast as any of its previous markets.
Early days: Read the 2015 long-form Bloomberg article originally titled ‘M-KOPA Solar is making a profit on poor Africans’ and watch this 2012 interview of CEO & Co-Founder Jesse Moore on KTN News Kenya:

🔦 Other deals

OTHER FUNDRAISES ACROSS THE CONTINENT

VALR, a South Africa cryptocurrency exchange, raised a $50M Series B at a $240M valuation led by Pantera Capital, with participation from Alameda Research, Coinbase Ventures, Cadenza, CMT Digital, Distributed Global, GSR, Third Prime, Avon Ventures, Bittrex, 4Di Capital, and others — This is the largest crypto funding round ever in Africa; VALR has over 250,000 retail customers and ~500 institutional clients. VALR’s $3.4M Series A was the deal of the week in Week 30 2020
Milezmore, an Egyptian cloud fulfillment, last-mile delivery, and logistics platform, raised a $5M pre-seed from Egyptian social commerce & agent distribution platform Brimore — As discussed in Week 5’s Week in Review, Milezmore is a Brimore spinoff headed and co-founded Brimore’s previous Head Operations; it has a network of 15 delivery hubs across Egypt and has delivered over 1 million packages since inception
Sudo Africa, a Nigerian card issuing API platform, raised a $3.7M pre-seed led by Global Founders Capital, with participation from Picus Capital, LoftyInc Capital, Rallycap Ventures, Kepple Africa, Berrywood Capital, ZedCrest, Suya Ventures, and others — Sudo’s customers include fintechs, e-commerce companies, microfinance & commercial banks, government agencies, logistics companies, and other non-tech enterprises
Stax, a Kenya-originating American USSD automation platform that allows users across Africa to buy mobile airtime and send, request, and receive money without mobile data, raised a $2.2M seed extension round co-led by World Within Ventures and Noemis Ventures — The Stax platform is fully operational in Kenya, Uganda, Tanzania, Nigeria, Ghana and Ethiopia, where over 100 banks and mobile money accounts are integrated, and active in an additional four African markets
Mumerz, an Egyptian mom-focused femtech e-retailer, raised a $1.2M pre-seed led by Disruptech — Mumerz is the largest bilingual femtech e-commerce platform in Egypt
- Pair with: McKinsey’s recent report, The dawn of the femtech revolution
Susu, an Ivorian full-service digital healthcare platform for specialized chronic disease care, preventative healthcare services, and more, raised a $1M pre-seed from angel investors — The company also raised $1.2 million in debt and grant financing from BPI France, the French government’s public investment bank.
FreshSource, an Egyptian B2B foodtech cold-chain logistics & storage platform, raised an undisclosed ‘seven-figure’ seed round co-led by 4DX Ventures and Wamda — Launched in 2019, FreshSource now serves a network of thousands of producers/farmers and hundreds of businesses (restaurants, hotels, e-retailers, and traditional retailers) across 11 Egyptian cities
Cartnshop, a Kenyan SaaS platform that helps SMEs and individuals set up e-commerce stores quickly, raised $400K from various angel investors — CartnShop has over 300 merchants using its solution across Kenya, Botswana, and Tanzania and is launching a new update that can handle over 1 million merchants
Kouncel, an Egyptian legal education platform, raised a $280K pre-seed from the African Development Bank, the Academy of Scientific Research and Technology, the Entrepreneurship Development Project in Egypt, and Zaldi Capital — The company will also receive ‘in-kind services’ valued at ~$1.06M as part of the funding round
Elmenus, an Egyptian food delivery platform, raised an undisclosed strategic investment from MENA super app Careem — Elmenus has over 12,000 eateries across five Egyptian cities on its platfom
Kasha Global, a Kenyan femtech e-retailer, raised a Series A2 bridge round (amount undisclosed) led by Beyond Capital Ventures — Founded in 2016, Kasha currently has operations in Rwanda and Kenya, with over 8 million products delivered to date
Lenco, a Nigerian multi-currency neobank for businesses, and Vendy, a Nigerian provider of offline payments infrastructure, are participating in Y Combinator’s W22 batch — This takes the number of African startups in the batch to 17 so far
- The other 15 are: Boya and Remedial Health (Week 7); Grey and Duplo (Week 6); HeyFood and EaziPay (Week 5); and beU Delivery, Numida, Tendo, Topship, Moni, IdentityPass, Dojah, Touch and Pay, and Frain (Week 3).

ADJACENT

Emtech, an American provider of digital, blockchain, & open banking infrastructure for central banks across Africa and other emerging markets, raised a $4M seed round from Noemis Venture, Octerra Capital, Consonance Invest, XFactor ventures, 500 Global, Canaan Partners, and others — Emtech initially completed a sandbox pilot with The Central Bank of Ghana, and has signed five agreements with central banks across Africa and the Caribbean

Fonbnk, an American distributed and decentralized finance platform that converts airtime credits into digital money for users across Africa and other emerging markets, raised a $3.5M seed round led by New Form Capital, with participation from Kraken Ventures, North Island Ventures, Principle Ventures, Formless Capital, Republic Capital, Audacity Fund, Black Ambition, Hustle Fund, Industrious Ventures, Lightspeed Ventures, Draper Frontier Ventures, Techstars Western Union, EchoVC Partners, and others
- Pair with: Our recent Twitter thread on Fonbnk

M&A

Chari, a Moroccan B2B e-commerce marketplace, announced the acquisition of Axa Credit, the Moroccan credit branch of Axa Assurance, for $22M (subject to regulatory approval) — The acquisition advances its B2B2C strategy of lending to its grocery store & shop owner clients (underwritten by bookkeeping) who then go on to lend money to end consumers who often have no credit history but strong relationships with specific shops; notably, the majority of the transaction consideration comes in the form of bank debt
Capital Appreciation (Capprec), a South African platform that acquires and operates fintech businesses including payment infrastructure provider Africa Resonance & fintech-focused software provider Synthesis, acquired the Responsive Technology Group for ~$3M (ZAR48.68M) — The acquisition includes three South African companies: Responsive Tech (100%), Responsive Digital (100%) and Rethink Digital Solutions (71%); RT Group is a digital solutions provider that serves a financial services providers including Capitec, Coronation, Experian, MoneyGram, Nedbank and Old Mutual
Homzmart, an Egyptian online furniture marketplace, acquired German advanced computer vision technology company MockUp Studio for an undisclosed amount — With the acquisition, Homzart gains core technology that allows it to digitize the whole interior design process, allowing consumers to visualize various options in their furnished home easily and in a 360-degree view; founded in 2019, Homzmart raised a $15M Series A led by China’s MSA Capital last year
Milango, an Egyptian proptech software provider digitizing interactions in closed communities from residential properties to membership-driven clubs, acquired Circle, an Egyptian real estate and property management communication platform, for an undisclosed amount — The acquisition grows Milango’s contracted user base to more than 100,000 residential units, increasing its market share and consolidating its position as the leading community management platform in the region; Circle, a 500 Startups-backed company was founded in 2020
Mowarrid, an Egyptian B2B food & grocery procurement marketplace was acquired by Sary, the leading B2B e-commerce platform in the MENAP region, for an undisclosed amount — Mowarrid reached a $25M annual GMV run rate with over 10,000 retailers using its platform and becomes Sary Egypt

📚 Quick Hits

FOR YOUR READING PLEASURE

BNPL for businesses — “B2B BNPL is essentially a rebranding of the centuries-old process of invoice factoring. BNPL was a hit in consumer markets however many underpinnings of its success need to be re-thought in B2B, because offering instant, digitized financing continues to be a challenge from a product, distribution, and risk assessment perspective…companies who are able to lower the customer barriers to purchasing will win market share.”
What is a moat and why does it matter? — Rick Zullo of Equal Ventures introduces a framework for evaluating startup moats: “We try to define moats, not in terms of impacts on an income statement, but rather how a startup operates in real-time — via it’s unit economics. For us, that means 4 core parameters — COGS, OpEx, CAC, Willingness-to-Pay (WTP).”
Web3’s mobile moment — “Today, web3 is largely web-native. There are almost no widely used mobile-native web3 apps … If [web3 is going to be as big as the internet], we will first see the emergence of mobile-native web3 applications to shepherd in the casual consumer.”
Quant comes to venture capital — An essay predicting & exploring the transition of venture capital firms from current practices to using quantitative models across the entire value chain —“from early founder evaluation to late-stage equity and debt deals”
Demystifying the role of a founding engineer — Base Case Capital’s Alana Anderson on what it means to be a founding engineer: “Joining a startup as a founding engineer can be one of the most thrilling, demanding, and rewarding experiences; however, the ambiguity and mystique around it can often be daunting to engineers who are deciding what to do next.”

Bonus:

The Future of NFTs — Interesting read on ‘community economies, ’where NFTs are headed, and how startups can use them. “Going forward, brands will use NFTs as a way of sparking consumer segments that are power-users… Historically, brands held all the data pertaining to a user and independent third party developers couldn’t incentivize those users directly… What NFTs enable is permissionless targeting of communities.”
Moving money internationally — A topical read from Stripe’s Patrick McKenzie on correspondent banking and how SWIFT works
A fantastic February for tech startups in Africa — Our recap of trends & developments across Africa’s startup ecosystem last month

📰 News of the Week

Last week, the story that attracted the most interest (and outrage) across the ecosystem was US digital-bank-for-startups Mercury Bank ‘temporarily restricting’ the accounts of dozens of companies across Africa — likely stemming from more rigorous fraud/compliance/AML processes from its licensed partner bank in the wake of global Russia-related sanctions.

Perseus Mlambo @perseusmlambo

What seems more likely, that all the African startups using Mercury Bank were involved in fraud, or Mercury Bank’s infra bank saw the sanctions in Russia + realised they had all these non white customers and ran a search. “If customer is black + not in Murica, fuck em.”

The matter also gave rise to discussions in some corners of building locally domiciled Mercury-style digital banks for African startups.

D. Barry @Daudex

How can @BankMercury justify this? Starving startups of their capital can easily kill them. This is akin to what PayPal, Coinbase and other fintechs have been doing to Africans for years. Time to build, own and regulate our own global fintechs. https://t.co/02pZkxMnyK

10X Tech Bro @OdunEweniyi

Mercury restricted a large number of African startups’ bank accounts enmasse due to “unusual activity”. Like that number of accounts. At the same time. Wild.

But the reception to such proposals was lukewarm.

STONΞ @StoneAtwine

The solution is not building another Mercury-esque business neobank for African tech. You won’t circumvent the same wholesale compliance queries by the sponsor banks.

Below, we’ve compiled some of the most relevant reading on the matter:

Media coverage:

Mercury restricted a number of accounts linked to African startups and didn’t exactly say why (Techcrunch)
Why did Mercury restrict tens of African startups’ accounts? (TechCabal)
African startups had their bank accounts suspended. Russia sanctions might be to blame (Rest of World)

Essays from the ecosystem:

Mode Odele, Founding Partner at Vazi Legal: On Mercury restricting accounts of African startups

And, as far as we know as of the time of writing, some of the temporarily restricted accounts have been unrestricted, others have been permanently closed, and the rest remain under investigation.

🙈 Visual of the week

THE FINTECH LANDSCAPE IN EGYPT

“Egypt holds a vast market with an unbanked population of almost 50%, limited technology savviness, 57.3% mobile internet [penetration], and limited trust in digital financial services. Yet, fintech in Egypt today plays a critical role in resolving nationwide challenges across multiple segments.”

Source: The Central Bank of Egypt’s Fintech Egypt report (PDF)

🕵️‍♀️ In case you missed it

NEWS & ANNOUNCEMENTS

According to local reports, mobile money unicorn Wave is experiencing difficulties acquiring a license in Togo and is suspending its operations in Benin (Links are to French>English translations by Google)
Microsoft plans to support 10,000 startups in Africa over the next five years
MTN Group becomes the first African company to enter the metaverse
Kenya's Cellulant targets 50,000 new merchants, boosts war chest
Vodacom launches Africa’s first AWS Outposts Innovation Lab
Standard Charted eyes a share of Kenya’s rising e-commerce
Codecademy and Black and Brilliant Launch Africa-Based AI training bootcamp

ESSAYS/REPORTS

Dare Okoudjou, MFS Africa Founder/CEO, writes ‘Why PAPSS dovetails neatly with MFS Africa’s vision’
Victor Asemota writes ‘From zero to $3bn’ for Nigeria’s BusinessDay
Dan Block, Investment Principal at Mercy Corps Ventures writes ‘Next-gen fintech custom-built for agent networks: Why we invested in Kuunda’

PODCASTS/AUDIO

Eghosa Omoigui, Founder and Managing GP of EchoVC, discussed designing VC funds and fund math in Africa on the Trajectory Africa podcast
Guy-Bertrand Njoya, CFO of Nigerian mobility platform MAX, discussed business growth & resilience on the African Startup Teardown podcast
Yehia Houry, Flat6Labs Tunisia MD, discussed the Tunisian startup ecosystem & Flat6Labs’ role on the Wilson Center podcast

INTERVIEWS/PROFILES

🗣️ Community Corner

I see you, friends!

Join Amir Barsoum and the Vezeeta team — they're hiring a Lagos-based Managing Director to grow the digital health platform in Nigeria
Well done to Earnipay’s Nonso Onwuzulike on the CNBC Africa interview
And ICYMI: Watch Nestcoin’s Yele Bademosi on GV’s panel of Black founders & investors driving influential work in the blockchain space

LA FIN

Thanks for reading 🙌🏽 As always, if you want to chat generally or if you’re interested in African tech as a current or aspiring founder/funder/operator, feel free to reach out: Whatsapp, Twitter DM, Email.

— Emeka ✍🏼

Afridigest