All posts in “Fundings & Exits”

Acquisitions, more than IPOs, will create Africa’s early startup successes

Africa has made its global IPO debut. Pan-African e-commerce company Jumia—a $1 billion-valued company—began trading live on the NYSE last week.

The stock offering made Jumia the first upstart operating in Africa to list on a major global exchange.

This raises expectations for unicorns and IPOs to create the continent’s first wave of startup moguls. But unlike other markets, big public listings and nine-figure valuations could remain rare in Africa.

The rise of venture arms and startup acquisitions will factor more prominently than IPOs in creating Africa’s early startup successes.

I’ll break down why. First, a quick briefer.

Primer on African tech

Not everyone may be aware, but yes, Africa has a booming tech scene. When measured by monetary values, it’s minuscule by Shenzen or Silicon Valley standards.

The different playbooks of D2C brands

Over the past half a decade, the tidal wave of niche brands delivering new kinds of products to consumers and doing so online has changed the retail and CPG landscapes forever.

This shift has in some way caused a shakeout in traditional retail, with once-popular retailers announcing store closures (JCPenney, Sears) or even liquidation (Payless, Toys R Us) and has sent fashion houses and CPG brands on a soul-searching journey. The changing demographics and desires of shoppers have also fueled the decline of traditional brands and their distribution mechanisms.

This bleak scenario of incumbent consumer brands is in stark contrast to the rapid emergence of a host of digitally-native Direct to Consumer (D2C) brands. A few D2C brands have been successful enough to become unicorns! Retailers like Walmart, Nordstrom, and Target have quickly adapted to the D2C era.

Walmart has made a string of acquisitions beginning with Jet.com and Bonobos. Nordstrom has broadened its assortment to include D2C brands, Target has partnered with Harry’s, Quip, and Flamingo – all of which have rolled out their products in Target’s stores across the country. Target has also invested in Casper, which is the latest D2C brand to become a Unicorn.

Venture capital firms have invested over four billion dollars in D2C brands since 2012, with 2018 alone accounting for over a billion. With investment comes pressure to scale and deliver profits. And this pressure is bringing the focus on some pertinent questions – How are these D2C brands going to evolve and how could they sustain as businesses?

Like always, the pioneering companies find their path and we then derive the playbooks out of them. From PipeCandy’s analysis of several D2C brands, we see the following approaches taken by D2C brands.

  • Playbook 1: Brand’s purpose anchored around one product category
  • Playbook 2: Brand’s purpose anchored around multiple product categories
  • Playbook 3: Brand’s purpose anchored around aggregation of other brands (for sale or rent)

We discuss the market size and capital availability factors that influence the paths and the outcomes.

Table of Contents

  1. D2C playbooks
    1. Playbook 1: Brand’s purpose anchored around one product category
    2. Playbook 2: Brand’s purpose anchored around multiple product categories
    3. Playbook 3: Brand’s purpose anchored around aggregation of other brands (for sale or rent)
  2. Access to capital and how D2C playbooks are impacted
  3. The VC route to scale
  4. The non-VC route to scale
  5. Outcome without hitting scale
  6. Roll-ups by strategic buyers
  7. Roll-ups by financial buyers
  8. Brand incubators

Brand’s Purpose anchored around one product category:

Many of these D2C brands that have experienced early success owe their rise largely to an authentic relationship with consumers that is built on the promise of one product. In many ways, focusing on one product line and a small set of SKUs makes total business sense.

Design, Production, Marketing & Customer Support complexities can stay manageable with such deliberate narrowing down of focus.

In some categories, you could stay focused on one product line for a long time and build a successful company.

Astroscreen raises $1M to detect social media manipulation with machine learning

In an era of social media manipulation and disinformation, we could sure use some help from innovative entrepreneurs. Social networks are now critical to how the public consumes and shares the news. But these networks were never built for an informed debate about the news. They were built to reward virality. That means they are open to manipulation for commercial and political gain.

Fake social media accounts – bots (automated) and ‘sock-puppets’ (human-run) – can be used in a highly organized way to spread and amplify minor controversies or fabricated and misleading content, eventually influencing other influencers and even news organizations. And brands are hugely open to this threat. The use of such disinformation to discredit brands has the potential for very costly and damaging disruption when up to 60% of a company’s market value can lie in its brand.

Astroscreen is a startup which uses machine learning and disinformation analysts to detect social media manipulation. It’s now secured $1M in initial funding to progress its technology. And it has a heritage which suggests it at least has a shot at achieving this.

Its techniques include coordinated activity detection, linguistic fingerprinting and fake account and botnet detection.

The funding round was led by Speedinvest, Luminous Ventures, UCL Technology Fund, which is managed by AlbionVC in collaboration with UCLB, AISeed, and the London Co-investment Fund.

Astroscreen CEO Ali Tehrani previously founded a machine-learning news analytics company which he sold in 2015 before fake news gained widespread attention. He said: “While I was building my previous start-up I saw at first-hand how biased, polarising news articles were shared and artificially amplified by vast numbers of fake accounts. This gave the stories high levels of exposure and authenticity they wouldn’t have had on their own.”

Astroscreen’s CTO Juan Echeverria, whose Ph.D. at UCL was on fake account detection on social networks, made headlines in January 2017 with the discovery of a massive botnet managing some 350,000 separate accounts on Twitter.

Ali Tehrani also thinks social networks are effectively holed-below the waterline on this whole issue: “Social media platforms themselves cannot solve this problem because they’re looking for scalable solutions to maintain their software margins. If they devoted sufficient resources, their profits would look more like a newspaper publisher than a tech company. So, they’re focused on detecting collective anomalies – accounts and behavior that deviate from the norm for their userbase as a whole. But this is only good at detecting spam accounts and highly automated behavior, not the sophisticated techniques of disinformation campaigns.”

Astroscreen takes a different approach, combining machine-learning and human intelligence to detect contextual (instead of collective) anomalies – behavior that deviates from the norm for a specific topic. It monitors social networks for signs of disinformation attacks, informing brands if they’re under attack at the earliest stages and giving them enough time to mitigate the negative effects.

Lomax Ward, partner, Luminous Ventures, said: “The abuse of social media is a
significant societal issue and Astroscreen’s defence mechanisms are a key part of the solution.”

Weengs, the UK logistics startup for online retailers, collects £6.5M Series A

Weengs, the U.K. logistics startup for e-commerce businesses that need a more convenient way of getting online orders to customers, has raised £6.5 million in Series A funding. Leading the round is venture capital firm Oxford Capital, with Weeng’s seed investors, including Local Globe, Cherry Ventures and Venture Friends, following on.

Founded by Alex Christodolou and Greg Zontanos, provides small and medium-sized online stores of various kinds, including eBay and Amazon power sellers and brick ‘n’ mortar stores with an e-commerce component, with a “ship-from-store” logistics solution that handles collection, packing and delivery.

The basic premise is that time costs money, which can make e-commerce quite prohibitive. By outsourcing time-consuming and labour intensive logistics, store owners can put their time into other more profitable and differentiating aspects of their business, such as sales and marketing, and customer experience.

To make this work, Weengs collects orders daily from retailers’ stores, and professionally packs them back at the Weengs warehouse before they are shipped to customers via the couriers the company partners with.

Weengs says it can pack and ship a broad range of products globally, including less obvious items such as plants to musical instruments, electronics and everyday items like cosmetics. It has developed algorithms to pick the most appropriate courier service based on the item and customer priorities.

“Our business is part of the rising omnichannel opportunity we are seeing in retail,” says Pier Ronzi, Weeng’s more recently added co-founder and CEO. “Increasingly, it makes sense for retailers to ship-from-store. Basically cities and stores are becoming distributed inventories that retailers can leverage to increase their business and Weengs helps them [by] offering a one-stop-shop solution for their fulfilment while they can focus on their core activity”.

Since Weengs’ seed round, the team has grown to 70 people and saw Ronzi, who previously worked at McKinsey&Co, join the company. The startup now has around 400 retailers as customers and says it has fulfilled more than 500,000 online orders to date.

“We have learnt that our service saves retailers a huge amount of time and that is the key to our value proposition versus, for example, price,” says Ronzi. Prior to Weengs, customers typically handled fulfilment themselves or used costly fulfilment centres.

To that end, Weengs says it will use the new funding to invest heavily in its new warehouse and accompanying automation and technology. The plan is to “supercharge” operations to be able to fulfil more than 15,000 e-commerce orders per day.

Explains the Weengs CEO: “The packing operations today is mainly manual. In the new automated warehouse we are implementing a process governed by our software and leveraging a packing machine that automatically performs the packing operations: the order item is fed to the machine and, at the end of a quick automated process, the order comes out packed in a very high standard and bespoke box, labelled and ready to be handed over to the carriers. The process becomes heavily automated but we still add the human touch for value added activities such as preparation of fragile items and supervision of the whole process”.

Bankin’ raises $22.6 million for its financial coach

French startup Bankin’ is raising a new $22.6 million funding round (€20 million). The company has managed to attract 2.9 million users in France and wants to become the only app you need to manage your money.

Overall, Bankin’ has raised over $32 million (€28.4 million). Investors include Omnes Capital, Commerz Ventures, Génération New Tech, Didier Kuhn, Simon Dawlat and Franck Lheurre.

Bankin’ first developed an aggregator so that you could view all your bank accounts from a single app. The company has been using a combination of APIs and scrapping to connect to nearly all French banks, 85 percent of Spanish and British banks and 65 percent of German banks.

The app automatically categorizes your transactions and sends you push notifications to alert you of important changes. There’s also a budget feature that can predict how much money you’ll have at the end of the month.

Bankin’ went one step further and started adding transfers from the app. If you want to ditch your bank app, you need to be able to view your balance and your transactions, but you also need to be able to send and receive money.

And now, Bankin’ wants to become your financial coach with automated recommendations and human-powered conversations. The app has been redesigned a couple of months ago to put these recommendations front and center.

For instance, the app can tell you if it’s time to renegotiate your loan, or that you should optimize your savings. The startup partners with other fintech companies, such as Yomoni, Pretto, Transferwise and Fluo, as well as online banks. This could be an interesting acquisition channel for other companies and a good revenue opportunity for Bankin’.

Finally, Bankin’ also sells access to its API called Bridge. For instance, Sage, Milleis Banque, Cegid and RCA use Bridge so that you can connect your third-party bank accounts and view them from your main bank account.

With today’s funding round, the company plans to hire reasonably. There are now 50 people working for Bankin’ and the startup plans to hire 20 more people this year.