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These startups are locating in SF and Africa to win in global fintech

To become a global fintech player, locate your company in San Francisco and Africa.

That’s the approach of payments company Flutterwave, digital lending startup Mines, and mobile-money venture Chipper Cash—Africa-founded ventures that maintain headquarters in San Francisco and operations in Africa to tap the best of both worlds in VC, developers, clients, and the frontier of digital finance.

This arrangement wasn’t exactly coordinated across the ventures, but TechCrunch coverage picked up the trend and some common motives among these rising fintech firms.

Founded in 2016 by Nigerians Iyinoluwa Aboyeji and Olugbenga Agboola, Flutterwave has positioned itself as a global B2B payments solutions platform for companies in Africa to pay other companies on the continent and abroad.

Clients can tap its APIs and work with Flutterwave developers to customize payments applications. Existing customers include Uber,  Facebook,  Booking.com and African e-commerce unicorn Jumia.com.

The Y-Combinator backed company is headquartered in San Francisco, runs its operations center in Nigeria, and plans to add offices in South Africa and Cameroon.

Flutterwave opened an office in Uganda in June and raised a $10 million Series A round in October. The company also plugged into ledger activity in 2018, becoming a payment processing partner to the Ripple and Stellar blockchain networks.

Partnering with Visa, emerging market lender Branch International raises $170 million

The San Francisco-based startup Branch International, which makes small personal loans in emerging markets, has raised $170 million and announced a partnership with Visa to offer virtual, pre-paid debit cards to Branch client networks in Africa, South-Asia and Latin America. 

Branch — which has 150 employees in San Francisco, Lagos, Nairobi, Mexico City and Mumbai — makes loans starting at $2 to individuals in emerging and frontier markets. The company also uses an algorithmic model to determine credit worthiness, build credit profiles and offer liquidity via mobile phones.

“We’ll use [the money] to deepen existing business in Africa. Later this year we’ll announce high-yield savings accounts…in Africa,” says Branch co-founder and chief executive Matt Flannery.

The $170 million round from Foundation Capital and its new debit card partner, Visa, will support Branch’s international expansion, which could include Brazil and Indonesia, according to Flannery. Branch launched in Mexico and India within the last year. In Africa, it offers its services in Kenya, Nigeria and Tanzania.

A potential Branch customer

The Branch-Visa partnership will allow individuals to obtain virtual Visa accounts with which to create accounts on Branch’s app. This gives Branch larger reach in countries such as Nigeria — Africa’s most populous country with 190 million people — where cards have factored more prominently than mobile money in connecting unbanked and underbanked populations to finance.

Founded in 2015, Branch started operating in Kenya, where mobile money payment products such as Safaricom’s M-Pesa (which does not require a card or bank account to use) have scaled significantly. M-Pesa now has 25 million users, according to sector stats released by the Communications Authority of Kenya. Branch has more than 3 million customers and has processed 13 million loans and disbursed more than $350 million, according to company stats.

Branch has one of the most downloaded fintech apps in Africa, per Google Play app numbers combined for Nigeria and Kenya, according to Flannery.

Already profitable, Branch International expects to reach $100 million in revenues this year, with roughly 70 percent of that generated in Africa, according to Flannery.

In addition to Visa and Foundation Capital, the $170 Series C round included participation from Branch’s existing investors Andreessen Horowitz, Trinity Ventures, Formation 8, the IFC, CreditEase and Victory Park, while adding new investors Greenspring, Foxhaven and B Capital.

Branch last raised $70 million in 2018. The company’s overall VC haul and $100 million revenue peg register as pretty big numbers for a startup focused primarily on Africa. Pan-African e-commerce startup Jumia, which also announced its NYSE IPO last month, generated $140 million in revenue (without profitability) in 2018.

Startups building financial technologies for Africa’s 1.2 billion population have gained the attention of investors. As a sector, fintech (or financial inclusion) attracted 50 percent of the estimated $1.1 billion funding to African startups in 2018, according to Partech.

Branch’s recent round and plans to add countries internationally also tracks a trend of fintech-related products growing in Africa, then expanding outward. This includes M-Pesa, which generated big numbers in Kenya before operating in 10 countries around the world. Nigerian payments startup Paga announced its pending expansion in Asia and Mexico late last year. And payment services such as Kenya’s SimbaPay have also connected to global networks like China’s WeChat.

Africa Roundup: African startup investments turn to fintech this winter season

Forty-seven and a half million dollars is a big commitment to African technology companies — even with the recent uptick in VC investment on the continent.

But for the Kenyan-based fintech firm Cellulant, whose digital payments platform processed 7 million transactions worth $350 million across 33 African countries in the last month alone, raising that amount in a series C round led by TPG Growth’s Rise Fund just makes sense.

In 2017, the company processed $2.7 billion in payments, said chief executive, Ken Njoroge.

Clients include the continent’s largest banks: Barclays Bank, Standard Chartered, Standard Bank, and Ecobank. Cellulant also has multiple revenue streams and is EBITDA positive, according to its CEO.

So what does an African technology company do with $47.5 million? “The round is to accelerate our growth of around 20 percent…north of 50 percent,” said Njoroge. “Most of the investment is to scale out our existing platform in Africa and build usage on our existing network.”

Founded in 2004, Cellulant offers Person-to-Business, B2B, and P2B services on its Mula and Tingg products. It’s also developing a blockchain based Agrikore product for agriculture related market activity.

On Africa’s digital payments potential, “We’ve built internal value models that estimate the size of the market at somewhere between $25BN and $40BN,” said Njoroge.

He differentiates Cellulant’s focus from Safaricom’s M-Pesa –one of Africa most recognized payment products — by transaction type and scope. “Kenya’s M-Pesa is optimized as a P2P platform in a few African countries. We’re optimized as a P2B platform and single pipe into multiple countries across Africa,” he said.

One of those countries is economic and population powerhouse Nigeria — where Cellulant offers both its Ting and Agrikore apps. Nigeria is also home to notable digital payment companies Paga and Interswitch, the latter of which has expanded across Africa and is considered a candidate for a public offering.

On a future Cellulant initial public offering, “it’s too early,” said Njoroge. But he doesn’t rule it out. “When you look at the size of the payments business, you could say we have fairly strong prospects to go in that direction.”

TONY KARUMBA/AFP/Getty Images

Meanwhile, the Nigerian investment startup Piggybank.ng closed $1.1M in seed funding and announced a new product — Smart Target, which offers a more secure and higher return option for Esusu or Ajo group savings clubs common across West Africa.

The financing was led by a $1 million commitment from LeadPath Nigeria, with Village Capital and Ventures Platform joining the round.

Founded in 2016, Piggybank.ng offers online savings plans — primarily to low and middle-income Nigerians — for deposits of small amounts on a daily, weekly, monthly, or annual basis. There are no upfront fees.

Savers earn interest rates of between 6 to 10 percent, depending on the type and duration of investment, Piggybank.ng’s Somto Ifezue explained in this TechCrunch exclusive.

The startup generates returns for small-scale savers (primarily) through investment in Nigerian government securities, such as bonds and treasury bills.

Piggybank.ng generates revenue through asset management and from the float its balances generate at partner banks.

The Lagos based startup will use its $1.1M in new seed funding for “license acquisition and product development,” according to company COO Odunayo Eweniyi.

Piggybank.ng looks to grow clients across younger Nigerians and the country’s informal saving groups and has taken preliminary steps to launch in other African countries.

Lead investor and LeadPath Nigeria founder Olumide Soyombo was attracted to Piggybank.ng as an acquisition target.

“The banks have been slow to try new things in this savings space. Piggybank is coming in…and filling a particular need, so they are in a very acquisitive space.”

PIUS UTOMI EKPEI/AFP/Getty Images

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Nigeria’s Piggybank.ng raises $1.1M, announces group investment product

Seeking to tap into Africa’s informal savings groups the Nigerian investment startup Piggybank.ng closed $1.1M in seed funding and announced a new product — Smart Target, which offers a more secure and higher return option for Esusu or Ajo group savings clubs common across West Africa.

The financing was led with a $1 million commitment from LeadPath Nigeria, with Village Capital and Ventures Platform contributing $50,000 each.

Founded in 2016, Piggybank.ng offers online savings plans — primarily to low- and middle-income Nigerians — for deposits of small amounts on a daily, weekly, monthly, or annual basis. There are no upfront fees.

Savers earn interest rates of between 6 to 10 percent, depending on the type and duration of investment, Piggybank.ng’s Somto Ifezue told TechCrunch in Lagos with co-founders Odunayo Eweniyi and Joshua Chibueze.

Users need an account with one of PiggyBank.ng’s bank partners to use the products. The startup generates returns for small-scale savers (primarily) through investment in Nigerian government securities, such as bonds and treasury bills.

PiggyBank.ng generates revenue through asset management and from the float its balances generate at partner banks.

The startup looks to grow clients across younger Nigerians and the country’s informal saving groups.

“The market that we are trying to serve is largely the millennial market, though we do not exclude anyone,” said Eweniyi, the company’s chief operating officer. The venture also looks to meet a demand in Nigeria for accessible investment options, citing a survey they conducted indicating that as a top priority for people with discretionary income.

“Piggybank offers savings, but our vision is not just savings, but to become a holistic platform — a financial warehouse — where other financial providers can plug in their services for PiggyBank users,” said Eweniyi. She cited banks, investment houses, insurance, and pension funds as possible partners.

The company currently has 53,000 registered users — 60 percent of whom are Nigerian Millennials — who have saved in excess of $5M since 2016, according to a release.

PiggyBank.ng will use its $1.1M in new seed funding for “license acquisition and product development.”

The startup has taken preliminary steps to launch in other African countries (Kenya in particular) but could not offer exact details.

Groups will be able to choose savings options and goals through PiggyBank.ng’s app and receive automated disbursement of returns across their individual bank accounts, according to COO Eweniyi .

As for how the company assures savers it won’t become another Ponzi scheme, Piggybank.ng and its lead investor point to the startup’s pending banking license with Nigeria’s Central Bank. The company is in the process of acquiring a micro-finance banking license, something LeadPath Nigeria founder Olumide Soyombo confirmed on a call with TechCrunch. He also pointed to Piggybank’s client balances being held with registered banks, which are protected under Nigeria’s own FDIC type banking insurance.

Soyombo will take a role on Piggybank.ng’s board and he’d like to see them open up new options for individuals to input money on the platform. “The agent network business is a huge play we plan to go into. They’ve basically become like human ATMs,” Soyombo said. He referenced Nigerian digital payment company Paga and Safaricom’s M-Pesa with large agent network stations where clients can fund digital accounts with cash.

While digital payments products have caught on in certain parts of Africa, E-Trade type citizen investment platforms have yet to emerge at any scale.

Soyombo doesn’t see Piggybank.ng moving from fixed income investments to equities just yet. “Maybe down the line stocks could be an interesting play, but not right now. People are currently looking for a more risk free place to e-tail,” he said.

Soyombo believes Piggybank.ng has the potential to become an acquisition target.

“They usually only happen in our market with two main players: banks and telcos,” he said. “The banks have been slow to try new things in this savings space. Piggybank is coming in…and filling a particular need, so they are in a very acquisitive space.”

A look back at the year that the Sub-Saharan African startup scene found its stride


African tech in 2017 was about the normalization of market events mostly absent even a decade ago. There were acquisitions, multiple investment rounds, lots of expansion, big strategic partnerships and some surprise failures.

Africa is fast becoming home to a dynamic tech sector. Here’s a snapshot of the news that shaped that transition over the last year.

Investment

Andela’s $40 million VC raise in October was one of the continent’s most notable. The technology training and job placement firm received Series C funding from CRE Venture Capital, DBL Partners, the Chan Zuckerberg Initiative and Salesforce Ventures, among others.

Andela said it would use the funds for continued expansion. The coding accelerator marked three years in May by adding a Uganda office to locations in New York, Nigeria and Kenya.

New investment also helped moved Africa’s startup boom into the used autos space. In May, Nigeria-based Cars45.com raised a $5 million Series A round from the Frontier Cars Group to better connect used-car sellers to digital price quotes, first-time online service histories and offers.

2017 fintech funding went to Nigerian startups Flutterwave ($10 million) and Lidya ($1.25 million).  In digital solar, Kenya’s PayGo Energy raised $1.4 million.

Agtech startup Farmcrowdy received $1 million from investors including Techstars Ventures and Cox Enterprises to bring Nigerian farmers online.

In April, South African media and technology giant Naspers made a $70 million (majority stake) investment in Cape Town-based e-commerce company Takealot.

South African digital cleaning startup Sweep South concluded a Series A Round backed by, among others, DJ Black Coffee.

Several new African tech funding initiatives emerged in 2017. GSMA’s Ecosystem Accelerator Innovation Fund made seven of its first nine global investments in African startups.

Lagos, London and Nairobi-based TLcom Capital raised $40 million for its new growth-stage Tide Africa Fund. In April, The World Bank launched its XL Africa accelerator to support Sub-Saharan African startups with business mentoring and up to $1.5 million in early-stage capital.

In October, U.S.-based private equity firm TPG Growth raised $2 billion for The Rise Fund, founded by TPG CEO Bill McGlashan with Bono’s support.

In perhaps a sign of things to come, Africa also registered some significant outward tech investment. In September, Naspers added $795 million to its holdings in Berlin-based food delivery company Delivery Hero.

Products, Partnerships, Expansion

African tech saw a number new products and platforms launch in 2017. In January, MasterCard’s 2Kuze — an agtech app connecting small-plot farmers to markets, payments and logistics services — went live in Kenya, Uganda and Tanzania.

Africa’s first unicorn, e-commerce venture Jumia, introduced an SME lending program. Safaricom ― Kenya’s largest telecom and M-Pesa mobile money provider ― went live with its Masoko e-commerce platform in November.

Earlier in March, Kenyan communications hardware company BRCK unveiled its SupaBRCK — a waterproof, solar-powered Wi-Fi box that operates as a 3G hotspot and off-grid server.

Africa also registered on the blockchain bandwagon. Earlier this month, 500 Startups-backed SureRemit launched a crypto token product aimed at disrupting Africa’s multi-billion-dollar remittance market.

On expansion and partnerships, Facebook was very active on the continent in 2017. FB announced its Africa Bots for Messenger Challenge in February, detailed plans to boost free Wi-Fi on the continent in April and teamed up with MainOne and Tizeti Network to improve Nigeria’s net connectivity in November. The company partnered with TechCrunch in October for the debut Startup Battlefield Africa and with CcHub to launch Nigeria’s NG_Hub accelerator.

Other big Silicon Valley names also registered in Africa in 2017. Microsoft announced the opening of Cloud Form data centers in May and a partnership with Liquid Telecom in August to accelerate cloud adoption in Africa.

Off of CEO Sundar Pichai’s July Nigeria trip, Google announced plans to train 10 million Africans in digital skills, increase funding to African startups and provide $20 million in grants to digital non-profits and modified versions of products (such as YouTube) in Africa. Google for Entrepreneurs also supported CcHub’s European PitchDrive tour in August.

The same month, eBay expanded its partnership with MallforAfrica.com to allow African vendors to sell wares directly to American online consumers.

On accelerators and capacity building, 500 Startups brought its frontier and emerging markets travel series ― Geeks on a Plane ― to Africa for the first time in March. Airbus held its inaugural BizLab pitch event in Nairobi targeting African startups using UAVs, 3D printing, smart sensors and IoT. The MEST incubator got a new CEO, Aaron Fu, and scaled its presence to include programs in Ghana, Nigeria, Kenya, South Africa and Cote d’Ivoire.

And in October, Safaricom launched its Safaricom Alpha innovation center in Nairobi, with a goal of leveraging the company’s commercial social network (i.e. M-Pesa) to connect people to new product solutions.

Contraction and closing up shop

Of course, no tech sector expands and grows all the time. In September, Y Combinator-backed French language VOD startup Afrostream shuttered, ending subscription services in 29 countries.

In November, Jumia e-commerce competitor Konga slashed 60 percent of its workforce and ended its pay on delivery service, reportedly to cut costs. It’s not clear if this is a sign of trouble or a realignment of business strategy, per Konga founder Sim Shagaya’s Medium post.

Acquisitions, IPOs

Exits and public offerings are still scant in Africa’s tech landscape. There was a notable acquisition in online real estate startup ToLet.com.ng’s purchase of Jumia House Nigeria from e-commerce unicorn Jumia in November. Africa’s much anticipated and much delayed IPO of fintech firm Interswitch is expected in 2019, according to Nigerian tech insiders — who offered TechCrunch perspective on other African ventures with listing potential.

Tech to power

African tech and politics collided on several occasions in 2017. In September, anti-government protests in Togo, and the use of social media to mobilize them, led to the president shutting down the internet for several days.

In a tech to power success story, Cameroon’s #BringBackOurInternet movement — developed by local IT activists — went global, forcing the country’s government to restore connectivity after switching it off in response to demonstrations that started in January.

Revenues and space

Big revenue news from African tech startups is still elusive, but Paga offered promising info in August. The Nigerian digital payments firm reported its first EBITDA positive quarter, after processing 31 million transactions worth some $1.3 billion since inception.

And in July, teams from Nigeria and Ghana launched satellites into space, with a little help from SpaceX and NASA — demonstrating the sky was not the limit for Africa’s scientists and techies in 2017.

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Featured Image: NASA/Bill Ingalls/NASA/Bill Ingalls