Atara Round-ups: Why May showed African FinTech Investment is about to rocketsays Anya Breen of Atara Partners

 

With a large portion of the population of many African countries unbanked or underbanked, FinTech startups across the continent have allowed consumers to leapfrog traditional banking institutions straight into digital services.  Tech investment more generally across Africa has been on an exponential journey in recent years, estimates for VC investment in 2015 were between $186 million and $277 million for the entire continent, whereas in 2019 this rose to over $2 billion. The pandemic has hit hard, crushing hopes for a 2020 increase, and the resulting uncertainty has meant a slow start to the year.  Recent news, however, has brought new hope that records could once again be topped this year, given greater confidence that the vaccine rollout is in motion.  This year’s AfricArena report has predicted over $2 billion in VC investment over the second two quarters of 2021 alone. 

 

May 2021 provided some key indicators that these expectations will be met, including:

 

Chipper Cash became the continent’s sixth tech Unicorn and the third company to announce a funding round of over $100 million this year following TymeBank in February and Flutterwave in March (also now at unicorn valuation).  The company has been cagey about disclosing its valuation but estimates put it as between $1 and $2 billion. Chipper was founded in 2018 by Ham Serunjogi and Maijid Moujaled, from Uganda and Ghana respectively, whose backgrounds encompass the likes of Facebook, Flickr and Yahoo. They are currently active in Ghana, Uganda, Nigeria, Tanzania, Rwanda, South Africa and Kenya; and have also now expanded to the UK. They offer mobile-based, no fee, P2P payment services and are emphasise the importance of this product to their users, they are looking to widen the products they offer over the coming year with a particular focus on crypto, and to grow their team by around 100 to 300 people over the coming months.

 

It was leaked in May that OPay, a fintech launched in 2018 in Lagos by the team leading Opera Software, are in talks with investors with intentions to raise up to $400 million in Series C this year.  This would bring the company’s valuation to over $1.5 billion, and position it as the third African unicorn of 2021, despite having only just launched outside the Nigerian market.  This is perhaps less surprising given that the company processes about 80% of bank transfers among mobile money operators in Nigeria, and that they now have an international money transfer licence and a partnership with WorldRemit in the works.  OPay raised $190 million in 2019, from the likes of SoftBank, Sequoia Capital China and IDG Ventures. This funding round will likely provide the means to expand into South Africa and Kenya, ambitions that were discussed during the 2019 raise.

 

Egyptian digital banking startup, Telda, raised the largest pre-seed to date across both MENA and Africa in May, with backing from Sequoia to the tune of $5m.  The Fintech takes the crown in MENA from YCombinator backed Egyptian start-up Flextock that raised a $3.25m pre-seed earlier in May. At only one month old, Telda wants to combat Egypts cash reliance, and the fact that two out of every three Egyptians are currently unbanked.  Founders Ahmed Sabbah (former CTO Swvl) and Youssef Sholqamy (former Uber) see a huge opportunity for digital banking in the country and plan to put top Egyptian hires at the the centre of their growth strategy, capitalising on their backgrounds and Sequoia’s clout to secure a reputation as a talent magnet.

 

A number of smaller FinTech investments across the continent also provided momentum in May.  Nigeria’s Mono, backed by YCombinator, raised $2m in seed funding from Entrée Capital among others.  The company provides open banking services to more than 16 financial institutions already in the country, and has ambitions to use its open API model to eventually become a big data player.  This is the third API based fintech to raise a multi-million dollar seed round so far this year across the continent, following (also Nigeria-based) Okra in April and South Africa’s Stitch in February. In addition to this, Cameroon based payments platform Smobilpay received $3 million in seed funding from MFS Africa.  BFREE an ethical credit management platform from Nigeria also raised an $800k seed round, Lami Technologies, an insurtech startup from Kenya, raised $1.8m in seed funding and, finally, Egyptian seed-stage accelerator Flat6Labs also raised $13.2 million in May to support and foster North Africa’s startup ecosystem.

 

Dubai and Riyadh based Nuwa Capital recently told TechCrunch that where they see opportunity in their investments in Africa is in those that capitalise on volume and “the power of the population”.  This growing circle of investment leading to increasing numbers of successful and well funded entrepreneurs and founding teams, looks set to prove immense opportunity for yet further exciting investment in the coming months.