PalmPay launches in Nigeria on $40M round led by China’s Transsion

Africa focused payment startup PalmPay has launched in Nigeria after raising a $40 million seed-round led by Chinese mobile-phone maker Transsion.

The investment came via Transsion’s Tecno subsidiary, with participation from China’s NetEase and Taiwanese wireless comms hardware firm Mediatek a Transsion spokesperson confirmed to TechCrunch.

PalmPay had piloted its mobile fintech offering in Nigeria since July, before going live today at a launch in Lagos.

The startup aims to become Africa’s largest financial services platform, according to a statement. 

As part of the investment, PalmPay enters a strategic partnership with mobile brands Tecno, Infinix, and Itel that includes pre-installation of the startup’s app on 20 million phones in 2020.

The UK headquartered venture — that was also founded with Chinese seed investment — offers a package of mobile based financial services, including no fee payment options, bill pay, rewards programs, and discounted airtime.

In Nigeria, PalmPay will offer 10% cashback on airtime purchases and bank transfer rates as low as 10 Naira ($.02).

In addition to Nigeria, PalmPay will use the $40 million seed funding to grow its financial services business in Ghana. The payments startup has plans to expand to additional countries in 2020, PalmPay CEO Greg Reeve told TechCrunch on a call.

PalmPay received its approval from the Nigerian Central Bank as a licensed mobile money operator in July. During its pilot phase, the payments venture registered 100,000 users and processed 1 million transactions, according to a company spokesperson.

With its payments focus, the startup enters Africa’s most promising digital sector, but also one that has become notably competitive and crowded  — particularly in the continent’s largest economy and most populous nation of Nigeria. 

By a number of estimates, Africa’s 1.2 billion people represent the largest share of the world’s unbanked and underbanked population.

An improving smartphone and mobile-connectivity profile for Africa (see GSMA) turns this scenario into an opportunity for mobile-based financial products.

That’s why hundreds of startups are descending on Africa’s fintech space, looking to offer scalable solutions for the continent’s financial needs. By stats offered WeeTracker, fintech now receives the bulk of VC capital and deal-flow to African startups.

Nigeria has multiple new digital-payments entrants — see Chippercash — and several firmly rooted later stage fintech players, such as Paga and recently confirmed unicorn Interswitch.

PalmPay CEO Greg Reeves believes the company can compete in Nigeria and across Africa based on several strategic advantages. A big one is the startup’s support from Transsion and partnership with Tecno.

Transsion Tecno Store Africa“On channel and access, we’re going to be pre-installed on all Tecno phones. Your’e gonna find us in the Tecno stores and outlets. So we get an immediate channel and leg up in any market we operate in,” said Reeve.

Tecno’s owner and PalmPay’s lead investor, Transsion, is the largest seller of smartphones in Africa and maintains a manufacturing facility in Ethiopia. The company raised nearly $400 million in a Shanghai IPO in September and plans to spend roughly $300 million of that on new R&D and manufacturing capabilities in Africa and globally.

In addition to Transsion’s support and network, Reeves names PalmPay’s partnership with Visa . “We signed a strategic alliance with Visa so now I can deliver Visa products on top of my wallet, link my wallet to Visa products and give access to someone who’s completely unbanked to the whole of the Visa network,” he said.

Another strategic advantage PalmPay may have as a newcomer in Africa’s fintech space is Reeve’s leadership experience. He comes to the CEO position after serving as Vodaphone’s global head of M-Pesa — one of the world’s most recognized mobile-money products. Reeve was also a GM for Millicom‘s fintech products across Africa and Latin America.

“I’ve had my fingers in mobile financial services for the last 10 years,” he said.

Reeve confirmed that PalmPay has local teams (and is hiring) in Nigeria and Ghana.

With the company’s launch and $40 million raise — which is potentially the largest seed-round for an Africa focused startup in 2019 — PalmPay’s bid to gain digital payment market share is on.

The Transsion led investment also serves as a big bold marker for China’s pivot to African tech in 2019. It follows several big moves by Chinese actors in the continent’s digital space.

These include Opera’s $50 million investment in multiple online verticals in Nigeria and a major investment by Chinese investors in trucking logistics startup Lori Systems this week.

Chaka opens up global investing to Africa’s most populous nation

Fintech startup Chaka aims to open up online investingd to Africa’s most populous nation, Nigeria.

The seed-stage company recently went live with its mobile-based platform that offers Nigerians stock trading in over 40 countries.

Chaka positions itself as a passport to local and global investing. The startup has created an API and interface that allows Nigerians with a bank account (and who meet KYC requirements) to create trading accounts to purchase global blue chip and local Nigerian stocks.

Investors can get started with as little as 1000 Naira or $10 to create a local and global wallet to trade, according to Chaka founder and CEO Tosin Osibodu.

The platform has partnerships with two brokers to facilitate stock purchases: Citi Investment Capital and U.S. based DriveWealth.

“Embedded in our offer is the ability to buy on the local stock market…we make it more seamless than usual, and assets…from this whole universe outside the continent,” said Osibodu.

The Nigerian Stock Exchange has been upgrading its platform to digitize and accommodate more listings. It has a five-year partnership with NASDAQ and Airtel Africa listed on the NSE in July. 

On the Chaka’s addressable market, “Our outlook is that within Nigeria…between one and two million people are strongly in the market for this product,” Osibodu said.

Tosin Osibodu

Chaka looks to offer more than stocks. “Our product road-map includes not just equities, but other investment products people are interested in — mutual funds, fixed income products, and eventually even cryptocurrencies — so that really expands our bounds,” said Osibodu.

Chaka’s fee structure is 100 Naira (or 3%) for local trades and $4.00 for global trades.

To mitigate the FX risk of the often volatile Nigerian Naira, the startup converts locally to dollars and funds client trades in USD. Chaka agrees to intra-day forward rates at 9am each day and locks them in until 2pm for transactional activity on its platform, according to Osibodu

Chaka hasn’t disclosed amounts, but confirms its has received pre-seed funding from Nigerian founder and investor Iyinoluwa Aboyeji, aka E.

The startup is in a unique position in African fintech. The sector receives the bulk of the continent’s VC (according WeeTracker), but most of it is directed toward P2P payments startups — vs. personal investment platforms.

An alum of U-Penn and Dartmouth, Chaka’s founder got the idea to form the venture, in part, due to challenges attempting to access well-known trading platforms, such as E-Trade.

“I tried to open these accounts and whenever I…disclosed I was Nigerian very shortly after those accounts were closed or denied,” said Osibodu. 

For decades, Nigeria has been known as an originating country for online fraud, commonly referred to as 419 scams. This is something for which the country’s legitimate business operators pay an undue reputational cost, according to Osibodu. 

In recent years, Nigeria has also become a magnet for legitimate business in Africa. The country has the continent’s leading movie and entertainment industry and has emerged as a hotspot for startup formation and VC activity.

Chaka backer Iyinoluwa Aboyeji, who confirmed his investment in the company to TechCrunch, believes progressive trends in Nigeria will open up a new investor class.

In addition to Aboyeji, Chaka has also received seed-funds from Microtraction, a Lagos located early-stage investment shop founded by Yele Bademosi and supported by Y-Combinator CEO Michael Seibel.

Chaka allows for API integrations and has a developer team. The company has created an automated customer verification process. “It sounds trivial compared to the American market, but it’s a bit of a first in Nigeria,” said CEO Tosin Osibodu.

On Chaka’s long-game, “The grand mission of the company is to reduce capital market access barriers,” cording to Osibodu.

“With a two to five million customer base — and a $40 to $200 ARPU — on the really conservative end that’s a $100 million revenue opportunity,” he said.

 

 

 

 

 

 

 

 

 

 

 

 

Senegal’s NIMA Codes to launch address app in 15 African countries

Senegalese startup NIMA Codes — a digital mapping service for locations without formal addresses  —  has upgraded its app and plans to go live in 15 African countries in 2020.

The pre-seed stage startup launched in 2018 around an API that uses mobile-phone numbers to catalog coordinates for unregistered homes and businesses in Senegal.

NIMA Codes is adding a chat tool to its platform, to help users locate and comment on service providers, and is integrating a photo-based location identifier, NIMA Snap, in the application.

“What we offer right now is a reliable street-addressing product. Because it’s very difficult for people…to communicate location in Africa and a lot of services are using location. So we need a service that can communicate reliable locations,” NIMA Codes co-founder and CEO Mouhamadou Sall told TechCrunch.

By several rankings, NIMA Codes has become a top-three downloaded navigation app in Senegal (for Android and iOS). The platform has 16,000 subscribed users and recorded over 100,000 searches, according to Sall.

He and co-founder Steven Sakayroun (a software engineer and IBM alum) came up with idea for assigning location coordinates to mobile numbers in previous software development roles.

“If you look at street addresses in North America, in the end they are just a way to name longitude and latitude, because the computer doesn’t know what 6th Avenue really means,” Sall said.

Since mobile-phone penetration in Senegal and broader Africa is high, mobile numbers serve as a useful reference point to attach location information tagged for both homes and businesses, Sall explained. Mobile-phones can also serve as an entry point for people to input location coordinates to NIMA Codes’ data-base.

There are also advantages to assigning coordinates to digits, vs. letters, in Sub-Saharan Africa with its 1000s of language groupings, Sall explained. “Nima Codes is a cross-border and language agnostic solution,” he said.

Mouhamadou Sall

Sall believes that will work to the startup’s advantage when it expands services and data-base building to all 15 countries of the Economic Community of West African States by the end of 2020.

NIMA Codes is still plotting prospects for its best use-cases and revenue generation. It hasn’t secured partners yet and is still identifying how those downloading the app are using it. “Right now it’s mostly people who download the app…and register locations. Some delivery companies may be using it and not telling us,” said Sall.

Ecowas Countries

The startup plans to generate revenue through partnerships and API usage fees.

Sall believes NIMA Codes’ new image-based location and chat-based business search functions could come together — akin to Google Maps and find nearby places — to create commercial revenue opportunities across merchants in West Africa’s large, informal economies.

Another obvious plug-in for NIMA Codes’ service is Africa’s fast-growing ride-hail and delivery markets. Sall points 2019 data that Uber paid $58 million over three-years for map and search services.The U.S. ride-hail company has also tested an image-based directions app called OKHi in Kenya. And there are reports of Uber’s imminent expansion into Senegal.

Whatever the application, Sall believes NIMA Codes is cornering a central point of demand in Sub-Saharan Africa.

“The use-case is so big, you need to start with something and eventually expand,” he said.

“But everything wraps around having a reliable location service for people and small business.”

Talking to Zero Motorcycles’ CEO and taking home the 2020 SR/F

The motorcycle industry is shifting to electric. Harley Davidson signaled the trend this year, becoming the first big gas manufacturer to release a street-legal e-motorcycle in the US, the LiveWire.

But before Harley’s EV pivot, California based startup Zero Motorcycles had been selling e-motos for years.

“We’re an electric motorcycle and power-train manufacturer founded in 2006 in Santa Cruz, California…we’re sold in over 30 countries,” Zero CEO Sam Paschel told TechCrunch.

“Fundamentally we aim to transform and elevate the motorcycling experience and by doing that we expect to make a huge dent in transforming transportation globally.”

Toward that aim, Zero recently released the all-new 2020, SR/F — a $19K high-performance e-motorcycle and competitor to Harley Davidson’s $29K LiveWire.

TechCrunch took an SR/F home to experience going full e-moto. The biggest distinction between e-motorcycles — versus gas two-wheelers — is lightning acceleration and uninterrupted forward movement.

Zero’s SRF has a magnet motor and one gear — with no clutch or shifting — and fewer mechanical parts to put the 14.4 kWh battery’s 140 ft-lbs of torque to the pavement.

You simply twist and go.

The SR/F is a fully digital, IoT motorcycle that syncs to a smartphone and the cloud to monitor charge status or adjust performance. It has preset riding modes  — Eco, Street, Sport, and Rain — for different combinations of power and range. The EV also allows for customized riding modes dialed in via smartphone.

Zero Ride Mode GIFOne can power Zero’s sporty e-moto from a household outlet or use fast-charging networks — like ChargePoint — for a full battery in around 80 minutes.

Zero’s SR/F has a range of up to 161 miles in the city, where it can recharge itself marginally through regenerative braking. For a combination of city, highway, an sport riding, I averaged around 100 miles a charge, alternating between riding modes.

On performance, Zero’s new sport-entry hauls ass. Going 0 to 60 at full power on the new SR/F is a rush, while 60 to 100 speed is so fast it’s downright frightening.  Overall, the e-moto’s acceleration is stronger and more constant than internal combustion machines, with no emissions and little sound.

Zero’s CEO Sam Paschel thinks the distinct electric motorcycle experience can convert gas riders

“We have what we consider enthusiasts…These are people that are avid motorcycle riders…What we find with them is they throw a leg over a Zero…have an electric motorcycle experience, it’s fundamentally different…They fall in love, they buy one,” he said.

Zero’s e-motos — starting at around $9K for the entry level FX — are also attracting a younger generation, according to the startup’s CEO.

“They’re an early adopter of new technology. They love the idea — whether it’s the performance elements the riding experience, green or eco elements of having electric vehicle — and we’re actually drawing them into the sport in a way that they wouldn’t have been drawn in by internal combustion,” he said.

Zero Chargepoint 1Paschel is undaunted by Harley’s EV debut or the other big gas motorcycle manufacturers entering the E-market.

“You have a major OEM that’s launched a bike into the space that we have been defining and creating for over a decade. Of course, the nature of that relationship is fundamentally competitive,” he said.

“The question I get more often is…are we concerned? Are we worried or scared of any OEMs entering? And The answer is no. This is actually the most exciting thing that’s happened in the space in a long time,” said Paschel.

“A rising tide is going to lift all ships, and…I’m more than confident that we will capture more than our fair share of a rapidly growing market simply because this is all we do. And we spent 13 years, millions of miles, and a lot of time doing this just right.”

Both Zero and Harley are banking on e-motos to reboot a flailing U.S. motorcycle industry. New bike sales dropped 50% since 2008 — with sharp declines in ownership by everyone under 40.

Zero has worked to close gaps on price, range, charge times, and performance compared to petrol-powered motorcycles.

The startup is not alone. Italy’s Energica is expanding distribution of its high-performance e-motos in the U.S. Other competitors include California based Lightning Motorcycles and e-moto startup Fuell, with plans to release its $10K, 150 mile range Flow this year.

Of course, there’s already been some speed-bumps and market attrition, with three e-moto startups — Alta Motors, Mission Motors, and Brammo — forced to power down over the last several years.

Zero looks to its head start and proprietary technology to win in the electric conversion of motorcycles.

The company has also received partnership inquiries

“It’s not something that we are actively seeking…I will tell you that there’s a lot of inbound interest. I think people were waking up and realizing that that transition is much closer than they thought it was…We’ve had conversations from a list of OEMS, many of whom you would recognize,” said Paschel.

Still, Zero is likely to ride on alone, according to its CEO.

“Right now it’s an inherently competitive relationship with a lot of those guys, so it would have to be the right deal…But right now we’re fiercely competitive company. We’re in a competition with all these brands.”

ZERO SRF TC IIZero’s SR/F could be the sweet spot of tech, price, range, and performance it has been striving toward to finally go mass market and compete with those brands.

And with Zero and Harley growing e-moto market share, expect big names still on the sidelines — Honda, Ducati, Kawasaki — to debut production EVs soon.

With that, the electrification of the motorcycle industry will become another facet of the transformation of global mobility.

Africa Roundup: Goldman leads $30M Twiga raise, China grows tech influence, Jumia weathers lockup-expiry

Kenya’s Twiga Foods raised a total of $30 million in October from lenders and investors led by Goldman Sachs.

This adds to the list of African startups the U.S. financial firm has backed, including e-commerce venture Jumia and South African fintech startup Jumo.

Twiga, a B2B food distribution company, will use its funds to set up a distribution center in Nairobi and deepen its conversion to offering supply chain services for both agricultural and FMCG products.

The startup is also targeting Pan-African expansion to French speaking West Africa by third quarter 2020, CEO Peter Njonjo told TechCrunch.

The venture has moved quickly on diversifying its supply-chain product mix. “We’re not just doing fruits and vegetables…I’d say we’re at 50/50 now between FMCG  and fresh,” said Njonjo.

Twiga doesn’t plan to move toward entering or supplying B2C e-commerce, where it could become a competitor to other online retailers, such as Jumia.

But the company has factored for advantages in the B2C e-commerce space. “If you’re able to serve Nairobi’s 180,000 retailers, it means that the furthest customer would be less than two kilometers away from any shop. That’s the power of building a B2C business on top of a B2B platform. So definitely, the potential is there,” said Njonjo.

China is known for its relationship with Africa based on trade and infrastructure, but not so much for tech. That’s changing with a number of Chinese actors increasing the country’s digital influence across the continent’s tech markets.

This includes Africa focused mobile phone Transsion’s IPO and planned expansion in Africa and recent moves on the continent by Alibaba and Chinese owned Opera.

In an ExtraCrunch feature, TechCrunch detailed China’s growing tech ties with Africa and what they could mean for the continent’s innovation ecosystem and Africa’s relationship with China overall.

In two stories in Ocotober, TechCrunch followed Jumia’s IPO lockup expiry and volatile share-price ahead of the Jumia’s November third-quarter earnings call.

The Africa focused e-commerce company — with online verticals in 14 countries —  has had a bumpy ride since becoming the first tech venture operating in Africa to list on a major exchange. Jumia saw its opening share price of $14.50 jump 70% after its NYSE IPO in April.

Then in May, Jumia’s stock tumbled when it came under assault from a short-seller, Andrew Left, who accused the company of fraud in its SEC filings.

In August, Jumia’s 2nd quarter earnings showed upside and downside: revenue growth still with big losses. Much of it may have been overshadowed by Jumia’s own admission of a fraud perpetrated by some employees and agents of its JForce sales program.

Jumia’s core investors appeared to show continued confidence in the company in October, when there wasn’t a big sell-off after the IPO lockup period expired.

It appears that what Jumia disclosed does not validate the claims in Citron Research’s May report. But the markets still seem wary of the company’s stock, which now stands at roughly half its opening IPO price.

Jumia will have a chance to clear up any lingering confusion and showcase its latest numbers on its third-quarter earnings call November 12.

PhutiMahanyele Dabengwa 52TechCrunch reported additional details to two big African tech market events that happened over the last year. First, Naspers Foundry’s new leader, Phuthi Mahanyele-Dabengwa, confirmed the 1.4 billion rand (≈$100 million) VC arm of South Africa’s Naspers is accepting pitches.

Announced in late 2018, Naspers Foundry will make equity investments in various amounts, primarily from Series A up to Series B in South African ventures. Founders from other parts of Africa with startup operations in South Africa can be considered for funding, Mahanyele-Dabengwa clarified.

CcHub and iHub CEO Bosun Tijani revealed more detail about the recent merger of both names. CcHub – iHub will pursue more operating revenue from consulting and VC investing, vs. grants, according to Tijani. The new Nigeria and Kenya based innovation network will also look to bring an Africa startup tour to the U.S. and is considering opening an office in San Francisco, he said.

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Supercross’s anticipated EV class not ready for primetime in 2020

Motorcycle racing series Supercross isn’t quite ready to add an EV class.

The sport — where riders race high-performance machines on jump-filled stadium tracks — currently fields only gas-powered two-wheelers.

Supercross was poised to launch an all-electric class this month, by converting its junior program to a new e-moto manufactured by KTM — Supercross Director of Operations Dave Prater told TechCrunch in April.

“We haven’t one-hundred-percented it yet, but it’s fairly close and we’re…going to race that electric KTM in October,” he said.

That won’t likely happen for the upcoming 2020 season, but input from Supercross and KTM indicates the launch of a junior EV class could be imminent.

On why it didn’t kick-off in October, “That would be a KTM question,” Prater told TechCrunch on a call this week.

“As a company, we’re embracing EV racing. At the moment, we’re beholden to the OEM’s and how quickly they want to introduce it into the mix,” he added.

The first-mover OEM could still be KTM and the first electric class the juniors.

“The KTM Junior racing in Supercross is an incredible experience for a small group of kids and their parents. At some point we might start using the SX-E5,” KTM’s Group Marketing Manager for North America Tom Moen told TechCrunch in an email.

“We can’t have them racing something that is not readily available,” he added.

KTM SX E 5 2020KTM’s SX-E5 launched in the U.S. this month, but won’t be available in dealerships until late November, according to Moen.

So for now, there appears to be a timing gap between Supercross and KTM.

Another area to watch for the introduction of e-moto competition — according to Moen — is outdoor dirt series Motocross, the rules of which (like Supercross) are governed by the American Motorcyclist Association (AMA).

“The AMA…is working on classes for the AMA Loretta Lynn’s championships for 2020, which is the national amateur MX series, the finals happen late summer, this is much more important racing wise,” Moen said.

TechCrunch has an inquiry into AMA for confirmation and will update accordingly.

One hurdle to entering electric motorcycles in AMA gas racing is how to classify battery powered two-wheelers compared to internal combustion engines that the AMA classes based on displacement, AMA off-road racing manager Erek Kudla explained to TechCrunch in April.

The other potentially larger hurdle (as Supercross’s Dave Prater alluded to) is the lack of an OEM-produced competition e-moto capable of racing at or near the specs of the high-performance gas machines that run in Supercross and Motocross.

California based EV startup Alta Motors had come the closest toward creating an e-moto toward that endeavor, but went bankrupt before getting there.

In addition to its junior SX-E5, KTM debuted its Freeride E-XC adult off-road e-motorcycle in the U.S. in 2018, but KTM didn’t indicate if this was the bike it was planning to reconfigure for motocross.

For the moment, it looks like seven to eight-year-olds racing KTM’s SX-E5 in Supercross could be the nearest bet for EV motorcycle competition.

And Supercross creating an all EV junior class has a spot of relevance in the overall transformation of global mobility — namely the conversion of the motorcycle industry to electric.

Factors such as declining sales among young people and competitive pressure from EV startups are pushing the big names toward E offerings. Harley-Davidson launched its first e-moto, the $29K  LiveWire, this year as part of a full EV pivot.

Zero Motorcycles is challenging HD with its new $19K SR/F.  And rumors have floated on Ducati developing an e-moto, after the Italian company debuted two e-bicycles.

Harley and e-moto companies such as Zero have spoken of the importance of early adopters to embrace e-motorcycles. Harley made moves this year to reach the earliest of early adopters when it acquired kids e-bicycle company StaCyc.

Launching one of motorcycle racing’s first all-electric classes with juniors and pairing it to Supercross’s stadium venues could become more than an EV gateway for OEM KTM.

It could actually start young riders on e-motos before they’ve ever ridden gas and keep them running on voltage into teen and adult years.

For the motorcycle industry at large, that means creating a future EV market versus trying convert one with preferences set in fossil-fuel the past.

 

Bosun Tijani talks strategy as CEO of Africa’s new largest tech hub

With CcHub‘s acquisition of iHub in September, Nigerian Bosun Tijani is at the helm of (arguably) the largest tech network in Africa.

He is now CEO of both organizations, including their robust membership rosters, startup incubation programs, global partnerships, and VC activities from Nigeria to Kenya .

One could conclude Tijani has become one of the most powerful figures in African tech with the CcHub iHub merger. But that would be a little shortsighted.

The techie from Lagos still faces plenty of challenges and unknowns in integrating two innovation hubs that lie 3,818 flight kilometers apart. Several sources speaking on background over the last year have indicated iHub was experiencing financial difficulties.

Tijani offered TechCrunch some initial details last month on how the acquisition will fall together.

But more recently he shared greater detail on his strategy for operating the multi-country innovation network. A big test for Tijani will be aligning the organizations on a path to sustainability. The buzzword is usually code for generating consistent operating income beyond expenses.

The growth of innovation spaces, accelerators and incubators in Africa — which tally 618 per GSMA stats — is often lauded as an achievement for the continent’s tech ecosystem.

But debate on how these focal points for startup formation, training and IT activity fund themselves is ever-present.

Grant income has served as a dominant revenue source for Africa’s tech hubs — including iHub in its early days — though many have worked to diversify.

TechHubsinAfricain2019 Briter Bridges

That includes CcHub, according to Tijani, who plans to continue the trend across the expanded CcHub, iHub organization.

“When people talk about sustainability, we’ve been in business for 9 years,” he notes of CcHub Nigeria.

“We de-emphasized grant funding six years ago; most of our revenue is actually earned revenue.”

On income sources Tijani looks to foster across both organizations, he named consulting services (for corporates, governments, and development agencies), events services, and generating greater return on investment.

iHub has been active with startup seed-investments and CcHub has a portfolio of companies through its Growth Capital Fund.

“Our size will become a major part of us being able to invest in startups and the longer we stay invested the more we will start to see significant returns and exits,” said Tijani.

CcHub CEO Bosun Tijani

The CcHub iHub nexus will also use its size to leverage more partnerships. Tijani and team have already mastered gaining collaborations with big African and global tech names, such as MainOne and Facebook.

Tijani will look to connect iHub to CcHub’s Google sponsored Pitch Drive — which has done African startup tours of Asia and Europe — and potentially take the show to the U.S.

“We’re talking about it,” Tijani said, of a U.S. pitch trip. And this could lead to a permanent presence in San Francisco for the new CcHub, iHub entity.

“Beyond just a tour, we want to build strong presence in the Bay Area,” Tijani said, but didn’t offer more specifics on what that could mean.

So on the list of things to emerge from the CcHub-iHub acquisition, African tech planting a big flag in San Francisco is a future possibility.

A more immediate result of the union between the innovation spaces will be Bosun Tijani becoming a regular sight on flights between Lagos and Nairobi.

 

 

 

 

 

 

 

 

Revisiting Jumia’s JForce scandal and Citron’s short-sell claims

In advance of Jumia’s November financial reporting, it’s worth revisiting the company’s second quarter results, the downside of which included some negative news beyond losses.

The Africa focused e-commerce company — with online verticals in 14 countries — did post second-quarter revenue growth of 58% (≈$43 million) and increased its customer base to 4.8 million from 3.2 million over the same period a year ago.

But Jumia also posted greater losses for the period, €67.8 million, compared to €42.3 million in 2018.

What appears to have struck the market more than revenues or losses was Jumia offering greater detail on the fraud perpetrated by some employees and agents of its JForce sales program.

This was another knock for the firm on its up and down ride since becoming the first tech company operating in Africa to list on the NYSE in April. The online retailer gained investor confidence out of the gate, more than doubling its $14.95 opening share price after the IPO.

That lasted until May, when Jumia’s stock came under attack from short-seller Andrew Left, whose firm Citron Research, issued a report accusing the company of fraud. That prompted several securities related lawsuits against Jumia.

At quick glance, Citron’s primary claim — that Jumia’s SEC filing contained discrepancies in sales figures — shares some resemblance to Jumia’s own disclosures.

The company’s share-price has suffered due to both — falling to less than 50% of its opening in April.

This has all funneled into an ongoing debate across Africa’s tech ecosystem on Jumia’s legitimacy as an African startup, given its (primarily) European senior management. Some of the most critical voices have gone so far as to support Left’s claims on Jumia’s fraud — and accept Jumia’s August admission as validation.

Sound messy and confusing? We’ll, yes, it is. But so go some IPOs.

Jumia’s info vs. Citron’s claims

Evaluating Jumia’s J-Force scandal vs. Citron’s short-sell claims is really Chartered Financial Analyst stuff. Citibank Research issued a brief rebutting Left’s claims in May and then another in August — though the firm has not made either public.

Judging by Jumia’s share-price fluctuation and chatter that continues in Africa’s tech ecosystem, there’s still confusion around both matters.

A simple exercise is to lay out the core of what Jumia has released vs. the crux of Citron Research’s claims.

On the J-Force/improper sales matter, here are excerpts of Jumia’s statement. Note that GMV is Gross Merchandise Value — the total amount of goods sold over the period: 

As disclosed in our prospectus dated April 11, 2019, we received information alleging that some of our independent sales consultants, members of our JForce program in Nigeria, may have engaged in improper sales practices. In response, we launched a review of sales practices covering all our countries of operation and data from January 1, 2017 to June 30, 2019.

Jumia did disclose this in its IPO prospectus on page 34

In the course of this review, we identified several JForce agents and sellers who collaborated with employees in order to benefit from differences between commissions charged to sellers and higher commissions paid to JForce agents. The transactions in question generated approximately 1% of our GMV in each of 2018 and the first quarter of 2019 and had virtually no impact on our 2018 or 2019 financial statements. We have terminated the employees and JForce agents involved, removed the sellers implicated and implemented measures designed to prevent similar instances in the future. The review of this matter is closed.

And finally, Jumia noted this:

More recently, we have also identified instances where improper orders were placed, including through the JForce program, and subsequently cancelled. Based on our findings to date, we believe that the transactions in question generated approximately 2% of our GMV in 2018, concentrated in the fourth quarter of 2018, approximately 4% in the first quarter of 2019 and approximately 0.1% in the second quarter of 2019. These 0.1% have already been adjusted for in the reported GMV figure for the second quarter of 2019. These transactions had no impact on our financial statements. We have suspended the employees involved pending the outcome of our review and are implementing measures designed to prevent similar instances in the future. We continue our review of this matter.

That’s the gist of Jumia’s disclosure: a small number of employees cooked some sales numbers and commissions, it was negligible to our financials, we flagged the investigation in our IPO prospectus, we took action, we ended it.

The Citron Research report Andrew Left issued to support his short-sell position made several critical claims regarding Jumia, but labeled “the smoking gun” as alleged material inconsistencies between an October 2018, Jumia investor presentation and Jumia’s April SEC Form F-1.

For the year 2017, there’s a difference of 600,000 active customers and 10,000 merchants in Jumia’s reporting between the fall 2018 investor presentation and the recent 2019 F-1, according to Citron Research. Citron also goes on to press concerns with GMV:

In order to raise more money from investors, Jumia inflated its active consumers and active merchants figures by 20-30% (FRAUD).

The most disturbing disclosure that Jumia removed from its F-1 filing was that 41% of orders were returned, not delivered, or cancelled.

This was previously disclosed in the Company’s October 2018 confidential investor presentation. This number is so alarming that is screams fraudulent activities. Instead, Jumia disclosed that “orders accounting for 14.4% of our GMV were either failed deliveries or returned by our consumers” in 2018.

TechCrunch connected with Jumia’s CEO Sacha Poignonnec and Citron Research’s Andrew Left since the August earnings reporting and disclosures.

On whether Jumia’s revelation of improper sales practices validated the fraud claims in Citron’s Brief, “It’s not the same,” Poignnonec,” told me on a call last month.

“For every one of those allegations,” he said referring to Left’s research, “there is a clear and simple answer for each of them and we have provided those,” said Poignnonec.

Where is Andrew Left on the matter? “I’m no longer short the stock” he told TechCrunch in a mail this week.

“But that does not mean the stock is a buy whatsoever,” he added — sticking to the fundamentals of his May brief.

What to make of it all?

It appears that what Jumia disclosed in its April prospectus (and added more detail to in August) does not provide one-to-one validation of the claims in Citron Research’s May report.

But then again, the entire matter — the data, the similar terminology, the multiple docs and disclosures — is still all a bit confusing.

That was evident in an exchange between Sacha Poignonnec and CNBC contributor John Fortt after Jumia’s 2nd quarter earnings call (see 1:19). Fort pressed Poignonnec on Left’s claims vs. Jumia’s admissions and still came away a bit puzzled.

The market, too, appears to be impacted by the fuzziness around Jumia’s disclosure of improper sales practices and Andrew Left’s claims.

Jumia’s share price plummeted 43% the week Left released his short-sell claims, from $49 to $26.

The company’s stock price has continued to decline since Jumia’s August earnings call (and sales-fraud disclosure) to $6.52 at close Monday.

That’s 50% below the company’s opening in April and 80% below its high before Citron’s Research brief and Andrew Left’s short-sell position.

Jumia Stock Snapshot To October 28 2019

Jumia’s core investors appeared to show continued confidence in the company this month, when there wasn’t a big selloff after the IPO lockup period expired.

Even so, Jumia’s 3rd quarter earning’s call on November 12 could be a bit make or break for the company with investors given all the volatility the e-commerce venture has faced since listing and its rapid loss in value.

As a public company now, the most direct way for Jumia to revive its share-price (and investor confidence) would be demonstrating it has reduced losses while maintaining or boosting revenues.

Of course, that’s the prescription for just about any recently IPO’d tech venture.

What Jumia may want to evaluate pre-earnings call is the extent to which its own sales-fraud disclosure and Andrew Left’s allegations are still being mashed together and impacting brand-equity in Africa and investor confidence abroad.

From there it could be wise to address both head on and explain — in a way that is as easy as possible for people to understand — how the two are not the same and don’t have a bearing on Jumia’s brand or business model.

Naspers Foundry is open for South African startup pitches, CEO says

Naspers’ 1.4 billion rand (≈$100 million) VC fund to support South African startups — Naspers Foundry — is accepting pitches, after making its first investment in online cleaning services company SweepSouth.

The funding initiative also has a new leader, Phuthi Mahanyele-Dabengwa, who joined Naspers in July as a CEO reporting to Group CEO of Naspers, Bob van Dijk.

“We’ll be investing in businesses here in South Africa that have an impact in South Africa. We look for these opportunities all around the country, to the extent that they have South African founders or have a marketplace in South Africa,” Mahanyele-Dabengwa told TechCrunch.

Founders from other parts of Africa with startup operations in South Africa can be considered for funding, she clarified.

Naspers Foundry will back companies that align with the internet business’s Naspers focuses on — such as food, payments, or classifieds — and any other digital venture that addresses a societal need.

On financing size, the Foundry will make equity investments in various amounts primarily from Series A up to Series B,  according to Mahanyele-Dabengwa.

Pre-series funding won’t be on the table, for now, but could be at some point. “We’ve been talking to our stakeholders…and there really is a need [in the region] for much more earlier stage [investment]. So we are giving thought to that,” she said.

Naspers Foundry is already engaged in outreach screening activity, but does have a rolling application call on its website open to any startup that meets specific criteria.

Heading up review of online investment applications is Minette Havemann, Naspers Foundry’s Strategy Director.

Naspers Minette Havemann

Minette Havemann

On her role in recruiting and determining startup investments, Mahanyele-Dabengwa points to her market experience.

She comes to head Naspers Foundry after several finance capital positions, including founding and running Sigma Capital Group, a Johannesburg based private equity fund.  Prior to that, Mahanyele-Dabengwa was CEO of Shanduka Group, an investment holding company formed by South Africa’s current president, Cyril Ramaposa.

She has experience in the U.S. and U.K., having obtained academic degrees in both countries.

There’s also some precedent in her new role, as Mahanyele-Dabengwa is the first female and first black chief executive in Naspers’ 104 year history.

For its VC allocation, Naspers Foundry will make investments over a three year period. The Foundry is part of a 1.4 billion rand (≈$314 million) overall commitment by Naspers to support South Africa’s tech sector.

As a firm, Naspers is on the top 100 largest global companies list — 85th by its $108 billion market cap, just after Nike—and is one the world’s largest tech investors.

Aside from operating notable internet, video, and entertainment platforms, Naspers has made significant investments in Europe, India, Asia, and South America.

Naspers was also an early investor in Chinese tech group Tencent, selling $10 billion in shares this year after a $32 million investment in 2001.

The company recently carved out a new holding company, called Prosus NV, to relist a portion of its assets on Amsterdam’s Euronext stock exchange.

Though Naspers Foundry will not back startups outside South Africa, Mahanyele-Dabengwa noted that its parent — Naspers — can finance ventures anywhere on the continent, if it sees the right opportunity.

The South African media group has invested less in (and been less successful) in Africa, in contrast to its robust global activities.

One of Naspers’ early Africa investments, Nigerian e-commerce startup Konga, was sold in a distressed acquisition in 2018.

The company recently added around $70 million to its commitment to South African e-commerce site Takealot and made one of the largest acquisitions in Africa this September, buying South Africa’s Webuycars for $94 million.

The $100 million fund Phuthi Mahanyele-Dabengwa leads could help South Africa surge in Africa’s increasingly competitive tech landscape.

The country was previously an unquestioned leader and outlier on the continent for its tech scene and VC investment. But over the last decade South Africa has been rivaled on venture capital and startup formation by Kenya and Nigeria.

In Africa’s tech ecosystem — that only recently surpassed $1 billion annually in VC funding — Naspers Foundry’s $100 million could shift the startup financing lead back toward South Africa.

 

 

Nigeria’s #StopRobbingUs campaign could spur tech advocacy group, CEOs say

Nigeria’s #StopRobbingUs campaign to curb police harassment of techies could grow into a formal lobbying group for the country’s tech sector, according to founders Bosun Tijani and Jason Njoku.

Tijani, the CEO of Lagos based innovation center CcHub and now Kenya’s iHub, helped spearhead the movement last month in response to detainment and extortion of tech workers by local authorities.

He joined Njoku — CEO of Nollywood VOD venture IROKO — and 29 other Nigerians to release a statement condemning police abuse of the country’s tech workers.

The language called for “an end to the common practice where Nigerian police stop young people with laptops and unlawfully arrest, attack or, in extreme circumstances, kidnap them, forcing them to withdraw funds from their bank accounts in order to regain their freedom.”

The campaign coined the #StopRobbingUs hashtag as a digital rallying point.

The statement went on to say the #StopRobbingUs movement would “consider a Class Action Lawsuit on police brutality.”

Energy for the campaign reached critical mass after Toni Astro, a Lagos-based software engineer, was reportedly beaten, arrested, detained and then extorted out of money by Nigeria’s Special Anti-Robbery Squad [SARS] the last week of September. He tweeted about the ordeal.

Stoprobbingus Nigeria

On the impetus for forming #StopRobbingUs, “We just got tired of [the harassment]. I personally got tired of it, which is why I spoke out and with other people decided to take action,” Tijani told TechCrunch on a call.

He described the shakedown of techies as the best and worst of Nigeria colliding, when it comes to shifting perceptions and stereotypes of the country.

“They’re taking one of the most positive things that’s happening on the continent, but also Nigeria in the last 10 years, and turning it into self-destruction,” Tijani said of the law enforcement maltreatment of tech sector workers.

“It’s a gross abuse of police stop and search…The people that are supposed to protect use are ultimately harassing us and robbing us,” iRoko CEO Jason Njoku said of the profiling and extortion of young Nigerians with laptops and smartphones.

He characterized the theft of laptops as taking away the means for techies to earn a living.

“A lot of people can work around not having a laptop, but if you’re a developer, how do you code without a laptop,” he said.

Njoku, Tijani and members of #StopRobbingUs have been talking to senior members of Nigerian President Muhammadu Buhari’s Enabling Business Environment task force and the Governor of Lagos State — the geographic district in Nigeria where much of the country’s tech activity takes place.

“We’re looking to set up some kind of fund, which does advocacy and…also lines up lawsuits…to force the issue in a more formal way,” said Njoku.

“It’s also an education thing. We’re reaching out to the powers that be, to engage and educate them to find some kind of solution to this.”

Both Njoku and Tijani see the #StopRobbingUs movement as a forerunner to an innovation industry advocacy group in Nigeria to speak to the broader needs of the country’s tech community.

The West African country is home to the continent’s largest economy and largest population of 200 million.

In addition to still being known for large-scale and petty corruption, Nigeria has made strides in improving infrastructure and governance and has one of Africa’s strongest tech scenes.

The country is now a focal point for VC, startup formation, and the entry of big global tech companies in Africa.

“I still see a bright future for fintech and internet companies in Nigeria. I think it makes sense for use to be much more vocal on the things that may or may not make sense to us. Technology, media, and entertainment right now is the hope for a lot of young people in this country,” Njoku said.

He added his company, IROKO, and startups he’s invested in account for roughly 1000 jobs.

“We’ll get to the point where tech will become one of the biggest drivers of employment in this country,” Njoku said.  “It makes sense for us to demand the respect and recognition from government to…do the right thing to give us that fertile ground to keep building these companies.”

CcHub’s Bosun Tijani is in accord with Njoku on the necessity of an tech industry advocacy group in Nigeria.

“We do need a voice at the table, a voice that can contribute to getting what we need from government…and the #StopRobbingUs campaign may be the trigger,” he said.