Africa’s agtech wave gets $10 million richer as Twiga Foods raises more capital

Kenya’s Twiga Foods has raised $10 million from investors led by the International Finance Corporation to add processed food and fast moving consumer goods to its product line-up.

The startup has built a B2B platform to improve the supply chain from farmers to markets. Twiga Foods now aims to scale additional merchandise on its digital network that coordinates pricing, payment, quality control, and logistics across sellers and vendors.

CEO and co-founder Grant Brooke sees “a growth horizon…to build a B2B Amazon,” with produce as the base.

“If we can build a business around fresh fruit and vegetables, everything else after that is much simpler to add on,” he told TechCrunch.

“Fresh food and vegetables gives you clients that are ordering every two days, and now that’s paying for access to vendors and a proper way to be on every street,” said Brooke.

“It’s now much easier to lay things over that that would have been very expensive to get to end retailers.” In addition to the processed food FMCG it will add now, CEO Grant Brooke named household goods, such as light-bulbs that stock and sell in lower volumes than produce, as something the startup could include in the future.     

The $10 million IFC led investment—co-led by TLcom Capital—comes in the form of convertible notes, available later as equity, according to Wale Ayeni, regional head of IFC’s Africa VC practice. As part of the deal, Ayeni will join Twiga Foods’ board.

Of the decision to fund the startup, Ayeni indicated IFC likes what the company’s already done in “figuring out a way to service a mass market with a digital platform focused on food in a sector that’s not really been touched,” he said. Another factor was Twiga’s prospects to create additional revenue by improving B2B supply chain for FMCG and other consumer products.

Co-founded in Nairobi in 2014 by Brooke and Kenyan Peter Njonjo, Twiga Foods serves around 2000 outlets a day with produce through a network of 13,000 farmers and 6000 vendors. Parties can coordinate goods exchanges via mobile app using M-Pesa mobile money for payment.

The company has reduced typical post-harvest losses in Kenya from 30 percent to 4 percent for produce brought to market on the Twiga network, according to Brooke.

“That’s savings we can offer the outlets and better pricing we can offer the farmers,” he said.

Twiga Foods generates revenues from margins on the products it buys and sells. As an example, the company could buy bananas at around 19 Schillings ($.19) a kilo and sell at 34 ($.34) Schillings a kilo.

“Our margin is how efficient we are at moving products between those two elements” and the company purchases from farmers at roughly 10 percent higher than Kenya’s traditional produce middle-men, according to Brooke.

Agtech has become a prominent startup sector in Africa. A number of companies, such as Ghana’s Agrocenta and Nigeria’s Farmcrowdy, have raised VC for apps that coordinate payments, logistics, and working capital across the continent’s farmers and food markets.

In 2017 Twiga Foods raised a $10.3 million Series A round lead by Wamda Capital. Earlier this year the startup partnered with IBM Africa to introduce a blockchain enabled finance working capital platform to its network of vendors.

With the new investment and product expansion, Twiga Foods will explore offering additional financial services to its client network. The startup doesn’t divulge revenue information but “profitability is on the horizon for us,” said Brooke.

Twiga Foods will maintain its focus primarily on Kenya, but “we’re starting to research and dabble in Tanzania,” according to Brooke.

The startup doesn’t plan to move beyond B2B to direct online retail. “I don’t think B2C e-commerce is viable on the continent once you factor in job size and cost of acquisition versus lifetime value,” said Brooke. He also named the high cost of marketing: “In B2C e-commerce space you really have to be in the advertising space. Our clients are ordering every two days with no marketing budget,” said Brooke.

So for the time being, Twiga Foods aims to stick with improving the supply chain for products between Kenya’s buyers and sellers.

Metacert’ Cryptonite can catch phishing links in your email

Metacert, founded by Paul Walsh, originally began as a way to watch chat rooms for fake Ethereum scams. Walsh, who was an early experimenter in cryptocurrencies, grew frustrated when he saw hackers dumping fake links into chat rooms, resulting in users regularly losing cash to scammers.

Now Walsh has expanded his software to email. A new product built for email will show little green or red shields next to links, confirming that a link is what it appears to be. A fake link would appear red while a real PayPal link, say, would appear green. The plugin works with Apple’s Mail app on the iPhone and is called Cryptonite.

“The system utilizes the MetaCert Protocol infrastructure/registry,” said Walsh. “It contains 10 billion classified URLs. This is at the core of all of MetaCert’s products and services. It’s a single API that’s used to protect over 1 million crypto people on Telegram via a security bot and it’s the same API that powers the integration that turned off phishing for the crypto world in 2017. Even when links are shortened? MetaCert unfurls them until it finds the real destination site, and then checks the Protocol to see if it’s verified, unknown or classified as phishing. It does all this in less that 300ms.”

Walsh is also working on a system to scan for Fake News in the wild using a similar technology to his anti-phishing solution. The company is raising currently and is working on a utility token.

Walsh sees his first customers as enterprise and expects IT shops to implement the software to show employees which links are allowed, i.e. company or partner links, and which ones are bad.

“It’s likely we will approach this top down and bottom up, which is unusual for enterprise security solutions. But ours is an enterprise service that anyone can install on their phone in less than a minute,” he said. “SMEs isn’t typically a target market for email security companies but we believe we can address this massive market with a solution that’s not scary to setup and expensive to support. More research is required though, to see if our hypothesis is right.”

“With MetaCert’s security, training is reduced to a single sentence ‘if it doesn’t have a green shield, assume it’s not safe,” said Walsh.

Okay, one final Form D note

Some more comments from readers on the changing culture around startups filing their Form Ds with the SEC, and then a short update on SoftBank and a bunch more article reviews.

We are experimenting with new content forms at TechCrunch. This is a rough draft of something new – provide your feedback directly to the authors: Danny at [email protected] or Arman at [email protected] if you like or hate something here.

Lawyers are pretty uniform that disclosure is no longer ideal

If you haven’t been following our obsession with Form Ds, be sure to read up on our original piece and follow up. The gist is that startups are increasingly foregoing filing a Form D with the SEC that provides details of their venture rounds like investment size and main investors in order to stay stealth longer. That has implications for journalists and the public, since we rely on these filings in many cases to know who is funding what in the Valley.

Morrison Foerster put together a good presentation two years ago that provides an overview of the different routes that startups can take in disclosing their rounds properly.

Traditionally, the vast majority of startups used Rule 506 for their securities, which mandates that a Form D be filed within 15 days of the first money of the round closing. These days though, more and more startups are opting to use Section 4(a)(2), which doesn’t require a Form D, but also doesn’t provide a “blue sky” exception to start securities laws, which means that startups have to file in relevant state jurisdictions and no longer have preemption from the SEC.

David Willbrand, who chairs the Early Stage & Emerging Company Practice at Thompson Hine LLP, read our original articles on Form Ds and explained by email that the practices around securities disclosures have indeed been changing at his firm and others:

We started pushing 4(a)(2) very hard when our clients kept getting “outed” thru the Form D and upset about it. In my experience, for 99% is the desire to remain in stealth mode, period.


When I started in 1996, Form Ds were paper, there was no internet, and no one looked. Now they are electronic and the media and blogs scrape daily and publish the information. It actually really is true disclosure! And it’s kind of ironic, right, which goes to your point – now that it’s working, these issuers don’t want it.


What I find is that the proverbial Series A is the brass ring, and issuers wants to call everything seed rounds (saving the title) until something chunky shows up, and stay below the radar too. So they pop out of the cake publicly for the first time with a big “Series A” that they build press around – and their first Form D.

Another piece of feedback we received was from Augie Rakow, the co-founder and managing partner of Atrium, which bills itself as a “better law firm for startups” that TechCrunch has covered a few times before. He wrote to us that in addition to the media concerns, startups also have to be aware of the broad cross-section of interested parties to Form Ds that hasn’t existed in the past:

Today, there is a bigger audience in terms of who cares about venture backed companies. Whether this spun off from the launch of the Facebook movie or the fact that over two billion people across the global have the internet at their fingertips via smartphones, people are connected and curious. The audience is not only larger but also encompasses more national and international interests. This means there are simply more eyes on trends, announcements, and intel on privately held companies whether they are media, investors, or your competitors. Companies that have a good reason to stay stealth may want to avoid attracting this attention by not making a public Form D filing.

For startups, the obvious advice is to just consult your attorney and consider the tradeoffs of having a very clean safe harbor versus more work around regulatory filings to stay stealthy.

But the real message here is for journalists. Form Ds are no longer common among seed-stage startups, and indeed, startup founders and venture investors have a lot of latitude in choosing how and when they file. You can no longer just watch the SEC’s EDGAR search platform and break stories anymore. Building up a human sourcing capability is the only way to get into those early investment rounds today.

Finally — and this is something that is hard to prove one way or the other — the lack of disclosure may also mean that the fears around seed financing dropping off a cliff may be at least a little bit unfounded. Eliot Brown at the Wall Street Journal reported just yesterday that the number of seed financings is down 40% according to PitchBook data. How much of that drop is because of changing macroeconomic conditions, versus changes in filing disclosures?

Quick follow up on SoftBank

Tokyo Stock Exchange. Photo by electravk via Getty Images

Last week, I also got obsessed with SoftBank. The company confirmed today that it intends to move forward with the IPO of its Japanese mobile telecom unit, according to WSJ and many other sources. The company is targeting more than $20 billion in proceeds, and its overallotment could drive that above $25 billion, or roughly the level of Alibaba’s record IPO haul.

One interesting note from Taiga Uranaka at Reuters on the public issue is that everyday investors will likely play an outsized role in the IPO process:

Yet SoftBank’s brand name is still likely to draw retail investors long accustomed to using SoftBank’s phone and internet services. Many still see CEO Son as a tech visionary who challenged entrenched rivals NTT DoCoMo Inc ( 9437.T ) and KDDI, and brought Apple Inc’s ( AAPL.O ) iPhone to Japan.

Japanese households are commonly seen as an attractive target in IPOs with their 1,829 trillion yen in financial assets, even if they are traditionally risk-averse with over 50 percent of assets in cash and deposits.

More than 80 percent of the shares will be offered to domestic retail investors, a person with knowledge of the matter told Reuters.

Pavel Alpeyev at Bloomberg noted that “SoftBank is looking to tempt investors with a dividend payout ratio of about 85 percent of net income, according to the filing. Based on net income in the last fiscal year, that would work out to an almost 5 percent yield at the indicated IPO price.” A higher dividend ratio is particularly attractive to retired individual investors.

Despite SoftBank’s horrifying levels of debt, Japanese consumers may well save the company from itself and allow it to effectively jump start its balance sheet yet again. Complemented with a potential Vision Fund II, Masayoshi Son’s vision for a completely transformed SoftBank seems waiting for him in the cards.

Notes on Articles

Tech C.E.O.s Are in Love With Their Principal Doomsayer – Nellie Bowles writes a feature on Yuval Noah Harari, the noted philosopher and popular author of Sapiens. Bowles investigates the paradoxical popularity of Harari, who sees technology as creating a permanent “useless class” and criticizes Silicon Valley with his now enduring popularity in the region. Interesting personal details on the somewhat reclusive Israeli, but ultimately the question of the paradox remains sadly mostly unanswered. (2,800 words)

Why Doctors Hate Their Computers – Atul Gawande discusses learning and using Epic, the dominant electronic medical records software platform, and discovers the challenges of building static software for the complex adaptive system that is health care. His observations of the challenges of software engineering will be well-known to anyone who has read Fred Brooks, but the piece does an excellent job of exploring the balancing act between the needs of technocratic systems and the human design needed to make messy and complicated professions work. Worth a read. (8,900 words)

Picking flowers, making honey: The Chinese military’s collaboration with foreign universities – An excellent study by Alex Joske at the Australia Strategic Policy Institute on the hundreds of military scientists from China who use foreign academic exchanges as a means of information acquisition for critical scientific and engineering knowledge, including in the United States. China’s government under Xi Jinping has made indigenous technology development a chief domestic priority, and the U.S. innovation economy is encouraged to increasingly guard its intellectual property. (6,500 words)

The Digital Deciders – New America report by Robert Morgus who investigates the fracturing of the internet, which I have written about at some length. Morgus finds that a small group of countries (the “digital deciders”) will determine whether the internet continues to be open or whether nationalist interests will close it off. Let’s all hope that Iraq believes in freedom of expression and not Chinese-style surveillance. Worth a skim. (45 page report, but with prodigious tables)

Reading Docket

Clearbanc raises $70M to fund startups with ad money for a rev share

Selling equity to buy Facebook and Google ads is a bad deal for startups. Clearbanc offers a fundraising alternative. For fast-growing businesses reliably earning sales from their marketing spend, Clearbanc offers funding from $5,000 to $10 million in exchange for a steady revenue share of their earnings until it’s paid back plus a 6 percent fee. Clearbanc picks what merchants qualify by developing tech that scans their Stripe, Facebook ads, and other accounts to assess financial health and momentum. It’s already doled out $100 million this year.

“As a business successfully scales, we continue to provide them ongoing capital” co-founder and CEO Andrew D’Souza tells me. “Our goal is the be the first and last backer of a successful business and save the entrepreneur from having to take hundreds of pitch meetings to keep their company funded.”

After largely flying under the radar since being found in 2015, now Clearbanc has some big funding news of its own. It’s now raised $70 million from a seed and new Series A round from Emergence Capital, Social Capital, CoVenture, Founders Fund, 8VC, and more with Emergence’s Santi Subotovsky joining the board.

“Venture capital has shifted. Instead of funding true research and development, today 40% of venture capital goes directly to buying Google and Facebook ads” D’Souza claims. “Equity is the most expensive way to fund digital ad spend and repeatable growth. So we created something new.”

Clearbanc emerged from an angel investing alliance between two serial entrepreneurs. D’Souza had built Andreessen Horowitz-funded social recruiting site Top Prospect, USV-backed education tech company Top Hat, and Mastercard portfolio biometric authentication wearable startup Nymi. He’d helped raise over $300 million in venture after a stint at McKinsey when he begun co-investing with Michele Romanow, a VC from Canada’s version of the TV show Shark Tank called Dragons’ Den. She’d bootstrapped shopping hub Buytopia that acquired 10 other ecommerce companies, and discount-finder SnapSaves that she sold to Groupon in 2014.

“We started investing together in some of the deals we would see from Dragons’ Den and often found that an equity investment wasn’t the right structure for these consumer product companies. They had great economics and had found a niche of customers, but often didn’t want to exit the business at any point” D’Souza recalls. “They needed money to acquire more customers, scale up their marketing efforts and online ad spend. So we started to do these revenue share deals.”

Both engineers, they built tech to automate the due diligence and find companies with healthy unit economics and customer acquisition costs. The partnership blossomed into Clearbanc, and romance. “We’re also a couple, so we spend a lot of time together” D’Souza writes.

Clearbanc’s team

Now Clearbanc has poured over $100 million into 500 companie in 2018 like Vinebox. The subscription wine box company used Clearbanc to grow its membership numbers while raising a Series A for developing new products. Clearbanc’s companies pay out 5 percent in revenue share until the investment plus 6 percent is paid back. That’s a great deal for companies that are already proven money makers like Hunt A Killer, a murder mystery game subscription box that had raised $10,000 and was selling swiftly. Derisked, it didn’t need venture, and has now taken $8 million to ramp its business.

Clearbanc co-founders Andrew D’Souza and Michele Romanow

Clearbanc is rising up at a time when organic growth channels are shutting down. The ruthless optimization of algorithmic feeds on Facebook, Instagram, and Twitter suppress marketing content unless businesses are willing to pay. Without free virality opportunities, companies must take venture funding or loans just to turn around and pay that money to big ad platforms. With the new cash that also comes from iNovia Capital, Real Ventures, Portag3, Precursor, WTI, Berggruen, and FJ Labs, Clearbanc plans to expand abroad after doing deals in the US and Canada. It’s also going to invest in building awareness as well as its data science capabilities.

D’Souza and Romanow must have confidence in their tech, as a wrong investment means they might never get their cash back. “We pay a lot of attention to our underwriting and decision-making process because if we make a mistake, we can lose a lot of money. Unlike a VC, we don’t expect the majority of our companies to fail and have the winners make up for the losses” says D’Souza. One big misstep could wipe out the gains from a bunch of other investments.

Meanwhile, it has to break the norms of how businesses find funding. Startups immediately seek traditional venture or debt financing that can depend on the flashy names already on their captable, while merchants turn to exploitative online lenders that require a personal guarantee and base their decisions on the founders’ own credit histor instead of the business.

While riskier hard tech startups that will take years to get to market will still need to rely on venture, a new crop of direct-to-consumer products and other fast-monetizing startups that are already humming can avoid diluting their team and investors by using Clearbanc. D’Souza concludes, “We’ve spent our entire careers as entrepreneurs and wanted to build a new asset class to help entrepreneurs grow.”

In venture capital, it’s still the age of the unicorn

This month marks the 5-year anniversary of Aileen Lee’s landmark article, “Welcome To The Unicorn Club”.

At the time, the piece defined a new breed of startup — the $1 billion privately held company. When Lee did her first count, there were 39 “unicorns”; an improbable, but not impossible number.. Today, the once-scarce unicorn has become a global herd with 376 companies on the roster and counting.

But the proliferation of unicorns begs raises certain questions. Is this new breed of unicorn artificially created? Could these magical companies see their valuations slip and fall out of the herd? Does this indicate an irrational exuberance where investors are engaging in wish fulfilment and creating magic where none actually existed?

List of “unicorn” companies worth more than $1 billion as of the third quarter of 2018

There’s a new “unicorn” born every four days

The first change has been to the geographic composition and private company requirement of the list. The original qualification for the unicorn study was “U.S.-based software companies started since 2003 and valued at over $1 billion by public or private market investors.” The unicorn definition has changed and here is the popular and wiki page definition we all use today: “A unicorn is a privately held startup company with a current valuation of US$1 billion or more.”

Beyond the expansion of the definition of terms to include a slew of companies from all over the globe, there’s been a concurrent expansion in the number of startup technology companies to achieve unicorn status. There is a tenfold increase in annual unicorn production.

Indeed, while the unicorn is still rare but not as rare as before. Five years ago, roughly ten unicorns were being created a year, but we are approaching one hundred new unicorns a year in 2018.

As of November 8, we have seen eighty one newly minted unicorns this year, which means we have one new unicorn every four days.

There are unicorn-sized rounds every day

These unicorns are also finding their horns thanks to the newly popularized phenomena of mega rounds which raise $100 million or more. These deals are ten times more common now, than they were only five years ago.   

Back in 2013, there were only about four mega rounds a month, but now there are forty mega rounds a month based on Crunchbase data. In fact, starting from 2015, public market IPO has for the first time no longer been the major funding source for unicorn size companies.

Unicorns have been raising money from both traditional venture capital but also more from the non-traditional venture capital such as SoftBank, sovereign wealth funds, private equity funds, and mutual funds.

Investors are chasing the value creation opportunity.   Most people probably did not realize that Amazon, Microsoft, Cisco, and Oracle all debuted on public markets for less than a $1 billion market cap (in fact only Microsoft topped $500 million), but today they together are worth more than $2 trillion dollars  

It means tremendous value was created after those companies came to the public market.  Today, investors are realizing the future giant’s value creation has been moved to the “pre-IPO” unicorn stage and investors don’t want to miss out.

To put things in perspective, investors globally deployed $13 billion in almost 20,000 seed & angel deals, and SoftBank was able to deploy the same $13 billion amount in just 2 deals (Uber and WeWork).  The SoftBank type of non-traditional venture world literally redefined “pre-IPO” and created a new category for venture capital investment.

Unicorns are staying private longer

That means the current herd of unicorns are choosing to stay private longer. Thanks to the expansion of shareholders private companies can rack up under the JOBS Act of 2012; the massive amount of funding available in the private market; and the desire of founders to work with investors who understand their reluctance to be beholden to public markets.

Elon Musk was thinking about taking Tesla private because he was concerned about optimizing for quarterly earning reports and having to deal with the overhead, distractions, and shorts in the public market.  Even though it did not happen in the end, it reflects the mentality of many entrepreneurs of the unicorn club. That said, most unicorn CEOs know the public market is still the destiny, as the pressure from investors to go IPO will kick in sooner or later, and investors expect more governance and financial transparency in the longer run.

Unicorns are breeding outside of the U.S. too

Finally, the current herd of unicorns now have a strong global presence, with Chinese companies leading the charge along with US unicorns. A recent Crunchbase graph indicated about 40% of unicorns are from China,, 40% from US, and the rest from other parts of the world.

Back in 2013, the “unicorn” is primarily a concept for US companies only, and there were only 3 unicorn size startups in China (Xiaomi, DJI, Vancl) anyways.  Another change in the unicorn landscape is that, China contributed predominantly consumer-oriented unicorns, while the US unicorns have always maintained a good balance between enterprise-oriented and consumer-oriented companies.  One of the stunning indications that China has thriving consumer-oriented unicorns is that China leads US in mobile payment volume by hundredfold.

The fundamentals of entrepreneurship remain the same

Despite the dramatic change of the capital market, a lot of the insights in Lee’s 5-year old blog are still very relevant to early stage entrepreneurs today.

For example, in her study, most unicorns had co-founders rather than a single founder, and many of the co-founders had a history of working together in the past.

This type of pattern continues to hold true for unicorns in the U.S. and in China. For instance, the co-founders of Meituan (a $50 billion market cap company on its IPO day in September 2018) went to school together and had co-founded a company before

There have been other changes. In the past three months alone, four new US enterprise-oriented unicorns have emerged by selling directly to developers instead of to the traditional IT or business buyers; three China enterprise-oriented SaaS companies were able to raise mega rounds.  These numbers were unheard of five years ago and show some interesting hints for entrepreneurs curious about how to breed their own unicorn.

The new normal is reshaping venture capital 

Once in a while, we see eye-catching headlines like “bubble is larger than it was in 2000.”   The reality is companies funded by venture capital increased by more than 100,000 in the past five years too. So the unicorn is still as rare as one in one thousand in the venture backed community.

What’s changing behind the increasing number of unicorns is the new normal for both investors and entrepreneurs. Mega rounds are the new normal; staying private longer is the new normal; and the global composition of the unicorn club is the new normal. 

Just look at the evidence in the venture industry itself. Sequoia Capital, the bellwether of venture capital, raised a whopping $8 billion global growth mega fund earlier this year under pressure from SoftBank and its $100 billion mega-fund. And Greylock Partners, known for its focus and success in leading early stage investment, recently led a unicorn round for the first time in its 53-year history.  

It’s proof that just as venture capitalists have created a new breed of startups, the new startups and their demands are reshaping venture capital to continue to support the the companies they’ve created.

Charge card startup Brex aims for decacorn success

By now, Brex, the young startup that is trying to reinvent corporate credit and charge cards, is well-known in Silicon Valley. The tender age of the company’s co-founders, Henrique Dubugras and Pedro Franceschi, the big-name backers, the $125 million Series C announced last month, the aggressive billboard advertising in San Francisco, and the company’s torrid growth have all contributed to the swirl of attention. But, of course, it was the valuation at the last round —which placed Brex into the fintech unicorn club — that tops the list.

Recently, Brex offered up a new reason for chatter as it unveiled its new, generous rewards program that was purpose-built for the kind of entrepreneurs who aspire to match Brex’s success. But lost in the buzz are the specifics of how Dubugras and Franceschi have approached the arcane challenge of building a payments start-up.

To better understand that, chief executive Dubugras opened up about his and Fraceshi’s previous start-up,, which was acquired by newly public Brazilian credit card processor StoneCo, the challenges of scaling quickly, how a Brex card compares to traditional corporate card products and the company’s plan to navigate the ups and downs of business cycles. Finally, Dubugras spoken candidly but confidently about the considerable pressures facing the company now that everyone is watching.

Gregg Schoenberg: It’s good to connect again, Henrique. As you know, Brex has gotten a lot of press for having gone from from zero to fabulous in a short time. But for those who have missed the Brex story, what problems are you solving for start-ups?

Henrique Dubugras: One is a case where the founder can’t get a credit card because they don’t have a FICO score or can’t provide a personal guarantee. Another case is when a founder can get a card, but doesn’t want to provide a personal guarantee.

GS: Which is understandable.

HD: Yes, I think it’s not a very smart idea. Brex can solve that because we can issue them a card now without a personal guarantee. Finally, there’s the founder who doesn’t care about the personal guarantee, but there are other things related to the experience of having a credit card that could be much better, and we‘ve solved for that.

GS: The first two speak to a differentiated underwriting approach, but that third issue seems especially challenging.

HD: Yes. On the underwriting side, we take into consideration your cash balances, and the VCs that invested in you. It’s a Silicon Valley way of underwriting that allows you to go from zero to a working card in like five minutes. But in terms of the third use case, yes, we had all of these people telling us, “Hey, it’s impossible to rebuild credit card systems from scratch. No one has done it in the last 20 years.” Success

GS: That’s why I want to discuss, because I think it provides insight as to how you were able to disprove doubters.

HD: Well, we had built a payments company before, so we kind of knew how to do it and just decided to rebuild everything from scratch. You saw the Stone IPO, right?

GS: I did, and buried deep in the footnotes of the S-1, it points out how much it spent on the remaining amount of for in 2016. So while you and Pedro built something that was a success, it wasn’t like you were able to buy an island with your proceeds.

HD: There’s another part that wasn’t part of the IPO, but no, we still can’t buy an island.

GS: And this narrative that you and Pedro were able to come here from Brazil and in short order wave in all of this amazing funding because you had a huge exit is not accurate. Instead, I see two guys who navigated a very bureaucratic financial system—

HD: Yes.

We had this experience that was pretty unique compared to US payment companies or ones from any other place.

GS: —and figured out a way to build something that was successful.

HD: Correct, but keep in mind that we built more than a product. We built an organization. It had over 100 people, was profitable, had substantial market share, and it got acquired.

GS: To me, a big aspect is that you did it in a Brazilian fintech bootcamp of sorts, because building a payments company there, that achieved scale, when you did it, was hard.

HD: It was really hard. And volume-wise, is a big part of Stone today.

GS: You also had to deal with the regulators quite a bit?

HD: Yes. The Central Bank decided to start regulating financial businesses around the time we started

GS: provided the short-term financing to all of those merchants doing business online, right?

HD: Correct. We had to raise debt in Brazil in order to factor the receivables to merchants, because prepayments are a big part of the market. We also rented an acquiring license instead of having one ourselves. So, yes, we had this experience that was pretty unique compared to US payment companies or ones from any other place.

GS: I think it would’ve been very hard for someone in the US payments ecosystem to have been confronted with that kind of diverse challenge and come out on top. It seems like a big part of how you hooked those early investors, people like Max [Levchin] saying, “I want to invest in you no matter what you build. I really like your talent.”

HD: Correct. And because Max understood payments so well, he could tell that we knew what we were doing in our area. The same is true for Ribbit Capital, which knew about

GS Seeing Max invest in a payments company is different than Max investing in a bunny rabbit start-up. In a space like payments, I think it matters a lot that he was behind you early.

HD: True.

GS: So returning to Brex, I’m interested in the rewards program you just announced, which is paradigm-shifting. Your rewards are designed to be used on an ongoing basis as opposed to being accumulated, right?

HD: Exactly. We want you to use all of the rewards, so that every single day you can have the best experience. Also, credit cards have these footnotes saying, “Hey, you can get up to these caps, restrictions and limits,” etc.

GS: Trying to prevent people from optimizing.

HD: Yes. We take a very different approach, where we’re like, “Hey, we’re not going to limit and punish good users and people who want to just use one credit card by adding all these limits and restrictions.”

GS: What’s the Brex Exclusive concept?

HD: The concept is that if Brex is your only card, you get all these benefits. But if it’s not your only card, you can still use Brex, but then you just get reduced benefits.

GS: Couldn’t you argue that right now, Amex, or Chase, or Capital One doesn’t care about your rewards offering? It’s akin to the early days of the roboadvisor space. But as you get bigger, wider in scope and peskier, what’s to stop Chase from introducing the unicorn card with a bounty of rewards?

HD: One is the effect on their legacy technology. You can say, “Why don’t they just change their technology,” right? Well, they have all these regulatory bodies that would say “No, you can’t change your entire technology system, because if you mess up, the whole US financial system might be impacted.”

GS: Can you give a specific example of how this would play out?

HD: Take the credit limit side. All these companies are built to have these static credit limits in which they set their credit limit today and they don’t look at it for two months, three months, six months, etc…

We don’t want to be the stupid company that raises a bunch of money and then starts doing all these stupid things.

GS: Right. But are you comparing a charge card versus a charge card, or a charge card versus a credit card?

HD: Brex is a charge card, but it doesn’t really matter for this concept, because my point is the technology of changing the limit every single day based on real-time data versus the system they have. Implementing a real-time system would be a fundamental shift for them.

GS: What about this idea that you have credit limits that are ten times the amount versus a traditional card? It’s cool, but you guys have access to lots of analytics and data, so you’re not really taking a huge amount of risk.

HD: That’s correct, which is why we have zero losses today.

GS: Today?

HD: To date.

GS: Impressive. Let’s talk about Sutton Bank, which is your issuer bank that you needed to access the Visa Network. What would you do if you got approached by another issuer bank that said, “I love what you’re doing, can we be an issuer bank too?”

HD: It would be something we would consider, but it’s not something we’re focused on right now. We use their license to issue, but we basically do everything. We do the underwriting. We do the technology and everything.
Growth Plans

GS: You’ve been public about wanting to grow out of the start-up world. Where’s next?

HD: We do want to go to a more traditional businesses, a little bit more mature and outside of technology. That’s something that we’re going to probably do sometime next year, but we have to adapt our underwriting model and our product.

GS: Rewards too, right? I can’t see a lot of traditional businesses caring as much about AWS credits.

HD: There’s nothing besides cash back that matters to these companies. We’re going to adapt because that’s what they care more about.

GS: What do you think of this whole blitzscaling ethos?

HD: I’m reading the book right now, actually, but I haven’t reached a conclusion yet. All the examples in the book seem like two-side marketplaces with a lot of network effects and a winner-take-all. That’s not us.

GS: Regardless of model, to say that you’re going to let some fires burn and ignore them… I don’t know if that flies in fintech or in financial services in 2018.

HD: Yes, fintech has this other aspect of it because it’s people’s money. You can’t let buyers burn. But I think there are other aspects to it. Are we going to reach a plan for success or hedge for failure? Are we going to hire faster or hire slower?

GS: Everybody who has raised a big round like you is in hiring mode. Have you encountered recruitment challenges given your youth?

HD: Not in the US. In Brazil, we’ve felt it. There’s so many examples of successful companies founded by very young people. I mean, maybe we’re one year younger than the other guy who did something really good.

GS: What about the idea of building a common culture, because the ink on your business cards is still sort of wet and you’re hiring all these people so quickly?

HD: The question of what kind of culture we want to build is something we think about a lot. Some companies are on the Google or Airbnb side, like, “Hey, we’re a family.” Some are more like Netflix or Apple, which is more like a professional sports team. We’re definitely more towards Netflix or Apple than we are towards Google or Airbnb.

Building a 10- to 20-billion-dollar business is hard. It’s really, really hard.

GS: What do you mean by more professional?

HD: More work-driven, and we’re not into the whole perks thing. Plus, we really like to pay people higher salaries and give them smaller stock grants, because a lot of people in Silicon Valley don’t believe in stock. We’ve said, “Yes, we’ll give you more cash,” and then we save the stock, not for the people who negotiate the best, but for the people who are performing the best over time.

GS: What’s your thinking?

HD: There’s this super premium given to risk, right? It’s for the people who joined when we were nothing and nobody believed in us. That premium is too big, I think, compared to people who will work in this company for a long period of time. I think a lot more of the premiums should be for someone who has spent six, seven, eight years busting their ass and growing this company.

GS: Let’s touch on where you going to put these people: Brazil or “Transaction Alley” in Atlanta?

HD: We’re thinking about it. I think Vancouver is the main candidate for now.

GS: Why there?

HD: You can get visas really quickly.

GS: Given your need for speed, are you worried about controlling your spending while you look to grow quickly?

HD: Honestly, we have the opposite problem. Keep in mind that was built with $300,000. It was the only money we raised for that company.

GS: Really?

HD: Yes. For us, not spending money is the default. But now we have a lot of money, and we need to invest it to grow faster, so we are constantly actively thinking of ways of spending more.

GS: It sounds like you’re struggling with this.

HD: It’s just hard because we don’t want to be the stupid company that raises a bunch of money and then starts doing all these stupid things. But we also need to invest to grow faster, so finding that balance—

GS: —Acquiring customers can be expensive.

HD: Yes, but for us, that’s not even the thing because our market is so niche, I can’t just put a couple hundred grand on Google. It just doesn’t work because we’re so niche.

GS: Right.

HS: But we definitely have an issue of how to deploy capital more than we have and how not to do it.

GS: Well, I suppose you could just advertise on more billboards.

HS: Actually, that’s cheap! There was an article about this. We spent $300,000 for three months for all of San Francisco.

GS: I’d like to close by talking about what it means to be one the hottest young start-ups in the Bay Area. And the fact that at some point, a recession is coming. To the first issue, are you concerned that given your rapid ascent, you can’t make mistakes quietly because everyone is watching you?

HD: Yes. I definitely feel that pressure. But I feel more confident because we’re doing this for a second time, in a market that we know. And I really like our executive team. Plus, there’s a lot of stuff we’ve already figured out with in terms of management and culture and what the scale problems will look like.

I think that anyone who says they know how to deal with a recession, it’s not true.

GS: Still, it’s a lot of pressure given your valuation and the expectations that come with it.

HD: Yes. I’m definitely scared because it’s a lot of responsibility, and I won’t consider Brex a success unless I give my investors a ten- to twenty-X return. Building a 10- to 20-billion-dollar business is hard. It’s really, really hard.
Business Cycle

GS: You have to become the next Stripe… Let’s conclude by talking business cycles. When I talk to many CEOs, they will feed me a line like, “Actually, we’re going to be great in a recession — even better under a recession,” right? While true in some cases, it’s mostly false.

HD: Yes.

GS: So what happens when the business cycle changes, there isn’t as much VC activity, and you still have to figure out how to grow?

HD: I think that anyone who says they know how to deal with a recession, it’s not true. Because every single recession is very different than the other. 2008 was completely different than 2001. There’s no one person who knows how to deal with all of them because they’re all very different.

GS: I agree.

HD: The only thing we can do is the big-picture playing, by one, raising more money than you need — which we did — and two, having levers of spending that you can cut very quickly.

GS: Perhaps this is where your Brazilian lineage helps, because you grew up in a country that had a lot of volatility.

HD: 100 percent.

GS: With prices changing on the store shelves from the morning to the evening.

HD: Well, we weren’t born in that time, but we heard our parents talk about it.

GS: Oh that’s right. I forgot.

HD: The thing we learned most from that is that nothing’s done until it’s done. Coming from Brazil, this fact-oriented culture was ingrained in us. We didn’t even celebrate closing the round here before the wires hit.

GS: Last question: If you ultimately face a worthy competitor focused squarely in your space, will it be from another Henrique and Pedro, or will it be from a big player?

HD: It would be a fintech company that adds this product. I don’t think it’ll be Amex or Chase. I think it will be a PayPal or a Square or an Adyen or a CyberSource. They are not the legacy guys, so they don’t have the problems that banks have.

GS: Gotcha.

HD: But I don’t think it’ll be another Henrique and Pedro, honestly. So…

GS: Well, I wish you luck on that.

This interview has been edited for content, length and clarity.

Mexican venture firm ALL VP has a $73 million first close on its latest fund

Buoyed by international attention from U.S. and Chinese investors and technology companies, new financing keeps flowing into the coffers of Latin American venture capital firms.

One day after the Brazilian-based pan-Latin American announced the close of its $150 million latest fund comes word from our sources that ALL VP, the Mexico City-based, early stage technology investor, has held a first close of $73 million for its latest investment vehicle.

The firm launched its first $6 million investment vehicle in 2012, according to CrunchBase, just as Mexico’s former President Enrique Peña Nieto was coming to power with a pro-business platform. One which emphasized technology development as part of its strategy for encouraging economic growth.

ALL VP founding partner Fernando Lelo de Larrea said he could not speak about ongoing fundraising plans.

And while the broader economy has stumbled somewhat since Nieto took office, high technology businesses in Mexico are surging. In the first half of 2018, 82 Mexican startup companies raised $154 million in funding, according to data from the Latin American Venture Capital Association. It makes the nation the second most active market by number of deals — with a number of those deals occurring in later stage transactions.

In this, Mexico is something of a mirror for technology businesses across Latin America. While Brazilian startup companies have captured 73% of venture investment into Latin America — raising nearly $1.4 billion in financing — Peru, Chile, Colombia and Argentina are all showing significant growth. Indeed, some $188 million was invested into 23 startups in Colombia in the first half of the year. 

Overall, the region pulled in $780 million in financing in the first six months of 2018, besting the total amount of capital raised in all of 2016.

It’s against this backdrop of surging startup growth that funds like ALL VP are raising new cash.

Indeed, at $73 million the first close for the firm’s latest fund more than doubles the size of ALL VP’s capital under management.

ALL VP management team

But limited partners can also point to a burgeoning track record of success for the Mexican firm. ALL VP was one of the early investors in Cornershop — a delivery company acquired by Walmart for $225 million earlier this year. Cornershop had previously raised just $31.5 million and the bulk of that was a $21 million round from the Silicon Valley-based venture capital firm, Accel.

International acquirers are making serious moves in the Latin American market, with Walmart only one example of the types of companies that are shopping for technology startups in the region. The starting gun for Latin American startups stellar year was actually the DiDi acquisition of the ride-hailing company 99 for $1 billion back in January.

That, in turn, is drawing the attention of early stage investors. In fact, it’s venture capital firms from the U.S. and international investors like Naspers (from South Africa) and Chinese technology giants that are fueling the sky-high valuations of some of the region’s most successful startups.

Loggi, a logistics company raised $100 million from SoftBank in October, while the delivery service, Rappi, raked in $200 million in August, in a round led by Andreessen Horowitz and Sequoia Capital.

In a market so frothy, it’s no wonder that investment firms are bulking up and raising increasingly large funds. The risk is that the market could overheat and that, with a lot of capital going to a few marquee names, should those companies fail to deliver, the rising tide of capital that’s come in to the region could just as easily come back out.


Monashees raises $150 million for its eighth Brazilian fund

As technology investment and exits continue to rise across Brazil, early stage venture capital firm monashees today announced that it has closed on $150 million for its eighth investment fund.

Commitments came from Temasek, the sovereign wealth fund affiliated with the Singaporean government, China’s financial technology company, CreditEase; Instagram co-founder Mike Krieger, the University of Minnesota endowment; and fund-of-funds investor Horsley Bridge Partners.

S-Cubed Capital, the family office of former Sequoia Capital partner, Mark Stevens, and fifteen high net worth Brazilian families and investment groups also invested in the firm’s latest fund.

As one of the largest venture capital firms in Latin America with over $430 million in capital under management, monashees has been involved in some of the most successful investments to come from the region. Altogether, monashees portfolio companies have gone on to raise roughly $2 billion from global investors after raising money from the Sao Paulo-based venture capital firm.

“We are excited to further advance our partnership with the monashees team,” said Du Chai, Managing Director at Horsley Bridge Partners . “Over the course of our partnership, we have continued to be impressed by monashees’ strong team, platform and their ability to attract the region’s leading entrepreneurs.”

In the past year, investment in Latin American startup companies has exploded.  The ride-hailing service 99 was acquired for $1 billion and Rappi, a delivery service, managed to raise $200 million at a $1 billion valuation. Another delivery service, Loggi, caught the attention of SoftBank, which invested $100 million into the Brazilian company.

Public markets are also rewarding Latin American startups with continued investment and high valuations. Stone Pagamentos, a provider of payment hardware technology, raised $1.1 billion in its public offering on the Nasdaq with an initial market capitalization of $6.6 billion.

“monashees brings a truly unique set of skills to the table, with a disciplined investment strategy, as well as the unmatched local expertise and knowledge that leads the team to identify and invest in the region’s best founders,” said Stuart Mason, Chief Investment Officer at the University of Minnesota . “The recent billion-dollar acquisition of 99 by DiDi is not only a milestone for the local ecosystem, but validation of this sentiment and suggests that there’s no liquidity hurdle for great companies in Latin America. We are excited to partner with monashees as it continues to find and nurture the best opportunities going forward.”


Africa Roundup: Local VC funds surge, Naspers ramps up and fintech diversifies

Africa’s VC landscape is becoming more African with an increasing number of investment funds headquartered on the continent and run by locals, according to Crunchbase data summarized in this TechCrunch feature.

Drawing on its database and primary source research, Crunchbase identified 51 “viable” Africa-focused VC funds globally—defining viable as formally established entities with 7-10 investments or more in African startups, from seed to series stage.

Of the 51 funds investing in African startups, 22 (or 43 percent) were headquartered in Africa and managed by Africans.

Of the 22 African managed and located funds, 9 (or 41 percent) were formed since 2016 and 9 are Nigerian.

Four of the 9 Nigeria located funds were formed within the last year: Microtraction, Neon Ventures, Beta.Ventures, and CcHub’s Growth Capital fund.

The Nigerian funds with the most investments were EchoVC (20) and Ventures Platform (27).

Notably active funds in the group of 51 included Singularity Investments (18 African startup investments) Ghana’s Golden Palm Investments (17) and Musha Ventures (36).

The Crunchbase study also tracked more Africans in top positions at outside funds and  the rise of homegrown corporate venture arms.

One of those entities with a corporate venture arm, Naspers, announced a massive $100 million fund named Naspers Foundry to support South African tech startups. This is part of a $300 million (1.4 billion Rand) commitment by the South African media and investment company to support South Africa’s tech sector overall. Naspers Foundry will launch in 2019.

The initiatives lend more weight to Naspers’ venture activities in Africa as the company has received greater attention for investments off the continent (namely Europe, India and China), as covered in this TechCrunch story.

“Naspers Foundry will help talented and ambitious South African technology entrepreneurs to develop and grow their businesses,” said a company release.

“Technology innovation is transforming the world,” said Naspers chief executive Bob van Dijk. “The Naspers Foundry aims to both encourage and back South African entrepreneurs to create businesses which ensure South Africa benefits from this technology innovation.”

After the $100 million earmarked for the Foundry, Naspers will invest ≈ $200 million over the next three years to “the development of its existing technology businesses, including OLX,  Takealot, and Mr D Food…” according to a release.

In context, the scale of this announcement is fairly massive for Africa. According to recently summarized Crunchbase data, the $100 million Naspers Foundry commitment dwarfs any known African corporate venture activity by roughly 95x.

The $300 million commitment to South Africa’s tech ecosystem signals a strong commitment by Naspers to its home market. Naspers wasn’t ready to comment on if or when it could extend this commitment outside of South Africa (TechCrunch did inquire).

If Naspers does increase its startup and ecosystem funding to wider Africa— given its size compared to others—that would be a primo development for the continent’s tech sector.

If mobile money was the first phase in the development of digital finance in Africa, the next phase is non-payment financial apps in agtech, insurance, mobile-lending, and investech, according to a report by Village Capital covered here at TechCrunch.

In “Beyond Payments: The Next Generation of Fintech Startups in Sub-Saharan Africa,” the venture capital firm and their reporting partner, PayPal, identify 12 companies it determined were “building solutions in fintech subsectors outside of payments.”

Village Capital’s work gives a snapshot of these four sub-sectors — agricultural finance, insurtech, alternative credit scoring and savings and wealth — including players, opportunities and challenges, recent raises and early-stage startups to watch.

The report highlights recent raises by savings startup PiggybankNG and Nigerian agtech firm FarmCrowdy. Village Capital sees the biggest opportunities for insurtech startups in five countries: South Africa, Morocco, Egypt, Kenya and Nigeria.

In alternative credit scoring and lending it sees blockchain as a driver of innovation in reducing “both transaction costs and intermediation costs, helping entrepreneurs bypass expensive verification systems and third parties.”

The Founders Factory expanded its corporate-backed accelerator to Africa, opening an office in Johannesburg with the support of some global and local partners.

This is Founders Factory’s first international expansion and the goal is “to scale 100 startups across Sub-Saharan Africa in five years,” according the accelerator’s communications head, Amy Grimshaw.

Founders Fund co-founder Roo Rogers will lead the new Africa office. Standard Bank is the first backer, investing “several million funds over five years,” according to Grimshaw.

The Johannesburg accelerator will grow existing businesses through a bespoke six-month program, while an incubator will build completely new businesses focused on addressing key issues on the continent.

Founder Funds will hire over 40 full-time specialists locally, covering all aspects needed to scale its startups including product development, UX/UI, engineering, investment, business development and, growth marketing. This TechCrunch feature has more from Founders Fund management on the outlook for the new South Africa accelerator.

More Africa Related Stories @TechCrunch

How a Ugandan prince and a crypto startup are planning an African revolution

Marieme Diop and Shikoh Gitau to speak at Startup Battlefield Africa

Flutterwave and Ventures Platform CEOs will join us at Startup Battlefield Africa

African Tech Around the Net

A lot is happening at Flutterwave right now—[E departs] 

Amazon Web Services to open data centres in Cape Town in 2020

Vodacom Business expands its fixed connectivity network in Africa

SA’s Sun Exchange raises $500k from Alphabit

IBM, AfriLabs partner to expand digital skills across 123 hubs in 34 countries

Victor Asemota to lead VC firm Alta Global Ventures’s business in Africa

Bank, local hub launch $1-million fund for Somali startups

Female founders have brought in just 2.2% of US VC this year (yes, again)

Despite efforts to level the playing field for female entrepreneurs, U.S. female-founded startups have raised just 2.2 percent of venture capital investment in 2018.

That statistic may sound familiar; it’s the exact same portion of capital startups founded by a solo female founder or an all-female team secured last year, too, according to PitchBook.

That figure has become a sort-of rallying cry for female founders and their advocates as they try to develop solutions to a long-standing problem: female entrepreneurs raise significantly less private capital than their male counterparts. Several new efforts and entire organizations, like All Raise, for example, have cropped up to ameliorate this through mentorship and programming, but it’s clearly going to take more than one year for that increase in resources to effect change.

Currently, less than 10 percent of decision-makers at VC firms are women and 74 percent of U.S. VC firms have zero female investors. Until those numbers begin to transform, it’s likely little progress will be made on closing the funding gap.

The good news is women have raised a record amount of VC this year with two months still remaining in 2018. In the last ten months, female-founded startups have closed 391 deals worth $2.3 billion, up from $2 billion in 2017. Mixed-gender teams have raised $13.2 billion this year across 1,346 deals, an increase from $12.7 billion last year.

For context, U.S. startups have raised a total of $96.7 billion in 2018, a number that’s expected to surpass $100 billion before the year is through. Female-founded companies have raised just 2.2 percent of that total; mixed-gender teams have raised about 12.8 percent, up from roughly 10.4 percent last year.

Last year, U.S. startups raised a total of $82 billion across more than 9,000 deals in what was similarly an impressive year for the venture industry.