Catalyst Fund gets $15M from JP Morgan, UK Aid to back 30 EM fintech startups

The Catalyst Fund has gained $15 million in new support from JP Morgan and UK Aid and will back 30 fintech startups in Africa, Asia, and Latin America over the next three years.

The Boston based accelerator provides mentorship and non-equity funding to early-stage tech ventures focused on driving financial inclusion in emerging and frontier markets.

That means connecting people who may not have access to basic financial services — like a bank account, credit or lending options — to those products.

Catalyst Fund will choose an annual cohort of 10 fintech startups in five designated countries: Kenya, Nigeria, South Africa, India and Mexico. Those selected will gain grant-funds and go through a six-month accelerator program. The details of that and how to apply are found here.

“We’re offering grants of up to $100,000 to early-stage companies, plus venture building support…and really…putting these companies on a path to product market fit,” Catalyst Fund Director Maelis Carraro told TechCrunch.

Program participants gain exposure to the fund’s investor networks and investor advisory committee, that include Accion and 500 Startups. With the $15 million Catalyst Fund will also make some additions to its network of global partners that support the accelerator program. Names will be forthcoming, but Carraro, was able to disclose that India’s Yes Bank and University of Cambridge are among them.

Catalyst fund has already accelerated 25 startups through its program. Companies, such as African payments venture ChipperCash and SokoWatch — an East African B2B e-commerce startup for informal retailers — have gone on to raise seven-figure rounds and expand to new markets.

Those are kinds of business moves Catalyst Fund aims to spur with its program. The accelerator was founded in 2016, backed by JP Morgan and the Bill & Melinda Gates Foundation.

Catalyst Fund is now supported and managed by Rockefeller Philanthropy Advisors and global tech consulting firm BFA.

African fintech startups have dominated the accelerator’s companies, comprising 56% of the portfolio into 2019.

That trend continued with Catalyst Fund’s most recent cohort, where five of six fintech ventures — Pesakit, Kwara, Cowrywise, Meerkat and Spoon — are African and one, agtech credit startup Farmart, operates in India.

The draw to Africa is because the continent demonstrates some of the greatest need for Catalyst Fund’s financial inclusion mission.

By several estimates, Africa is home to the largest share of the world’s unbanked population and has a sizable number of underbanked consumers and SMEs.

Roughly 66% of Sub-Saharan Africa’s 1 billion people don’t have a bank account, according to World Bank data.

Collectively, these numbers have led to the bulk of Africa’s VC funding going to thousands of fintech startups attempting to scale payment solutions on the continent.

Digital finance in Africa has also caught the attention of notable outside names. Twitter/Square CEO Jack Dorsey recently took an interest in Africa’s cryptocurrency potential and Wall Street giant Goldman Sachs has invested in fintech startups on the continent.

This lends to the question of JP Morgan’s interests vis-a-vis Catalyst Fund and Africa’s financial sector.

For now, JP Morgan doesn’t have plans to invest directly in Africa startups and is taking a long-view in its support of the accelerator, according to Colleen Briggs — JP Morgan’s Head of Community Innovation

“We find financial health and financial inclusion is a…cornerstone for inclusive growth…For us if you care about a stable economy, you have to start with financial inclusion,” said Briggs, who also oversees the Catalyst Fund.

This take aligns with JP Morgan’s 2019 announcement of a $125 million, philanthropic, five-year global commitment to improve financial health in the U.S. and globally.

More recently, JP Morgan Chase posted some of the strongest financial results on Wall Street, with Q4 profits of $2.9 billion. It’ll be worth following if the company shifts its income-generating prowess to business and venture funding activities in Catalyst Fund markets such as Nigeria, India and Mexico.

Into Africa: tech leaders weigh in on Jack Dorsey’s planned move to the continent

It’s not every day that the CEO of a large Silicon Valley tech company decides to relocate to a different part of the world in order to learn more about it — particularly a frequently maligned and often overlooked by big-business part.

But Jack Dorsey, the American tech entrepreneur who co-founded and leads not one, but two publicly listed companies (Twitter and Square) is not your typical CEO. Dressed down, bearded, often wearing a wooly hat and speaking in a slow, quiet voice, you might even call Dorsey the anti-CEO. He eschews many of the stereotypical trappings of the executive life and mannerisms in favor of taking silent retreats and traveling to countries like Burma.

In November 2019, Dorsey’s itchy feet took him to Africa, where he visited Nigeria, Ghana, South Africa and Ethiopia on a listening tour. He had meetings at incubators in Lagos and Addis Ababa; and talked to a number of African tech-leaders, including Tayo Oviosu, the CEO of Nigerian payments startup Paga; and Yeli Bademosi, the director of Binance Labs.

And before he departed back for the US, he did something more: he announced that he would return in 2020 to live somewhere on the continent for up to six months.

“Africa will define the future (especially the bitcoin one!). Not sure where yet, but I’ll be living here for 3-6 months mid 2020,” he Tweeted from Ethiopia.

Why Africa?

And where? And when? If you have ever spoken to Dorsey — or more likely read an interview with him — you’ll note that the he can be somewhat oblique. It’s rare that he gives straight answers to straight questions, even if he always responds with something.

So when spokespeople from both Twitter and Square declined to comment on what his plans will be and if they will relate to those two companies, it might be just as likely that they don’t want to disclose anything as they don’t actually know.

But one thing is clear: Africa’s 54 countries and 1.2 billion people is one of the last blue oceans for global tech growth (one that not only Dorsey has identified).

To that end, TechCrunch talked to several people from Africa’s tech world to get their thoughts on what he could do, and what bears remembering as the world follows Dorsey’s spotlight.

The state of the market

When you look at year-over-year expansion in VC investment in the region, startup formation and incubators, the African continent is one of the fastest-growing technology markets in the world — even if today, by monetary value, it’s tiny by Shenzhen or Silicon Valley standards.

Three of the top destination countries for startup investment — Kenya, Nigeria and South Africa — collectively surpassed $1 billion in investment for the first time in 2018, with fintech businesses currently receiving the bulk of the capital and dealflow, according to Partech and WeeTracker stats.

By most accounts, Dorsey’s first foot forward last November was to make himself a student of the continent’s innovation scene — but specifically as it relates to fintech (and by association, his affiliation with Square and latterly Bitcoin).

“It was more them listening than anything else. Not just Jack, but the other senior members of his team,” CcHub’s CEO Bosun Tijani said of Dorsey’s meetings at the incubator.

After acquiring Kenya’s iHub, CcHub is the largest incubator in Africa. Other members of Dorsey’s team who joined him there included Twitter CTO Parag Agrawal and Product Lead Kayvon Beykpour.

“[Dorsey] said the main reason [he was in Ethiopia and Africa] was to listen and to learn what’s going on in the region,” said Ice Addis’ Markos Lemma .

Jack Dorsey CcHub Bosun Tijani Damilola Teidi

Dorsey with CcHub’s Bosun Tijani and Damilola Teidi

Over recent years, Nigeria has become Africa’s leader in startup formation, VC, and the entry of big tech players, such as Facebook — which opened an incubator in Lagos in 2018.

Since 2014, the country of 200 million has held the dual distinction as Africa’s most populous nation and largest economy. This makes it a compelling market for fintech and social media apps.

Twitter in Africa, according to sources, was less of a topic during Jack Dorsey’s meetings with founders and techies. This makes some sense. The service has lower penetration in the region estimated at 7.46%, higher than Instagram but lower than Pinterest — and that essentially means that the business opportunities there are fewer, since the majority of Twitter’s revenues comes from advertising.

“The only concrete thing in all this communication…is he seems to be interested in Bitcoin,” said Tijani.

Markos Lemma had the same takeaway after talking with Dorsey. “I think he’s specifically interested in Bitcoin,” he said.

Crypto

Dorsey’s crypto focus in Africa isn’t such a surprise, given his bullish stance on Bitcoin and blockchain-based technology.

In October, he invested $10 million in CoinList, a startup that facilities and manages token sales. And rather than create its own cryptocurrency, like Facebook’s Libra experiment, Square is using Bitcoin as the basis for its digital-currency strategy. The company added Bitcoin trades to CashApp, its P2P payment and investment product, in 2018 and its Square Crypto effort announced this year aims to “support and promote Bitcoin” through open source development.

A recent interview with Australia’s Financial Review could offer further insight into Dorsey’s crypto Africa vision.

“I think the internet will have a native currency and anything we can do to make that happen we’ll do,” he said in reference to Square’s moves.

“In the long term it will help us be more and more like an internet company where we can launch a product…and the whole world can use it, instead of having to go from market to market, to bank to bank to bank and from regulatory body to regulatory body.”

Square Bitcoin

What Dorsey is describing, in part, is the primary use case for cryptocurrency in Africa — where there remain all kinds of inefficiencies around moving money. The continent’s people pay the highest remittance costs in the world largely due to fragmented (and often inadequate) financial infrastructure and expensive cross-border transaction costs.

By several estimates, Africa is also home to the largest share of the world’s banked and underbanked consumer and SME populations.

Roughly 66% of Sub-Saharan Africa’s 1 billion people don’t have a bank account, according to World Bank data.

There are hundreds of payments startups across the region looking to move that needle by getting these people on the financial map — and more opportunistically, getting them to use their products.

To be fair, the adoption of digital finance products, such as M-Pesa in Kenya, have succeeded in reaching tens of millions.

A characteristic of successful African fintech products, however, is that their use has been geographically segregated, with few apps able to scale widely across borders. Some of that relates to vastly different regulatory structures and the difficulty in shaping product-market-fit from country to country.

Cryptocurrency’s potential to bypass inefficient or deficient finance structures has been getting attention in Africa.

The last two years saw several ICOs on the continent. One of the largest coin offerings ($7 million) was in 2018 by SureRemit — a startup that launched a crypto-token aimed at Africa’s incoming and intra-country remittance markets.

SureRemit’s CEO, Adeoye Ojo, sees the relevance and timing of Jack Dorsey’s interest in cryptocurrencies on the continent.

“Right now a lot of people and governments in Africa are aware of blockchain and cryptocurrencies, compared to two years ago, and asking questions about how this can be leveraged; what kind of products can we build around this,” Ojo told TechCrunch.

Bitcoin, according to Ojo, is finding utility on the continent. “It has helped people with value transfer significantly. A lot of businesses trying to make payments outside Nigeria…frustrated with access to forex or access to USD, are leveraging Bitcoin to make payments directly to vendors or suppliers in Asia and Europe,” he said.

On business motivations for Dorsey’s move to Africa, “I think he is definitely looking at the opportunity to get more people to adopt payments on Bitcoin, buying Bitcoin with Square here,” Ojo said — based on the collective information he’s followed re Dorsey’s crypto motives and what emerged from Jack’s recent trip. 

Square has yet to launch any services in Africa, but if there is a business purpose to Dorsey’s residency, one could be considering how and if the company has scope for building out services in the region, specifically one based around cryptocurrency.

SureRemit CEO Adeoye Ojo believes Dorsey could also look to establish a unique African Bitcoin exchange.

But Ojo underscored the specific hurdles to cryptocurrency adoption on the continent. The first is regulation. Regulatory reviews on digital-currency use are ongoing in major economies Nigeria and Kenya. South Africa’s Central Bank is considering rules that would limit use of cryptocurrencies for foreign transfers.

“Even if the application for crypto works here, if the regulations that come forward don’t support it, it won’t happen,” said Ojo.

As with other parts of the world, Africa also faces a trust issue on digital currency adoption, he added, due to Bitcoin’s implication in several scams — most notably to defraud millions of Nigerians in the Mavrodi Mundial Moneybox (MMM) ponzi scheme.

“For many Nigerians, their first introduction to Bitcoin was this MMM scam…People have been adopting  mobile money in Africa, but it’s gonna take a bit of market education for them to understand using Bitcoin isn’t just some scam,” he said.

Advice for Dorsey

On where Dorsey should spend time on his return, Cellulant CEO Ken Njoroge, thinks Kenya is a must, given its lead as one of the top countries in the world for mobile-money adoption.

“Coming to live in the ecosystem is a good thing…it’s the best way to really understand…and get the nuances of business in Africa,” he said.

Cellulant CEO Ken Njoroge

Njoroge, whose Nairobi-based fintech company processes payments in 35 African countries, also suggested Dorsey understand any tech play in Africa requires a long-game commitment, given the infrastructure challenges in the ecosystem compared to others.

On that topic, Ice Addis co-founder Markos Lemma suggested Dorsey provide founders advice on operating around and influencing tech-regulation. “He’s had a lot experience navigating the U.S. and other markets with Twitter and Square. I don’t know any entrepreneur in Ethiopia or other African markets who has that experience navigating and negotiating regulations,” he said.

For all the likelihood Dorsey’s pending move could be motivated by Square and Bitcoin, three of the founders interviewed by TechCrunch — Bosun Tijani, Ken Njoroge, and Markos Lemma — underscored the rise of Twitter in Africa’s civic and political spheres.

Square doesn’t operate in Africa but Twitter is the fourth most used social media app on the continent and sells ads in Africa through partner, Ad Dynamo, a Twitter spokesperson confirmed.

Social Media Stats 2019 Africa“Twitter is quite powerful in Nigeria,” CcHub’s CEO said of the social media platform in the country, which has been plagued by theft of state resources in the hundreds of billions.

“It’s not just a social media platform for Nigeria. It’s changing the dynamics between people with power and those that they’re meant to serve,” Tijani explained.

Twitter (along with Facebook) has also been implicated in Africa’s first (notable) social media political interference campaigns.

“There’s a lot of hate speech and misinformation that’s been showing up on social media,” said Ice Addis’ Markos Lemma. “With [Ethiopia’s] 2020 elections on the horizon, I think it would be important for him to address how Twitter can mitigate that risk.”

Dorsey has faced flak from some analysts and Twitter board members for his planned move outside the U.S., given risks associated with Twitter and the upcoming American election.

So Dorsey’s 2020 Africa move could certainly uncover opportunities for cryptocurrency and Square on the continent.

It could also become a reminder that wherever he travels so too do the complications of his social media company back home.

Into Africa: tech leaders weigh in on Jack Dorsey’s planned move to the continent

It’s not every day that the CEO of a large Silicon Valley tech company decides to relocate to a different part of the world in order to learn more about it — particularly a frequently maligned and often overlooked by big-business part.

But Jack Dorsey, the American tech entrepreneur who co-founded and leads not one, but two publicly listed companies (Twitter and Square) is not your typical CEO. Dressed down, bearded, often wearing a wooly hat and speaking in a slow, quiet voice, you might even call Dorsey the anti-CEO. He eschews many of the stereotypical trappings of the executive life and mannerisms in favor of taking silent retreats and traveling to countries like Burma.

In November 2019, Dorsey’s itchy feet took him to Africa, where he visited Nigeria, Ghana, South Africa and Ethiopia on a listening tour. He had meetings at incubators in Lagos and Addis Ababa; and talked to a number of African tech-leaders, including Tayo Oviosu, the CEO of Nigerian payments startup Paga; and Yeli Bademosi, the director of Binance Labs.

And before he departed back for the US, he did something more: he announced that he would return in 2020 to live somewhere on the continent for up to six months.

“Africa will define the future (especially the bitcoin one!). Not sure where yet, but I’ll be living here for 3-6 months mid 2020,” he Tweeted from Ethiopia.

Why Africa?

And where? And when? If you have ever spoken to Dorsey — or more likely read an interview with him — you’ll note that the he can be somewhat oblique. It’s rare that he gives straight answers to straight questions, even if he always responds with something.

So when spokespeople from both Twitter and Square declined to comment on what his plans will be and if they will relate to those two companies, it might be just as likely that they don’t want to disclose anything as they don’t actually know.

But one thing is clear: Africa’s 54 countries and 1.2 billion people is one of the last blue oceans for global tech growth (one that not only Dorsey has identified).

To that end, TechCrunch talked to several people from Africa’s tech world to get their thoughts on what he could do, and what bears remembering as the world follows Dorsey’s spotlight.

The state of the market

When you look at year-over-year expansion in VC investment in the region, startup formation and incubators, the African continent is one of the fastest-growing technology markets in the world — even if today, by monetary value, it’s tiny by Shenzhen or Silicon Valley standards.

Three of the top destination countries for startup investment — Kenya, Nigeria and South Africa — collectively surpassed $1 billion in investment for the first time in 2018, with fintech businesses currently receiving the bulk of the capital and dealflow, according to Partech and WeeTracker stats.

By most accounts, Dorsey’s first foot forward last November was to make himself a student of the continent’s innovation scene — but specifically as it relates to fintech (and by association, his affiliation with Square and latterly Bitcoin).

“It was more them listening than anything else. Not just Jack, but the other senior members of his team,” CcHub’s CEO Bosun Tijani said of Dorsey’s meetings at the incubator.

After acquiring Kenya’s iHub, CcHub is the largest incubator in Africa. Other members of Dorsey’s team who joined him there included Twitter CTO Parag Agrawal and Product Lead Kayvon Beykpour.

“[Dorsey] said the main reason [he was in Ethiopia and Africa] was to listen and to learn what’s going on in the region,” said Ice Addis’ Markos Lemma .

Jack Dorsey CcHub Bosun Tijani Damilola Teidi

Dorsey with CcHub’s Bosun Tijani and Damilola Teidi

Over recent years, Nigeria has become Africa’s leader in startup formation, VC, and the entry of big tech players, such as Facebook — which opened an incubator in Lagos in 2018.

Since 2014, the country of 200 million has held the dual distinction as Africa’s most populous nation and largest economy. This makes it a compelling market for fintech and social media apps.

Twitter in Africa, according to sources, was less of a topic during Jack Dorsey’s meetings with founders and techies. This makes some sense. The service has lower penetration in the region estimated at 7.46%, higher than Instagram but lower than Pinterest — and that essentially means that the business opportunities there are fewer, since the majority of Twitter’s revenues comes from advertising.

“The only concrete thing in all this communication…is he seems to be interested in Bitcoin,” said Tijani.

Markos Lemma had the same takeaway after talking with Dorsey. “I think he’s specifically interested in Bitcoin,” he said.

Crypto

Dorsey’s crypto focus in Africa isn’t such a surprise, given his bullish stance on Bitcoin and blockchain-based technology.

In October, he invested $10 million in CoinList, a startup that facilities and manages token sales. And rather than create its own cryptocurrency, like Facebook’s Libra experiment, Square is using Bitcoin as the basis for its digital-currency strategy. The company added Bitcoin trades to CashApp, its P2P payment and investment product, in 2018 and its Square Crypto effort announced this year aims to “support and promote Bitcoin” through open source development.

A recent interview with Australia’s Financial Review could offer further insight into Dorsey’s crypto Africa vision.

“I think the internet will have a native currency and anything we can do to make that happen we’ll do,” he said in reference to Square’s moves.

“In the long term it will help us be more and more like an internet company where we can launch a product…and the whole world can use it, instead of having to go from market to market, to bank to bank to bank and from regulatory body to regulatory body.”

Square Bitcoin

What Dorsey is describing, in part, is the primary use case for cryptocurrency in Africa — where there remain all kinds of inefficiencies around moving money. The continent’s people pay the highest remittance costs in the world largely due to fragmented (and often inadequate) financial infrastructure and expensive cross-border transaction costs.

By several estimates, Africa is also home to the largest share of the world’s banked and underbanked consumer and SME populations.

Roughly 66% of Sub-Saharan Africa’s 1 billion people don’t have a bank account, according to World Bank data.

There are hundreds of payments startups across the region looking to move that needle by getting these people on the financial map — and more opportunistically, getting them to use their products.

To be fair, the adoption of digital finance products, such as M-Pesa in Kenya, have succeeded in reaching tens of millions.

A characteristic of successful African fintech products, however, is that their use has been geographically segregated, with few apps able to scale widely across borders. Some of that relates to vastly different regulatory structures and the difficulty in shaping product-market-fit from country to country.

Cryptocurrency’s potential to bypass inefficient or deficient finance structures has been getting attention in Africa.

The last two years saw several ICOs on the continent. One of the largest coin offerings ($7 million) was in 2018 by SureRemit — a startup that launched a crypto-token aimed at Africa’s incoming and intra-country remittance markets.

SureRemit’s CEO, Adeoye Ojo, sees the relevance and timing of Jack Dorsey’s interest in cryptocurrencies on the continent.

“Right now a lot of people and governments in Africa are aware of blockchain and cryptocurrencies, compared to two years ago, and asking questions about how this can be leveraged; what kind of products can we build around this,” Ojo told TechCrunch.

Bitcoin, according to Ojo, is finding utility on the continent. “It has helped people with value transfer significantly. A lot of businesses trying to make payments outside Nigeria…frustrated with access to forex or access to USD, are leveraging Bitcoin to make payments directly to vendors or suppliers in Asia and Europe,” he said.

On business motivations for Dorsey’s move to Africa, “I think he is definitely looking at the opportunity to get more people to adopt payments on Bitcoin, buying Bitcoin with Square here,” Ojo said — based on the collective information he’s followed re Dorsey’s crypto motives and what emerged from Jack’s recent trip. 

Square has yet to launch any services in Africa, but if there is a business purpose to Dorsey’s residency, one could be considering how and if the company has scope for building out services in the region, specifically one based around cryptocurrency.

SureRemit CEO Adeoye Ojo believes Dorsey could also look to establish a unique African Bitcoin exchange.

But Ojo underscored the specific hurdles to cryptocurrency adoption on the continent. The first is regulation. Regulatory reviews on digital-currency use are ongoing in major economies Nigeria and Kenya. South Africa’s Central Bank is considering rules that would limit use of cryptocurrencies for foreign transfers.

“Even if the application for crypto works here, if the regulations that come forward don’t support it, it won’t happen,” said Ojo.

As with other parts of the world, Africa also faces a trust issue on digital currency adoption, he added, due to Bitcoin’s implication in several scams — most notably to defraud millions of Nigerians in the Mavrodi Mundial Moneybox (MMM) ponzi scheme.

“For many Nigerians, their first introduction to Bitcoin was this MMM scam…People have been adopting  mobile money in Africa, but it’s gonna take a bit of market education for them to understand using Bitcoin isn’t just some scam,” he said.

Advice for Dorsey

On where Dorsey should spend time on his return, Cellulant CEO Ken Njoroge, thinks Kenya is a must, given its lead as one of the top countries in the world for mobile-money adoption.

“Coming to live in the ecosystem is a good thing…it’s the best way to really understand…and get the nuances of business in Africa,” he said.

Cellulant CEO Ken Njoroge

Njoroge, whose Nairobi-based fintech company processes payments in 35 African countries, also suggested Dorsey understand any tech play in Africa requires a long-game commitment, given the infrastructure challenges in the ecosystem compared to others.

On that topic, Ice Addis co-founder Markos Lemma suggested Dorsey provide founders advice on operating around and influencing tech-regulation. “He’s had a lot experience navigating the U.S. and other markets with Twitter and Square. I don’t know any entrepreneur in Ethiopia or other African markets who has that experience navigating and negotiating regulations,” he said.

For all the likelihood Dorsey’s pending move could be motivated by Square and Bitcoin, three of the founders interviewed by TechCrunch — Bosun Tijani, Ken Njoroge, and Markos Lemma — underscored the rise of Twitter in Africa’s civic and political spheres.

Square doesn’t operate in Africa but Twitter is the fourth most used social media app on the continent and sells ads in Africa through partner, Ad Dynamo, a Twitter spokesperson confirmed.

Social Media Stats 2019 Africa“Twitter is quite powerful in Nigeria,” CcHub’s CEO said of the social media platform in the country, which has been plagued by theft of state resources in the hundreds of billions.

“It’s not just a social media platform for Nigeria. It’s changing the dynamics between people with power and those that they’re meant to serve,” Tijani explained.

Twitter (along with Facebook) has also been implicated in Africa’s first (notable) social media political interference campaigns.

“There’s a lot of hate speech and misinformation that’s been showing up on social media,” said Ice Addis’ Markos Lemma. “With [Ethiopia’s] 2020 elections on the horizon, I think it would be important for him to address how Twitter can mitigate that risk.”

Dorsey has faced flak from some analysts and Twitter board members for his planned move outside the U.S., given risks associated with Twitter and the upcoming American election.

So Dorsey’s 2020 Africa move could certainly uncover opportunities for cryptocurrency and Square on the continent.

It could also become a reminder that wherever he travels so too do the complications of his social media company back home.

2019 Africa Roundup: Jumia IPOs, China goes digital, Nigeria becomes fintech capital

2019 brought more global attention to Africa’s tech scene than perhaps any previous year.

A high profile IPO, visits by both Jacks (Ma and Dorsey), and big Chinese startup investment energized that.

The last 12 months served as a grande finale to 10 years that saw triple digit increases in startup formation and VC on the continent.

Here’s an overview of the 2019 market events that captured attention and capped off a decade of rapid growth in African tech.

IPOs

The story of the year is the April IPO on the NYSE of Pan-African e-commerce company Jumia. This was the first listing of a VC backed tech company operating in Africa on a major global exchange —  which brought its own unpredictability.

Founded in 2012, Jumia pioneered much of its infrastructure to sell goods to consumers online in Africa.

With Nigeria as its base market, the Rocket Internet backed company created accompanying delivery and payments services and went on to expand online verticals into 14 Africa countries (though it recently exited a few). Jumia now sells everything from mobile-phones to diapers and offers online services such as food-delivery and classifieds.

Seven years after its operational launch, Jumia’s stock debut kicked off with fanfare in 2019, only to be followed by volatility.

The online retailer gained investor confidence out of the gate, more than doubling its $14.95 opening share price post 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. The American activist investor’s case was bolstered, in part, by a debate that played out across Africa’s tech ecosystem on Jumia’s legitimacy as an African startup, given its (primarily) European senior management.

The entire affair was further complicated during Jumia’s second quarter earnings call when the company disclosed a fraud perpetrated by some of its employees and sales agents. Jumia’s CEO Sacha Poignonnec emphasized the matter was closed, financially marginal and not the same as Andrew Left’s short-sell claims.

Whatever the balance, Jumia’s 2019 ups and downs cast a cloud over its stock with investors. Since the company’s third-quarter earnings-call, Jumia’s NYSE share-price has lingered at around $6 — less than half of its original $14.95 opening, and roughly 80% lower than its high.

Even with Jumia’s post-IPO rocky road, the continent’s leading e-commerce company still has heap of capital and is on pace to generate over $100 million in revenues in 2019 (albeit with big losses).

The company plans reduce costs by generating more revenue from higher-margin internet services, such as payments and classifieds.

There’s a fairly simple equation for Jumia to rebuild shareholder confidence in 2020: avoid scandals, increase revenues over losses. And now that the company’s publicly traded — with financial reporting requirements — there’ll be four earnings calls a year to evaluate Jumia’s progress. 

Jumia may not be the continent’s standout IPO for much longer. Events in 2019 point to Interswitch becoming the second African digital company to list on a global exchange in 2020.  The Nigerian fintech firm confirmed to TechCrunch in November it had reached a billion-dollar unicorn valuation, after a (reported) $200 million investment by Visa. 

Founded in 2002 by Mitchell Elegbe, Interswitch created much of the initial infrastructure to digitize Nigeria’s (then) predominantly cash-based economy. Interswitch has been teasing a public listing since 2016, but delayed it for various reasons. With the company’s billion-dollar valuation in 2019, that pause is likely to end.

“An [Interswitch] IPO is still very much in the cards; likely sometime in the first half of 2020,” a source with knowledge of the situation told TechCrunch. 

China-Africa goes digital

2019 was the year when Chinese actors pivoted to African tech. China is known for its strategic relationship with Africa based (largely) on trade and infrastructure. Over the last 10 years, the country has been less engaged in the continent’s digital-scene.

china africa techThat was until a torrent of investment and partnerships this past year.

July saw Chinese-owned Opera raise $50 million in venture spending to support its growing West African digital commercial network, which includes browser, payments and ride-hail services.

In August, San Francisco and Lagos-based fintech startup Flutterwave partnered with Chinese e-commerce company Alibaba’s Alipay to offer digital payments between Africa and China.

In September, China’s Transsion  — the largest smartphone seller in Africa — listed in an IPO on Shanghai’s new STAR Market. The company raised ≈ $394 million, some of which it is directing toward venture funding and operational expansion in Africa.

The last quarter of 2019 brought a November surprise from China in African tech. Over 15 Chinese investors placed over $240 million in three rounds. Transsion backed consumer payments startup PalmPay raised a $40 million seed, stating its goal to become “Africa’s largest financial services platform.”

Chinese investors also backed Opera-owned OPay’s $120 million raise and East-African trucking logistics company Lori Systems’ (reported) $30 million Series B.

In the new year, TechCrunch will continue to cover the business arc of this surge in Chinese tech investment in Africa. There’ll surely be a number of fresh macro news-points to develop, given the debate (and critique) of China’s role in Africa.

Nigeria and fintech

On debate, the case could be made that 2019 was the year when Nigeria become Africa’s unofficial capital for fintech investment and digital finance startups.

Kenya has held this title hereto, with the local success and global acclaim of its M-Pesa mobile-money product. But more founders and VCs are opting for Nigeria as the epicenter for digital finance growth on the continent.Nigeria naira

A rough tally of 2019 TechCrunch coverage — including previously mentioned rounds — pegs fintech related investment in the West African country at around $400 million over the last 12 months. That’s equivalent to roughly one-third of all startup VC raised for the entire continent in 2018, according to Partech stats.

From OPay to PalmPay to Visa — startups, big finance companies and investors are making Nigeria home-base for their digital finance operations and outward expansion in Africa.

The founder of early-stage payment startup ChipperCash, Ham Serunjogi, explained the imperative to operate in the West African country. “Nigeria is the largest economy and most populous country in Africa. Its fintech industry is one of the most advanced in Africa, up there with Kenya  and South Africa,” he told TechCrunch in May.

When all the 2019 VC numbers are counted, it will be worth matching up Nigeria to Kenya to see how the countries compared for fintech specific investment over the last year.

Acquisitions

Tech acquisitions continue to be somewhat rare in Africa, but there were several to note in 2019. Two of the continent’s powerhouse tech incubators joined forces in September, when Nigerian innovation center and seed-fund CcHub acquired Nairobi based iHub, for an undisclosed amount.

CChub ihub Acquisition

The acquisition brought together Africa’s most powerful tech hubs by membership networks, volume of programs, startups incubated and global visibility. It also elevated CcHub’s Bosun Tijani standing across Africa’s tech ecosystem, as the CEO of the new joint-entity, which also has a VC arm.

CcHub CEO Bosun Tijani1

CcHub/iHub CEO Bosun Tijani

In other acquisition activity, French television company Canal+ acquired the ROK film studio from Nigerian VOD company IROKOtv, for an undisclosed amount. The deal put ROK founder and producer Mary Njoku in charge of a new organization with larger scope and resources.

Many outside Africa aren’t aware that Nigeria’s Nollywood is the Hollywood of the continent and one of the largest film industries (by production volume) in the world. Canal+ told TechCrunch it looks to bring Mary and the Nollywood production ethos to produce content in French speaking African countries.

Other notable 2019 African tech takeovers included Kenyan internet company BRCK’s acquisition of internet provider Surf, Nigerian digital-lending startup OneFi’s Amplify buy and Merck KGaa’s purchase of Kenya-based online healthtech company ConnectMed.

Moto ride-hail mania

In 2019, Africa’s motorcycle ride-hail market — worth an estimated $4 billion — saw a flurry of investment and expansion by startups looking to scale on-demand taxi services. Uber and Bolt got into the motorcycle taxi business in Africa in 2018.

Ampersand Africa e motorcycle

Ampersand in Rwanda

A number of local and foreign startups have continued to grow in key countries, such as Nigeria, Uganda and Kenya.

A battle for funding and market-share emerged in Nigeria in 2019, between key moto ride-hail startups Max.ng, Gokada, and Opera owned ORide.

The on-demand motorcycle market in Africa has attracted foreign investment and moved toward EV development. In May, MAX.ng raised a $7 million Series A round with participation from Yamaha and is using a portion to pilot renewable energy powered e-motorcycles in Africa.

In August, the government of Rwanda announced a national policy to phase out gas-motorcycle taxis altogether in favor of e-motos, in partnership with early-stage EV startup Ampersand.

New funds

The year 2019 saw several new funding initiatives for Africa’s startups. Senegalese VC investor Marieme Diop helped spearhead Dakar Network Angels, a seed-fund for startups in French-speaking Africa — or 24 of the continent’s 54 countries.

Africinvest teamed up with Cathay Innovation to announce the Cathay Africinvest Innovation Fund, a $100+ million capital pool aimed at Series A to C-stage startup investments in fintech, logistics, AI, agtech and edutech.

Accion Venture Lab launched a $24 million fintech fund open to African startups.

And Naspers offered more details on who can pitch to its 1.4 billion rand (≈$100 million) Naspers Foundry fund and made its first investment in online cleaning services company SweepSouth.

Closed up shop

Like any tech ecosystem, not every startup in Africa killed it or even continued to tread water in 2019. Two e-commerce companies — DealDey in Nigeria and Afrimarket in Ivory Coast — closed up digital shop.

Southern Africa’s Econet Media shut down its Kwese TV digital entertainment business in August.

And South Africa based, Pan-African focused cryptocurrency payment startup Wala ceased operations in June. Founder Tricia Martinez named the continent’s poor infrastructure as one of the culprits to shutting down. A possible signal to the startup’s demise could have been its 2017 ICO, where Wala netted only 4% of its $30 million token-offering.

Africa’s startups go global

2019 saw more startups expand products and business models developed in Africa to new markets abroad. In March, Flexclub — a South African venture that matches investors and drivers to cars for ride-hailing services — announced its expansion to Mexico in a partnership with Uber.

In May, ExtraCrunch profiled three African founded fintech startups — Flutterwave, Migo and ChipperCash — developing their business models strategically in Africa toward plans to offer their products in other regions.

By December, Migo (formerly branded Mines) had announced its expansion to Brazil on a $20 million Series B raise.

2020 and beyond

As we look to what could come in the new year and decade for African tech, it’s telling to look back. Ten years ago, there were a lot of “if” questions on whether the continent’s ecosystem could produce certain events: billion dollar startup valuations, IPOs on major exchanges, global expansion, investment from the world’s top VCs.

All those questionable events of the past have become reality in African tech, even if some of them are still in low abundance.

There’s no crystal ball for any innovation ecosystem — not the least Africa’s — but there are several things I’ll be on the lookout for in 2020 and beyond.

Two In the near term, start with what Twitter/Square CEO Jack Dorsey may do around Bitcoin and cryptocurrency on his return to Africa (lookout for an upcoming TechCrunch feature on this).

I’ll also follow the next-phase of e-commerce in Africa, which could pit Jumia more competitively against DHL’s Africa eShop, Opera and China’s Alibaba (which hasn’t yet entered Africa in full).

On a longer-term basis, a development to follow is how the continent’s first wave of millionaire and billionaire tech-founders could disrupt dynamics around politics, power, and philanthropy in Africa —  hopefully for the better.

More notable 2019 Africa-related coverage @TechCrunch

Africa Roundup: Nigerian fintech gets $360M, mints unicorn, draws Chinese VC

November 2019 could mark when Nigeria (arguably) became Africa’s unofficial capital for fintech investment and digital finance startups.

The month saw $360 million invested in Nigerian focused payment ventures. That is equivalent to roughly one-third of all the startup VC raised for the entire continent in 2018, according to Partech stats.

A notable trend-within-the-trend is that more than half — or $170 million — of the funding to Nigerian fintech ventures in November came from Chinese investors. This marks a pivot in China’s engagement with Africa to tech. We’ll get to that.

Before the big Chinese backed rounds, one of Nigeria’s earliest fintech companies, Interswitch, confirmed its $1 billion valuation after Visa took a minority stake in the company. Interswitch would not disclose the amount to TechCrunch, but Sky News reporting pegged it at $200 million for 20%.

Founded in 2002 by Mitchell Elegbe, Interswitch pioneered the infrastructure to digitize Nigeria’s then predominantly paper-ledger and cash-based economy.

The company now provides much of the tech-wiring for Nigeria’s online banking system that serves Africa’s largest economy and population. Interswitch offers a number of personal and business finance products, including its Verve payment cards and Quickteller payment app.

The financial services firm has expanded its physical presence to Uganda, Gambia and Kenya . The Nigerian company also sells its products in 23 African countries and launched a partnership in August for Verve cardholders to make payments on Discover’s global network.

Visa and Interswitch touted the equity investment as a strategic collaboration between the two companies, without a lot of detail on what that will mean.

One point TechCrunch did lock down is Interswitch’s (long-awaited) and imminent IPO. A source close to the matter said the company will list on a major exchange by mid-2020.

For the near to medium-term, Interswitch could stand as Africa’s sole tech-unicorn, as e-commerce venture Jumia’s volatile share-price and declining market-cap — since an April IPO — have dropped the company’s valuation below $1 billion.

Circling back to China, November was the month that signaled Chinese actors are all in on African tech.

In two separate rounds, Chinese investors put $220 million into OPay and PalmPay — two fledgling startups with plans to scale in Nigeria and the broader continent.

PalmPay, a consumer oriented payments product, went live last month with a $40 million seed-round (one of the largest in Africa in 2019) led by Africa’s biggest mobile-phone seller — China’s Transsion.

The startup was upfront about its ambitions, stating its goals to become “Africa’s largest financial services platform,” in a company release.

To that end, PalmPay conveniently entered a strategic partnership with its lead investor. The startup’s payment app will come pre-installed on Transsion’s mobile device brands, such as Tecno, in Africa — for an estimated reach of 20 million phones.

PalmPay also launched in Ghana in November and its UK and Africa based CEO, Greg Reeve, confirmed plans to expand to additional African countries in 2020.

OPay’s $120 million Series B was announced several days after the PalmPay news and came only months after the mobile-based fintech venture raised $50 million.

Founded by Chinese owned consumer internet company Opera — and backed by 9 Chinese investors — OPay is the payment utility for a suite of Opera developed internet based commercial products in Nigeria. These include ride-hail apps ORide and OCar and food delivery service OFood.

With its latest Series A, OPay announced it would expand in Kenya, South Africa, and Ghana.

Though it wasn’t fintech, Chinese investors also backed a (reported) $30 million Series B for East African trucking logistics company Lori Systems in November.

With OPay, PalmPay, and Lori Systems, startups in Africa have raised a combined $240 million from 15 Chinese investors in a span of months.

There are a number of things to note and watch out for here, as TechCrunch reporting has illuminated (and will continue to do in follow-on coverage).

These moves mark a next chapter in China’s engagement in Africa and could raise some new issues. Hereto, the country’s interaction with Africa’s tech ecosystem has been relatively light compared to China’s deal-making on infrastructure and commodities.

There continues to be plenty of debate (and critique) of China’s role in Africa. This new digital-phase will certainly add a fresh component to all that. One thing to track will be data-privacy and national-security concerns that may emerge around Chinese actors investing heavily in African mobile consumer platforms.

We’ve seen lines (allegedly) blur on these matters between Chinese state and private-sector actors with companies such as Huawei.

As OPera and PalmPay expand, they may need to do some reassuring of African regulators as countries (such as Kenya) establish more formal consumer protection protocols for digital platforms.

One more thing to follow on OPay’s funding and planned expansion is the extent to which it puts Opera (and its entire suite of consumer internet products) in competition with multiple actors in Africa’s startup ecosystem. Opera’s Africa ventures could go head to head with Uber, Jumia, and M-Pesa — the mobile money-product that put Kenya out front on digital finance in Africa before Nigeria.

Shifting back to American engagement in African tech, Twitter and Square CEO Jack Dorsey was on the continent in November. No sooner than he’d finished his first trip, Dorsey announced plans to move to Africa in 2020, for 3 to 6 months, saying on Twitter “Africa will define the future (especially the bitcoin one!).”

We still don’t know much about what this last trip — or his future foray — mean in terms of concrete partnerships, investment, or market moves in Africa from Dorsey and his companies.

He visited Nigeria, Ghana, South Africa and Ethiopia and met with leaders at Nigeria’s CcHub (Bosun Tijani), Ethiopia’s Ice Addis (Markos Lemming), and did some meetings with fintech founders in Lagos (Paga’s Tayo Oviosu).

I know most of the organizations and people Dorsey talked to pretty well and nothing has shaken out yet in terms of partnership or investment news from his recent trip.

On what could come out of Dorsey’s 2020 move to Africa, per his tweet and news highlighted in this roundup, a good bet would be it will have something to with fintech and Square.

More Africa-related stories @TechCrunch

African tech around the ‘net

Twitter’s political ads ban is a distraction from the real problem with platforms

Sometimes it feels as if Internet platforms are turning everything upside down, from politics to publishing, culture to commerce, and of course swapping truth for lies.

This week’s bizarro reversal was the vista of Twitter CEO Jack Dorsey, a tech CEO famed for being entirely behind the moral curve of understanding what his product is platforming (i.e. nazis), providing an impromptu ‘tweet storm’ in political speech ethics.

Actually he was schooling Facebook’s Mark Zuckerberg — another techbro renowned for his special disconnect with the real world, despite running a massive free propaganda empire with vast power to influence other people’s lives — in taking a stand for the good of democracy and society.

So not exactly a full reverse then.

In short, Twitter has said it will no longer accept political ads, period.

Whereas Facebook recently announced it will no longer fact-check political ads. Aka: Lies are fine, so long as you’re paying Facebook to spread them.

You could argue there’s a certain surface clarity to Facebook’s position — i.e. it sums to ‘when it comes to politics we just won’t have any ethics’. Presumably with the hoped for sequitur being ‘so you can’t accuse us of bias’.

Though that’s actually a non sequitur; by not applying any ethical standards around political campaigns Facebook is providing succour to those with the least ethics and the basest standards. So its position does actually favor the ‘truth-lite’, to put it politely. (You can decide which political side that might advantage.)

Twitter’s position also has surface clarity: A total ban! Political and issue ads both into the delete bin. But as my colleague Devin Coldewey quickly pointed out it’s likely to get rather more fuzzy around the edges as the company comes to defining exactly what is (and isn’t) a ‘political ad’ — and what its few “exceptions” might be.

Indeed, Twitter’s definitions are already raising eyebrows. For example it has apparently decided climate change is a ‘political issue’ — and will therefore be banning ads about science. While, presumably, remaining open to taking money from big oil to promote their climate-polluting brands… So yeah, messy.

There will clearly be attempts to stress test and circumvent the lines Twitter is setting. The policy may sound simple but it involves all sorts of judgements that expose the company’s political calculations and leave it open to charges of bias and/or moral failure.

Still, setting rules is — or should be — the easy and adult thing to do when it comes to content standards; enforcement is the real sweating toil for these platforms.

Which is also, presumably, why Facebook has decided to experiment with not having any rules around political ads — in the (forlorn) hope of avoiding being forced into the role of political speech policeman.

If that’s the strategy it’s already looking spectacularly dumb and self-defeating. The company has just set itself up for an ongoing PR nightmare where it is indeed forced to police intentionally policy-provoking ads from its own back-foot — having put itself in the position of ‘wilfully corrupt cop’. Slow hand claps all round.

Albeit, it can at least console itself it’s monetizing its own ethics bypass.

Twitter’s opposing policy on political ads also isn’t immune from criticism, as we’ve noted.

Indeed, it’s already facing accusations that a total ban is biased against new candidates who start with a lower public profile. Even if the energy of that argument would be better spent advocating for wide-ranging reform of campaign financing, including hard limits on election spending. If you really want to reboot politics by levelling the playing field between candidates that’s how to do it.

Also essential: Regulations capable of enforcing controls on dark money to protect democracies from being bought and cooked from the inside via the invisible seeding of propaganda that misappropriates the reach and data of Internet platforms to pass off lies as populist truth, cloaking them in the shape-shifting blur of microtargeted hyperconnectivity.

Sketchy interests buying cheap influence from data-rich billionaires, free from accountability or democratic scrutiny, is our new warped ‘normal’. But it shouldn’t be.

There’s another issue being papered over here, too. Twitter banning political ads is really a distracting detail when you consider that it’s not a major platform for running political ads anyway.

During the 2018 US midterms the category generated less than $3M for the company.

And, secondly, anything posted organically as a tweet to Twitter can act as a political call to arms.

It’s these outrageous ‘organic’ tweets where the real political action is on Twitter’s platform. (Hi Trump.)

Including inauthentically ‘organic’ tweets which aren’t a person’s genuinely held opinion but a planted (and often paid for) fake. Call it ‘going native’ advertising; faux tweets intended to pass off lies as truth, inflated and amplified by bot armies (fake accounts) operating in plain sight (often gaming Twitter’s trending topics) as a parallel ‘unofficial’ advertising infrastructure whose mission is to generate attention-grabbing pantomimes of public opinion to try and sway the real thing.

In short: Propaganda.

Who needs to pay to run a political ad on Twitter when you can get a bot network to do the boosterism for you?

Let’s not forget Dorsey is also the tech CEO famed for not applying his platform’s rules of conduct to the tweets of certain high profile politicians. (Er, Trump again, basically.)

So by saying Twitter is banning political ads yet continuing to apply a double standard to world leaders’ tweets — most obviously by allowing the US president to bully, abuse and threaten at will in order to further his populist rightwing political agenda — the company is trying to have its cake and eat it.

More recently Twitter has evolved its policy slightly, saying it will apply some limits on the reach of rule-breaking world leader tweets. But it continues to run two sets of rules.

To Dorsey’s credit he does foreground this tension in his tweet storm — where he writes [emphasis ours]:

Internet political ads present entirely new challenges to civic discourse: machine learning-based optimization of messaging and micro-targeting, unchecked misleading information, and deep fakes. All at increasing velocity, sophistication, and overwhelming scale.

These challenges will affect ALL internet communication, not just political ads. Best to focus our efforts on the root problems, without the additional burden and complexity taking money brings. Trying to fix both means fixing neither well, and harms our credibility.

This is good stuff from Dorsey. Surprisingly good, given his and Twitter’s long years of free speech fundamentalism — when the company gained a reputation for being wilfully blind and deaf to the fact that for free expression to flourish online it needs a protective shield of civic limits. Otherwise ‘freedom to amplify any awful thing’ becomes a speech chiller that disproportionately harms minorities.

Aka freedom of speech is not the same as freedom of reach, as Dorsey now notes.

Even with Twitter making some disappointing choices in how it defines political issues, for the purposes of this ad ban, the contrast with Facebook and Zuckerberg — still twisting and spinning in the same hot air; trying to justify incoherent platform policies that sell out democracy for a binary ideology which his own company can’t even stick to — looks stark.

The timing of Dorsey’s tweet-storm, during Facebook’s earnings call, was clearly intended to make that point.

“Zuckerberg wants us to believe that one must be for or against free speech with no nuance, complexity or cultural specificity, despite running a company that’s drowning in complexity,” writes cultural historian, Siva Vaidhyanathan, confronting Facebook’s moral vacuousness in a recent Guardian article responding to another Zuckerberg ‘manifesto’ on free speech. “He wants our discussions to be as abstract and idealistic as possible. He wants us not to look too closely at Facebook itself.”

Facebook’s position on speech does only stand up in the abstract. Just as its ad-targeting business can only run free of moral outrage in unregulated obscurity, where the baked in biases — algorithmic and user generated — are safely hidden from view so people can’t joins the dots on how they’re being damaged.

We shouldn’t be surprised at how quickly the scandal-prone company is now being called on its ideological BS. We have a savvier political class as a result of the platform-scale disinformation and global data scandals of the past few years. People who have have seen and experienced what Facebook’s policies translate to in real world practice. Like compromised elections and community violence.

With lawmakers like these turning their attention on platform giants there is a genuine possibility of meaningful regulation coming down the pipe for the antisocial media business.

Not least because Facebook’s self regulation has always been another piece of crisis PR, designed to preempt and steer off the real thing. It’s a cynical attempt to maintain its profitable grip on our attention. The company has never been committed to making the kind of systemic change necessary to fix its toxic speech issues.

The problem is, ultimately, toxicity and division drives engagement, captures attention and makes Facebook a lot of money.

Twitter can claim a little distance from that business model not only because it’s considerably less successful than Facebook at generating money by monopolizing attention, but also because it provides greater leeway for its users to build and follow their own interest networks, free from algorithmic interference (though it does do algorithms too).

It has also been on a self-proclaimed reform path for some time. Most recently saying it wants to be responsible for promoting “conversational health on its platform. No one would say it’s there yet but perhaps we’re finally getting to see some action. Even if banning political ads is mostly a quick PR win for Twitter.

The really hard work continues, though. Namely rooting out bot armies before their malicious propaganda can pollute the public sphere. Twitter hasn’t said it’s close to being able to fix that.

Facebook is also still failing to stem the tide of ‘organic’ politicized fake content on its platform. Fakes that profit at our democratic expense by spreading hate and lies.

For this type of content Facebook offers no searchable archive (as it now does for paid ads which it defines as political) — thereby providing ongoing cover for dark money to do its manipulative hack-job on democracy by free-posting via groups and pages.

Plus, even where Facebook claims to be transparently raising the curtain on paid political influence it’s abjectly failing to do so. Its political ads API is still being blasted by research academics as not fit for purpose. Even as the company policy cranks up pressure on external fact-checkers by giving politicians the green light to run ads that lie.

It has also been accused of applying a biased standard when it comes to weeding out “coordinated inauthentic behavior”, as Facebook euphemistically calls the networks of fake accounts set up to amplify and juice reach — when the propaganda in question is coming from within the US and leans toward the political right.

 

Facebook denies this, claiming for example that a network of pages on its platform reported to be exclusively boosting content from US conservative news site, The Daily Wire, arereal pages run by real people in the U.S., and they don’t violate our policies. (It didn’t offer us any detail on how it reached that conclusion.) 

A company spokesperson also said: “We’re working on more transparency so that in the future people have more information about Pages like these on Facebook.”

So it’s still promising ‘more transparency’ — rather than actually being transparent. And it remains the sole judge interpreting and applying policies that aren’t at all legally binding; so sham regulation then. 

Moreover, while Facebook has at times issued bans on toxic content from certain domestic hate speech preachers’, such as banning some of InfoWars’ Alex Jones’ pages, it’s failed to stop the self-same hate respawning via new pages. Or indeed the same hateful individuals maintaining other accounts on different Facebook-owned social properties. Inconsistency of policy enforcement is Facebook’s DNA.

Set against all that Dorsey’s decision to take a stance against political ads looks positively statesmanlike.

It is also, at a fundamental level, obviously just the right thing to do. Buying a greater share of attention than you’ve earned politically is regressive because it favors those with the deepest pockets. Though of course Twitter’s stance won’t fix the rest of a broken system where money continues to pour in and pollute politics.

We also don’t know the fine-grained detail of how Twitter’s algorithms amplify political speech when it’s packaged in organic tweet form. So whether its algorithmic levers are more likely to be triggered into boosting political tweets that inflame and incite, or those that inform and seek to unite.

As I say, the whole of Twitter’s platform can sum to political advertising. And the company does apply algorithms to surface or suppress tweets based on its proprietary (and commercial) determination of ‘engagement quality’. So its entire business is involved in shaping how visible (or otherwise) tweeted speech is.

That very obviously includes plenty of political speech. Not for nothing is Twitter Trump’s platform of choice.

Nothing about its ban on political ads changes all that. So, as ever, where social media self-regulation is concerned, what we are being given is — at best — just fiddling around the edges.

A cynical eye might say Twitter’s ban is intended to distract attention from more structural problems baked into these attention-harvesting Internet platforms.

The toxic political discourse problem that democracies and societies around the world are being forced to grapple with is as a consequence of how Internet platforms distribute content and shape public discussion. So what’s really key is how these companies use our information to program what we each get to see.

The fact that we’re talking about Twitter’s political ad ban risks distracting from the “root problems” Dorsey referenced in passing. (Though he would probably offer a different definition of their cause. In the tweet storm he just talks about “working hard to stop people from gaming our systems to spread misleading info”.)

Facebook’s public diagnosis of the same problem is always extremely basic and blame-shifting. It just says some humans are bad, ergo some bad stuff will be platformed by Facebook — reflecting the issue back at humanity.

Here’s an alternative take: The core issue underpinning all these problems around how Internet platforms spread toxic propaganda is the underlying fact of taking people’s data in order to manipulate our attention.

This business of microtargeting — or behavioral advertising, as it’s also called — turns everyone into a target for some piece of propaganda or other.

It’s a practice that sucks regardless of whether it’s being done to you by Donald Trump or by Disney. Because it’s asymmetrical. It’s disproportionate. It’s exploitative. And it’s inherently anti-democratic.

It also incentivizes a pervasive, industrial-scale stockpiling of personal data that’s naturally hostile to privacy, terrible for security and gobbles huge amounts of energy and computing resource. So it sucks from an environmental perspective too.

And it does it all for the very basest of purposes. This is platforms selling you out so others can sell you stuff. Be it soap or political opinions.

Zuckerberg’s label of choice for this process — “relevant ads” — is just the slick lie told by a billionaire to grease the pipes that suck out the data required to sell our attention down the river.

Microtargeting is both awful for the individual (meaning creepy ads; loss of privacy; risk of bias and data misuse) and terrible for society for all the same reasons — as well as grave, society-level risks, such as election interference and the undermining of hard-won democratic institutions by hostile forces.

Individual privacy is a common good, akin to public health. Inoculation — against disease or indeed disinformation — helps protect the whole of us from damaging contagion.

To be clear, microtargeting is also not only something that happens when platforms are paid money to target ads. Platforms are doing this all the time; applying a weaponizing layer to customize everything they handle.

It’s how they distribute and program the masses of information users freely upload, creating maximally engaging order out of the daily human chaos they’ve tasked themselves with turning into a compelling and personalized narrative — without paying a massive army of human editors to do the job.

Facebook’s News Feed relies on the same data-driven principles as behavioral ads do to grab and hold attention. As does Twitter’s ‘Top Tweets’ algorithmically ranked view.

This is programmed attention-manipulation at vast scale, repackaged as a ‘social’ service. One which uses what the platforms learn by spying on Internet users as divisive glue to bind our individual attention, even if it means setting some of us against each another.

That’s why you can publish a Facebook post that mentions a particular political issue and — literally within seconds — attract a violently expressed opposing view from a Facebook ‘friend’ you haven’t spoken to in years. The platform can deliver that content ‘gut punch’ because it has a god-like view of everyone via the prism of their data. Data that powers its algorithms to plug content into “relevant” eyeballs, ranked by highest potential for engagement sparks to fly.

It goes without saying that if a real friendship group contained such a game-playing stalker — who had bugged everyone’s phones to snoop and keep tabs on them, and used what they learnt to play friends off against each other — no one would imagine it bringing the group closer together. Yet that’s how Facebook treats its captive eyeballs.

That awkward silence you could hear as certain hard-hitting questions struck Zuckerberg during his most recent turn in the House might just be the penny dropping.

It finally feels as if lawmakers are getting close to an understanding of the real “root problem” embedded in these content-for-data sociotechnical platforms.

Platforms that invite us to gaze into them in order that they can get intimate with us forever — using what they learn from spying to pry further and exploit faster.

So while banning political ads sounds nice it’s just a distraction. What we really need to shatter the black mirror platforms are holding against society, in which they get to view us from all angles while preventing us from seeing what they’re doing, is to bring down a comprehensive privacy screen. No targeting against personal data.

Let them show us content and ads, sure. They can target this stuff contextually based on a few generic pieces of information. They can even ask us to specify if we’d like to see ads about housing today or consumer packaged goods? We can negotiate the rules. Everything else — what we do on or off the platform, who we talk to, what we look at, where we go, what we say — must remain strictly off limits.

Daily Crunch: Twitter is banning political ads

The Daily Crunch is TechCrunch’s roundup of our biggest and most important stories. If you’d like to get this delivered to your inbox every day at around 9am Pacific, you can subscribe here.

1. Jack Dorsey says Twitter will ban all political ads

Arguing that “internet political ads present entirely new challenges to civic discourse,” CEO Jack Dorsey announced that Twitter will be banning all political advertising — albeit with “a few exceptions” like voter registration.

Not only is this a decisive move by Twitter, but it also could increase pressure on Facebook to follow suit, or at least take steps in this direction.

2. Apple beats on Q4 earnings after strong quarter for wearables, services

Apple’s iPhone sales still make up over half of its quarterly revenues, but they are slowly shrinking in importance as other divisions in the company pick up speed.

3. Facebook shares rise on strong Q3, users up 2% to 2.45B

More earnings news: Despite ongoing public relations crises, Facebook kept growing in Q3 2019, demonstrating that media backlash does not necessarily equate to poor business performance.

4. Driving license tests just got smarter in India with Microsoft’s AI project

Hundreds of people who have taken the driver’s license test in Dehradun (the capital of the Indian state of Uttarakhand) in recent weeks haven’t had to sit next to an instructor. Instead, their cars were affixed with a smartphone that was running HAMS, an AI project developed by a Microsoft Research team.

5. Crunchbase raises $30M more to double down on its ambition to be a ‘LinkedIn for company data’

Good news for our friends at Crunchbase, which got its start as a part of TechCrunch before being spun off into a separate business several years ago. CEO Jager McConnell also says the site currently has tens of thousands of paying subscribers.

6. Deadspin writers quit after being ordered to stick to sports

The relationship between new management at G/O Media (formerly Gizmodo Media Group/Gawker Media) and editorial staff seems to have been deteriorating for months. This week, it turned into a full-on revolt over auto-play ads and especially a directive that Deadspin writers must stick to sports.

7. What Berlin’s top VCs want to invest in right now

As we gear up for our Disrupt Berlin conference in December, we check in with top VCs on the types of startups that they’re looking to back right now. (Extra Crunch membership required.)

Twitter banning political ads is the right thing to do, so it will be attacked mercilessly

Twitter founder and CEO Jack Dorsey announced abruptly — though the timing was certainly not accidental — that the platform would soon disallow any and all political advertising. This is the right thing to do, but it’s also going to be hard as hell for a lot of reasons. As usual in tech and politics, no good deed goes unpunished.

Malicious actors state-sponsored and otherwise have and will continue to attempt to influence the outcome of U.S. elections via online means including political ads and astroturfing. Banning such ads outright is an obvious, if rather heavy-handed solution — but given that online platforms seem to have made little progress on more targeted measures, it’s the only one realistically available to deploy now.

“Not allowing for paid disinformation is one of the most basic, ethical decisions a company can make,” wrote Representative Alexandria Ocasio-Cortez (D-NY) in a tweet following the news. “If a company cannot or does not wish to run basic fact-checking on paid political advertising, then they should not run paid political ads at all.”

One of the reasons Facebook has avoided restricting political ads and content is that by doing so it establishes itself as the de facto arbiter between “appropriate” and “inappropriate,” and the fractal-complex landscape that creates across thousands of cultures, languages, and events. Don’t cry for Mark Zuckerberg, though — this is a monster of his own creation. He should have retired when I suggested it.

But Twitter’s decision to use a sledgehammer rather than a scalpel doesn’t remove the inherent difficulties in the process. Twitter is just submitting itself for a different kind of punishment. Because instead of being the arbiter of what is appropriate, it will be the arbiter of what is political.

This is slightly less fraught than Facebook’s task, but Twitter will not be able to avoid accusations — perhaps even true ones — of partisanship and bias.

For instance, the fundamental decision to disallow political advertising seems pretty straightforward and nonpartisan. Incumbents rely on traditional media more and progressives tend to be younger and more social media–savvy. So is this taking away a tool suited to left-leaning challengers? But incumbents tend to have bigger budgets and their spend on social media has been increasing, so could this be considered a way to curb that trend? Who this affects and how is not a clear-cut fact but something campaigns and pundits will squabble about endlessly.

Or consider the announcement Dorsey made right off the bat that “ads in support of voter registration will still be allowed.” Voter registration is a good nonpartisan goal, right? In fact it’s something many conservative lawmakers have consistently opposed, because unregistered voters, for a multitude of reasons, skew toward the liberal side. So this too will be considered a partisan act.

Twitter will put out official guidelines in a few weeks, but it’s hard to see how they can be satisfactory. Will industry groups be able to promote tweets about how their new factory is thriving because of a government grant? Will an advocacy organization be able to promote a tweet about a serious situation on the border? Will news outlets be able to promote a story about the election? What about a profile of a single candidate? What about an op-ed on an issue?

The difference between patrolling the interior of the politics world, and patrolling its borders, so to speak, may appear significant — but it’s really just a different kind of trouble. Twitter is entering a world of pain.

But at least it’s moving forward. It’s the right decision, even if it’s a hard one and could hit the bottom line pretty hard (not that Twitter has ever cared about that). The decision to do this while Facebook is dismantling its credibility with a series of craven, self-interested actions is a canny one. Even if Twitter fails to get this right, it can at least say it’s trying.

And lastly it should be said that it also happens to be a good choice for users and voters, a rare exception to the parade of user-hostile decisions coming out of the big tech and media companies. Going into an election year, we can use all the good news we can get.

Zuckerberg defends political ads that will be 0.5% of 2020 revenue

As Jack Dorsey announced his company Twitter would drop all political ads, Facebook CEO Zuckerberg doubled-down on his policy of refusing to fact check politicians’ ads. “At times of social tension there has often been an urge to pull back on free expression . . . We will be best served over the long term by resisting this urge and defending free expression.”

Still, Zuckerberg failed to delineate between freedom of expression, and freedom of paid amplification of that expression which inherently favors the rich.

During today’s Q3 2019 earnings call where Facebook beat expectations and grew monthly users 2% to 2.45 billion, Zuckerberg spent his time defending the social network’s lenient political ad policy. You can read his full prepared statement here.

One clear objective was to dispel the idea that Facebook was motivated by greed to keep these ads. Zuckerberg explained “We estimate these ads from politicians will be less than 0.5% of our revenue next year.” For reference, Facebook earned $66 billion in the 12 months ending Q3 2019, so Facebook might earn around $330 million to $400 million in political ads next year. Unfortunately, it’s unclear if Zuckerberg meant 0.5% of ads were political or just from politicians without counting issue ads and PACs.

Zuckerberg also said that given Facebook removed 50 million hours per day of viral video watching from its platform to support well-being which hurt ad viewership and the company’s share price, Facebook clearly doesn’t act solely in pursuit of profit.

We just shared our community update and quarterly results. Here’s what I said on our earnings call. — Before we…

Posted by Mark Zuckerberg on Wednesday, October 30, 2019

Facebook’s CEO also tried to bat down the theory that Facebook is allowing misinformation in political ads to cater to conservatives or avoid calls of bias from them. “Some people say that this is just all a cynical political calculation and that we’re acting in a way that we don’t really believe because we’re just trying to appease conservatives” he said, responding that “frankly, if our goal was that we’re trying to make either side happy then we’re not doing a very good job because I’m pretty sure everyone is frustrated.” 

Instead of banning political ads, Zuckerberg voiced support for increasing transparency about how ads look, how much is spent on them, and where they’re run. “I believe that the better approach is to work to increase transparency. Ads on Facebook are already more transparent than anywhere else. We have a political ads archive so anyone can scrutinize every ad that’s run.” 

He mentioned that political ads are run by “Google, YouTube, and most internet platforms”, seeming to stumble for a second as he was likely prepared to cite Twitter too until it announced it would drop all political ads an hour earlier. He omitted that Pinterest and TikTok have also banned political ads.

It doesn’t help that hundreds of Facebook’s own employees have called on their CEO to change the policy. He concluded that no one could accuse Facebook of not deeply thinking through the question and its downstream ramifications. Zuckerberg did leave himself an out if he chooses to change the policy, though. “I’ve considered whether we should not [sell political ads] in the past, and I’ll continue to do so.”

Dorsey had tweeted that “We’ve made the decision to stop all political advertising on Twitter globally. We believe political message reach should be earned, not bought.” Democrat Representative Alexandria Ocasio-Cortez expressed support for Twitter’s move while Trump campaign manager Brad Parscale called it “a very dumb decision”

Twitter’s CEO took some clear swipes at Zuckerberg, countering his common arguments for allowing misinformation in politician’s ads. “Some might argue our actions today could favor incumbents. But we have witnessed many social movements reach massive scale without any political advertising. I trust this will only grow.” Given President Trump had outspent all Democratic candidates on Facebook ads as of March of this year, it’s clear that deep-pocketed incumbents could benefit from Facebook’s policy.

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Trump continues to massively outspend Democratic rivals on Facebook ads. Via NYT

Miming Facebook’s position, Dorsey tweeted “It‘s not credible for us to say: ‘We’re working hard to stop people from gaming our systems to spread misleading info, buuut if someone pays us to target and force people to see their political ad…well…they can say whatever they want!”

Twitter doesn’t earn much from political ads, citing only $3 million in revenue from the 2018 mid-term elections, or roughly 0.1% of its $3 billion in total 2018 revenue. That means there will be no major windfall for Facebook from Twitter dropping political ads. But now all eyes will be on Facebook and Google/YouTube. If Sundar Pichai and Susan Wojcicki move in line with Dorsey, it could make Zuckerberg even more vulnerable to criticism.

$330 million might not be a big incentive for Facebook or Zuckerberg, but it still sounds like a lot of money to earn from ads that potentially lie to voters. I respect Facebook’s lenient policy when it comes to speech organically posted to users, organizations, or politicians’ own accounts. But relying on the candidates, press, and public to police speech is dangerously idealistic. We’ve seen how candidates will do anything to win, partisan press will ignore the truth to support their team, and the public aren’t educated or engaged enough to consistently understand what’s false.

Zuckerberg greatest mistakes have come from overestimating humanity. Unfortunately, not everyone wants to bring the world closer together. Without safeguards, Facebook’s tools can help tear it apart. It’s time for Facebook and Zuckerberg to recognize the difference between free expression and paid expression.

Jack Dorsey says Twitter will ban all political ads

CEO Jack Dorsey just announced, via tweet, that Twitter will be banning all political advertising — albeit with “a few exceptions” like voter registration.

“We believe political message reach should be earned, not bought,” Dorsey said.

While it’s not totally clear how broad those exceptions will be, it sounds like the ban will apply to both ads endorsing candidates and ads advocating a position on political issues.

Dorsey said the company will share the final policy by November 15, and that it will start enforcing that policy on November 22.

“Internet political ads present entirely new challenges to civic discourse: machine learning-based optimization of messaging and micro-targeting, unchecked misleading information, and deep fakes,” he wrote. “All at increasing velocity, sophistication, and overwhelming scale.”

So why not continue accepting ads while trying to stamp out misinformation? He argued that the company “needs to focus our efforts on the root problems, without the additional burden and complexity taking money brings.”

A blanket policy could also help Twitter avoid the headache and controversy of making these determinations of truthfulness on a case-by-case basis.

This comes after Facebook, in particular, has faced heavy criticism around its refusal to fact-check political advertising (even as it took steps to fight election-related misinformation elsewhere), with Facebook employees writing an open letter objecting to the company’s stance.

At the same time, one of the ads that prompted the recent controversy — in which the Trump campaign promoted a conspiracy theory about Joe Biden — also ran on YouTube and Twitter (and on some TV networks, although CNN refused to air it).

So even though the discussion has focused on Facebook, the broader questions of permissiveness and responsibility are ones that all the major internet platforms have to face.

Over the summer, in fact, Twitter said it would start blocking state-run media outlets from running ads on its platform after it identified an operation to “sow political discord” around the protests in Hong Kong, which involved hundreds of accounts linked to the Chinese government.

The idea that Facebook should just ban all political ads is a solution that’s been floated by a number of pundits, including our own Josh Constine. Before today, that might have seemed like an extreme or unrealistic step. Suddenly, it looks much more possible — or at least like Mark Zuckerberg will have to keep answering questions about this for a while.

Dorsey didn’t mention Facebook by name in his tweets, but he seemed to allude to the company’s position when he wrote, “For instance, it‘s not credible for us to say: ‘We’re working hard to stop people from gaming our systems to spread misleading info, buuut if someone pays us to target and force people to see their political ad…well…they can say whatever they want! 😉'”

It’s also interesting that Twitter chose to announce this just as Facebook released its latest earnings report.

Dorsey also acknowledged that Twitter is “a small part of a much larger political advertising ecosystem,” but he said, “We have witnessed many social movements reach massive scale without any political advertising. I trust this will only grow.”

In a statement, eMarketer senior analyst Jasmine Enberg said the move is “in stark contrast to Facebook,” but also noted “it’s likely that political advertising doesn’t make up a critical part of Twitter’s core business.”