A founder’s guide to recession planning for startups

We are living through one of the nation’s longest periods of economic growth. Unfortunately, the good times can’t last forever. A recession is likely on the horizon, even if we can’t pinpoint exactly when. Founders can’t afford to wait until the midst of a downturn to figure out their game plans; that would be like initiating swim lessons only after getting dumped in the open ocean.

When recession inevitably strikes, it will be many founders’ — and even many VCs’ — first experiences navigating a downturn. Every startup executive needs a recession playbook. The time to start building it is now.

While recessions make running any business tough, they don’t necessitate doom. I co-founded two separate startups just before downturns struck, yet I successfully navigated one through the 2000 dot-com bust and the second through the 2008 financial crisis. Both companies not only survived but thrived. One went public and the second was acquired by Mastercard.

I hope my lessons learned prove helpful to building your own recession game plan.

Recession is an opportunity to leapfrog the competition

In entrepreneurship, the goal isn’t just to survive; it’s to win. Some founders think that surviving recession amounts to hoarding cash and sitting out the financial winter. While there’s wisdom in hoarding cash (see below), I strongly recommend against sitting idly when that time could be actively leveraged to strengthen competitive advantage.

I founded my first startup, Yodlee, in a strong economy with almost 20 competitors. Ten years and a painful recession later, we were the only game in town. Critical to our success was acquiring our largest competitor, something we never could have done in a strong economy because they never would have been willing to sell. The recession made it untenable for them to fundraise, enabling us not only to buy them, but to do so without cash in an all-equity deal. I recommend thinking ahead of time about which companies you would want to buy if the opportunity arose, and your goals for doing so, such as consolidating competition, acquiring customers or engineering talent, entering new markets or strengthening product offerings or distribution channels.

Recession is also an opportunity to improve

You can’t rebuild a plane when you’re traveling 500 miles per hour. During a strong economy, companies spend most of their energy on sales and growth. During a weaker economy, it’s easier to justify the investment in infrastructure and technical debt. Yodlee was built on PERL, which we knew would eventually need upgrading. Once the downturn hit, we took advantage of the slower sales cycles to totally retool in Java, an enterprise-class programming language capable of scale. And we didn’t stop there — we created six new products during the downturn.

Make yourself indispensable to customers and partners

The precipice of a recession is not the time to over-index on top-line revenue. You never want to be on your customers’ top five lists of easiest-to-cut products and services. Instead, take the time to understand your customers’ needs, embed yourself deeply in their operations or customer experience and invest significantly in top-notch customer success.

At my second startup, Truaxis, once recession struck, we pivoted from credit card customer acquisition for banks (which requires no help during a recession) to helping banks address churn. Our revised offering yielded a tremendous ROI for banks — a 10X increase in profit. Our product also became the cornerstone to their online consumer banking experience. If you figure out how to make your product indispensable or core to the customer experience, it won’t get cut, even during a recession.

Lock-in long-term customer contracts

Both of my companies started out with B2C business models. After each recession hit, I quickly pivoted to B2B2C. Here’s why: While consumers can react immediately to economic jitters, businesses must keep spending in order to keep operating. Plus, they work on annual budget cycles. Even when businesses want to reduce their costs, they typically can’t react very quickly because they have to wait out their contracts.

In a bull economy, short-term contracts are popular because they enable companies to keep raising prices. Don’t be tempted by short-term cash. B2B and B2B2C firms should take the potential revenue hit by locking in long-term contracts now while budgets and buyers are flush.

Consider diversifying revenue streams and customer segments

While the economy is still healthy, explore options for diversifying your revenue streams and customer bases to more recession-resistant segments. If your business is consumer-focused, consider a different distribution model via businesses or new consumer segments like affluent populations, which are less sensitive to economic fluctuations. If you have an enterprise-focused business, transition more of your revenue to larger enterprises, which are more financially resilient than smaller ones, or to enterprises that need your service for survival, especially in a down market.

Key to the diversification strategy is plotting your axis ahead of time. You don’t want to start your exploration when the market has already turned and you’re burning cash faster than you can get it. Upon exploration, you may find that no pivot is necessary — perhaps only the need to slow down. Now is the time to look for and deeply understand the signals in your business, though you may not need to act on them for a while — or perhaps even ever.

Raise a lot of money — and stash away more than you think you’ll need

It’s obviously a lot easier to raise money in a healthy economy than a weak one. If your coffers aren’t full going into a downturn, it doesn’t matter what you do; you’ve lost the game right there. Having enough cash can make the difference between emerging as the market leader (i.e. the only one still with cash in the bank) and going out of business — even if your company would have thrived in a strong economy. Be conservative when projecting how much money you’ll need to stay afloat. Many leaders underestimate how much elongated sales cycles, diminished average deal sizes and dwindling total sales transactions weaken total revenue.

Be thoughtful about valuations for your employees’ sake

I’m supportive of founders seeking aggressive valuations, but it’s important to realize the potential downside. Valuations soften during recessions, which can lead to corrections or recapitalizations. Recapitalizations create new companies in which the old stock is worth nearly nothing, leaving many employees’ options under water.

I learned this the hard way at Yodlee after raising a lot of money at a high valuation in 1999. We banked enough money that we could have lasted through most downturns without fundraising. Alas, while the average recession lasts 11 months, the dot-com crash lasted several years. Even though we were strong enough to fundraise during the recession, our high valuation forced us to recapitalize. This was crushing for the employees whose equity was suddenly worthless.

In a weak economy, startups struggle to retain their strongest employees who often retreat for safer work environments and more predictable incomes. Recapitalizations deliver an unwanted shove out the door to demoralized employees who feel they have no reason to stay. Inevitably after recapitalizations the people who are strong enough to get hired elsewhere do so. Surviving a downturn is challenging enough. Doing so without a strong, motivated team is nearly impossible.

While times are strong, choose the board you’ll want when things go bad

When my Yodlee board members suggested we pivot from B2C to B2B2C, I thought they were crazy. We had acquired 1 million users through word of mouth in only two-three months. I couldn’t believe they advocated such a significant pivot when things were going so well. I eventually came to understand that these seasoned board members were actually saving my business.

As my colleague Karan Mehandru said, “investors are your war partners, not your beer buddies.” When fundraising, think carefully about who you want around the table if the economy goes south. I recommend asking potential investors if they’ve weathered downturns before and how they’d help you navigate one. I’d ask the same questions of the firm’s other partners to look for consistency of answers and to gauge your investors’ standing and seniority within the partnership. All too many board members are lovely when companies grow rapidly, but challenging when speed bumps arise. Will your board members actively help you address these challenges or stand in passive judgment?

Being a founder is hard enough, but leading a startup through a recession catapults an already challenging job to a whole different level. Whether the recession begins tomorrow or in four years, I hope you’ll learn from my experience and be prepared either way.

African fintech firm Flutterwave raises $35M, partners with Worldpay

San Francisco and Lagos-based fintech startup Flutterwave has raised a $35 million Series B round and announced a partnership with Worldpay FIS for payments in Africa.

With the funding, Flutterwave will invest in technology and business development to grow market share in existing operating countries, CEO Olugbenga Agboola — aka GB — told TechCrunch.

The company will also expand capabilities to offer more services around its payment products.

More than payments

“We don’t just want to be a payment technology company, we have sector expertise around education, travel, gaming, e-commerce, fintech companies. They all use our expertise,” said GB.

That means Flutterwave will provide more solutions around the broader needs of its clients.

The Nigerian-founded startup’s main business is providing B2B payments services for companies operating in Africa to pay other companies on the continent and abroad.

Launched in 2016, Flutterwave allows clients to tap its APIs and work with Flutterwave developers to customize payments applications. Existing customers include Uber, Booking.com and e-commerce company Jumia.

In 2019, Flutterwave processed 107 million transactions worth $5.4 billion, according to company data.

Flutterwave did the payment integration for U.S. pop-star Cardi B’s 2019 performances in Nigeria and Ghana. Those are two of the countries in which the startup operates, in addition to South Africa, Uganda, Kenya, Tanzania, Zambia, the U.K. and Rwanda.

Flutterwave Cardi B Nigeria“We want to scale in all those markets and be the payment processor of choice,” GB said.

The company will hire more business development staff and expand its developer team to create more sector expertise, according to GB.

“Our business goes beyond payments. People don’t want to just make payments, they want to do something,” he said. And Fluterwave aims to offer more capabilities toward what those clients want to do in Africa.

GB Flutterwave disrupt

Olugbenga Agboola, aka GB

“If you are a charity that wants to raise money for cancer research in Ghana, or you want to sell online, or you’re Cardi B…who wants to do concerts in Africa…we want to be able to set up payments, write the code and create the platform for those needs,” GB explained.

That also means Flutterwave, which built its early client base across global companies, aims to serve smaller African businesses, including startups. Current customers include African-founded tech companies, such as moto ride-hail venture Max.ng.

Worldpay partnership

The new round makes Flutterwave the payment provider for Worldpay in Africa.

“With this partnership, any Worldpay merchant in Europe or the U.S. can accept any African payment. If someone goes to pay Netflix with an African card, it just works,” GB said.

In 2019, Worldpay was acquired for a reported $35 billion by FIS, a U.S. financial services provider. At the time of the purchase, it was projected the two companies would generate revenues of $12 billion annually, yet neither has notable presence in Africa.

Therein lies the benefit of collaborating with Flutterwave.

FIS’s Head of Ventures Joon Cho confirmed the partnership with TechCrunch. FIS also backed Flutterwave’s $35 million Series B. US VC firms Greycroft and eVentures led the round, with participation of Visa, Green Visor and African fund CRE Venture Capital.

Flutterwave’s latest funding brings the company’s total investment to $55 million and follows a year in which the fintech company announced a series of weighty partnerships.

In July 2019, the startup joined forces with Chinese e-commerce company Alibaba’s Alipay to offer digital payments between Africa and China.

The Alipay collaboration followed one between Flutterwave and Visa to launch a consumer payment product for Africa, called GetBarter.

Flutterwave and African fintech

Flutterwave’s $35 million round and latest partnership are among the reasons the startup has become a standout in Africa’s digital-finance landscape.

As a sector, fintech gains the bulk of dealflow and the majority of startup capital flowing to African startups annually. VC to Africa totaled $1.35 billion in 2019, according to WeeTracker’s latest stats.

While a number of payment startups and products have scaled — see Paga in Nigeria and M-Pesa in Kenya — the majority of the continent’s fintech companies are P2P in focus and segregated to one or two markets.

Flutterwave’s platform has served the increased B2B business payment needs spurred by the decade of growth and reform that has occurred in Africa’s core economies.

The value the startup has created is underscored not just by transactional volume the company generates, but the partnerships it has attracted.

A growing list of the masters of the payment universe — Visa, Alipay, Worldpay — have shown they need Flutterwave to be relevant in Africa.

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.

What we know (and don’t) about Goldman Sachs’ Africa VC investing

Goldman Sachs is investing in African tech companies. The venerable American investment bank and financial services firm has backed startups from Kenya to Nigeria and taken a significant stake in e-commerce venture Jumia, which listed on the NYSE in 2019.

Though Goldman declined to comment on its Africa VC activities for this article, the company has spoken to TechCrunch in the past about specific investments.

Goldman Sachs is one of the most enviable investment banking shops on Wall Street, generating $36 billion in net revenues in 2019, or roughly $1 million per employee. It’s the firm that always seems to come out on top, making money during the financial crisis while its competitors were hemorrhaging. For generations, MBAs from the world’s top business schools have clamored to work there, helping make it a professional incubator of sorts that has spun off alums into leadership positions in politics, VC and industry.

All that cache is why Goldman’s name popping up related to African tech got people’s attention, including mine, several years ago.

Felix Capital closes $300M fund to double down on DTC, break into fintech and make late-stage deals

To kick off 2020, one of Europe’s newer — and more successful — investment firms has closed a fresh, oversubscribed fund, one sign that VC in the region will continue to run strong in the year ahead after startups across Europe raised some $35 billion in 2019. Felix Capital, the London firm founded by Frederic Court that was one of the earlier firms to identify and invest in the trend of direct-to-consumer businesses, has raised $300 million, money that it plans to use to continue investing in creative and consumer startups and platform plays as well as begin to tap into a newer area, fintech — specifically startups that are focused on consumer finance. 

Felix up to now has focused mostly on earlier-stage investments — it now has $600 million under management and 32 companies in its portfolio in eight countries — based across both Europe and the US. Court said in an interview that a portion of this fund will now also go into later, growth rounds, both for companies that Felix has been backing for some time as well as newer faces.

As with the focus of the investments, the make-up of the fund itself has a strong European current: the majority of the LPs are European, Court noted. Although Asia is something it would like to tackle more in the future both as a market for its current portfolio and as an investment opportunity, he added, the firm has yet to invest into the region or substantially raise money from it.

Felix made its debut in 2015, founded by Court after a strong run at Advent Capital where he was involved in a number of big exits. While Court had been a strong player in enterprise software, Felix was a step-change for him into more of a primary focus on consumer startups focused on fashion, lifestyle and creative pursuits.

That has over the years included investing in companies like the breakout high-fashion marketplace Farfetch (which he started to back when still at Advent and is now public), Gwyneth Paltrow’s GOOP, the jewellery startup Mejuri, trend-watching HighSnobiety, and fitness startup Peloton (which has also IPO’d).

It’s not an altogether easygoing, vanilla list of cool stuff. Peloton and GOOP have had been mightily doused in snarky and sharky sentiments; and sometimes it even seems as if the brands themselves own and cultivate that image. As the saying goes, there’s no such thing as bad press, I guess.

Although it wasn’t something especially articulated in startup land at the time of Felix’s launch, what the firm was honing in on was a rising category of direct-to-consumer startups, essentially all in the area of e-commerce and building brands and businesses that were bypassing traditional retailers and retail channels to develop primary relationships with consumers through newer digital channels such as social media, messaging and email (alongside their own DTC websites). 

This is not all that the company has focused on, with investments into a range of platform businesses like corporate travel site TravelPerk, Amazon -backed food delivery juggernaut Deliveroo and Moonbug (a platform for children’s entertainment content), as well as increasingly later stage rounds (for example it was part of a $104 million round at TravelPerk; a $70 million round for marketplace-building service Mirakl; and $23 million for Mejuri.

Court’s track record prior to Felix, and the success of the current firm to date, are two likely reasons why this latest fund was oversubscribed, and why Court says it wants to further spread its wings into a wider range of areas and investment stages.

The interest in consumer finance is not such a large step away from these areas, when you consider that they are just the other side of the coin from e-commerce: saving money versus spending money.

“We see this as our prism of opportunity,” said Court. “Just as we had the intuition that there was a space for investors looking at [DTC]… we now think there is enough evidence that there is demand from consumers for new ways of dealing with money and personal finance.”

The firm has from the start operated with a board of advisors who also invest money through Felix while also holding down day jobs. They include the likes of executives from eBay, Facebook, and more. David Marcus –who Court backed when he built payments company Zong and eventually sold it to eBay before he went on to become a major mover and shaker at Facebook and is now has the possibly Sisyphean task of building Calibra — is on the list, but that has not translated into Felix dabbling in cryptocurrency.

“We are watching cryptocurrency, but if you take a Felix stance on the area, it’s only had one amazing brand so far, bitcoin,” said Court. “The rest, for a consumer, is very difficult to understand and access. It’s still really early, but I’ve got no doubt that there will be some things emerging, particularly around the idea of ‘invisible money.'”

Visa is acquiring Plaid for $5.3 billion, 2x its final private valuation

Visa announced today that it is buying financial services API startup Plaid for $5.3 billion. 

Plaid develops financial services APIs. It is akin to what Stripe does for payments, but instead of facilitating payments, it helps developers share banking and other financial information more easily. It’s the kind of service that makes sense for a company like Visa.

The startup bought Quovo two years ago to move beyond just banking, and into broader financial services and investments. The idea was to provide a more holistic platform for financial services providers. As the founders wrote in a blog post at the time of the acquisition, “Financial applications have historically used Plaid primarily to interact with checking and savings accounts. In acquiring Quovo, we are extending our capabilities to a wider class of assets.”

The Price

Plaid’s exit price is a triumph for its investors, who put a combined $353.3 million into the company, according to Crunchbase data. Most important among those rounds was a $250 million infusion that came in late 2018. Index and Kleiner led that round, valuing Plaid at $2.65 billion, or 50% of its final sale price (we doubt that that ratio is a coincidence).

At the same time, it was later revealed, Mastercard and Visa also took part in the round, with TechCrunch reporting in 2019 that the two payments giants “quietly participated in the round.” 

Whether those investments were large enough to grand Visa information rights isn’t clear, but certainly the two credit card giants had more insight into what Plaid was doing than they did before their investment. We can presume, then, that Plaid was doing well as a private company; no one pays twice a multi-billion dollar valuation for a firm unless they want to keep it away from their core business, or a key competitor. 

Or perhaps both in the case of Plaid.

The Twilio comparison

Plaid is often compared to Twilio, another API-first company that sits in the background, helping other players do business. Noyo, on the early-stage front, is doing something similar with its healthcare information and insurance APIs. Stripe, as mentioned above, is similar but in the payment space. The model has proved lucrative for Twilio, which has soared as a public company; Plaid’s huge exit will add extra shine to the startup varietal.

However, unlike Twilio, Plaid was bought while still private, depriving us of a good look into its figures. We anticipate that they would show growth in high-margin revenues. That’s something that all companies, public and private, covet.

For Visa, however, there’s likely something more to the deal. Namely it now has a view into scads of high-growth, private companies that are reinventing the world that Visa operates in. Buying Plaid is insurance against disruption for Visa, and also a way to know who to buy. 

But for today, it’s a win for Plaid shareholders (including employees).

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.

In the shadow of Amazon and Microsoft, Seattle startups are having a moment

Venture capital investment exploded across a number of geographies in 2019 despite the constant threat of an economic downturn.

San Francisco, of course, remains the startup epicenter of the world, shutting out all other geographies when it comes to capital invested. Still, other regions continue to grow, raking in more capital this year than ever.

In Utah, a new hotbed for startups, companies like Weave, Divvy and MX Technology raised a collective $370 million from private market investors. In the Northeast, New York City experienced record-breaking deal volume with median deal sizes climbing steadily. Boston is closing out the decade with at least 10 deals larger than $100 million announced this year alone. And in the lovely Pacific Northwest, home to tech heavyweights Amazon and Microsoft, Seattle is experiencing an uptick in VC interest in what could be a sign the town is finally reaching its full potential.

Seattle startups raised a total of $3.5 billion in VC funding across roughly 375 deals this year, according to data collected by PitchBook. That’s up from $3 billion in 2018 across 346 deals and a meager $1.7 billion in 2017 across 348 deals. Much of Seattle’s recent growth can be attributed to a few fast-growing businesses.

Convoy, the digital freight network that connects truckers with shippers, closed a $400 million round last month bringing its valuation to $2.75 billion. The deal was remarkable for a number of reasons. Firstly, it was the largest venture round for a Seattle-based company in a decade, PitchBook claims. And it pushed Convoy to the top of the list of the most valuable companies in the city, surpassing OfferUp, which raised a sizable Series D in 2018 at a $1.4 billion valuation.

Convoy has managed to attract a slew of high-profile investors, including Amazon’s Jeff Bezos, Salesforce CEO Marc Benioff and even U2’s Bono and the Edge. Since it was founded in 2015, the business has raised a total of more than $668 million.

Remitly, another Seattle-headquartered business, has helped bolster Seattle’s startup ecosystem. The fintech company focused on international money transfer raised a $135 million Series E led by Generation Investment Management, and $85 million in debt from Barclays, Bridge Bank, Goldman Sachs and Silicon Valley Bank earlier this year. Owl Rock Capital, Princeville Global,  Prudential Financial, Schroder & Co Bank AG and Top Tier Capital Partners, and previous investors DN Capital, Naspers’ PayU and Stripes Group also participated in the equity round, which valued Remitly at nearly $1 billion.

Up-and-coming startups, including co-working space provider The Riveter, real estate business Modus and same-day delivery service Dolly, have recently attracted investment too.

A number of other factors have contributed to Seattle’s long-awaited rise in venture activity. Top-performing companies like Stripe, Airbnb and Dropbox have established engineering offices in Seattle, as has Uber, Twitter, Facebook, Disney and many others. This, of course, has attracted copious engineers, a key ingredient to building a successful tech hub. Plus, the pipeline of engineers provided by the nearby University of Washington (shout-out to my alma mater) means there’s no shortage of brainiacs.

There’s long been plenty of smart people in Seattle, mostly working at Microsoft and Amazon, however. The issue has been a shortage of entrepreneurs, or those willing to exit a well-paying gig in favor of a risky venture. Fortunately for Seattle venture capitalists, new efforts have been made to entice corporate workers to the startup universe. Pioneer Square Labs, which I profiled earlier this year, is a prime example of this movement. On a mission to champion Seattle’s unique entrepreneurial DNA, Pioneer Square Labs cropped up in 2015 to create, launch and fund technology companies headquartered in the Pacific Northwest.

Boundless CEO Xiao Wang at TechCrunch Disrupt 2017

Operating under the startup studio model, PSL’s team of former founders and venture capitalists, including Rover and Mighty AI founder Greg Gottesman, collaborate to craft and incubate startup ideas, then recruit a founding CEO from their network of entrepreneurs to lead the business. Seattle is home to two of the most valuable businesses in the world, but it has not created as many founders as anticipated. PSL hopes that by removing some of the risk, it can encourage prospective founders, like Boundless CEO Xiao Wang, a former senior product manager at Amazon, to build.

“The studio model lends itself really well to people who are 99% there, thinking ‘damn, I want to start a company,’ ” PSL co-founder Ben Gilbert said in March. “These are people that are incredible entrepreneurs but if not for the studio as a catalyst, they may not have [left].”

Boundless is one of several successful PSL spin-outs. The business, which helps families navigate the convoluted green card process, raised a $7.8 million Series A led by Foundry Group earlier this year, with participation from existing investors Trilogy Equity Partners, PSL, Two Sigma Ventures and Founders’ Co-Op.

Years-old institutional funds like Seattle’s Madrona Venture Group have done their part to bolster the Seattle startup community too. Madrona raised a $100 million Acceleration Fund earlier this year, and although it plans to look beyond its backyard for its newest deals, the firm continues to be one of the largest supporters of Pacific Northwest upstarts. Founded in 1995, Madrona’s portfolio includes Amazon, Mighty AI, UiPath, Branch and more.

Voyager Capital, another Seattle-based VC, also raised another $100 million this year to invest in the PNW. Maveron, a venture capital fund co-founded by Starbucks mastermind Howard Schultz, closed on another $180 million to invest in early-stage consumer startups in May. And new efforts like Flying Fish Partners have been busy deploying capital to promising local companies.

There’s a lot more to say about all this. Like the growing role of deep-pocketed angel investors in Seattle have in expanding the startup ecosystem, or the non-local investors, like Silicon Valley’s best, who’ve funneled cash into Seattle’s talent. In short, Seattle deal activity is finally climbing thanks to top talent, new accelerator models and several refueled venture funds. Now we wait to see how the Seattle startup community leverages this growth period and what startups emerge on top.

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