What is Branch Pro, and why is the lender keen on becoming a full-fledged neobank?
Branch bought a microfinance bank in Kenya in 2023 after it secured a licence to operate a bank from the central bank of Kenya. Now, Branch operates as a neobank with additional products and services. In the future, its customers may be able to access business loans. Loan apps have been having a tough time in markets such as Kenya, and regulators have since instituted laws against personal data abuse, among other measures. These measures include policing cases of harassment for customers who cannot repay their loans and mandating that loan companies must have physical offices. The laws also require that digital credit companies obtain a licence from regulators. To this end, licensed digital apps have dropped from over 200 to just under 40. Other players, such as Branch, have since pivoted beyond loan services to further appeal to customers. Launched in 2016, digital lender Branch says it is now a neobank. This is coming on the heels of a revamp of its product portfolio aided by the acquisition of Century Mfb, a microfinance bank in Kenya. Branch, which operates in Kenya, Tanzania, Nigeria, and India, revealed that it has since spread its wings and looks forward to participating in the digital banking sector that has since been home to other neobanks like Fingo and NCBA Loop, a neobank offshoot by NCBA Bank. According to Branch founder and CEO Matt Flannery and the company’s managing director for East Africa Rose Muturi, the platform has been eyeing a bigger market beyond its basic online loans. For this reason, it acquired a microfinance licence from the Central Bank of Kenya (CBK), which allowed it to purchase Century Microfinance. Afterwards, Branch embarked on a journey to make its products and services fully neobank-based by closing most of Century’s physical branches across Kenya. At the moment, only one banking hall exists, which serves some enterprise customers it inherited from Century. According to MD Rose Muturi, while Branch acquired a banking license from the CBK, the regulator is yet to develop a regulatory framework for neobanks. For the moment, neobanks are mostly under ordinary banking laws, but Muturi hopes the CBK will formulate different regulations for neobanks. Branch offers three primary products: loans, savings, and payments to Branch-specific tills. Branch also allows customers to send funds to each other for free, saving them additional costs that arise from transferring funds to another mobile money wallet such as M-PESA. Using AI to manage borrowing risk Similar to other loan apps such as Tala, Branch, which has a customer base of 4.5 million customers, leverages AI tools, machine learning and algorithms to determine credit scores. These technologies are, however, not new. Still, AI has been gaining momentum over the last couple of months, thanks to its powerful feature sets and availability to millions worldwide. In this case, Branch leverages AI algorithms to evaluate the creditworthiness of borrowers. According to Branch CTO Anshul Agrawal, the tools analyse various data points, such as credit history, to assess the likelihood of loan repayment. Also, AI algorithms can analyse borrower profiles, financial data, and preferences to provide personalised loan recommendations. This is the reason different applicants have different recommendations; while those with poor scores are rejected, they can improve their repayment profiles for future credit. Branch Pro Following its transition into a neobank, Branch now has enterprise customers, such as businesses that may want facilities such as loans. For this reason, the lender has Branch Pro, which is available only in India, for now. Branch Pro offers loans to businesses. It uses different data sources and models to determine if a business qualifies for credit, such as bank statements. Although Branch reps cannot say exactly when the product will launch in other markets, there is likely a plan to expand it beyond India. Branch now owns an online bank in Kenya, with millions of customers who may want additional services such as business loans. The lender has since disbursed 16.4 million loans to 3.1 million customers in Kenya, with a cumulative value of KES 5.2 billion ($37.5 million). What they said “As the first neobank in Kenya, Branch International continues to transform the banking landscape through its innovative use of AI technology to implement a risk-based lending model that allows it to effectively meet the credit needs of all its customers, meeting customers’ diverse financial needs. By reducing credit risk with AI algorithms, Branch International ensures responsible lending practices that benefit both individuals and the broader economy,” said Muturi. What do you think about our stories? Tell us how you feel by taking this quick 3-minute survey.
Read MoreFrom scarcity to oversupply: The tech talent market does a 180
Capital isn’t the only ingredient that moves a startup from concept to success. The other is people. Without high-quality founders and the right team to support them, a venture will never move from pre-seed to the graduation of Series A. However, much like the Great Reset taking place on the continent with investment harder to come by, a different reset has happened in the talent market. Post-COVID, African tech talent benefitted broadly from a job market favouring workers. A high-quality developer from Abuja could be based in Nigeria and work for a large US tech company that pays in US dollars. Sounds great, right? Not too fast. The talent market has done a 180 COVID-19 forced reluctant global employers to experiment with remote work, but they learned quickly how remote work can be used to suit their needs. Many have since returned to an in-office model, but the lessons remain. If a ramp-up in internal capacity is needed quickly, the remote talent place is always a good place to start. However, as we move into Q3 and Q4 of 2023, the talent marketplace has changed again. The tougher macroeconomic environment has forced global employers, including tech giants like Google and Meta, to cut their workforces, with Africans bearing the brunt of these layoffs. Meta fired its entire content team in Kenya—a case that ended up in court—, while Twitter made large parts of its Africa team redundant, with some workers having only joined weeks before. In the market, other large employers with skilled tech workers on their books have felt the pinch, with workforces reduced across sectors to cut costs. The result is a one-two punch for the ecosystem. Startups are finding it harder to raise funds, but at the same time, the local talent they need to take that next step is suddenly back on the market. The worker market has done a 180. We are now in an employer’s market. In Nigeria, for example, the tech talents that left the country as part of the Japa wave in search of better working conditions and pay are not returning. There are exceptions, but for the majority, the journey is a hard one, and they do not want to sacrifice hard-earned gains. It’s a similar story across other markets in West and East Africa. What has changed is that even though these skilled tech professionals now live overseas, they are open to work offered in their home countries. The problem these workers now face is that the salaries they need to live abroad are not provided by local companies, with large corporations the exception. Even more importantly, hiring employers are dedicating more time to due diligence because they don’t want to bear the costs of a poor hire. They are also searching for candidates who have the potential to grow out of the roles they are hired for. Training internally is far cheaper than going to the market, even in a talent market that favours the employer. That means a preference has emerged for locally-based workers because these workers are easier to monitor, manage and pay than overseas candidates. The post-COVID salary hangover has arrived A different consequence of the post-COVID-19 pro-worker talent market is that salaries increased at rates not seen in years. Local firms raised salaries, as did their international competitors. Foreign firms held the advantage because of their deep wallets and the dollar exchange rates, allowing them to increase wages quickly and even offer payment in US dollars, placing extreme pressure on tech employers in East and West Africa. So far, in 2023, this salary bubble has burst. The salaries that tech workers expect to be paid are out of sync with what the market is willing to offer, with inflation and high-interest rates eating into employer margins. International and local employers in the tech sector are tightening their belts wherever possible. The candidates who understand these market dynamics and how best to navigate them have the best opportunity to find employment or re-employment in the tech sector and ecosystem. For example, there were CTO roles in Nigeria that were open for months on end in 2022. Now, employers can close applications within a few weeks because they have many available candidates to choose from. As the full effects of the interest rate cycle bear fruit in the coming quarters, competition in the tech talent market will only become more fierce. That doesn’t mean opportunities do not exist, but employers are wiser than they were 12 months ago, while tech workers must adjust to the macro dominating their respective sectors. Ololade Odunsi is Talent Acquisition Lead at Founders Factory Africa.
Read MoreAmidst sanctions, this AI chatbot is offering Zimbabweans an alternative to ChatGPT
To address his country’s barred access to OpenAI’s famous generative AI chatbot ChatGPT, Zimbabwean developer Kuda Musasiwa and his team have built alternatives—ZivAI and DanAI. These AI chatbots offer capabilities such as image and PDF generation, e-commerce, etc. Access to ChatGPT is barred in Zimbabwe as a result of the sanctions against the southern African nation by the US government and European Union. TechCabal caught up with Musasiwa to get more info on the chatbots, ZivAI and DanAI, the motivations behind building them, and his thoughts on the future of generative AI tools on the continent. Please tell us a bit more about ZivAI and the problem you are trying to solve through the chatbot Kuda Musasiwa: Before building ZivAI, I was leading the biggest online retail store in Zimbabwe called Fresh In A Box. At Fresh In A Box we leveraged a lot of AI technologies, especially for our customer service side of things and one of these technologies, called Shamu and then renamed Lucille, eventually became ZivAI. We built this bot because OpenAI had blocked Zimbabwe from accessing ChatGPT because of all the sanctions so we figured, using the open source API, we could build an alternative for our people. Leveraging our expertise in e-commerce, we were able to extend the chatbot’s functionalities beyond what ChatGPT has. For example, we have an image generator, PDF generator, news, and e-commerce capabilities, all baked into the chatbot. We have also integrated a store into the platform which will be onboarding vendors in Zimbabwe and across the region this week. ZivAI is basically a co-pilot for Zimbabweans and we have another product, DanAI, which seeks to cover the rest of Africa and do its co-piloting role in a more relatable African context. What was the motivation for building the chatbots? KM: Unfortunately, Zimbabwe is a sanctioned state so companies like OpenAI do not bother trying to launch their products here. Additionally, we don’t have payment gateways like Stripe which work here so that’s another challenge for our people if they want to use these global products. So as entrepreneurs, it was a problem or challenge that we wanted to solve. We then set out to build our own payment gateways to facilitate transactions and we incorporated abroad to have access to some developer tools we need to build a really strong product. In terms of challenges, which ones were most pressing when you were building the chatbots? KM: Honestly, I wouldn’t say we had any challenges. Our development team is incredibly world class and we are really good at what we do as evidenced by our track record. As Zimbabweans, the only thing we need is access and unfortunately, as a result of the aforementioned sanctions, sometimes we do not get this access but we always try to find a way. For example, a simple thing such as paying for a GitHub account or API access using a debit card is not as straightforward in Zimbabwe so we always have to find a way around that, but when it comes to expertise, I think we have that part well on lock. What traction have the chatbots garnered so far? KM: We have peaked at over 18,000 users on the platform at some point in the last few days. Additionally, we have authorised over 19,000 logins via Linkedin and Twitter. For the time being, we are not allowing Google and Facebook logins because we are trying to ensure that the traffic coming to the site via those platforms, which we anticipate will be a whole lot, does not throttle user experience. But we will be allowing access via those platforms very soon as we build up the resiliency of the platform. We have also now uploaded the application onto the Apple and Android stores to make sure that people can have this on their phone, seeing that going to a website might not be as sticky when 90% of people access the internet via their mobile phones. What are your thoughts on the advancement of generative AI chatbots in Africa? KM: All the chatbots that we have right now in Africa and in the world are the worst that they can ever be right now because every single day, they get superior and they get better. So I want to be clear, this is the new way that computing is going to be done. This is the new way productivity is going to be done. And as Africans, we have a choice. Do we sit back and watch the world develop around us and not participate? Or do we jump in at this particular point, and make it a point that we are a part of the conversation? Our biggest goal is to make sure that we have our own versions of these technologies that speak our languages and think like we do, hence representing us well in the international space. Interview has been edited for clarity and length
Read MoreFlourish Ventures wants to create systemic change and build fair financial systems in Africa
Efayomi Carr, principal at Flourish Ventures, talks to TechCabal about what he has learned from investing in Africa, how Flourish Ventures invests, and his view on the current state of the African funding landscape. Although he was born in Sierra Leone and mostly raised in the United States, Efayomi Carr began his entrepreneurial journey in Nigeria. His first taste of entrepreneurship started with Transparent Nigeria, a media startup he and his friend founded. “We saw an opportunity to disrupt the media space; we saw that many young journalists and interesting reporters just didn’t have an outlet for their stories,” Carr, now a principal at Flourish Ventures, said. “That was when I got the bug for leveraging entrepreneurship to create interesting products and enable others to facilitate success for other people and encourage other people to have opportunities,” he continued. That bug has led Carr to work as head of marketplace at Jumia, and as chief financial officer at Lori; after which he covered Africa for Quona Capital, a venture capital firm. Between those roles, he served as an advisor to the Sierra Leone government during the height of the Ebola virus crisis. Carr has invested in 7 African startups at Flourish Ventures, including FairMoney and MaxAB. He also co-founded Madica, a Flourish Ventures investment programme for African startups that focuses on startups “that receive a disproportionately small share of venture funding.” Over a call with me for TechCabal, he talks about what he has learned from investing in Africa and his perspective on venture funding in Africa. Muktar Oladunmade: What’s Flourish Venture’s investment thesis for Africa? Efayomi Carr: We’re a global early-stage venture capital firm headquartered in Silicon Valley, but we’ve invested in Africa for over 10 years. In Africa, we focus on the impact of our investments and how the companies we invest in engage with their end users and businesses to create solutions. We’re driven by a core thesis about creating systemic change and building fair financial systems. Our core mission is to invest in companies and individuals who can create financial products and services that can level the playing field and give opportunities to more people and businesses, which can generate wealth and opportunity. We have invested in everything from digital credit, challenger banks, payments, and embedded finance to achieve this. MO: What do you look for in founders and startups before investing? EC: For founders, one important quality that very few have is being detail-oriented. You want someone who is very detail-oriented, can get their hands dirty, and knows their numbers, customers, and product incredibly well. They should have a high-level vision that they can articulate. We want someone who knows where their industry and customers are going so that their business can anticipate changes and be at the forefront. It’s challenging to find a founder with those overlapping qualities of attention to detail and understanding of intricate problems that can articulate a high-level vision and motivate others as a leader. That’s the most important thing to look for in a founder, aside from the obvious things like integrity and experience. For businesses, we look for businesses that can affect real change. One of the unique opportunities of working in Africa is that there are a lot of problems that need solutions. We are all in a position where we can impact our communities. So we want to invest in businesses that can affect that change and create solutions. We look at these solutions that can impact people and scale so that they can impact a broad range of people over time. MO: What red flags do you look for, and how do you perform due diligence? EC: For founders, their track record is the most critical way to evaluate someone. When doing diligence, we talk to previous and current colleagues, bosses, and employees to understand the founder’s character, how they operate, and how they handled past challenges. For businesses, we use standard elements like financial, legal, and business due diligence and how businesses interact with their customers. We have an advantage over others because we have a longer track record. We have companies across six or seven African markets with a network of experts and investors that can give us quality intel. MO: What does your ticket size look like? EC: We typically invest $1 million to $5 million as our first check. MO: Besides macroeconomic conditions, are other factors driving the decline in VC investments? EC: People always point to the amount of capital deployed to show the success of a venture ecosystem, and that’s misleading because venture funding, like any financial asset class, is a returns-based business. It’s not a deployment-based business. If you look at the returns investors see in venture capital, they’ve gone down. We haven’t seen the expectations that investors had two or three years ago. Everyone needs to reassess what the overall potential is for this asset class. In Africa, every year, the amount of capital being deployed increases, yet we haven’t seen a spike in exits, substantial acquisitions, or IPOs. When we see this money coming in but don’t see investors getting returns, it means that over time, there’ll be more reluctance to deploy more capital. Macroeconomic conditions are a huge driver for seeing capital dry up. The other driver is that there has been a different return profile, so investors are finding that there might be less of an opportunity than they originally had. This isn’t irreversible by any means. That trend can shift, especially as exits happen over the next few years. But that’s really what the landscape looks like today. MO: Which is more important, the pitch, the leadership, or the business model? EC: This comes down to the stage. For me, the pitch isn’t a very important factor. It’s a good sign and can show the founder’s credibility if they can attract other investors and rally a team. At the early stages, leadership is most important. Do they have these qualities we look
Read MoreHelium Health secures $30m funding to power healthcare financing
The Lagos-based health tech company secures $30 million to power credit financing to healthcare providers via its fintech product, HeliumCredit. Helium Health, a Nigerian health tech company, has raised $30 million in a Series B funding round. Helium Health will use the funding to expand the reach of its fintech product, HeliumCredit. With its latest round of funding, Helium Health has raised a combined amount of $42.12 million, with a notable $10 million Series A funding secured in 2020 AXA IM Alts led this round of funding with participation from Capria Ventures, Angaza Capital, Anne Wojcicki (Founder of 23&Me) and Flatworld Partners. Existing investors Global Ventures, Tencent, Ohara Pharmaceuticals, LCY Group, WTI and AAIC also participated in the round. Founded in 2014 by Adegoke Olubusi, Tito Ovia and Dimeji Sofowora, Helium Health has emerged as one of the companies highlighting the role technology can play in adequate healthcare records management in Africa. Through this funding, the company will increase its reach in offering healthcare providers access to credit via its fintech product, HeliumCredit. HeliumCredit was launched in 2020 to provide hospitals, clinics, pharmacies and diagnostics centers with loans to purchase medical equipment, medications, and business expansions of these health facilities. According to Helium Health, HeliumCredit has given over $3.5 million in loans to over 200 healthcare facilities. Helium Health is set to launch HeliumCredit in Kenya this year. The Company will also increase its lending portfolio to 1,000 healthcare facilities by 2024 in partnership with the U.S. International Development Finance Corporation (DFC). How Helium Health assembled a star founding team “We believe in a future where good healthcare is a reality for all Africans, not just the few. We are deeply committed to supporting both private healthcare providers and public health stakeholders with finance, technology, and data to achieve that vision,” said Adegoke Olubusi, Helium Health CEO/co-founder while speaking on the funding. “We are delighted to have such seasoned healthcare investors accompany us on our journey.” Noor Sweid, Managing Partner, Global Ventures, one of the participating investors in this round expresses confidence in Helium Health and its suite of products. “We have seen first-hand the evolution of Helium Health over the years. The leadership team has a deep understanding of Africa’s healthcare sector and knows how to build products that meet its nuanced needs,” he said. Helium Health says it will also continue to scale its SaaS suite for healthcare providers through HeliumOS, its Electronic Medical Records and Hospital Management Information System (EMR/HMIS) solution
Read MoreChipper Cash’s latest layoffs affect COO, Kenya’s country director
Chipper Cash laid off 50 employees in December 2022. It more than doubled the number in March 2023. Last week, another round of layoffs saw the COO leave the business. Last week, the African fintech startup Chipper Cash laid off at least ten staff members in the company’s third round of layoffs in under one year. A source told TechCabal that the vice president of marketing, Alicia Levin, the global chief operating officer, and Leon Kiptum, the country director for Kenya, were part of those affected by last week’s layoffs. Several product managers were also fired. Chipper Cash acknowledged these layoffs in an email to TechCabal but did not disclose the exact number of affected employees. Part of Chipper’s email said, “As part of our previously announced restructuring as an organization to focus on core products and markets, we recently made redundant a very small number of roles across our global teams.” This marks the third time that Chipper Cash has trimmed its workforce. Toward the end of 2022, ChipperCash fired over 50 employees. The layoffs affected staff members across different departments. At that time, the reasons behind the company’s decision to downsize its workforce remained unclear. The move raised concerns about the potential impact on the company’s operations and prospects. In February 2023, Chipper Cash fired over 100 workers, affecting about a third of its workforce. According to insiders, Chipper Cash CEO Ham Serunjogi acknowledged to employees the significant challenges the company was facing. He justified the layoffs by citing the ongoing economic difficulties and the uncertainty surrounding the future. Ham added the importance of adaptability and responsiveness in the business environment, emphasizing necessary changes to ensure long-term success and outpace competitors. Later, it would emerge that Chipper Cash would exercise careful resource management, prioritizing essential aspects of the business. This included streamlining efforts to concentrate on core markets and products to boost profitability and thrive in those areas. In March 2023, insiders disclosed that Chipper Cash had been exploring potential options before the collapse of SVB. The company allegedly received multiple merger and acquisition proposals from various parties, which were evaluated to different extents. However, no final decisions were made, and the company may have chosen not to pursue any options. Chipper Cash reportedly clarified that it had never intended to be acquired. However, receiving such proposals was a common practice for them. In 2021, the firm raised $250 million in a funding round led by Silicon Valley Bank (SVB) and FTX, which have since collapsed. This funding round valued the company at approximately $2 billion. What do you think about our stories? Tell us how you feel by taking this quick 3-minute survey.
Read MoreWith VC funding hard to come by in Africa, DFIs are coming to the rescue
Development finance institutions are now playing are more active and direct role in Africa’s VC funding ecosystem. In November last year, the International Finance Corporation launched a $225 million venture capital platform to back early-stage startups in Africa, the Middle East, Central Asia and Pakistan. The platform will be backed by an additional $50 million from the Blended Finance Facility of the International Development Association’s Private Sector Window, which helps de-risk investments in low-income countries. Africa is earmarked to receive approximately $180 million from this VC funding initiative over a period of three years. The development finance institution (DFI), which is a member of the World Bank, stated at the time that it would make equity and “equity-like” investments in tech startups to “grow them into scalable ventures that can attract mainstream equity and debt financing.” The IFC is the latest DFI to dabble in venture investing in Africa. The British International Investment (BII), formerly known as the Commonwealth Development Corporation, also announced that it would deploy $500 million into startups by the end of 2026, and half of that amount has been earmarked for African tech companies. The US’ International Development Finance Corporation (DFC), in conjunction with other DFIs, also committed to investing $80 billion in African businesses over 5 years as well as the African Development Bank (AfDB), which committed to investing $618 million in more than 200 Nigerian technology and creative sector startups. As VC funds and institutional investors slow down their check writing due to the global economic downturn, the active involvement of DFIs in African VC could not have come at a better time. “Any LP is important, but because the DFIs have a long-term outlook, they have seen downturns before. So it is more about how to work together to manage through the downturn and sharing lessons learnt from previous downturns,” said Keet van Zyl, co-founder and partner at Knife Capital, a Cape Town-based venture capital firm. Knife Capital received a $10 million investment from the IFC last year for its Knife III fund. IFC was an anchor LP in the investment and together with the Mineworkers Investment Company (MIC) and the SA SME Fund, were the first to commit to Knife Fund III which seeks to make late stage investment in startups. According to van Zyl, beyond just writing the check, the IFC’s investment also helped to shape the investment agreements in a way that made it easier for other funders to come in on the same standard terms. “The IFC also regularly engaged with Knife to share deal flow and co-investment opportunities across the continent. The backing also reassured entrepreneurs that Knife has credible backers that could potentially follow on in future rounds due to their funding capabilities. It also gave other LPs a level of comfort to engage because of the rigorous due diligence done by an established DFI like the IFC,” added van Zyl. A DFI’s perspective According to the IFC, its investments in Africa’s venture capital sector are countercyclical, helping to cushion the blow struck by rising interest rates and higher inflation which is driving down valuations in the tech sector and making it much harder for entrepreneurs to raise capital. The IFC also adds that it is often one of the only international investors on African startups’ cap tables when they first invest, helping to shepherd other institutional and strategic investors into future funding rounds. “IFC takes an ecosystem approach to supporting VC activity in Africa, an important role we see for DFIs more broadly. By supporting the VC ecosystem growth, we can encourage other investors to finance Africa’s growing startups. We do this by making direct investments and supporting other funds,” said William Sonneborn, global director of disruptive technologies & funds at IFC. In keeping with its ecosystem approach to boosting VC activity, IFC launched the Startup Catalyst in 2016. The Startup Catalyst is a platform designed to invest in incubators, accelerators, and seed funds supporting innovative early-stage startups in emerging markets through mentoring, networking, and funding. To date, the program has supported 19 accelerators and seed funds (including 5 in Africa) that have invested in over 1,180 startups in 24 emerging markets. The IFC has also recently doubled the program with a new pool of $60 million to expand support for incubators, accelerators, and seed funds in the most nascent venture ecosystems, including startups focusing on strategically important areas such as climate innovations, gender and inclusion. IFC claims to have a long-term commitment to Africa, and to that end has invested and mobilised over $1.3 billion in capital for the continent over the last 8 years in support of the disruptive technology and venture capital ecosystems. “In Africa, the digital economy has the potential to contribute $712 billion to the continent’s GDP by 2050. This offers a significant opportunity to support innovation, job creation and new ways to deliver critical services,” added Sonneborn. For the BII, Sonal Premjee, investment manager in technology and telecoms, the rationale behind backing African startups is the knowledge that tech-enabled companies, which are inherently highly scalable, have the ability to drive inclusive economic growth resulting in transformational impact. “BII has been investing in emerging markets, including Africa, for 75 years, and continues to carry out our mandate by supporting private sector growth and innovation in Africa, South Asia and the Caribbean. Technology is a key route to achieving this objective and will continue to be a focus for BII. As such, we will maintain our pace of investment in African VC,” she told TechCabal. Going into the future With the VC downturn showing no signs of stopping anytime soon, the role of DFIs in supporting Africa’s VC ecosystem and consequently, its tech startup ecosystem, remain vital. According to van Zyl, going forward, the DFIs will target specific regional ecosystem expert fund managers in a co-investment and follow-on investment model, with VCs assuming the commercial lead role. “For instance, Knife is finalising an investment in East Africa where 3 DFIs are
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The leading African tech moves from May 2023
1. Funding: East Africa leads the way In May 2023, African startups raised $621.8 million from 34 fully disclosed* raises. Compared to May 2022 where African startups raised $437.1 million, this shows a 42% year-on-year increase. The number is also a significant increase from April 2023 where the total amount raised was $129.8 million, a whopping 379% increase! Per region, East African startups led the way with the majority of the funding—about $414.7 million representing 64.6% of the total funding. These figures are led by fintech M-Kopa’s $255 million raise, and Sun King’s recent $130 million raise. Image source: Timi Odueso/TechCabal Per sector, the top from May 2023 are fintech, cleantech and mobility/logistics. Fintech leads with $442 million (68.9%), cleantech with $130 million (20.3%), and mobility/logistics with $39 million (6.1%). Image source: Timi Odueso/TechCabal The top 5 disclosed deals of the month are: Kenyan asset financing startup M-Kopa’s combined $255 million debt-and-equity financing round. Kenyan cleantech SunKing’s $130 million securisation deal. South African digital bank TymeBank’s $77.8 million pre-Series C round. South African fintech E4’s $52 million acquisition led by Infinite Partners. Nigerian Logistics startup Sabi’s $38 million Series B funding. *Note: This data is inclusive only of funding deals announced in May 2023. Raises are often announced later than when the deals are actually made. This data also excludes estimated grants from accelerators like Techstars or Y Combinator. 2. Big deals: Ghana secures $3 billion from IMF, MTN gets $320 million Topping the big non-startup deals of May 2023, Ghana secured a $3 billion bailout from the International Monetary Fund (IMF). The approved funding will serve to replenish Ghana’s foreign-exchange reserves, which have seen a significant decline of nearly 50% since their peak in August 2021. Meanwhile, MTN is sticking to its “everywhere you go” mantra with a $320 million deal. The deal, which comes as part of a partnership with development fund Africa50, will see the creation of a fibre optic network between 10 African countries by 2025. 3. Regulations: Nigeria’s new ICT bill resurfaces amidst pushback Amendments to the regulatory act of Nigeria’s ICT agency, NITDA, made a stir in May. Last month, the Senate Committee on ICT and Cybersecurity also recommended that the Senate pass the new National Information Technology Development Agency (NITDA) Act. The recommendation comes as the bill faces intense opposition from ICT leaders who have labelled the bill a “bundle of chaos”. Nigerian telecoms also wrote to the National Assembly, requesting exclusion from the bill that could bring double taxation and regulation to their doorsteps. 4. Fintech: Kenyan government launches unified QR code system In East Africa, May saw the Kenyan government implanting financial interoperability with the launch of a unified QR code system. The Kenya Quick Response Code Standard 2023, or the “KE-QR Code Standard 2023”, will offer all payment service providers regulated by the Central Bank of Kenya (CBK) the ability to process payments using QR codes. 5. Crypto: Zimbabwe launches digital currency, sells $39 million worth Zimbabwe kicked off its digital currency early in May. Post-launch, the country faced criticism from the International Monetary Fund (IMF) who cautioned that the gold-backed currency would not solve its fiat currency devaluation problems, and could deplete the country’s gold reserves. Despite this, the Reserve Bank of Zimbabwe (RSV) reportedly sold 14 billion Zimbabwean dollars’ worth of gold-backed digital tokens—worth around $39 million. 6. Acquisitions: Safaricom buys M-Pesa Holdings for $1 In the deal of the month, Vodafone sold the trust company M-Pesa Holding Company Limited (MPHCL) to Safaricom for $1. The holding company presently has €1.2 billion ($1.3 billion) in customer funds which Safaricom could invest in short-term securities. Safaricom will need the money after acquiring a $150 million licence to operate mobile money services in Ethiopia. 7. Regulations: Nigeria suspends licences of 179 microfinance banks While April may have seen Nigeria approving licences for loan apps to operate in the country, May meets the country revoking licences in other sectors. Last month, the Central Bank of Nigeria (CBN) revoked the licences of 179 microfinance banks (MFBs), four primary mortgage banks, and three finance companies. The licences were revoked because the institutions didn’t comply with regulatory requirements or carried out unauthorised businesses. Part of the affected MFBs included Eyowo, a Nigerian digital bank whose customers are finding creative ways to withdraw money after the bank suspended all withdrawals pending its licence re-approval. 8. Africa + Big Tech: Kenya rules against Sama again, Bolt opens engagement centre in Nairobi Continuing the trend from previous months where Kenyan courts have ruled that they have the jurisdiction to hear cases against big tech companies like Meta, Kenya once again—in May—held the tech behemoth accountable. Last month, Kenya’s Employment and Labour Relations Court ordered the content moderation service Sama to pay its employees. This comes after Sama, Meta’s outsourcing partner, refused to pay its content moderators their salaries due to the moderators’ court case against them. Meanwhile, in contrast, could Bolt be finally taking its Kenyan drivers’ complaints seriously with the launch of its Nairobi engagement centre? 9. Telecom: Mozambique joins the 5G gang In May, East Africa’s Mozambique became the newest African country to launch 5G. Early in the month, telecom Vodacom announced the launch at selected sites in Maputo, Matola; the central area of Nampula; downtown Nacala, Munhava, Maquinino, and Chipanga neighbourhoods; Beira; and Tete. So far, at least a dozen African countries have launched 5G commercially while many more are reportedly running trials across their respective countries. 10. Economy: IMF says Nigeria’s e-naira is failing Contrary to claims by the Central Bank of Nigeria’s (CBN) governor, Nigeria’s digital currency might be a bust. In May, the International Monetary Fund (IMF) revealed that 98.5% of e-naira 14 million wallets have not been used even once, two years after its launch. According to the IMF, the total number of retail e-naira wallets amounted to about 860,000, which is equivalent to just 0.8% of Nigeria’s active bank accounts.
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Next Wave: Can Africa’s startup ecosystem survive its data gap?
Cet article est aussi disponible en français <!– In partnership with –> 4 June 2023 Can Africa’s startup ecosystem survive its data gap? Photo by Clauddio Scharwz on Unsplash This is a guest contribution from Ayomide Agbaje, Analyst at TechCabal Insights. By now, it is trite to say that the African startup ecosystem has become a hotbed of innovation, entrepreneurial activity and digital transformation, showcasing remarkable growth and resilience in recent years. With its most recent celebration by the global technology community at GITEX Africa 2023 this past week in Marrakech, Morocco, the ecosystem has witnessed a 40% increase in the number of tech startups and investments rising from $1.3 billion in 2020 to $4.85 billion in 2022—indicating significant growth and investor confidence. However, a critical challenge threatens to undermine this progress: the data gap. This edition of The Next Wave confronts the data gap head-on, with a closer look at its implications and solutions. In April 2023, I engaged with a tweet by Lois Adeniji, a startup founder based in Nigeria, lamenting the lack of data in the African startup ecosystem and the need for access to market research reports. “This thing is so frustrating! You literally have to do a fresh survey for every piece of information you need,” a Twitter user commented. This frustration resonated with many, including myself. As someone analysing African tech with data stories at the continent’s premier digital economy consultancy, TechCabal Insights, I understand firsthand the difficulties the ecosystem faces due to the scarcity of up-to-date, timely, and valuable data insights. Let’s face it: most available market data in Africa, often collected by state agencies, are either outdated or lack the necessary granularity for accurate decision-making and specific answers. More than anything, this serves as a stark reminder of the urgency to bridge the data gap on the continent. Impact on Africa’s ecosystem’s fundraising drive Unfortunately, this data gap isn’t just an inconvenience—it affects fundraising as well. Regardless of the funding trackers you consult, the data shows that funding to African startups has taken a significant hit—with the ecosystem, for instance, experiencing its largest year-on-year quarterly drop in Q3 and Q4 2022 at 52% and -63%, respectively. While other factors amid the global funding meltdown may have contributed, the lack of data that limits investors’ knowledge to fully evaluate opportunities in the ecosystem is also not far-fetched. Investors rely on data to make informed decisions, and the absence of reliable and comprehensive data on market potential and growth prospects across the African tech startup ecosystem leaves them cautious and hesitant. This limited knowledge translates into reduced investments and slower dealmaking, hindering the growth of early-stage companies. Startup funding to Africa is on the decline | Chart by Ayomide Agbaje, TC Insights The latest State of Tech in Africa report (Q1 2023) by TechCabal Insights revealed a trend of stricter due diligence accompanying the deployment of VC funds by tech investors, resulting in a sharp slowdown in dealmaking across the continent. In March 2023, African startups secured only $66 million in capital, a new low since at least August 2020, according to funding data from the Big Deal. While multiple factors may contribute to this decline, data gaps can significantly reduce due diligence. Investors face difficulties accessing accurate financial information, historical performance data, and customer insights. The lack of verifiable data and metrics heightens risk perception and prolongs due diligence periods, as investors, particularly those unfamiliar with the African region, seek alternative means to fill information gaps. According to a survey by Partech Africa, 80% of African startups struggle to access early-stage funding. Africa’s data gap creates an additional barrier, making it even more challenging for early-stage startups to secure the necessary funding for growth, underscoring the urgency for data-driven insights to attract capital. Partner Message Thank you for being part of Africa’s largest tech event, the innaugural GITEX Africa in Marrakech, Morocco! Keep in touch Intelligence will help African startups To address this challenge, African intelligence firms with local expertise need to rise up to the occasion by creating high-valued data products about African markets and the tech ecosystem. By directly collecting data from consumers and providing market insights backed by real-time information on Africa, these firms can bridge the data gap. Armed with unit-level data on consumer behaviour, product preferences, purchase frequency and geographic locations, startup businesses can include adequate information in their data rooms for fundraising and avoid making strategic decisions blindly. Such robust data will also empower African startups to strategically expand to favourable demographics, identify growing markets, scale customer acquisition and enhance competitiveness in line with disruptive trends shaping the continent. Also, data-driven rankings, like the recent Financial Times/Statista ranking data of Africa’s fastest-growing companies, is a positive step towards bridging the data gap on the continent. These rankings offer much-needed visibility to the African startup scene, assisting investors, policymakers, and industry stakeholders in identifying sectors with growth potential and focusing their efforts to support the continent’s digital economic growth. Partner Message In 5 minutes, you can get your health insurance, motor insurance, and life insurance on the P2Vest app. Available on Google Play & App Store. Get InsuranceParasol True progress requires collaboration Collaboration with development agencies, big tech companies, and research institutions is crucial to bolster data collection and analysis efforts by investing in data analytics and commissioning custom research reports. By sharing data feeds, industry forecasts and proprietary datasets, these partnerships can fill the data gap and empower startup businesses with the actionable, data-driven insights they need to thrive. Moreover, establishing industry-wide standards, such as common metrics and reporting frameworks, will enhance the reliability and comparability of startup-related data, enabling accurate assessments and benchmarking. Embracing a data-driven future Now, more than ever, Africa needs to boldly embrace data as a strategic asset. By experimenting with innovative data collection methods, harnessing advanced analytics, and providing actionable insights through collaboration, we can lay the foundation for a robust data-driven startup ecosystem. Empowering startups, investors, entrepreneurs, and policymakers with
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Next Wave: Every company will be a tech company
Cet article est aussi disponible en français <!– In partnership with –> This is a guest contribution from ’Lamide Young and Judith Hassan of Gumi & company Towards the end of 2022, Nigeria’s Central Bank announced it would be redesigning the country’s currency notes. A short time frame to deposit old notes and a consequent insufficient supply of new notes created a cash crunch that has been well documented and criticised. The scarcity meant businesses of all sizes had to adapt, including friendly neighbourhood ones run by owners who had withstood cashless payments for years or simply had no real need for it. Suddenly, people were buying everyday goods from local shops and making payments using their phones or ATM cards. Government data reported a year-on-year increase in mobile transfers of 230.6% in January 2023, while the Nigeria Interbank Settlement System (NIBSS) also reported a 118.2% increase in the value of transactions. Owners adapted because their businesses depended on it. Those who had already embraced digital systems and tools prior to all this were top-of-mind for customers who were careful about how they spent whatever physical cash they had. For businesses and service providers that did not adapt, they lost business to those who did. Nigeria’s cash limit policy was a boon for mobile payments | Charts by Ayomide Agbaje, TC Insights Nigeria’s recent experience is one case in many pointing to this truth: digital transformation is no longer an option for organisations; it is a requirement. It is a moving train heading towards the future, and those who do not get on board will be stuck in a world that is sure to vanish soon. Whether an organisation is a “digital native” or not, the promise and potential of (exponential) technology, data, and new ways of creating and delivering value, is immense. Here are the facts Organisations that aren’t digitised lag behind sector leaders by as much as 15% in market share and earnings. Making the choice to undergo digital transformation can either increase industry contribution to GDP over the next three years by over $1.25 trillion or reduce it northward of $600 billion. For emerging-market organisations, once the train is missed, catching up is difficult. Partner Message Join hundreds of African tech entrepreneurs, investors, media and ecosystem stakeholders at Africa’s biggest tech gathering in Morocco! Register now A common argument for not trying to catch up with digital transformation is that the markets organisations in Africa (especially) and the Middle East serve are themselves behind in their adoption of the core technologies that enable the digital economy (the internet being the cornerstone). There is also the lack of appropriate infrastructure to enable organisational efforts. Reimagined value does not seem crucial because the belief is that there will be insufficient consumers of it, if any, resulting in white elephants. Is there a point then? Where there is a lag, and where there is leadership, there are opportunities common and unique to both regions. In Africa, for example, initiatives such as the Digital Economy Initiative for Africa, by the World Bank, as well as the African Union’s Digital Transformation Strategy for Africa show the direction of both regional and global agenda to integrate countries which are falling behind into the digital economy. In the Middle East, projections show that the digital economy is expected to hit $500 billion by 2030 and contribute a 40% increase to GDP per capita. Data like this points to opportunities where they abound, as well as a commitment to creating them, where they seemingly do not. Sponsored: Meet the Max mafia What to do then? Today, the technology industry is one of the fastest growing, with major players in the business world being tech companies. These organisations are somewhat seen as separate from more traditional entities that do not focus on technologically-based goods and services. However, the evolving reality of our world is that technology can no longer stand separate as a descriptive term for certain kinds of companies. Today’s technology company is not (only) the company that builds apps or cool gadgets, as technology becomes a core part of value created (products and services), as well as operations for organisations across sectors and industries. In the 21st century, and beyond, every company will have to be a digital organisation, powered by technology, because that is what it will require to participate in and thrive in a digital economy. This is especially crucial for organisations in Africa and the Middle East (AME) where major gaps exist in infrastructure, skill of working populations, approaches to work, technology adoption, policies, and use of data. Bridging organisational gaps, putting in place the right foundational systems, and doing it today, will determine which organisations make it to the future, and end up defining it. Learn how organisations in Africa and the Middle East can radically innovate the way they currently work and increase stakeholder value through exponential technologies in our Digital Transformation Cheat Sheet. Author Profiles ’Lamide Young and Judith Hassan are, respectively, innovation & strategy leader, and knowledge & communications manager at Gumi and Company, an innovation factory working across Africa and the Middle East. Partner Message Will you join us? Book your pass to Europe’ biggest Startup and Business event today. Get tickets now We’d love to hear from you Psst! Down here! Thanks for reading The Next Wave. Subscribe here for free to get fresh perspectives on the progress of digital innovation in Africa every Sunday. Please share today’s edition with your network on WhatsApp, Telegram and other platforms, and feel free to send a reply to let us know if you enjoyed this essay Subscribe to our TC Daily newsletter to receive all the technology and business stories you need each weekday at 7 AM (WAT). Follow TechCabal on Twitter, Instagram, Facebook, and LinkedIn to stay engaged in our real-time conversations on tech and innovation in Africa. If you liked this edition of Next Wave, please share with your friends. And feel free to
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