Next Wave: Agritech are startups outpaced by traditional brokers. What can be done?
Cet article est aussi disponible en français <!– In partnership with –> <!–TopBanner Join us for TechCabal Battlefield, Moonshot’s startup competition where you can showcase your startup idea to a global audience and an esteemed panel of judges and stand a chance to win up to 2.5 million naira in funding for your business! Click to register for TC Battlefield First Published 10 March, 2024 Tech-driven agricultural startups (agritech) are driving innovation by connecting different players in the agricultural sector. They are particularly helpful for rural farmers, linking them directly with urban buyers. Ghana-based AgroCenta, for example, offers an online marketplace for farmers’ porduce while Hello Tractor uses a mobile app to facilitate tractor rentals for small-scale farmers. Nigeria’s ThriveAgric takes a more comprehensive approach by providing a mobile platform that connects farmers to buyers and suppliers to credit. However, convincing farmers to collaborate with agritech companies has proven challenging since traditional brokers remain influential in controlling crop and market access. It makes sense because comparing traditional brokers/middlemen with B2C or B2B businesses, there isn’t much of a difference beyond the technology layer. B2B and B2C penetration challenges Agritech startups encounter obstacles when competing with traditional vendors who connect farmers to buyers due to entrenched relationships, local knowledge, and limited need for technology adoption among farmers. According to a report filed by Mozilla about the digital startup ecosystem in Africa, traditional vendors have built long-standing trust and familiarity with farmers, taking advantage of their deep local networks and understanding of farmers’ specific needs. This has made it challenging for agritech startups to penetrate the market, especially in rural areas where technology adoption is low and dependence on traditional farming methods is strong. Cultural and language barriers have also complicated the crisis, as traditional vendors often speak the local language and understand the cultural norms of farming communities, enabling them to establish rapport and trust more easily than agritech startups. Next Wave continues after this ad. The Algorithm is a TechCabal vertical that focuses on the backend of the creator economy. We’ll bring you stories that delve into the creation process, the business of being a content creator, interviews with creators, and everything else about online creators! Read the second story here. Overcoming these obstacles will require agritech startups making targeted efforts to build trust, provide localised support, and address the cultural and language barriers that impede the adoption of agritech solutions in farming communities. Despite agriculture being a crucial economic sector, investment in agritech has attracted little funding over the last couple of years. According to the aforementioned Mozilla report, in 2021, the African agritech sector received $95.1 milliom, which was 4.4% of total funding for tech startups in Africa, marking a notable jump from $59.9 milliom (8.6% of total) in 2020. Partner Content: Read: How Filmmakers Mart is changing filmmaking in Africa by solving production problems here. Now, what happens if these barriers are not overcome? Agritech startups, particularly those linking farmers to vendors, face challenges that may worsen in Africa due to rural poverty and natural-resource scarcity. These challenges include addressing competing claims on natural resources, ensuring the inclusion of the poor in the development process, and effectively integrating small-scale farmers into value chains. To address these issues, agritech startups must tailor their approaches to designing the brokering role. Before establishing market operations, they should analyse innovation system imperfections and gauge stakeholders’ willingness to support or collaborate with them. Building trust and credibility among farmers is essential for success in the agritech industry. Agritech firms should consider multiple functions required at different stages of innovation but avoid applying them as a fixed template. Flexibility is key, allowing for the reassessment of context, needs, and opportunities as necessary. This also helps networks adapt accordingly. Facilitating interaction is a dynamic process that demands continuous attention to build mutual understanding and trust, particularly in response to evolving visions and networks. Next Wave continues after this ad. Talent PEO Africa launches in Kenya, offering comprehensive HR solutions for businesses. From EOR services to recruitment and HR consulting, we simplify operations for seamless growth. Partner with us to tap into Kenya’s talent, navigate regulations, and achieve success. Contact us at www.talentpeo.com or kenya@talentpeo.com. Sometimes, agritechs face conflicts of interest that require strong conflict management and mediation skills. They must navigate contrasting demands and opposition from other actors in innovation systems resistant to change. Transparency about actions and interventions is key to avoid misinterpretation, particularly in countries with weak governance where challenges like corruption and favouritism may come up. And despite resource dependencies, agritech firms should avoid being perceived as “hidden messengers” for the government or other parties, as this can undermine their credibility. Kenn Abuya Senior Reporter, TechCabal Thank you for reading this far. Feel free to email kenn[at]bigcabal.com, with your thoughts about this edition of NextWave. Or just click reply to share your thoughts and feedback. We’d love to hear from you Psst! Down here! Thanks for reading today’s Next Wave. Please share. Or subscribe if someone shared it to you here for free to get fresh perspectives on the progress of digital innovation in Africa every Sunday. As always feel free to email a reply or response to this essay. I enjoy reading those emails a lot. TC Daily newsletter is out daily (Mon – Fri) brief of all the technology and business stories you need to know. Get it in your inbox 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 reply with thoughts and feedback. We welcome those. 18, Nnobi Street, Surulere, Lagos, Nigeria View in Map You received this email because you signed up on our website or made purchase from us.If you know longer wish to recieve these emails, please unsubscribe
Read More
👨🏿🚀TechCabal Daily – Showmax’s legal showdown
In partnership with Share this newsletter: Lire en Français اقرأ هذا باللغة العربية Good morning If you’ve ever dreamed of starting your own GRWM videos, we’ve got a sweet read for you. In this edition of The Algorithm, my colleague Hannatu spoke to three lifestyle content creators to discover the secrets to becoming a successful social media vlogger. Much like your mood swings, these creators say the secret is showing up every day…among other things. Read up here. In today’s edition Lagos moves to sanction Uber Showmax faces fresh lawsuit IFC sues Africa Talking Gro Intelligence lays off 60% of its staff How many African companies make revenues worth $1 billion? The World Wide Web3 Job openings Mobility Lagos state government to sanction Uber Ever wondered how safe your late-night Uber ride truly is? Well, the Lagos State Government might be taking a peek under the hood. The government wants Uber to supply records of users’ trip information to ensure the safety of Lagosians. Uber, however, has failed to comply with this regulation. The news: Now the Lagos State Government is flexing its regulatory muscle, threatening sanctions against Uber Nigeria for failing to comply with “essential data sharing agreements”, which mandate the company to share user and trip information with the Lagos government. Now, this data exchange can be a double-edged sword. For riders, it could mean faster emergency response times if things go south. On the flip side, for Uber, complying could translate to hefty costs in integrating new data-sharing systems. But non-compliance could be a recipe for a Lagos-sized headache—think hefty fines or even a complete shutdown as with Gokada, ORide or MaxRide. Uber’s no stranger to regulatory battles worldwide. Singapore, for example, mandates real-time trip tracking for safety reasons, essentially becoming a backseat passenger on every Uber ride. India has also explored similar measures. So, what does this all mean? It’s a sign of the times. Governments are increasingly flexing their muscles in the digital age, demanding more transparency from tech giants. While Uber wrestles with Lagos’ demands, one thing’s for sure: finding a solution that balances safety with privacy concerns will be key to keeping those Uber trips rolling in Lagos. Access payments with Moniepoint You don’t have to take our word for it. Give it a shot like he did Click here to experience fast and reliable personal banking with Moniepoint. Streaming Showmax faces legal battle in new documentary premiere Showmax started its reboot with a sleek UI design and an expansive content library to keep you glued to your screens. Now, the streamer is making new additions to keep you at the edge of your seat. What additions? Showmax is set to begin streaming “Tracking Thabo Bester”, a four-part true crime documentary that tells the story of the prison escape and recapturing Thabo Bester, who was serving a life sentence for rape and murder. Showmax will premier the first two episodes of the documentary on 15 March, 2024, and release the final two episodes on 22 March, 2024. But Bester does not want his story told. Bester, who faked his death and escaped from Mangaung Correctional Centre in Bloemfontein in 2022, has threatened legal action against Showmax’s owners MultiChoice if it goes on with the premiere of the documentary. Bester and his accomplice, Nandipha Magudumana, weren’t happy about their names being used to sell a show, claiming they never gave permission. The pair also wanted to see the documentary first before it hit the airwaves. Bester’s lawyers also argue that airing the show would impede his criminal trial, which is set to begin in June 2024, and infringe on his rights to a fair trial. MultiChoice has maintained that streaming the show serves the public good, and perhaps their responsibility to shareholders. While true-crime fans eagerly await the March 15th premiere, a legal battle threatens to derail the documentary’s release. It remains to be seen whether “Tracking Thabo Bester” will land with a bang or a whimper. Bester’s case is eerily similar to a defamation suit brought by a retired police officer in Netflix’s docuseries “Making a Murderer”. The police officer claimed that Netflix defamed him by accusing him of planting evidence. However, the judge ruled in favour of the streaming giant, claiming that the suit raised no statements that are defamatory. While Bester’s claim about a fair trial might hold more weight, the outcome likely hinges on whether the documentary is deemed prejudicial. Legal IFC sues Africa Talking for rejecting Infobip’s acquisition offer Last week, we exclusively reported that Africa’s Talking (AT), was sued by Eston Maina Kimani, Bilha Ndirangu, and three others who allege that AT’s CEO, Samuel Gikandi pushed out Ndirangu as director after she requested a “workplace abuse” investigation. More investigation has revealed that the company has been caught up in another legal dispute since 2023. The Kenyan-based communication-platform-as-a-service (“cPAAS) API startup, was reportedly sued by one of its major investors, the International Finance Corporation (IFC). Why? IFC, a lead investor in Africa’s Talking (AT) 2018 $8.4 million series A round, was unhappy with AT rejecting Infobip’s acquisition offer and sued the company. While IFC holds a 20% stake in AT, CEO Samuel Gikandi controls the board, preventing IFC from pushing the sale through without board approval. According to sources familiar with the deal, two additional co-founders of Africa’s Talking expressed openness to the Infobip acquisition and are now also suing Gikandi. Gikandi, in an email to TechCabal, described AT as being “viciously attacked” by the IFC, suggesting a pattern of abuse dating back to their investment in 2018. He perceived the “attack” as a “cover-up” and claimed ignorance of the IFC’s motives. Zoom out: As part of the Series A deal, Wale Ayeni, who led IFC’s venture capital arm in Africa at the time of the investment, joined Africa’s Talking board. Marieme Diop has since replaced him. No hidden fees or charges with Fincra Collect payments via Bank Transfer, Cards, Virtual Account & Mobile Money with Fincra’s secure
Read More
What does it take to be a successful lifestyle content creator on social media?
In just one year, Ima transformed from being a lawyer into a successful lifestyle content creator. With 144K followers on TikTok, 32K on Instagram, and 14K on YouTube, she is on top of the creator platform trifecta —YouTube, Instagram and TikTok —that is dominating the video content landscape. Her journey began in 2021 when she beat procrastination and started her YouTube channel: something she’d wanted to do since her university days. Like many other lifestyle content creators, the COVID-19 lockdown provided a great opportunity to start a career in content creation. There’s a large audience across the continent and the majority of creators want to target different kinds of audiences – as many as they can – on these three platforms. Despite starting on YouTube, it was its newer competitor that carried her to social media popularity. Less than a year after she began posting consistently on the app, her chaotic vlogs and hilarious storytimes drew the attention of a predominantly Gen Z audience, earning her over 100K followers in a matter of months. While TikTok’s demographic ranges from individuals between the ages of 10 and 50, the highest percentage of users on the app are between ages 10 and 19. Ninety-five percent of YouTube users, on the other hand, are between the ages of 19 to 29. Miss Ima’s YouTube. Social media is complex, and each platform requires a unique process for creators looking to navigate and build an audience. While having an audience on TikTok has been beneficial in helping Ima grow her other platforms like YouTube and Instagram, she believes that building niche audiences for these platforms still requires a lot of work. While storytelling thrives on TikTok, its competitor, Instagram, prefers more fast-paced content. “In my personal experience, Instagram prefers content that’s more curated as the app is still slightly more formal than TikTok,” she shared. “TikTok, on the other hand, prefers more organic content with a lot of face time. Ima believes that to be successful on TikTok, one must have consistency and offer value, even more than other important traits like authenticity. “No matter how authentic you are, or how great and interesting your stories are, if you are not showing up every day, it doesn’t matter,” she said. “Also, you have to be offering value to people. Being consistent and offering value in your unique way is what people see as authentic.” Crafting stories that resonate as a lifestyle content creator Hamda Koya was working at an ad agency in 2021 where she frequently collaborated with many digital creators for marketing campaigns. As someone who loved to explore places and document these via pictures and videos, she found the concept of being a creator fascinating and decided one day to try her hands at becoming one. This spontaneous experiment led to the birth of The Lagos Tourist, Hamda’s Instagram page. Her content, which is upbeat and happy — a characteristic she says stems from her personality, has attracted 62,000 followers on the app. According to Hamda, the secret to being a successful lifestyle content creator is crafting compelling stories that grab the audience’s attention in the first three seconds — a universal truth in the world of marketing. Whether it’s sharing spontaneous adventures or scripted rants, her ultimate content creation strategy is spinning engaging narratives that keep her audience hooked from the beginning. “Your video editing skills might be great, and your videos might be nice, but if they can’t find a way to draw attention in the first two or three seconds, you’ll lose the audience,” she said. While she shares that she’s not so organised in terms of sticking to schedules and calendars, she uses content buckets that help with an overall sense of direction in regard to what she’s looking to share. “I sit and think of what would be funny, relatable and engaging, and then write the script for it.” In November 2023, Hamda moved to Canada and has been more strategic about the kind of content she puts out. She aims to collaborate with Canadian lifestyle content creators as a way to break into the Canadian creator scene and diversify her audience, which currently consists predominantly of people in Lagos. Community is the bedrock of creating From left to right: Miss Ima, Hamda, and Amaka Amaku For Amaka Amaku, who has about 20K followers on Instagram, creating content means sharing her everyday life with people online—something she does with an uninhibited flair. She has always posted content on her Instagram for the purpose of sharing, which eventually helped her connect with people and build a community there. It wasn’t until 2019 that she realised that she had built a career out of it. In the year that followed, she got her first brand deal. Beyond publishing photos and videos on her account, the entire concept of creating is one that she enjoys as it allows her to view her everyday life through more curious and interesting lenses. Amaka also has a TikTok, and while she believes that you can share the same content to both platforms, you still need to optimise for each. “Instagram started as a photo-sharing app, and while we now have reels, the attention span of a lot of the audience is still short,” she shared. According to her, the videos on Instagram need to be shorter, have a catchy sound, and be more fast-paced to gain traction On the other hand, TikTok loves storytelling, in her experience. “If you want to do well; just tell stories. People love hearing what you did, how you did it, and where you did it.” What happened in morocco pic.twitter.com/JDsIgezgKd — Charms (@The_amakaaa) January 7, 2024 Whether on Instagram or TikTok, she tailors her content for each platform’s unique audience, understanding the need for brevity on Instagram and the love for storytelling on TikTok. Amaka’s content is charming, and she shares that a lot of it stems from her resolve to create content from a place
Read MoreIFC sues portfolio company Africa’s Talking for rejecting acquisition offer
International Financial Corporation (IFC), a member of the World Bank Group and a lead investor in Africa’s Talking (AT) 2018 $8.4 million series A round, sued its portfolio company in 2023 for rejecting an acquisition offer from Infobip, a person familiar with the matter told TechCabal. The matter is still ongoing at court, people familiar with the matter said. TechCabal had not received the court documents at the time of this report. IFC, which holds a 20% stake in Africa’s Talking, recommended that the company accept the acquisition offer but ultimately failed to convince the rest of the board. As part of the Series A deal, Wale Ayeni, who led IFC’s venture capital arm in Africa at the time of the investment, joined Africa’s Talking board. Marieme Diop has since replaced him. “If they controlled the board, they could have approved the sale. But in this case, Samuel Gikandi, Africa’s Talking CEO, controls the board. So, IFC has to get majority board approval,” an investor who asked not to be named said. IFC did not respond to multiple requests for comments from TechCabal. Two other cofounders at Africa’s Talking were open to the Infobip acquisition, sources familiar with the deal claimed. Those cofounders are also suing Gikandi. “AT was viciously attacked by the IFC last year, continuing a pattern of abuse that started with their investment in 2018,” Gikandi told TechCabal via email. He added that the “attack” felt like a “cover-up” and claimed he was unaware of IFC’s motivation. Gikandi did not answer any questions on the legal proceedings. How Huawei became Nigeria’s biggest telecoms vendor and enterprise business Orange Digital Ventures, a $350 million fund, and Social Capital, a $600 million fund looking to sell its stake in startups, also participated in Africa’s Talking Series A round. Africa’s Talking is now caught up in at least two legal cases. On Monday, TechCabal reported that Africa’s Talking and Gikandi were sued by Africa’s Talking other co-founders Eston Maina Kimani and Bilha Ndirangu, and three others who allege that Gikandi pushed out Ndirangu as director after she called for an investigation into “workplace abuse.” “The 1st Applicant (Ndirangu), who previously served as a CEO and until the irregular ouster held the position of an independent director, possesses a deep understanding of the 1st Respondent and its operations,” a court document read. *This is a developing story
Read More
How Huawei became Nigeria’s biggest telecoms vendor and enterprise business
When Huawei launched in Nigeria in 1999, two years before its telecommunications revolution, very few people could have predicted it would become the country’s biggest telecoms vendor and build one of the country’s biggest enterprise business. In 1999, it entered a market with other big-name players like the Chinese multinational ZTE, Nokia, the Finnish giant, and Sweden-based Ericsson. These companies original equipment manufacturers (OEMs) doubled as infrastructure and service providers to telecom companies like MTN and Airtel. ZTE, for instance, was instrumental in building MTN Nigeria’s 2G and 3G networks. While ZTE and Ericsson have trimmed their operations in the last two decades, Huawei has been on the ascendancy, expanding its carrier and enterprise business. Today, its offerings include networking equipment like routers, firewalls, switches, servers, and storage devices; it provides data centre solutions and cloud services and deploys applications like mobile wallets for its customers. Huawei’s success in Nigeria is down to a mix of its pricing strategy and a bold decision to provide end-to-end solutions to customers in a market where its competitors often choose specialisation. “While IBM and Dell are synonymous with storage, and Cisco focuses on networking and security, Huawei provides everything by competing in both the carrier and enterprise businesses,” an industry insider with knowledge of Huawei’s business told TechCabal. Huawei declined to comment on any part of this story. A roll-call of ambitious projects Huwaei has sold servers and storage solutions for top Nigerian banks like UBA, Zenith, Access, and Fidelity. Other traditional banks Huawei serves include Keystone, First Bank, Unity Bank, UBA, and FCMB. In May 2023, a fire at Zenith Bank’s primary data center caused a service downtime, and attempts to switch to its disaster recovery center also failed, two people told TechCabal. That incident is thought to have convinced Zenith—a tier-1 bank with a market capitalisation of ₦1.1 Trillion—to sign a $10 million deal with Huawei for a storage solution, two people with direct knowledge of the deal said. Chinese-backed Huawei has secured other significant deals in Nigeria. Galaxy Backbone, a government-owned internet IT shared services provider, is one of its biggest clients. Huawei is building two data centers for Galaxy, said one person familiar with the project. Those data centers are part of a broader project called the National Information and Communication Technology Infrastructure Backbone (NICTIB). The first phase of the controversial project was completed in 2018 and the second phase—valued at $328 million—was also contracted to the Chinese company. Huawei has handled projects for the Lagos state government, the Nigerian Ports Authority (NPA), the Central Bank of Nigeria (CBN), Nigeria National Petroleum Corporation (NNPC), and Ikeja Electric. It was also a Technical Partner for the Nigeria Customs Modernisation Project in 2022. Before Huawei, there was Ericsson Ericsson was the market leader among mobile telecommunications vendors in Nigeria since 2009, said one person familiar with the company. The Swedish company’s biggest clients were MTN and Airtel. At the time, Nokia and Alcatel had already lost significant market share and were beating a retreat, according to two people with industry knowledge. But things began to change in 2014 as Huawei began its march to dominance by poaching several Ericsson employees. It then went after its Swedish competitor’s clients next. Huawei had a model: ‘You can use our equipment now, you don’t have to pay right away,’ said an ex-Ericsson employee. “Very quickly, they were able to win over a lot of the market share that Ericsson had. It was very easy for mobile telecommunication companies to swap out Ericsson to save costs.” Unlike Ericsson which only catered to telcos, Huawei had bigger ambitions. Jack of all trades Handling managed services is one of the most lucrative businesses in the telecommunication industry. Not only do OEMs get paid for maintenance, but they can also propose solutions to operators that involve buying more services or equipment. Huawei benefitted greatly from this. Huawei’s primary strategy is to sell one solution to a client and then ensure it upsells all its other inventory, according to a person familiar with the company’s thinking. “Huawei likes to position itself as the solution for every client,” the person said. Huawei currently offers managed services to Galaxy, Lagos State government on the enterprise side, according to a person familiar with the company. On the telco side, its clients include MTN and Airtel. It has also built data centres for Zenith Bank, MTN, Seplat Petroleum, and the Lagos state government, according to one person with direct knowledge of the deals. In 2020, MTN launched a Tier III data center built by Huawei. In 2021, Cloud Exchange, a system integrator IT company, launched Africa’s first uptime institute tier IV modular prefabricated data center in collaboration with Huawei. Huawei also offers cloud services. Opay, the Chinese fintech, runs on Huawei’s cloud architecture, a person with direct knowledge of the matter said. The cloud business is now a separate business entity, the person added. Huawei’s government playbook Huawei entered the government and enterprise business in 2015. The shift to enterprise was strategic, considering Nigeria’s place as the company’s most important African market. “We expect it [Nigeria] to remain the number-one global market for enterprise business,” Frank Li, Huawei Nigeria’s Managing Director at the time, said in a 2018 interview. The company secured an office in Abuja, the nation’s capital, the seat of the federal government, hoping to build a stronger relationship with the government. That move has generated results. Huawei now handles major contracts for the Nigerian government and in 2023, the company was awarded the National Productivity Merit Award by the Nigerian government. By August 2004—barely five years into the market, Huawei had invested more than $10 million into its Nigerian training center. By 2018, the figure had risen to $76 million. In December 2023, it launched a scholarship program in partnership with the Ministry of Communications, innovation, and digital economy. The company also invests in training employees and prioritises knowledge transfer. Yet, Huawei’s success story in Nigeria is not without controversy.
Read MoreFlutterwave shuts down Barter as it refocuses on enterprise and remittance business
Flutterwave, Africa’s biggest startup, is shutting down Barter, a virtual card service it launched in 2017, as it focuses on its enterprise and remittance business segments. The fintech told customers to withdraw their money in the app over the past month. “The decision to sunset Barter was based on a comprehensive analysis of market trends and evolving customer needs,” the fintech shared in a mail with TechCabal. Flutterwave is doubling down on proven winners by focusing on remittance and enterprise. In October, the fintech told TechCabal enterprise services was its biggest revenue driver. In comparison, Barter only accounted for about 1% of the company’s $2 billion-worth transactions, one of the company’s cofounders told Quartz Africa in 2018. “While retail remains important to us, our immediate focus is optimizing services for businesses and remittance solutions,” the company said. Meanwhile, Flutterwave’s remittance products, Send and Swap, aim to capture a significant market share in Africa’s $54 billion remittance market. It is unclear how much progress both products have made. Read also: Flutterwave’s new product Swap wants to solve Nigeria’s FX problems Barter is a storied product. When it launched in 2017, it was one of the first tech startups to offer Nigerians the ability to make international payments. “Barter will leverage on Flutterwave’s virtual card API and platform to allow users create an unlimited number of virtual dollar cards for single or repeat transactions,” said a TechCabal Daily announcing its launch in March 2017. But the product has seen its share of troubles. In 2022, Barter was unavailable for weeks because of “an update from the company’s card partner.”That partner was Union54, the Zambian card issuer that got hit with a $1.2 billion chargeback fraud attempt. Customers also complained about downtime issues with the platform and card rejections by merchants, including Netflix, Facebook, PayPal and Apple Music. Read also: Flutterwave appoints Olajumoke Adenowo as board member as fintech giant pursues international expansion Exclusive: Flutterwave’s biggest revenue driver in 2023 is its enterprise segment
Read More
👨🏿🚀TechCabal Daily – How Eyowo’s pivot to fintech stumbled
In partnership with Share this newsletter: Lire en Français اقرأ هذا باللغة العربية TGIF Happy International Women’s Day! To celebrate #InternationalWomensDay, TechCabal brings you three female founders from Bamboo, SendStack, and SHOP F.A.W.L. They will be speaking on building startups in Africa, revenue being the cheapest form of funding, their thoughts on AI automation, and their hopes for the future. Catch them on our YouTube channel! In today’s edition How Eyowo’s pivot to fintech stumbled MTN recovers $7.8 million of stolen funds TowerCo secures new funds for Ugandan network expansion Nigeria releases guidelines for digital asset operators Funding tracker The World Wide Web3 Job openings Fintech How Eyowo’s pivot to fintech stumbled Depending on who you ask, Softcom was the dream place to work. The software agency had great perks for employees—including work retreats to Dubai and SA—and lucrative contracts from clients like Coca-Cola, MTN, and the Nigerian government. In 2021, the company stopped building software for its client and took an ambitious turn to produce a fintech giant in Eyowo. Everyone loved Eyowo. Early users also gushed about the product. Ex-employees believed they could change the world. However, five years down the road, salary delays, service outages, and ultimately, a revoked licence, meant that this bet failed. How did such a promising product with its sights on becoming a fintech giant run into problems? Dig Deeper here Access payments with Moniepoint You don’t have to take our word for it. Give it a shot like he did Click here to experience fast and reliable personal banking with Moniepoint. Telecom MTN Nigeria recovers $7.85 million of the $14 million lost to MoMo glitch In June 2022, MTN Nigeria, the Nigerian arm of one of Africa’s largest telecom companies, disclosed a ₦22.3 billion ($14 million) mobile money fraud that involved 18 Nigerian banks on its mobile money platform— MTN MoMo. The fraud happened due to a glitch on the platform, one week after its launch in May 2022. Despite MTN’s ₦16 billion ($10 million) investment in MoMo, its 2022 financial report revealed that MoMo incurred a loss of ₦10.5 billion ($6.5 million) due to the glitch. The news: MTN has successfully recovered ₦12.5 billion ( $7.85 million) of the funds lost during the glitch in its mobile money service. However, the remaining balance of ₦9.5 billion ($5.97 million) will be absorbed by MTN Nigeria under a shared services cost agreement between the telecom company and its MoMo service. How has this loss affected MoMo’s service? As at June 2023—one year after its launch— the service was reportedly still seeking adoption by Nigerians. MTN Nigeria’s CEO, Toriola, noted slower-than-anticipated business development. Regulatory approval delays and challenges with NIN requirements hindered MoMo’s growth. However, Toriola expressed satisfaction with MoMo PSB wallet base, which has increased from 3.3 million monthly active users to 5.3 million, supported by 326,000 MoMo agents and 324,000 merchants. Meanwhile, MTN Nigeria has also swallowed its first loss in three years. The telecom reported a loss after tax of ₦137.0 billion ($86 million) in 2023 compared to profits of ₦348.7 billion ($218.9 million) in 2022, after a naira devaluation and rising cost of doing business ate into its margins. Investments TowerCo Uganda secures $40 million to expand network coverage in Uganda In July 2023, Ubuntu Towers Uganda rebranded into TowerCo of Africa Uganda after TowerCo of Africa (TOA)—a tower infrastructure company—acquired a 90% stake in Ubuntu Towers. Already managing a network of towers spanning 360 locations, with most utilising hybrid energy solutions, TowerCo is keen on adding more sites in a few years. Fueled by a $40 million investment, TowerCo Uganda wants to expand its reach by constructing 506 new towers in underserved areas in Uganda. The project aims to expand mobile network coverage in Uganda from 65% to 95%, reaching remote areas currently lacking access, and will enable rural communities to access 4G and 5G data services. The investment: The European Investment Bank, in partnership with ACP Trust Fund, will provide $16 million, and $12 million each will come from the Development Bank of Austria (OeEB) and the Belgian Investment Company for Developing Countries (BIO) over the next 10 years. Multiple mobile operators will share the towers and a significant portion will be solar-powered for sustainable development. The tower construction is expected to create 2,000 jobs and be completed within the next two years. TOA also operates in Madagascar, the Democratic Republic of Congo (DRC) and Tanzania. Zoom out: In other African countries like Zambia, following their announcement of digital centres for free internet access, the Zambian government plans to construct 60 new 4G mobile towers specifically targeting remote areas. No hidden fees or charges with Fincra Collect payments via Bank Transfer, Cards, Virtual Account & Mobile Money with Fincra’s secure payment gateway. What’s more? You get to save money for your business when you use Fincra. Start now. Crypto Nigeria releases guidelines for Digital Asset Operators Last year, Nigeria’s Security Exchange Commission (SEC) began processing the application of digital exchanges on its capital market, a move to attract the country’s young digitally-savvy population. The commission’s head of securities and licence investment at the time said it was going to register tokenized assets backed by equity, debt, and real estate. Now, as the NGX inches closer to including digital assets in the capital markets, it has released new guardrails to mitigate risks associated with the asset class. The news: Yesterday, the commission released new regulations aimed at licensing and registering new digital and virtual asset service provider (VASPs) entrants to the capital market. The regulations, aimed at reducing the participation of bad actors from trading in the capital market, packs a punch with three separate guidelines, including Countering the Financing of Terrorism (CFT), Anti-Money Laundering (AML), and Countering Proliferation Financing (CPF) onboarding manual. The new regulation is another litmus test for Nigeria’s crypto landscape which has seen Binance discontinue providing naira services in the country after the government blamed it for currency speculation and remanded two of its
Read MoreRecord funding in women-led healthtech startups sets agenda for founders
Women-led healthtech companies in Africa saw a significant bump in funding from investors in 2023, according to a new report by Salient Advisory. Rwandan-based startup Kasha, Kenya’s Maisha Meds, and Egypt-based startups Dawi Clinics and Chefaa cumulatively raised $52 million across 33 deals, and were responsible for a 2,000% increase in funding to women-led companies in Africa’s healthtech industry. According to Jessica Vermon, CEO of Maisha Meds, her company’s funding came from solving problems with a business model that’s different from competitors. “We’re meeting people where they first go to get care: at private drug shops, pharmacies, and clinics. And we’re using technology to make those places more digital, efficient, and accessible,” Vermon told TechCabal. In 2022, women-led companies in healthcare were only able to raise $2 million across 26 deals representing 1.4% of all healthtech funding. The report from Salient Advisory noted that Kasha’s $21 million Series B funding was the largest investment ever made in a woman-led health tech company in Africa. Additionally, funding to mixed-gender founding teams rose to 21% in 2023 from 10% in 2022. The funding in these companies follows what the Salient Advisory report described as an impressive year for the general healthtech space, which received $167 million in 2023. While the general healthtech funding was 2% lower than what investors deployed in 2022, it was better than the broader African tech ecosystem, which saw a 39% funding decline. Women-led startups in Africa have, over the years, been largely overlooked by venture capital and private equity investors. But 2023 was a relatively good year for gender financing. Women-led startups raised just above $200 million, a +7% positive growth on a year-on-year basis, data from Africa: The Big Deal showed. The 2,000% funding growth is the first time the gender financing gap in health tech startups —and the ecosystem in general— is narrowing. The funding accounted for 31% of the total investment in health tech companies in 2023. Investors in Maisha Meds and most of the other women-led companies include global development institutions such as USAID and the Bill & Melinda Gates Foundation. Funding from these institutions is mostly grants. Maisha Meds raised $5.25 million in scale-up stage 3 funding from USAID Development Innovation Ventures (DIV). Stage 3 grants are DIV’s highest level of funding awarded to innovators who have demonstrated the ability to scale up their proven solutions to critical challenges. Grants from institutions like the Bill & Melinda Gates Foundation, MSD, Cencora, Microsoft, and Chemonics have contributed to setting up women-led companies in health tech and the space in general. The report noted that over half (52%) of the 145 deals for African healthtech innovators in 2023 were grants indicating the important role that grants play in bridging funding gaps for early-stage healthtech innovators. This stands out as the largest source of grant funding on the continent. However, the total ticket size of grants was only 7% of the funding raised, with the average being $168,000. Equity funding in comparison, accounted for 91% of funding raised, with an average ticket size of $3.2 million. Experts say there are still barriers women founders or CEOs face in accessing private equity or venture capital funding. These barriers are not necessarily from investors’ bias against female founders or CEOs, but they could stem from these women prioritising things like family over their business, hence they don’t show up enough for investors to see them, according to Ibijoke Faborode, founder of Africa Female Founders Collective (AFFC). AFFC which launched in February is planning a programme in 2024 that helps women founders or CEOs create more time for their startups and meet more investors who are interested in investing in their sectors. The goal is to help these startups focus on building the innovations that make them attractive to investors and also address problems in society. Vermon pointed out that the specific women-led startups that were funded in the DIV round are those that are innovating on unique models for healthcare delivery, including a major emphasis on the last mile and underserved populations. Amaan Khalfan, CEO of Goodlife Pharmacy, East Africa’s largest private retail pharmacy chain, said investors would largely fund a business that has good record keeping and can position itself in a way that identifies the opportunities in the health tech space. Jenne Nwoke, founder of Clafiya, a digital health platform that has raised $610,000 to date mainly from venture capital, said women-led startups are not raising much from VCs because there is little intentionality behind funding women-led businesses. According to Nwoke, it would help if more VC funds were run by women entrepreneurs. However, she notes that women need to be more open in sharing funding opportunities. “For the next funding cycle, I’m going to be more intentional with the investors I want, i.e. finding investors who understand health, consumerism, and finance in Africa or in general,” she said.
Read MoreHow Eyowo’s bid to become a fintech giant hit the rocks
Eyowo had big dreams of becoming a fintech giant, and for a while, that dream was within reach. Softcom, a popular Nigerian startup founded in 2017, was once considered the dream workplace. The software development agency threw colourful end-of-year parties and flew employees to South Africa and Dubai on work retreats. It felt like the example of a modern Silicon Valley startup. Initially a B2B company, it had prominent clients like Coca-Cola, MTN, and the Nigerian government. However, in 2019, it shifted its focus from its client-side business to building consumer-facing products. That strategic shift resulted in Eyowo, one of Nigeria’s earliest digital banks. Hailed by many former employees as a game-changer, Eyowo scored an early win as the platform of choice for Tradermoni, a controversial collateral-free government loan to two million small business owners in 2019. Five years after that big win, Sofcom’s fortunes turned, with three rounds of layoffs, persistent delays in salary payment, and a revocation of Eyowo’s banking licence in 2023. Without a banking licence, Eyowo, with its promise of “making life better for everyone,” began scrambling to secure a banking partnership so its customers could get their deposits. While that involved many missed timelines, many customers began accessing their funds this week. Eyowo’s cofounders declined to comment on any part of this story. Four ex-Softcom employees blamed Eyowo’s troubles on a lack of experience in core banking and the company’s inability to change its strategic thinking to become consumer-facing. A glitchy goodbye for Eyowo “Eyowo’s licence revocation could have been avoided if the startup had hired professionals to handle regulatory compliance,” one person with knowledge of the business said. The same person claimed the CBN visited Eyowo to start a conversation and give recommendations months before the licence was withdrawn. TechCabal was unable to verify these claims independently. “It was a great product, but it was hard to keep up with the disappointments,” another ex-employee shared. One such disappointment was that the company’s founders, Yomi Adedeji and Omoseinde Olubayo, neglected payment discussions until the last minute. As a result, the startup was cut off from its cloud service provider four times for defaulting on payments, leading to service outages. These outages often sent the marketing team into overdrive. “The frequent disruptions eroded trust,” an ex-employee said. The company’s management and marketing team also had different growth and marketing strategies perspectives. While the founders preferred sponsoring events, the marketing team argued that these events added little value to the company and starved the team of funds for more effective campaigns. In 2021, Eyowo sponsored Marlian Fest, a concert by Nigerian artist Naira Marley and also sponsored Ake Festival, a book and arts festival, one year later. “They were waiting for virality, for that one big moment,” one person said of the management’s marketing approach. Softcom’s golden age “It was like a family, It was churchlike,” one former employee of Softcom’s work culture. Among former employees, the consensus was that the leadership team was supportive. One-on-one check-ins were the norm, and a flat organisational structure contributed to the sense that the company’s leadership was accessible. The company shared some of its yearly profits with employees and sponsored team bonding sessions to Dubai in 2017 and South Africa in 2018. In 2019, Softcom’s best-performing employees were treated to an all-expense-paid Dubai vacation. “We felt like we were going to change the world,” one former employee said. Softcom did change the world with its business solutions. Its enterprise business—which built bespoke websites and applications for top companies—was its cash cow. Through its Useforms app, a software with similar capabilities to Google Forms, the company carried out trade visibility research for MTN. Softcom also made learning management systems for Covenant University, National Open University, and Delta State University. The company also catered to FMCG companies, offering services like the “Eyowo rewards”—a raffle draw system that let customers win cash prizes by dialing customized USSD codes. One employee claims one of those contracts with Coca-Cola was worth ₦850 million *($578,584), and another with Honeywell was worth ₦65 million. TechCabal was unable to independently verify those figures. Softcom’s most lucrative deals were from government contracts, two former employees claimed. It built a website for the Consumer Protection Commission (CPC) and was involved with Npower, a government-backed empowerment scheme to solve youth unemployment. But things changed quickly when the startup lost N-power as a client. The loss of that contract may have convinced Softcom to focus on Eyowo as its next lucrative venture. In 2020 the company began a restructuring process that included a downsizing of its workforce in preparation for Eyowo X, the new and consumer-facing iteration of its fintech app. The complexities of a consumer-focused fintech This shift from being a software maker to a B2C fintech startup required a change in strategy. Softcom’s previous business model required less customer interaction and focus on scaling. But Eyowo operated in a different landscape that demanded frequent customer engagement. But both founders approached Eyowo with the Softcom mindset, leading to a chain of questionable decisions and unrealistic expectations, two persons familiar with the company said. “They should have treated Eyowo as a separate product without shuttering Softcom,” one former employee said. Alongside Eyowo X, it launched three other products: Kwik Sell, an inventory and stock management software, Usepass, an event management and ticketing system, and Useforms, a software with similar capabilities to Google Form. The company began conversations to raise $10 million for all four products in 2021, said sources directly involved. Ultimately, those fundraising conversations were unsuccessful. As Eyowo struggled to raise funds, it was burning through monies it had earned from the Softcom era and it soon ran into cash flow problems. “Former employees only began noticing when there were delays in salary payment in December 2021,” one person said. Towards the end of 2022, the company laid off about 20% of its 200 employees. “They didn’t cut costs early enough,”the same person said. Understanding the cash burn at Eyowo
Read MoreMTN Nigeria recoups ₦12.5 billion lost to mobile money glitch as monthly active users grow
MTN Nigeria, one of Nigeria’s largest telecom providers, has recovered over half of the ₦22 billion it lost when its Mobile Money service suffered a glitch in May 2022. The incident, which occurred one week after the launch of the mobile money service, highlights the scale of fraud in Nigeria’s financial services sector. While ₦12.5 billion ($7.85 million) has been recovered to date, the balance of ₦9.5 billion ($5.97 million) will be absorbed by MTN Nigeria due to a shared services cost agreement between the telco and MoMo service. “MTN Nigeria has fully provided for this amount,” a statement from its 2023 financials said . In Nigeria, MoMo is still gaining adoption, as TechCabal previously reported. “The development of the business has been slower than anticipated,” said Toriola, MTN Nigeria’s CEO, in the 2023 full-year report. Delays in regulatory approvals from the Central Bank and the inability of many prospective customers to meet the NIN requirement for Know Your Customer (KYC) were drawbacks to MoMo’s growth. However, Toriola expressed his satisfaction with the progress in building the MoMo PSB wallet base, and claimed monthly active users increased from 3.3 million in the year to 5.3 million. This growth was supported by 326,000 MoMo agents and 324,000 merchants in its ecosystem. MoMo PSB is optimistic about growing its reach via consumer education and leveraging its distribution network. The fintech hopes to include the provision of cross-border remittances to boost adoption and monetisation. “We will leverage the momentum from Q4 to accelerate the growth of wallets and adoption of services as we expand our merchant ecosystem,” Toriola added.
Read More