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

Published December 2, 2019

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

More Africa-related stories @TechCrunch

African tech around the ‘net

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Startups Weekly: Chinese investors double down on African startups

Published November 30, 2019

Hello and welcome back to Startups Weekly, a weekend newsletter that dives into the week’s noteworthy startups and venture capital news. Before I jump into today’s topic, let’s catch up a bit. Last week, I wrote about Airbnb’s issues. Before that, I noted Uber’s new “money” team.

Remember, you can send me tips, suggestions and feedback to kate.clark@techcrunch.com or on Twitter @KateClarkTweets. If you’re new, you can subscribe to Startups Weekly here.

China’s pivot to Africa

Three African fintech startups; OPay, PalmPay and East African trucking logistics company Lori Systems, closed large fundraises this year. On their own, the deals aren’t particularly notable, but together, they expose a new trend within the African startup ecosystem.

This year, those three companies brought in a total of $240 million in venture capital funding from 15 different Chinese investors, who’ve become increasingly active in Africa’s tech scene. TechCrunch reporter Jake Bright, who covers African tech, writes that 2019 marks “the year Chinese investors went all in on the continent’s startup scene” — particularly its fintech projects. Why?

“The continent’s 1.2 billion people represent the largest share of the world’s unbanked and underbanked population — which makes fintech Africa’s most promising digital sector,” Bright notes. “In previous years, the country’s interactions with African startups were relatively light compared to deal-making on infrastructure and commodities. Chinese actors investing heavily in African mobile consumer platforms lends to looking at new data-privacy and security issues for the continent.”

Active Chinese investors in Africa include Hillhouse Capital, Meituan-Dianping, GaoRong, Source Code Capital, SoftBank Ventures Asia, BAI, Redpoint, IDG Capital, Sequoia China, Crystal Stream Capital, GSR Ventures, Chinese mobile-phone maker Transsion and NetEase .

Here’s more of TechCrunch’s recent coverage of Africa startup activity:

VC Deals

It was a short week (Happy Thanksgiving, by the way). But here’s a quick look at the top deals of the last few days.

M&A (VR edition)

Last week, Facebook announced it was buying Beat Games, the game studio behind Beat Saber, a rhythm game that’s equal parts Fruit Ninja and Guitar Hero. Heard of the company? Maybe if you’re a gamer, but if you’re readying this newsletter because of your interest in VC, this company may not have come across your radar.

Why? It’s one of virtual reality’s biggest successes today, but it’s just an eight-person team with no funding.

“I’m really proud that we were able to build the company with this mindset of making decisions based on what is good for the game and not what is the most profitable thing,” Beat Games CEO told TechCrunch earlier this year. Read about Facebook’s acquisition here and an in-depth profile of the small team here.

Equity

If you like this newsletter, you will definitely enjoy Equity, which brings the content of this newsletter to life — in podcast form! Join myself and Equity co-host Alex Wilhelm every Friday for a quick breakdown of the week’s biggest news in venture capital and startups.

This week, we discussed Weekend Fund’s new vehicle, Cocoon’s new friend-tracking app and the unfortunate demise of a startup called Omni. You can listen here.

Equity drops every Friday at 6:00 am PT, so subscribe to us on Apple Podcasts, Overcast, Spotify and all the casts.

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Africa’s top mobile phone seller Transsion lists in Chinese IPO

Published October 1, 2019

Chinese mobile phone and device maker Transsion has listed in an IPO on Shanghai’s STAR Market, a Transsion spokesperson confirmed to TechCrunch. 

Headquartered in Shenzhen, Transsion is a top seller of smartphones in Africa under its Tecno brand. The company has also started to support venture funding of African startups.

Transsion issued 80 million A shares at an opening price of 35.15 yuan (≈ $5.00) to raise 2.8 billion yuan (or ≈ $394 million).

A shares are the common shares issued by mainland Chinese companies and are normally available for purchases only by mainland citizens. 

Transsion’s IPO prospectus is downloadable (in Chinese) and its STAR Market listing application is available on the Shanghai Stock Exchange’s website.

STAR is the Shanghai Stock Exchange’s new Nasdaq-style board for tech stocks that went live in July with some 25 companies going public.

Transsion plans to spend 1.6 billion yuan (or $227 million) of its STAR Market raise on building more phone assembly hubs, and around 430 million yuan ($62 million) on research and development, including a mobile phone R&D center in Shanghai, a company spokesperson said.

To support its African sales network, Transsion maintains a manufacturing facility in Ethiopia. The company recently announced plans to build an industrial park and R&D facility in India for manufacture of phones to Africa.

The IPO comes after Transsion announced its intent to go public and filed its first docs with the Shanghai Stock Exchange in April.

Listing on STAR Market puts Transsion on China’s new exchange — seen as an extension of Beijing’s ambition to become a hub for tech startups to raise public capital. Chinese regulators lowered profitability requirements for the STAR Market, which means pre-profit ventures can list.

China Star Market Opening July 2019 1

Transsion’s IPO comes when the company is actually in the black. The firm generated 22.6 billion yuan ($3.29 billion) in revenue in 2018, up from 20 billion yuan a year earlier. Net profit for the year slid to 654 million yuan, down from 677 million yuan in 2017, according to the firm’s prospectus.

Transsion sold 124 million phones globally in 2018, per company data. In Africa, Transsion holds 54% of the feature phone market — through its brands Tecno, Infinix and Itel — and in smartphone sales is second to Samsung and before Huawei, according to International Data Corporation stats.

Transsion has R&D centers in Nigeria and Kenya and its sales network in Africa includes retail shops in Nigeria, Kenya, Tanzania, Ethiopia and Egypt. The company also attracted attention for being one of the first known device makers to optimize its camera phones for African complexions.

On a 2019 research trip to Addis Ababa, TechCrunch learned the top entry-level Tecno smartphone was the W3, which lists for 3,600 Ethiopian Birr, or roughly $125.

In Africa, Transsion’s ability to build market share and find a sweet spot with consumers on price and features gives it prominence in the continent’s booming tech scene.

Africa already has strong mobile-phone penetration, but continues to undergo a conversion from basic USSD phones, to feature phones, to smartphones.

Smartphone adoption on the continent is low, at 34%, but expected to grow to 67% by 2025, according to GSMA.

This, added to an improving internet profile, is key to Africa’s tech scene. In top markets for VC and startup origination — such as Nigeria, Kenya and South Africa — thousands of ventures are building business models around mobile-based products and digital applications.

If Transsion’s IPO enables higher smartphone conversion on the continent, that could enable more startups and startup opportunities — from fintech to VOD apps.

Another interesting facet to Transsion’s IPO is its potential to create greater influence from China in African tech, in particular as the Shenzhen company moves more definitely toward venture investing.

In August, Transsion-funded Future Hub teamed up with Kenya’s Wapi Capital to source and fund early-stage African fintech startups.

China’s engagement with African startups has been light compared to China’s deal-making on infrastructure and commodities — further boosted in recent years as Beijing pushes its Belt and Road plan.

Transsion’s IPO is the second event this year — after Chinese owned Opera’s venture spending in Nigeria — to reflect greater Chinese influence and investment in the continent’s digital scene.

So in coming years, China could be less known for building roads and bridges in Africa and more for selling smartphones and providing VC for African startups.

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Africa’s top mobile phone seller Transsion to list in Chinese IPO

Published August 8, 2019

Chinese mobile-phone and device maker Transsion will list in an IPO on Shanghai’s STAR Market, Transsion confirmed to TechCrunch.

The company — which has a robust Africa sales network — could raise up to 3 billion yuan (or $426 million).

“The company’s listing-related work is running smoothly. The registration application and issuance process is still underway, with the specific timetable yet to be confirmed by the CSRC and Shanghai Stock Exchange,” a spokesperson for Transsion’s Office of the Secretary to the Chairman told TechCrunch via email.

Transsion’s IPO prospectus is downloadable (in Chinese) and its STAR Market listing application available on the Shanghai Stock Exchange’s website.

STAR is the Shanghai Stock Exchange’s new Nasdaq-style board for tech stocks that also went live in July with some 25 companies going public. 

Headquartered in Shenzhen — where African e-commerce unicorn Jumia also has a logistics supply-chain facility — Transsion is a top-seller of smartphones in Africa under its Tecno brand.

The company has a manufacturing facility in Ethiopia and recently expanded its presence in India.

Transsion plans to spend the bulk of its STAR Market raise (1.6 billion yuan or $227 million) on building more phone assembly hubs and around 430 million yuan ($62 million) on research and development, including a mobile phone R&D center in Shanghai, a company spokesperson said. 

Transsion recently announced a larger commitment to capturing market share in India, including building an industrial park in the country for manufacture of phones to Africa.

The IPO comes after Transsion announced its intent to go public and filed its first docs with the Shanghai Stock Exchange in April. 

Listing on the STAR Market will put Transsion on the freshly minted exchange seen as an extension of Beijing’s ambition to become a hub for high-potential tech startups to raise public capital. Chinese regulators lowered profitability requirements for the exchange, which means pre-profit ventures can list.

Transsion’s IPO process comes when the company is actually in the black. The firm generated 22.6 billion yuan ($3.29 billion) in revenue in 2018, up from 20 billion yuan a year earlier. Net profit for the year slid to 654 million yuan, down from 677 million yuan in 2017, according to the firm’s prospectus.

Transsion sold 124 million phones globally in 2018, per company data. In Africa, Transsion holds 54% of the feature phone market — through its brands Tecno, Infinix and Itel — and in smartphone sales is second to Samsung and before Huawei, according to International Data Corporation stats.

Transsion has R&D centers in Nigeria and Kenya and its sales network in Africa includes retail shops in Nigeria, Kenya, Tanzania, Ethiopia and Egypt. The company also attracted attention for being one of the first known device makers to optimize its camera phones for African complexions.

On a recent research trip to Addis Ababa, TechCrunch learned the top entry-level Tecno smartphone was the W3, which lists for 3,600 Ethiopian Birr, or roughly $125.

In Africa, Transsion’s ability to build market share and find a sweet spot with consumers on price and features gives it prominence in the continent’s booming tech scene.

Africa already has strong mobile-phone penetration, but continues to undergo a conversion from basic USSD phones, to feature phones, to smartphones.

Smartphone adoption on the continent is low, at 34%, but expected to grow to 67% by 2025, according to GSMA.

This, added to an improving internet profile, is key to Africa’s tech scene. In top markets for VC and startup origination — such as Nigeria, Kenya, and South Africa — thousands of ventures are building business models around mobile-based products and digital applications.

If Transsion’s IPO enables higher smartphone conversion on the continent, that could enable more startups and startup opportunities — from fintech to VOD apps.

Another interesting facet to Transsion’s IPO is its potential to create greater influence from China in African tech, in particular if the Shenzhen company moves strongly toward venture investing.

China’s engagement with African startups has been light compared to China’s deal-making on infrastructure and commodities — further boosted in recent years as Beijing pushes its Belt and Road plan.

Transsion’s IPO move is the second recent event — after Chinese owned Opera’s big venture spending in Nigeria — to reflect greater Chinese influence and investment in the continent’s digital scene.

So in coming years, China could be less known for building roads and bridges in Africa and more for selling smartphones and providing VC for African startups.

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China’s Vivo is eyeing smartphone users in Africa and the Middle East

Published July 30, 2019

Africa’s mobile phone industry has in recent times been dominated by Transsion, a Shenzhen-based company that is little known outside the African continent and is gearing up for an initial public offering in China. Now, its Chinese peer Vivo is following its shadow to this burgeoning part of the world with low-cost offerings.

Vivo, the world’s fifth-largest smartphone maker, announced this week that it’s bringing its budget-friendly Y series smartphones into Nigeria, Kenya and Egypt; the line of products is already available in Morocco.

It’s obvious that Vivo wants in on an expanding market as its home country China experiences softening smartphone sales. Despite a global slowdown, Africa posted annual growth in smartphone shipments last year for the first time since 2015 thanks in part to the abundance of entry-level products, according to market research firm IDC.

Affordability is the key driver for any smartphone brands that want to grab a slice of the African market. That’s what vaulted Transsion into a top dog on the continent where it sells feature phones for less than $20. Vivo’s Y series smartphones, which are priced as little as $170, are vying for a place with Transsion, Samsung and Huawei that have respective unit shares of 34.3%, 22.6% and 9.9% in Africa last year.

The Middle East is also part of Vivo’s latest expansion plan despite the region’s recent slump in smartphone volumes. The Y series, which comes in several models sporting features like the 89% screen-to-body ratio or the artificial intelligence-powered triple camera, is currently for sale in the United Arab Emirates and will launch in Saudi Arabia and Bahrain in the coming months.

Vivo’s new international push came months after its sister company, Oppo, also owned by BBK, made a similar move into the Middle East and Africa by opening a new regional hub in Dubai.

“Since our first entry into international markets in 2014, we have been dedicated to understanding the needs of consumers through in-depth research in an effort to bring innovative products and services to meet changing lifestyle needs,” said Vivo’s senior vice president Spark Ni in a statement.

“The Middle East and Africa markets are important to us, and we will tailor our approach with consumers’ needs in mind. The launch of Y series is just the beginning. We look forward to bringing our other widely popular products beyond Y series to consumers in the Middle East and Africa very soon,” the executive added.

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