⛰️ The Climb: August 2021
Welcome to the August edition (…a bit delayed) of The Climb!
What a month for African startups, with the largest ever batch taking the stage at YC’s S21 Demo Day! Including our very own Payhippo! We couldn’t be prouder of Zach, Chioma, Uche and the fast growing Payhippo team. YC isn’t alone among global venture leaders who are beginning to focus more on Africa; in August, Softbank made their 1st African investment into Chinese-backed OPay, leading a $400m round at a $2bn valuation. We know this pace will only increase, with founders across the continent sharing a spike in inbound interest from global investors looking to make their first or second investment in African tech.
This influx of capital has also given rise to increased demand for services and digital infrastructure to fuel startup growth: Kudi (with their most recent $5.8m round led by Partech Africa) has recently partnered with OnePipe (Sherpa portfolio) to expand the financial institutions their customers can reach out to, and Payhippo has partnerships with a range of startups including BFREE (backed by our friends at Launch Africa) to deliver value to their customers. What partners will OPay need to cultivate to expand its digital services and continue scaling?
2021 is certainly looking like it will not only smash records when it comes to fundraising, but we also believe it will be considered a pivotal year for the future of African tech. With an explosion of microVCs, global venture firms investing in Africa, senior team members of Series B+ startups building fresh new companies, Pan-African founder collaborations like never before, and a trend dear to our team’s heart: founders investing in founders!
Keep hustling fam!
- Aaron
PORTFOLIO HIGHLIGHTS ⭐️
On the heels of their $1 million pre-seed raise, Payhippo announced its acceptance into Y Combinator! The Nigerian fintech leverages AI to provide seamless on-demand loans for SMEs in under three hours, regardless of their credit histories. Known globally as one of the premier startup accelerators, Y Combinator has invested in DoorDash, Uber, AirBnB, Twilio and others. As part of YC, Payhippo will receive $125,000 in investment.
CashBackApp, a Kenyan fintech enabling consumers to save money while shopping from their favorite brands, announced their $475,000 pre-seed raise! The investment drew interest from other notable investors, including Lofty Inc, Loyal VC and several angel investors based in Africa, the U.S. and the U.K. We’re pumped to back the CashBackApp team to enable Kenyan shoppers to earn cash back on their purchases.
Nigerian API fintech OnePipe announced its partnership with digital bank Kudi. As part of the partnership, Kudi’s customers will be able to access digital financial accounts from the financial institutions connected to OnePipe’s single API gateway.
Kenyan fintech Koa was featured in a recent local news segment from KTN News! The startup has garnered notable press recently after its announced partnership with Britam and recent acceptance into the Kenyan Capital Markets Authority Sandbox Program for fintechs Watch the 7 minute clip here.
Hustle Sasa Founder and CEO Peng Chen was quoted in a recent How We Made it in Africa article about how their startup empowers greater per stream earnings for musicians compared to large players like Spotify, BoomPlay and others. Read the full article here.
WHAT’S NEW WITH SHERPA 🚀
Our first Venture Associate Fellow in South Africa has landed! – meet Stuart Miller, CFA. Stuart joins us after founding WECAST, an African talent marketplace for models and actors that serviced global brands like Nike, Hermes, Adidas, Gucci and others.
We hosted our 1st #SherpaSocial in Nairobi where some of our team got to jam in real life with our partners, LPs and portfolio founders! Looking forward to the day we can hold a larger conference with the whole ecosystem!
WHAT WE’RE READING 📖
Why Ghana’s tech scene was booming even before Twitter and Dorsey moved in 👉 Link
Despite its growth over the past five years, the Ghanaian tech scene attracts much less media attention than the other so-called Big Four startup markets on the continent, which include Kenya, Egypt, South Africa and Nigeria. Yet when Twitter announced that its new African headquarters would be located in Accra, Ghana’s vibrant capital, it took some by surprise. Startup enthusiasts who’ve been operating in Ghana for years, though, were less shocked. Instead, they viewed the announcement as another sign of ecosystem maturity and accelerated global interest in the country’s tech scene. While Twitter cited Ghana’s relative stability, support for free speech and internet freedom, it’s hard not to overlook the fact that Ghana still attracts only a fraction of the amount of VC funding compared to Nigeria, its West African counterpart. Could frequent power cuts (Nigeria), stifling regulation (Twitter and the Nigerian government have a fraught relationship), excessive digital taxes (Kenya) or stringent capital controls (South Africa) also have influenced Twitter’s decision? It’s very possible. But here’s the point: Ghana shouldn’t be overlooked as an attractive destination for top tech talent, exciting startups and ecosystem-friendly policies on the continent. Don’t take our word for it, though. Hear it from two operators on the ground that were quoted directly in the piece:
Kayode Adeyinka (Catalyst Fund Country Manager):
“Ghana’s growth is due to several strengths, including significant consumer and business markets, a growing entrepreneurial talent pool fueled by an influx of accelerators, code academies and training programmes, and relative economic and political stability.”
“The market is robust enough to have launched several successful startups, such as mPharma and Zeepay, who were able to gain enough traction and prove product-market-fit to then expand into other markets. Due to the relative ease of doing business and stable political climate in Ghana, many see it as a great place to test, iterate and grow an early-stage business before attempting to launch in larger, more challenging markets such as Nigeria.”
“A notable change in the Ghana tech space is the increasing growth of access to local capital and ties to a growing number of international investors who before now were focused more on later and matured companies. There has been an increase in both VC and PE investments in early-stage companies in Ghana across different sectors.”
Meghan McCormick (OZÉ Co-Founder and CEO):
“Accra attracts talent from across Ghana, across West Africa, and around the world. We found that our early customers were so willing to partner with us and build with us. The market is large enough that you can demonstrate traction but small enough that you can really get to know your customer segment and get your hands around the market.”
“Don’t dismiss all critical stories on African tech. Read this first” – Victoria Crandall 👉 Link
Earlier this month, The Economist published a piece on the Nigerian tech sector titled Fintech is booming despite a weak economy: can that last?, which quickly drew ire from some tech enthusiasts on the continent, including a noteworthy rebuttal from tech analyst Derrin Adebayo of Endeavor. The Economist piece questioned whether the Nigerian startup scene is in somewhat of a funding bubble, given the continued downward spiraling of the country’s economy, stifling regulation, political uncertainties and poor infrastructure. The authors managed to substantiate its claims by including quotes from four local operators/investors, which further advanced the counter-narrative that Nigerian tech may be receiving unwarranted attention.
Despite agreeing with some of the points in Adebayo’s rebuttal, we found another piece on the matter written by African Tech PR guru Victoria Crandall to be instructive for dealing with media skeptical of recent funding surges in the African tech ecosystem. For TechCabal, Crandall wrote an op-ed explaining how entrepreneurs, investors and others ecosystem players should handle the increased attention from mainstream media outlets. Rather than dismissing all critical pieces on African tech, entrepreneurs need to control the narrative they aspire to put out into the press and generate buzz about their business. They can start by engaging in media training to steer journalists’ questions in the right direction, she muses, as it’s better than staying silent or dismissing counterarguments outright. We tend to agree, and think that media training will only grow in importance for prominent startup founders on the continent.
Nigeria’s regulatory clampdown is rattling startups 👉 Link
Regulatory risk is considered one of the biggest threats to the continued growth of Nigeria’s tech ecosystem. As record-setting money has flowed into Nigeria’s tech sector over the last few years, the Nigerian government has taken a more active role by imposing more stringent regulations on various startup activities, from stock trading to cryptocurrencies, bike hailing and more.
Now the government seems to be at it again, as it wrestles with passing a new bill that would give the National Information Technology Development Agency (NITDA) – a relatively obscure agency established in 2007 – much more control over the country’s nascent tech sector. If the bill were to pass, NITDA would be “…solely responsible for issuing licenses as well as registering and determining which companies can operate in the country’s tech sector.” Moreover, “companies with annual revenue exceeding approximately $243,000 (100 million Naira) will have to pay a 1% levy to the agency’s development fund. Those companies that fail to comply with the new rules risk jail time or a fine no less than approximately $73,000 (30 million Naira).” Interestingly, however, this news comes amidst simultaneous discussions over passing a Nigerian Startup Bill, which would be widely viewed as a step in the right direction for tech founders.
Nigerian startups have thus far remained resilient amidst a challenging business environment, but this new bill could usher in a new era for the country’s tech sector. Growing concern among investors considering startup investments elsewhere, all of whom didn’t want to be named in the piece, were cited. While the overarching concerns about regulatory action are valid, we think it’s too soon to be sounding the alarm bells before additional moves are taken by NITDA. Regardless of the bill’s passage, one thing seems clear, however: Nigerian founders will have to contend with a more fickle regulator going forward, and addressing regulatory risk should be top of mind when answering questions from investors during fundraising rounds.
OPEN ROLES IN SHERPA’S PORTFOLIO 🤓
Head of Finance @ Payhippo
Head of Marketing @ Koa (reach out to info@withkoa.com for the JD)
Finance Lead @ Koa
UX Designer @ Koa
National Service Personnel @ Boost Ghana