⛰️ The Climb: June 2021
Welcome to The Climb! We’re so glad you’re here! You’re the 1st 200 who’ve signed up to Sherpa Ventures’ monthly newsletter! A space where we hope to share more of what we learn as we continue to back pre-seed startups across Africa redefining industries.
For those of you just joining us, a quick recap, Sherpa Ventures launched in Dec’ 20 with a simple idea that startup operators and founders in emerging markets make the best investors, and so are backed and run by individuals who have been through startup life in Africa and other emerging markets and wanna come together to back the next generation!
We’ve seen 8 amazing founders join our portfolio over the past 6 months. Looking ahead, we hope to expand our community beyond these founders and LPs and share our journey with the world. The team and I hope this newsletter becomes a useful read to aspiring founders, investors and other tireless enablers of startups in Africa - so please let us know what you’d like to see more of!
The last month was massive for partnerships in the Sherpa portfolio, with both Koa and OnePipe securing key government and startup partners. Assembling an ecosystem of stakeholders is vital to building your startup in the early days, and this is especially acute in Africa where each micro-component of value chains is so challenging and resource intensive to build for, that working together with dedicated specialist teams while you focus on your core capabilities is critical. Of course, these partnerships don’t happen overnight, and in the coming months we hope to do more deep dives into ways to build these partnerships. What have your experiences been with building partnerships as a startup in Africa? We’d love to hear from you!
Until next month! Keep building and stay healthy!
- Aaron
PORTFOLIO HIGHLIGHTS ⭐️
Koa was successfully admitted into the Kenyan Capital Markets Authority (CMA) Regulatory Sandbox, giving the fintech regulatory approval to live test its digital savings and investment product for six months. Read the announcement here.
OnePipe’s newly announced partnership with YC-backed agritech startup Releaf will unlock financial opportunities for millions of unbanked rural smallholder farmers. The partnership advances OnePipe’s social mandate to drive financial inclusion through technology by enabling Nigerian farmers to access digital fund disbursements via embedded, customized accounts. “[Releaf farmers] can receive money from any bank/channel, transfer funds to any Nigerian bank account, and purchase airtime for themselves or third parties.”
WHAT’S NEW WITH SHERPA 🚀
Team work makes the dream work and we couldn’t be more thrilled at the launch of our Investment Associate Fellow program with our first two fellows joining team Sherpa! Say hello to Nanthini Kumararajan and Tiffany Monthe-Siewe who are joining us after careers at M-KOPA, Twitter, McKinsey and JP Morgan!
Our General Partner, Aaron Fu, was invited as a mentor for CATAPULT Inclusion Africa 2021, a Luxembourg based program focused on African fintech startups and aiming to build a bridge between African and Europe.
We discussed 200+ amazing startup pitches this past month! We’re also working on improving the speed of our review process to get founders that quick initial decision. If you’re building a startup transforming industries in Africa, we can’t wait to hear about it!
Partnerships are everything and we had a ton of fun working with UCLA’s Bruin Ventures to deliver US consumer research to Zumi, a digital marketplace for apparel wholesalers and retailers in Kenya.
We published our first Medium piece about why we invested in Boost Technology, a platform enabling informal small businesses across Africa to thrive in the digital economy. Read it here and let us know what you think!
WHAT WE’RE READING 📖
SVB-led $100M Investment Makes Chipper Cash Africa’s ‘Most Valuable Startup’
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Chipper Cash, a three-year-old Nigerian fintech that facilitates cross-border payments in Africa, closed a $100 million Series C round at the end of May. There is widespread belief the startup may be valued at over $1 billion, which would make startup Africa’s sixth tech unicorn Why this matters:
African fintech remains the hottest game in town. 🔥 The sector accounted for a quarter of the $1.5 billion raised by African startups last year; in 2021 thus far, African startups are on pace to raise over $2 billion for the first time ever — with fintech by far the largest source of funding. Four startups have already raised $100 million rounds this year, including TymeBank (February), Flutterwave (March), OPay (May) and now Chipper Cash.
Perhaps what’s most noteworthy is the reduced amount of time that it’s taken African startups to raise large funding rounds. Might this be a welcome sign of a maturing ecosystem? Tage Kene-Okafor comments for TechCrunch on the rate at which funding vaults startups into unicorn status:
“The timeframe at which startups are reaching this landmark seems to be shortening. While it took Interswitch and Fawry 17 and 13 years respectively, it took Flutterwave five years; Jumia, four years; then OPay and Chipper Cash three years.”
Roots, Trees and African Fintech
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Saul Levin from global VC firm Entreé Capital broke down the investment opportunity for fintechs in Africa quite well. (The firm has invested in Kuda Bank and Mono in Africa — as well as Stripe, Snap, Deliveroo and others outside the continent). Here are their three answers for why investors should look to put money into African fintech now (as opposed to, well, five years ago):
1) “Data costs are plummeting creating a low cost opportunity for the delivery of financial services via the internet”
2) “Mobile internet penetration has skyrocketed”
3) Regulators are finally building an enabling framework for founders to easily build, test and deploy financial solutions while protecting consumers
Why Future Africa is Backing Global Wealth Management Startups
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Future Africa, an Africa-focused fund backing mission-driven startups, has recently invested in Nigerian “wealth-tech” startups like Chaka, Bamboo and Rise. In a recent piece, the firm breaks down why they’re so bullish on fintechs that enable Nigerians to build wealth by investing assets abroad. In sum: there’s a huge market opportunity, a consistently devalued Naira and unfriendly and outdated bank regulations that make it hard to build wealth domestically (did you know that the Nigerian Stock Exchange has crashed four times in the last 12 years?). Through technology, fintechs are rewriting the rules of wealth creation by providing avenues for Nigerians to invest in global assets directly through their phones. It’s a must read.
The Tiger and the Tree
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If you haven’t subscribed to Derin Adebayo’s Unevenly Distributed Substack, you definitely should. In his latest newsletter, he namedrops Tiger Global and Sequoia and uses them to compare two different approaches that VCs use when expanding geographically. The fascinating approaches they deploy can be described in this way:
On Tiger Global: “Tiger Global is creating a global index of all the technology companies that fit into its investment thesis. Its top-down approach to research, its lack of requirement for a board seat, and its outsourcing of value-add allow it to scale its geographical reach and deal activity in a way no firm has done before. In the first couple of months of this year, Tiger Global maintained a pace of 1 deal every working day, across multiple geographies, with only two partners on its private equity team.”
On Sequoia: “Compared to Tiger Global, Sequoia operates like a traditional VC firm. They take board seats and are extremely hands-on. They do not describe investments as deals, but instead as 'partnerships' looking to work closely with founders for up to a decade or longer…This type of hands-on involvement across multiple portfolio companies and multiple geographies is only possible when you have General Partners focused on each geography with deep local expertise and connections.”
For their part, Tiger Global led Flutterwave’s $170m Series C round in March and Sequoia made its first African investment into Egypt’s digital bank Telda. While neither investor has built an Africa-focused team, both have shown interest in deploying capital into fast-growing tech startups with business models that mirror successes in other markets. He spoke about the same phenomenon in a short ‘Unajua Series’ episode from African Tech Roundup, which you can listen to on Spotify here.
Who Will Capture the Merchant Payment Opportunity in Africa?
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Osahon Akpata, the Head of Consumer Payments for Ecobank, highlights why interoperability and digital trust lies at the heart of capturing the merchant payment space across the continent. With large and fragmented markets that have different currencies and regulators, fintechs must think creatively about partnerships when attempting to scale across borders. Before that, their main challenge in a cash-based economy is to persuade both consumers and merchants to switch from cash transactions to digital payments — which, despite recent COVID-induced growth, still represent just 5% of all consumer payments. As Osahon notes, providing greater value-added services for merchants could help incentivize them to reduce the transaction fees typically tacked onto POS payments for consumers. In this space, look to fintechs with other ways of earning revenue aside from transaction fees to be able to acquire new customers more quickly.
OPEN ROLES IN SHERPA’S PORTFOLIO 🤓
Local Co-Founders (in Egypt, Uganda, Senegal or Côte D'Ivoire) @ Boost
Business Development Executive @ OnePipe
Marketing Coordinator @ MoneyMie
Head of Commercial @ Money254
Product Designer @ Money254
UX Researcher @ Money254
Loved this. Great to hear your progress, and enjoyed the curation of articles. Looking forward to the next issue