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The Next Wave: Hunting the next Paystack

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Digital platforms are archiving a long-awaited civil uprising in Nigeria
OCTOBER 18, 2020
This newsletter is a weekly in-depth analysis of tech and innovation in Africa that will serve as a post-pandemic guide. Subscribe here to get it directly in your inbox every Sunday at 3 pm WAT.

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Hello,

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ICYMI; some (not so) humblebrag, Jack Dorsey read last week’s edition of this newsletter, and he tweeted it.

Anyway, moving on
to this week’s conversation; Two hundred million dollars. That number has got everyone in African tech giddy.

In solidarity with Nigerians protesting police brutality through the #EndSARS movement, startup news sort of took the backseat last week. Only the living write code and raise funds.

But we are not overlooking this momentous event. Paystack’s acquisition is, firstly, a glorious feat by Shola Akinlade, Ezra Olubi and their 114 or so staff. But it stirs many talking points including the potential rewards for investing in Africa and how to think about unlocking Africa’s prodigious talents.

I’m standing in for Victor this week and before we dive in, a request: please
subscribe to and catch up on older editions of this newsletter. And after enjoying this edition, please share.

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WHAT’S HAPPENING

A new wave

On June 27 this year, Paystack CEO Shola Akinlade was on a lively panel discussion with Fara Ashiru-Jituboh, founder of payment platform Okra, and Odunayo Eweniyi of Piggyvest.

It was the New African Renaissance conference, a two-day online event that featured over 30 speakers – mostly African entrepreneurs and investors – from all walks of life.

Patrick Collison, founder and CEO of Stripe, was on the panel too. Almost immediately, the conversation turned to Stripe’s interests in Africa and Paystack in particular, since co-leading the latter’s $8million Series A in August 2018.

“We’re very impressed by their product rigour and thoughtfulness.
We learn from things that Paystack builds,” Collison said.

Exactly 110 days after that engaging conversation, Paystack became a Stripe company. Reportedly worth over $200million, the acquisition is an unprecedented achievement for a five-year-old startup in Africa.

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The announcement comes as Nigerian youth rally around the #EndSARS movement to protest against a litany of difficulties stifling innovation and economic success. They’ve held Paystack up as a symbol of what can be achieved when young people are allowed to build and scale in peace.

Maya Horgan-Famodu, founder and CEO of Ingressive Capital, says Paystack was the investment her fund made in 2017 – “the (modest) entirety of what we’d raised at the time,” she says.

“It’s important that Ezra and Shola won not just because they’re Nigerians building for Nigeria, but because they worked for it. They are the role models Africans need.”

Paystack’s acquisition is possible today because five years ago, some individuals put their money in to get the idea off the ground. Naturally, they have been elated.

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Angel investors are crucial in every tech ecosystem. In Africa, they are particularly important to boost young founders who cannot turn to banks for funding.

Sure, it’s a risk stumping up $10,000 or $50,000 for an ambition that has no guaranteed future. But the payout can be mouthwatering:

  • Olumide Soyombo, an angel investor, tells TechCabal the exit has provided him his best return yet. He invested in Paystack before the startup’s participation in the Y Combinator programme in 2016, and stayed involved to help the
    startup figure out regulation, stakeholder management and networking.
  • Michael Seibel, CEO of Y Combinator told us he is “excited for all the startup founders who will be inspired by Paystack and who will build products on top of their platform.” A back-of-the-envelope math suggests the return from Paystack will see YC what they’ve invested in the 40 African startups on their portfolio.
  • Kola Aina, founder of Ventures Platform, believes more local investors will “smell the coffee” as a result of this deal: “The multiples are incredible as we got in super early.”

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Will this move the needle for early-stage funding in Africa? Soyombo thinks so:

“I have been getting several calls of people asking me to carry them along when next I invest.”

He says some of those calls have been from high networth individuals who could finally be coming around to the idea of tech startup
investment in Africa. Paystack’s success could be the beginning of a feeling of a fear of missing out:

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When HNIs start investing in startups, they will amplify young people’s demands for an environment more conducive to innovation and entrepreneurship. With more skin in the game, these influential
individuals can nudge politicians away from arbitrary policy choices that hurt startups.

More importantly, Paystack’s acquisition should start a conversation in every African country about what it means to empower young people.

More Paystacks will come through when empowerment focuses on education, broadband infrastructure and power. Otherwise, the alternative is to be stuck with “Presidential Youth Empowerment” schemes powered by tricycles and cooking oil.

Software is eating the world

“At YC we invest around the globe because we believe that great software companies can build great products for all the citizens of the world,” Seibel says.

Africans should be building these great products, and Stripe’s move to have Paystack all for itself signals there is a global demand for African ingenuity.

As TechCrunch observed, Stripe is taking a risk investing in Nigeria where mistrust, corruption, and internal security
problems tend to frustrate foreign direct investment.

Yet, the American company has stumped up $200million for a startup that has become the envy of banks. This deal was foreseen by many but that doesn’t make it any less exciting. In fact, it signals a new dawn.

“I don’t doubt this ripple will change the country,” Horgan-Famodu says. “With brilliance, curiosity and integrity, you can change the world.”

This feels like a pivotal moment; young Nigerians changing their country through civil agitation on the streets and commanding the world’s attention in the boardroom. Maybe, just maybe, Africa is finally rising.

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FROM THE CABAL

Digital platforms are archiving a long-awaited civil uprising in Nigeria

Nigerians are building digital platforms to make sure the agitations of the past week do not fade in
people’s memory. There is much anger and frustration on the streets, but there has been incredible organisation on legal aid, healthcare and protest jollof. Kay has a tally of
the digital platforms recording this moment for posterity.

Kenya-based Pariti to manage deal flow for Future Hub, a Transsion-backed investor. After launching in January as a platform that connects startups to consultants, Kenya-based Pariti has shifted its business model a bit to prioritize the provision of that service to investors. It has landed a first client; Pariti will manage deal flow for Future Hub, an Africa-focused VC backed by Transsion. We asked Wossen Ayele, Pariti’s COO, to shed more light on their new direction.

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Best wishes for a great week

Stay safe and please observe all guidelines provided by health experts.

You can subscribe to our TC Daily Newsletter; the most comprehensive roundup of technology news on the continent, and have it delivered to your inbox every weekday at 7 am WAT.

Follow TechCabal on Twitter, Instagram, Facebook, and LinkedIn to stay updated on tech and innovation in Africa.

– Alexander O. Onukwue, Staff Writer, TechCabal

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The post The Next Wave: Hunting the next Paystack appeared first on TechCabal.