Rise of fintechs and Flutterwave’s phenomenon
ADEYEMI ADEPETUN, in this report, writes on the growing impact of Nigeria’s startup ecosystem with a focus on Flutterwave’s recent feat.
Last December, a report had it that out of about $4 billion start-up funding that Africa attracted in 2021, Nigeria earned the largest chunk of $1.37 billion.
Expectedly, four countries—Nigeria, South Africa, Egypt and Kenya, emerged at the top. They accounted for 80 per cent of the total amount raised on the continent up until the end of November 2021, with 35 per cent of capital raised in Nigeria alone.
Data from “Africa: The Big Deal,” contained the total funding raised by startups in Africa for deals worth $100, 000 or more.
While Nigerian startups raised $1.37 billion in 2021, South Africa raised $838 million; Egypt, $588 million and Kenya, $375 million. Nigeria boasts of over 200 deals for the year and the other three countries, over 100 deals each. Other mentions were Senegal, where startups raised $222 million in 2021 and Tanzania at $96 million.
Indeed, from fintech to edtech, young innovators in the country are breaking new grounds. It is therefore not surprising that Nigerian start-ups are attracting more foreign investors’ interests than their counterparts in other African countries. This face of Nigerian business continued to change as the country’s young tech-savvy entrepreneurs launch successful fundraisings attracting global investment.
Arguably today, some of the start-ups in Nigeria making waves include Paystack, Autochek, Chaka, CowryWise, Flutterwave, OPay, Flying Doctors Nigeria and Giga Layer, among others.
News filtered in last week that one of the leading fintech start-ups in the country, Flutterwave, had raised $250 million from its Series D funding round. The funding round, which attracted international investors, saw the startup’s value rise to over $3 billion.
The Flutterwave enigma
FLUTTERWAVE, founded in Nigeria and based in San Francisco, has become one of the fastest-growing payments companies in the world.
Flutterwave is a leading technology company that enables businesses across the world to expand their operations in Africa and other emerging markets through a platform that enables cross-border transactions via one API.
The firm has also partnered with leading global and pan-African technology and telecommunication companies such as Uber, Flywire, Booking.com, PayPal, MTN and Airtel Africa to drive financial inclusion on the continent.
The company’s key advantage is international payment processing in 150 currencies and multiple payment modes, including local and international cards, mobile wallets, bank transfers and barter by Flutterwave, among others.
The brand continues to transform the way Africans transact on the continent and worldwide.
Since Flutterwave’s inception in 2016, the team has been on a mission to create endless possibilities for customers and businesses in Africa and the emerging markets.
In 2021, Flutterwave launched a range of new products, including Flutterwave Market for merchants, to sell their goods via an online marketplace and, most recently, Send, a remittance service that empowers customers to seamlessly send money to recipients to and from Africa.
Flutterwave, triple times a unicorn, joined Nigeria’s Interswitch, which became Africa’s first unicorn in late 2019 after US payments technology corporation Visa acquired a 20 per cent stake in the company for $200 million.
It enjoyed compound yearly growth of 226 per cent from 2018 to 2020. The company will soon set up shop in more
Francophone and North African markets, including Egypt, Tunisia and Morocco.
The Series D funding
IN venture capital terminology, the term Series D Round refers to the fourth stage in the seed stage financing cycle of new business growth. This Series D Round stage is generally for financing a special situation, such as a merger or acquisition, and so is not in the normal venture capital financing progression.
According to Flutterwave, the funding was led by the respected investor, B Capital Group, and with participation from Alta Park Capital, Whale Rock Capital, Lux Capital, among others. Several existing investors, who also participated in previous rounds, also followed this round, including, Glynn Capital, Avenir Growth, Tiger Global, Green Visor Capital and Salesforce Ventures
With this new investment, Flutterwave has now become the highest valued African start-up.
No fintech business founded by Africans with a focus on Africa is worth more or has raised more in a faster time frame.
The new funds will drive Flutterwave’s ambitious expansion plan to accelerate customer acquisition in existing markets and growth through M&A, as well as develop complementary products while encouraging new innovations in its products and services development.
This latest fundraising has seen Flutterwave’s valuation more than triple since its last funding round in March last year when it became one of Africa’s fastest ever Unicorn.
According to the firm, it will continue to transform the way Africans transact on the continent and worldwide. The funding follows five years of growth and success with over 200 million transactions worth over $16 billion dated across 34 countries in Africa. It also follows a year of rapid growth for the brand, which now serves over 900,000 businesses across the globe.
The Series D round comes a year after Flutterwave closed its $170 million Series C round and $35 million Series B in 2020 and $20 million Series A in 2018.
WITHOUT wasting time, the company has unveiled Flutterwave 3.0 which represents a rebrand of its visual identity and mission. Four new products were introduced as well as additional improvements to existing ones. It would appear that the company that hitherto was known as a payment company is aiming for more in the technology startup scene.
By rolling out a BNPL (Buy Now Pay Later) called Flutterwave Capital, the firm has made its entry into the lending markets.
Other products launched include, ‘Grow’ – a B2B that helps entrepreneurs easily incorporate their businesses globally, Fintech as a Service (Faas) – a solution to help startups become fintech companies using Flutterwave pre-built API, and Cards – a platform for other businesses to issue virtual and physical debit cards to their customers. product lending to card-issuing.
How thick is Flutterwave?
FOUNDER and Chief Executive Officer of Flutterwave, Olugbenga Agboola, said the story of the firm is that of resilience and hard work, stressing that the growth so far is due to the support of customers, partners, the banks, the public, the regulators, and importantly, the people.
According to him, the Central Bank of Nigeria, under the leadership of Dr. Godwin Emefiele, laid the vision of a transformational Payment System in Nigeria, provided the framework for innovation in this space, and has continued to create regulations that have enabled growth and thrive.
“We are grateful to them and to all the other Central Banks in all the countries where we operate. We set out to build a platform that simplifies payments for everyone and today, our solutions are used across the globe to connect Africans to the world and the world to Africans. We are delighted that investors believe in us and our story and are committing their resources to this belief. This latest funding demonstrates the conviction of some of the world’s leading investors in our business model, team and the Africa technology market. It gives Flutterwave the much-needed support to deliver on our plans to provide the best experience for our merchants and customers around the world,” he stated.
Partner at B Capital, Matt Levinson, said the firm seeks to back generational companies with broad platform potential.
Levinson said Flutterwave has a unique opportunity to accomplish this as the dominant payments infrastructure provider across Africa. He said in addition to their emergence as the leading enterprise payments processor for the continent, Flutterwave is innovating at breakneck speed with novel fintech solutions for large corporates, SMEs and consumers.
“I’ve had the pleasure of backing this world-class team since 2017 and couldn’t be more thrilled that B Capital is leading their Series D. Flutterwave may ultimately build one of the most consequential fintech businesses in the world, enabling hundreds of thousands of merchants to transact online and connect Africa to the global economy,” he added.
For the Managing Partner of Glynn Capital, David Glynn, believes the digitisation of payments globally is one of the largest and most important trends in technology.
Glynn said having been investors in Flutterwave since 2017, “we have had a front-row seat in seeing Flutterwave establish itself as a leading payments company in Africa as it drives adoption of seamless digital payments experiences for merchants and consumers alike. We look forward to supporting the company as it addresses its significant growth opportunity in the years ahead.”
According to Glynn, this latest fundraising has seen Flutterwave’s valuation more than triple since its last funding round in March last year when it became one of Africa’s fastest-growing Unicorn.
Challenges within the Nigerian startup ecosystem
THE Guardian had exclusively reported how fintech shunned the stock exchange for $876.5 million funding overseas.
The report revealed how Nigerian fintech are approaching investors and getting funded, especially from venture capitalists (VC) in countries such as the United States, United Kingdom, Switzerland and Belgium. From these offshore destinations, these fintechs have raised some $876.5 million in the last six years.
From 2014 to 2020, for instance, Fintechs raised about $600 million in funding, attracting 25 per cent ($122 million) of the $491.6 million raised by African tech startups in 2019 alone – second only to Kenya, which attracted $149 million.
Indeed, aside from the issue of lack of funding locally, which forced many start-ups to rely on foreign investors, stakeholders have rued the poor state of electricity in the country as one of the major challenges limiting the growth of the ecosystem. This, coupled with the country’s inability to achieve a central database of Nigerians’ identity, they said, would continue to hamper the development of solutions, which are making waves in other climes.
At a recent gathering for the startup ecosystem in Lagos organized by the National Information Technology Development Agency (NITDA), it was noted that many of the government’s policies were not favourable to the startups. Specifically, they cited the recent policy of the Central Bank of Nigeria (CBN) on forex as an antithesis to the growth of start-ups in the country.
According to them, this policy has been affecting many start-ups that require forex to transact with other players outside the country. They, therefore, requested the intervention of NITDA, as the IT regulator on various industry policies affecting the system.
AT the meeting in Lagos, the Minister of Communications and Digital Economy, Prof. Isa Pantami, challenged startups and innovators in the country’s ecosystem to take ownership of existing policies to further consolidate and enhance the success of the ecosystem.
Pantami at the NITDA organized conference themed: “Fostering an Enabling Environment for Start-up Growth,” disclosed that the objective of the session was to understand firsthand what the ecosystem requires from the government to thrive.
“The importance of a vibrant, functional innovation ecosystem cannot be underscored and that is why we have taken deliberate steps to organise this interactive session specifically, to address certain pertinent issues.
“First, to know how to consolidate our ecosystem; secondly to understand the market and its challenges, thirdly, to map our market and set targets, to strengthen our networking strategies and more importantly, to collaborate and partner with the government. This is key to the success of our ecosystem because the government has a major role to play in providing an enabling environment.
Pantami emphasised that the Federal Government is open to suggestions on what it can do to further ensure the success of the ecosystem.
He said, “If there are challenges in implementing any of the policies we have put in place for the sector to thrive, please let us know.”
He cited the National Startup Bill, the National Council for Digital Innovation and Entrepreneurship, the National Policy for the Development of Indigenous Content in the Telecommunications Sector, among others, as examples of the government’s commitment to enact and implement policies that enable the ecosystem.
Pantami disclosed that incentives like grants, tax and fiscal incentives, startup labelling, seed funding for startups, tax holidays have been provided for, in the plan to provide the necessary support by government.
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