Suppliers of Money in Africa: Time to show our start-ups the money
KIZITO OKECHUKWU | SEPTEMBER 18, 2018
As the old cliché goes, money makes the world go round. But for many an innovative start-up, lack of it brings their entrepreneurial world to a grinding and severely frustrating halt. Any fledgling business needs money of some amount to jump-start and fuel their growth. In capitalist markets, there are two stakeholders; the suppliers of money and the users of money. I use the lurid word ‘money’ in this article just to drive home the key point I want to make and that is there’s no separating money (liquid cash) from business success.
Commercial banks are an important source of funds for any business and also for small businesses, as these don’t often have ready access to the long term securities market, so bank credit is the only practical source of new capital funds, i.e. intermediate-term financing.
Besides commercial banks, there are various other sources of business funding. These include grants from private, NGO or public sectors, angel investors, venture capitalists and fund managers of private or public sector funds, among others.
The suppliers of money quite literally hold the future or failure of many small businesses in the palms of their hands, even if they can prove sustainability. The immense power they yield inevitably decides which ones get developed and also how much they, as an investor, can benefit from it. There’s a popular saying in the Igbo tradition that ‘whoever has the money has the key’.
Recently, three African start-ups, two Nigerian ones and a South African one, secured huge investment deals in the same week.
Yet something left me quite gobsmacked. Not a single African money supplier played any part in these deals or led these deals. There were probably more deals made that week and deals continue to be made each day, but I want to focus on three specific ones, given that I have associated with some of the beneficiaries of these highly lucrative and game-changing deals.
Tizeti received an investment of US$ 3 million
The company was established to tackle poor internet connectivity, not only in Nigeria, but on the continent at large, by developing a cost-effective solution from inception to delivery, for reliable and uncapped internet access for potentially millions of Africans.
Using solar-powered base stations, Tizeti is able to reduce operating costs, which allow the company to be hyper-competitive when it comes to subscription packages (a Wifi.com.ng unlimited plan in Nigeria currently costs just $30 per month). This, coupled with the company’s extensive coverage reach, has given Tizeti a competitive edge in the ISP sector, establishing the young company as an ICT and tech infrastructure leader.
4DX ventures, a New York-based venture capital company that focuses on Africa, led the US$3 million in investments. I first met the Tizeti team last year and, although I saw not much opportunity for them in South Africa, I firmly believed that their product is world-class and a no-brainer for any investor seeking opportunities in Sub-Saharan Africa.
Paga received an investment of US$10 million
Paga, a mobile payment platform, was founded in Nigeria in 2009 by Tayo Oviosu and publicly launched in 2011. Today it has over nine million customers and allows its users to transfer money and make payments through their mobile devices. Paga acts as a mobile wallet where any user equipped with a mobile device can conduct transactional activities using their device. The Global Innovation Fund, which is both Washington and London-based, led the investment deal.
Yoco received an investment of US$16 million
Yoco, a fintech start-up, was founded in 2015 and is a South African-based point-of-sale payments provider that builds tools and services to help small businesses get paid, run their business better and grow.
In just its first year, Yoco processed some R13 million, not an insignificant amount for a fintech start-up in South Africa, which has the most sophisticated financial services industry in Africa and is well served by several major banks that regularly receive global awards for innovation and excellence.
Yoco was also named one of the “250 top private companies changing the face of financial services around the world” in the Fintech 250 report by researchers CB Insight. One of only five African start-ups to make the prestigious list, the report praised Yoco for its “powerful business portal”. Last year, I attended their stakeholder session where they shared their vision for growing the company beyond the shores of South Africa.
Partech, a global investment firm based in San Francisco, led the investment.
Just these few examples are solid proof that African start-up innovation can proudly compete with the best on the planet. Yet many of us wish that our Africa institutions and suppliers of money will recognise the power in our young ‘up-and-comers’ and give them the monetary muscle to scale and take their rightful place alongside their international peers.
I have met many of our African investors (banks, angels, VCs, fund institutions, etc). It seems they expect a start-up to have a grey hair, have worked for many years and so much other frustrating criteria. Africa is abundant with fantastic initiatives, which global investors are quickly realising, but sadly many of the money suppliers in Africa are not and most times it takes them so much time and a lot of convincing to believe in African startups.
The global investment community believes in our youth and this is evident through my recent interaction with a group of UK investors from the Department of International Trade whom I met last week during their visit to our 22 on Sloane campus. Startups are pivotal in securing a positive economic future for our country and it would be great if our African funders too, would start quickly coming to the party.
I think for every aspirant start-up with proven sustainability, the words of Tom Cruise and Cuba Gooding Jr. in the 1996 hit movie Jerry Maguire ring true. “Show me the money!”
Kizito Okechukwu is the co-chair of Global Entrepreneurship Network (GEN) Africa; 22 on Sloane is Africa’s largest startup campus.
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