The Africa SMME Tech Report

Issue No. 13. Africa-Middle East small business tech news for 9 August 2021. This edition features Julaya, Sky.Garden, Dastgyr, Payhippo, SimpliFi, and more...

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Ivorian Fintech Julaya Raises $2M to Digitize SMME Payments

The Ivorian fintech Julaya has raised US$2 million, bringing its fundraising total to US$2.8 million since its founding three years ago. The company plans to drive deeper into the Ivory Coast market while also eyeing international expansion.

Its solution is all about helping SMMEs use mobile money to wean themselves off of cash. However, many large enterprises use the platform as well.

According to TechCrunch, “The platform enables companies to streamline their accounting and improve their operational efficiency by digitizing payments to workers and suppliers instead of relying on cash.”

Julaya’s early funding rounds came from angel investors. This pre-Series A round brings in venture investors that include Orange Ventures and MFS Africa Frontiers; VC firms Saviu Ventures, Launch Africa, and 50 Partners Capital.

The participation of Orange Ventures is particularly notable. Its the venture arm of the French telecom Orange, which is a major mobile carrier in Africa, operating in 15 countries on the continent. Orange Ventures is also an investor in the South African payments player Yoco, among others.

“Fintech’s environment in Africa is distinguished by its competitiveness and strong dynamism. Orange Group, through its technology investment fund, intends to participate in this boom by supporting fintechs such as Julaya. The goal is to target local technology champions at the service of the transition to a more digital and responsible world,” said Habib Bamba, the director of Transformation, digital and media at Orange Ivory Coast, in a statement to TechCrunch.

Angel investors from Africa and Europe also participated, according to TechCrunch.

Julaya works with small businesses as well as major businesses and government institutions to disburse payments to mobile money and mobile banking wallets. It requires partnerships with telecom operators and other regional fintech startups.

Its customers include the eCommerce platform Jumia, as well as the Ivory Coast Ministry of Education and the World Bank.

In the Ivory Coast, 75% of consumers have a mobile money account, vs just 20% with a bank account.

Julaya, which means “trade” in Bambara, was founded in 2018 by two French entrepreneurs, Charles Talbot and Mathias Léopoldie. The founders had previously worked in Mali and Burkina Faso for the French Fintech LemonWay, where they leasnred about the fragmentation and multiple pain points affecting francophone Africa’s mobile money market.

As Julaya says on its website, “it is a nightmare for merchants and SMEs to use mobile money and mobile banking solutions, as they lack user-friendliness and interoperability.”

Julaya is headquartered in Abidjan and has its technical team based in Paris. The company launched its first mobile money app in October 2018. The company employs 16 people.

“Mobile money is coming to a mature stage where business and public institution use-cases provide new growth opportunities for the sector. The pandemic has opened up minds about the urge to digitize payments. Fintech competition in West Africa is making digital finance more affordable for consumers, and technical integrations with telecom operators are becoming more reliable,” Co-founder Talbot said in a statement. 

Is an ‘Impact Story’ Enough?

A question I often discuss with African tech founders is to what degree the “impact story” factors into their ability to raise money. What I’ve come to understand is that the impact story opens the door to early-stage capital. But the scale story keeps the money flowing.

And when we say “impact”, we refer loosely to the notion of launching or investing in a business to address a societal need, not just to make money. In the space we cover here, this means empowering African and Middle Eastern small businesses by allowing them to go cashless, sell online, access capital, use tools to improve their operations, and more. But is every business solving a need truly an impact business?

On the most recent BIG5D Podcast, we asked Martin Majlund, CEO of Kenyan eCommerce startup Sky.Garden, whether the impact story has become table stakes for attracting capital.

Martin told us the short answer is “yes”. But he added that the story is a bit more complicated than a yes/no answer can do justice. Here is what he said.

“The first raise we did, we joined an impact accelerator, after our seed round. And and I think, for us, one thing is the story that you communicate. But another thing is also the the self-belief in the kind of company that you are building and the kind of talent that you attracting. And I think that has been a part of our core DNA since day one. The empowerment of the entrepreneur [mission] is so strong, that’s not something that we’re ever going to divert from.

“I think you see, especially in Sub Saharan Africa, that it's almost impossible these days to raise early stage money without having a powerful impact story. But then, when you get to a post-seed round, and before Series A, you'll see a pretty massive vacuum. And then, while the impact story still has to be there, it becomes a pure numbers game.”

So as the rounds get larger, the scale story has to be at least as strong as the impact story. That makes sense. After all, bigger company, bigger impact.

Martin pointed to one downside he is seeing to the current emphasis on impact stories. In his view, too many startups are using an impact story to secure early-stage funding. And then failing to survive to future rounds because their businesses are not viable.

“Too many companies are getting access to easy money too soon. And too few good companies are getting access to the proper VCs, which in the key to getting to a Series A round,” Martin said.

“It was incredibly easy to get access to the first money and I see a lot of startups getting access to that. And then it becomes harder. But that's part of evolution.”

Another recent podcast guest, Tori Samples, CTO and Co-founder of Leaf Global Fintech, said the impact story can be a double-edged sword with investors.

Her company offers a blockchain-based digital wallet designed to help refugees and small traders safely move money across borders using a feature phone.

We asked Tori if the fact that the word “refugee” appears in her company’s mission made it more or less challenging to raise capital. Here is how she responded on the podcast.

“I think that the refugee, the refugee story, definitely helps attract interest and sometimes grant capital, but it also can serve as a deterrent to certain forms of investment.

“So I wouldn't say that all VCs are turned off by that. But it definitely comes with a certain stigma to some. One of the things that we've been really, really passionate about from the beginning is making sure that we get the right people on our cap table, the right people on our board. And so finding investors that have an appetite for not just a comfort level with an appetite for working in emerging markets, with a population that is generally overlooked, and underestimated is very important to us.”

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Nigeria’s Payhippo Joins YCombinator

Payhippo, a company we’ve recently featured in the newsletter, has been accepted into YCombinators Summer 2021 Accelerator Cohort.

YCombinator is a legendary seed-stage investor and accelerator that has a standard deal for early-stage startups — US$125,000 for 7% equity. In addition to the cash, startups get access to the accelerator’s basic business training, as well as access to the network of alums that serves as a future resource for mentorship, partnerships, and funding.

Back in July, we covered Payhippo’s $1 million pre-seed round, designed to help it build out an SMME micro-lending business, which launched in January 2020. The company sees a massive opportunity to help Nigeria’s 40 million SMMEs get faster access to the small loans they need to purchase stock and raw materials, pay rent, and so on. Cash flow is a killer, and quick access to cash can make the difference in survival for many small businesses.

We picked up a few fresh details about Payhippo from YCombinator and from an interview in Business Insider with Co-founder and COO Chioma Okotcha.

  • Payhippo has been growing at a 25% per month since it launched in January 2020. And it reports revenue of US$27,000 in May 2021. At a steady-state of 25% growth, this works out to roughly $600,000 in revenue for the calendar year 2021. Of course, this figure could vary considerably if the company’s growth accelerates (or declines, but that seems less likely).

  • The company currently has 15 people on payroll and Okotcha says it is hiring rapidly in finance, engineering, and sales.

  • The company made its first loans with investment capital drawn from the founders’ personal savings.

  • Payhippo has made 3,000 loans to date, with an average loan size of about US$1,600, on which it makes about US$96. This works out to 6% in average fees/interest on each loan.

  • The company gave up the 7% to YC reluctantly. Here is how Okotcha justified the decision in the BI interview: “We had mixed feelings at first because 7% of your company is a lot to give up. We called up a few YC alumni from our market and got their input. Ultimately we went with Y Combinator because we saw how much we could learn from the YC partners and the overall network.”

  • The company claims a 97% repayment rate. And it attributes the high rate to its AI algorithm, which gets smarter with each transaction. So as its credit-scoring model gets more sophisticated, the company will presumably be able to issue larger loans without sacrificing its repayment rate. This in addition to growing its customer base will help Payhippo scale.

Pakistani B2B Marketplace Dastgyr Raises $3.5M to Help Small Retailers

We haven’t written a lot about the startup environment for SMME focused technology in Pakistan, which stretches a bit outside our geographic mission to cover SMME tech trends in African-Middle East.

Still, there is a lot going on in Pakistan, and the parallels with the AME market are clear. Both regions have large numbers of small and micro businesses that share a common need for inexpensive tech tools to make their business life easier. And they need access to capital, often in the form of small loans or lines of credit, to smooth out cash flow.

One company we recently came across addressing these pain points in Pakistan is Dastgyr, which just raised a US$3.5 million seed round. The company aims to disrupt Paksitan’s US$50 billion+ retail grocery market.

The new round, led by VC firm SOSV, brings Dastgyr’s fundraising total to $4 million since its 2020 founding.

Here is how U.S.-based SOSV describes its mission on its website.

SOSV provides intellectual and financial capital to accelerate founders’ big ideas for positive change. SOSV has funded over 1000 startups to date. We currently fund over 150 startups per year through our programs: HAX (hardware and connected devices), IndieBio (life sciences), Chinaccelerator and MOX (cross-border internet and mobile in Asia), and dlab (blockchain, data and decentralization).

Dastgyr started out as a B2B eCommerce play, helping small retailers get access to stock for their shops. The company is evolving into a fintech, however. With the fresh funding, the company plans to become more of a complete solution for SMMEs by adding small loans and a buy now, pay later feature to its solution set.

Dastgyr’s founding team cut its teeth at some of the region’s top eCommerce and logistics startups, including Airlift, Daraz, and Careem.

What’s ‘Card as a Service’?

While we are on the subject of new startups launched by Careem veterans, let’s talk about Dubai-based SimpliFi. This is a new “cards as a service” platform focused on MENA + Pakistan. It also closed a seed round led by Rally Cap Ventures.

According to Menabytes, the company was founded in 2020 by Ali Sattar, the former head of Careem Pay.

So what, exactly, is a “card as a service” platform? The idea is to “democratize” credit card issuance. The platform, via APIs, allows third parties, for example, a fintech, gig platform, or an SMME to issue virtual or physical cards. And they can do this almost instantly. And they can manage the program via SimpliFi’s online portal.

The card as a service concept isn’t new. A quick Google search turned up several that claim to offer such a service. However, SimpliFi appears to be differentiating on the speed with which a partner can begin issuing cards via its platform.

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