How African Founders are Enabling Tomorrow's Startups with Fope Adelowo (Helios Investment Partners), Ken Njoroge (Cellulant), Tayo Oviosu (Paga Payments) | Disrupt SF (Day 3)
7:31PM Sep 7, 2018
We're going to talk about how African founders are enabling tomorrow's startups. So with that, I'd like you to I'm do going to do my best with these names.
Please welcome to the stage Fope Adelowo, Ken Njoroge and Tayo Oviosu, as well as your moderator, Jake Bright, please welcome them.
How'd you feel? Oh,
So hello, Disrupt
Africa has a tech industry and when I first started covering it, I actually heard that more as a question than a statement because a lot of people didn't believe it. Seven years later the continent has its first tech unicorn. Thousands of startups, all the big global tech names are moving in every other day. We see eight figure VC rounds, going to African startups. And today we have the first Africa panel on a disrupt stage. So there's a lot to talk about.
I want to welcome our panelists. And the way I want to get started is by doing some quick q & a with each of them on who they are and what they're doing and one of the world's fastest growing tech scenes. So let's start with Fope Adelowo from Helios Investment Partners. Fope, tell us about Helios. How big are you guys?
So Helios is a private equity fund focused on Africa. We manage about $3 billion of assets under management and invest in across asset classes on the continent. I spend my time looking at mostly our tech companies and payments based and retail in healthcare, EdTech as well
and offices in
We have offices in London, but we also have offices in Nigeria and the Nairobi
And you've also been close to two investments that are two of the kind of IPO rumors or possibilities for the continent, right? Can you just name those and say a little bit? I'm thinking of mall for Africa and of course inner switch.
Yeah. So the two companies I spend quite a lot of time with actually. One is interswitch, which is a payment processing company. It's the largest payment processing company in Nigeria and also has the largest digital payments platform offering payment solutions for banks, individuals, corporate and government. quite an exciting company. high growth story. We can talk a bit more about it
we'll come back to that.
Yeah, and mall for Africa is an e commerce platform allowing African consumers to connect to international merchants in the US and UK.
Perfect. We'll come back to that when I go to Ken Njoroge, CEO and founder of Cellulant based in Kenya and Ken just in a line or two could you tell the audience what you guys do?
So cellulant is a integrated payments platform. We built a payment platform that allows people with bank accounts and people without bank accounts to make payments. We've specialized in sort of three verticals, payments in agriculture and payments for local merchants. And so basically local utilities, water utilities are want to take payments from consumers, and then global ecommerce companies that want to take payments from African consumers. We differentiate ourselves because we built a footprint across 33 markets in in Africa. And, and we integrate deeply into these three verticals in terms of differentiation.
And you guys raised a little bit of money this year, huh?
Yes, we did. We raised our series C was 47 and a half million round was led by TPG through the rise fund brings our total fund raised just about 15, $57 million to date. Yeah. And so we're powering to grow over the next couple of years across across Africa.
Yeah, little little preview, we're doing a little crunchbase Africa project. And I think so far, your round is the biggest one raised on the continent this year. So good stuff.
Want to go to Tayo Oviosu, CEO and founder of Paga payments located in Nigeria? Tayo. Can you just say quickly, a little bit about Paga and what you guys do on your platforms?
Yeah, first of all, thank you. Thank you very much. And it's really great to be back home was here for a while before I move back to Nigeria. Paga is a mobile payment company and our purpose is to make it simple for 1 billion people to access and use money. So essentially, what we're trying to do is to solve the problem that is actually exists across the world. And a lot of emerging markets have difficult to transfer money and very difficult to leverage money. And so Nigeria is our first market technology is built, you know, on the continent and in Nigeria. Now, we're the largest mobile payment operator. So very similar to a Venmo in this market where banked users can add their bank accounts can link the cards and then perform transactions, send money, request money from friends. And then also people who are not banked can actually put money into the wallet, leveraging our network of agents to do transactions. So we so we're very excited about the opportunity. And I'm happy to talk more about the opportunity of this across emerging markets.
And just quickly we'll get deeper into this. But we broke a big headline yesterday, TechCrunch you guys had some news raise and you're going to go a little bit outside Nigeria?
Yeah, that's right. We we announced yesterday that we closed a 10 million Series B two round which which brings the total we raised about 35 million and and we also announced the were looking to go beyond Nigeria and D beyond Africa. So we're looking at large markets where these problems exist. Half the people in the world who are not banked live in seven countries and 60% of those people are actually women so it's very interesting where there's a lot of opportunity and we're looking to take the platform we built outside the continent
And I think the big storyline and we'll come back to that was in our conversation that you're actually looking to take on paypal the big global payment players so
We'll come back to that but that's definitely something to know so i def I want to start with money the money always tells a good story and get into a little bit about the continents VC investment thesis and who best to start with on that then Fope. So Fope just quickly, so we give people some background and how would you characterize the VC market both from your own perspective and continent wide? What's happened over the last five years in particular, which been last five to seven years have been pretty big in this market. So how would you characterize some of the changes the values of volumes where things are going
and where maybe where they might go?
Yes, I think there has been a ton of development in the last five years and it's super exciting, and I'll say just if you're thinking if you think about it from sort of where the investment is coming from. But even just the ecosystem of players in the space, right? So I think one is you're seeing actually just more founders come out and, you know, developed companies that we can invest in. And by we, I mean, the investment community. So I think that crop of individuals is growing, then I think, you know, when you look at sort of the investment space, what we've seen in the last few years is just a number of accelerators and incubators that have developed over the continent that numbers increase massively. And I think that's creating sort of a platform, a launch platform for more and more entrepreneurs to develop businesses. When I look at, you know, I guess private equity funds like ourselves, you know, typically we look at bigger check sizes, but I think when you when you think of where growth is likely to come from on the continent, it forces us to look at even the earliest stage companies so you know, where you're finding what you'd call maybe non traditional VC players actually playing in that space as well.
There's definitely still a gap from sort of the incubation space stage, you know, straight out to sort of the exit stage. But I think, you know, what you're finding is there, they're increasingly more players across the value chain. And, and yeah, super excited about where that is going to go to in the next few years.
So I want to press a little bit TechCrunch did a market engagement trip in Ghana and Nigeria for 10 days. And we had some debates and I want to play a little devils advocate, because one of the things that we talked about was performance. And Africa's tech scene is pretty light so far. And we were talking about how if you're in a geographic agnostic, VC was only looking for returns, you don't have any kind of pre existing relationship with Africa. It's a pretty performance light market. You haven't seen a lot of exits. There hasn't been an IPO yet sort of somebody like a hard nosed VC investor from Silicon Valley, you know, what would be the case to invest in Africa
I think simply growth. If you think about, you know, most of the sectors on the continent, most of them are still on the very early stage of adoption of technology. And what that does is a present significant opportunity. So for us, the way we think about investments and, you know, this is across tech or other sectors is there massive infrastructure challenges that, you know, when you think about how those get sold over time, I think technology has a big role to play in Africa. The reality is, you know, models of invest in sort of large capital and long gestation periods for some of these infrastructure problems, probably, you know, will not be successful in Africa. So, where you have technology with, you know, these small distributed solutions beat in solar or payments. Those are where the exciting opportunities are. And I think, look, the amount of growth that you can see is phenomenal. The other day, I was looking at how much electronic transfers in Nigeria has grown and that's grown by over 70% year on year in the last five years.
Now that number is, you know, phenomenal. And I think you can see that happen in lots of different sectors. And that's where the growth is. And I think that's the value proposition, whether you're in Africa, whether you're looking at investments in Asia, you're looking for growth. And because you're at such an early stage in the, in the adoption cycle in Africa, it becomes quite interesting from that perspective.
So I want to get Tayo and Ken in on this because you guys have actually had to make these cases to investors.
And in a nutshell, you know, what has been the way you guys have dealt with maybe some of the skepticism or convinced outside investors that you guys are a good bet for performance goals?
Yeah. So first of all, I think the first thing you have to distill I mean, distill for people is that the talent quality and for we touched on it briefly, the talent quality you find on the continent is very similar to what you will find here in terms of the founders and the teams that are setting up high quality companies, right. And so if you you sort of say, okay, I'm going to get the same talent that I can that can run after the idea. And then the question is, the markets are so young and ripe for a long term play.
So I think you have to be in a bit longer right in our markets, right? Then you would think in Silicon Valley but the multiples you can get I mean, I can't wait to like give Tim Draper an exit in Paga right so it's embryo is one of our first angel investors but I know we've more than 20 X his money right right. So based on our last valuation, so I can't wait till we give them an exit and then we'll tell that story of the kinds of exit. Fope wouldn't tell us on inter switch
the multiple but I know it's a very significant multiple of what her company's already earned in terms of the valuation
Well Ken does it come down to that? I mean, you you guys I know. And it's it's not you're not public yet, but I've tried to dig into as much as I can. You guys have performance, you have results, you have numbers. Does that kind of make the sale to investors, you know, across any market across any geography,
Yeah, I think if you look at what investors Look, look, look at, which is a size of the market, and the quality of the teams, and, and Tayo makes a good point about the quality of founders, I think I had one investor who says, Look, if you look at the nascent ecosystem in Africa, it's incredibly difficult to sort of build out a business. So the few businesses that sort of survive then have very, very high quality teams, because it's just that much more difficult an environment. Second thing is just sheer market size. So if you look at payments, which is sort of a hot space in Africa now,
and you've processed a lot like your annual numbers, can you just share those like they're pretty big?
Yeah, I think last year we processed about two and a half billion dollars this year, we're on track to process about $5 billion of payment volume in in our network if you look at in the continent and there are markets where, you know, even single use cases of sort of peer to peer transfers. Like in my country, Kenya, that cross volume processed on just one single use case is close to 50% of GDP.
Now, if you extrapolate that across the African continent, which is going to be a, let's say, a 1.1, $1.2 trillion GDP in 2020 I mean, that's a bloody good business, I mean, for a payment and, and the payments models are known. You take 1%, 2%, 3%, of cross payment value, it's a huge business, any investor anywhere in the world is interested in that size of of opportunity.
And just staying on FinTech with you. You know you're in Kenya you guys have operations in 33 countries. But I wanted to ask how you guys differentiate yourself from Safari comes m-pesa and with m-pesa now I think you either have that like half of you are a percentage of you are totally tired about
Hearing about in m-pesa a is one of the the contents most successful payment platforms or maybe half of you don't even know what they are but how do you differentiate yourself from them? And and basically do you agree that the FinTech space, which has a lot of opportunity, it's just diversifying across the continent. And you guys prove that.
Yeah, so m-pesa is a huge success. I think it's a just about 13 years old. It's a it's a wallet that's primarily primarily used for p2p, so it's a combination between our wallet and our cash distribution network. It's $660 million business or last financial year, 25 million customers. So it's a huge platform, but it's only in Kenya,
And it's primarily a p2p platform. So in a sense in that sort of stock of payment solutions, it's sort of you could say, the baseline platform and that's essentially going to form the foundation for Africa, what people like us are doing is on the back of those baseline platform, sort of building these highly specialized multi country, multi currency, multi use case platforms, and then giving customers a single pipe, single connection, single contract into payments on the continent. So for instance, and an internet merchant who wants to charge $5 subscriptions from African consumers,
Instead of coming into the continent, and finding a license in Kenya, doing a couple of integrations, going to Nigeria, doing another handful of integrations, that sort of thing and shove a single pipe single API into taking payments from 33 countries. So that that's a big differentiator. And indeed, we see a lot of customers because they're their mobile platform, I think now on their continent is there somewhere in the region of 250 million smartphones, you can imagine everything that you see on the internet will make its way to an African consumer in one form or another.
So that's that's a good segue, I want to talk a little bit about macro environment for startups. And I think I, I wrote one time that the environment that a lot of African startups and I'm generalizing a little bit the continents, big, there's 54 countries 48 in Sub Saharan Africa. But there are some cross cutting trends. But that the the macro environment that African startup founders face would make the toughest Silicon Valley founder just cry and like, give up immediately. And I'm thinking of one time when I first met Tayo, in his offices in Lagos. And he was telling me about all these plans that he's now made good on, the electricity just went out, if he was telling me and I flinched like what's going on and Tayo just continued to talk as if nothing happened at all but Tayo on macro environment, like what are some of the challenges that you faced? How have they gotten better?
and how do you improve those things to kind of take away some of the skepticism people have about investing and doing business on the continent. That's a big question. I know.
Yeah, no, but I think the, the main challenge across most countries on the continent is one of infrastructure and the lack there off.
So but even with that, so for example, talking about electricity, we now have 24 by seven call center. That means we're running a generator all night every day. So we're running a generator just to get air conditioning to our staff. So it can run our call center. But what I say to people is, if you look at MTN, which is the largest mobile telephone company on the continent in Nigeria, they make they have you know, the base stations every base station has two generators, right so if you just think about your mobile signal as you're going around here AT&T everyone having generators on every single base station, and yet they make over $2 billion in profits, right, just from Nigeria, that's profit.
So there's a huge infrastructure problem. But if you can figure out how to tackle that, and it makes it more expensive to do business, there is an opportunity to make good returns from from tackling that now, aside from infrastructure, then there are other things that just, you know, exist in this, this market for startup founders that we don't really have yet or still early stage. So the ecosystem the mentoring that occurs, right, those informal mentoring those are things that we are still building and so those of us that actually you know, it's better now because those of us that started 10 plus years ago I'd now giving back right and other people are creating community as well. But yeah, but a lot of those things make it very challenging to to really run your business
and Tayo I want to do a kind of a yes no thing here because I saw that their African startups in Battlefield yesterday and I saw them get grilled on corruption, about corruption. And is it the only game in town
Just kind of a Yes. No. across each each panelist and also to Fope to your investments has corruption in Africa, your country seriously impeded your ability to succeed.
No, it hasn't at all.
It's not the only game in town.
All right. Ken?
No, not at all. We, we, we've done business. We we have never paid a single brightens.
Okay. Yeah. Fope?,
I agree with the, with the other panelists. If you take, you know, there are companies that are operating and, you know, people's do need to pay for goods, people still need to buy things, people still need to consume food and their business opportunities there. So, you know, you can do those businesses, you can invest in those businesses without having to to face corruption. And I think you have businesses that are actually trying to tackle it. So for example, one of the things interswitch it does is it allows it allows governments to collect their taxes in an electronic manner and, you know, some of the stats that have come out of that is some governments have saved up to $100 million just by having a way of collecting their taxes and doing that electronically. So there are things to help make payments more transparent to help reduce corruption. But there's definitely ways to do business without actually coming across.
So I want to talk about tech talent. One thing I think is really interesting about Africa is tech scene coming online is it's changing flows of people across tech. But it's not just changing flows of people across tech. It's just changing flows of people from Africa, the entire world, you have people from Africa going to work here you have people coming home, you have diaspora returning so let's start with Tayo I mean Tayo you're a repeat entrepreneur. Yeah, um what was it that made you I mean, you didn't need to leave the us you know pretty well out here What made you go home and found a startup in Nigeria and you don't need to do that here but you must have had some interesting conversations with your family not quitting your Silicon Valley job to go home and for start a payments company
Yeah, no. I was an engineer here in the valley, and then that was working with Cisco Systems, and the acquisitions and venture teams are doing venture capital. And I mean, look, I'm I like to say that I'm a very adventurous person. And if I was not Nigerian, I would have moved back to Nigeria or moved to Nigeria because of the opportunity of that country. So and I really think specifically about Nigeria, no disrespect to any other African country. But Nigeria is 180 million people in, by 2050, it's going to be the third largest country in the world larger than the US and by 2100 it's going to be the second largest country in the world only second to India. So the opportunity to go to a country such as that that doesn't have a lot of the basic things that you we all enjoy here and to launch in any sector FMC g whatever it may be right so many different opportunities right that's what drove me to that's what led me to go back
and you're tapping global talent you
and we and in Nigeria, we're tapping not just Nigerian talent, but also global talent. And I think, you know, if I take our CTO as an example, he's a brown graduate, you know, developed systems here before he moved, moved to Addis Ababa. So what's really exciting me now, actually, is that we now want to take the technology we've built on the continent and go the other way.
Right. So. And for me, it's very simple. If I'm sitting here in Silicon Valley, using Spotify, and I'm sitting in Lagos, using Spotify. Why cannot why Can somebody sitting in Mexico City or Guadalajara be using Paga, right? I mean, we build this platform that is enterprise grade. So I think we're going to start seeing African technology platforms also go to the world.
Well, I want to come back to that. I'm just quickly can you, you hire people from all over, right? Your talent pool is pan African. Is it global?
It's Yeah, so we've got a different situation from Tayo. So me and my co founder fully born and bred enough in Africa so we did all our schooling in Africa.
Interestingly. So we, we refused to go to the continent because of just sheer opportunity. I mean, close to a billion people basket full full of problems to solve and so on. And we stuck there. Our team is sort of fully African born and bred as well. Our engineering is sort of built out of Nairobi and Lagos and, you know, and it's great experience. I mean, we have got good graduates coming out of an engineering school. And I, of course, we basically exert a lot of effort to expose them to different environments. We are certain things have been done before in the US and Asia and so on.
And, yeah, and it's a blended work. So I think it's fantastic area. There's lots of good home homegrown talent, there's lots of good talent that's coming back into into the country. There's a lot of expert talents that basically wants to sort of work in sort of a problem context space in the emerging market. So I think, yeah, I mean, it's fantastic job hunting, fun finding talent
And on on the topic, I mean, on the sexual panel topic, you both are doing stuff to mentor entire, you've actually become an angel to some of the young startups on the continent. Just we have a little bit of time left. I guess the question is why? And, you know, that shouldn't be a tough question. But you guys are still in the throes of launching your own startups. And
and why have you decided to already start supporting some of the younger entrepreneurs?
Yeah, I mean, the one thing that doesn't exist in Nigeria is a lot of high net worth individuals or investing in other in startups, right. And so, you know, there's a big gap, especially that beginning stage and so for me and my friends who are were formed an angel club, it's about how do we help find entrepreneurs who have great ideas, solving problems, and actually we're looking at the whole gamut to that are just tech entrepreneurs. We invested in the pharmacy retail chain. So just to help and and drive what people are, you know, give people the opportunity to get their businesses going.
Can your your mentor young startups, and there's a lot of energy in the younger startup scene, right? I mean, this too, right?
Yeah. Yeah. It's for the same reasons that people invest in us. I think it's a fantastic opportunity. I mean, the ecosystems are nascent. There's absence of capital. So basically, it's a good time to invest, you can get fair pricing, you can add a lot of value by mentoring and therefore create much more lot of value. So it's just a very good angel investment proposition in addition to to obviously nurturing the ecosystem which is good for everybody, including ourselves.
So I get one question and it's going to be one, one or two words. So I want each of you guys to name hot tech sectors or countries in Africa, one or two countries that aren't Nigeria, Kenya or South Africa.
So Fope you're on the spot.
I'd say Egypt and Rwanda
I would say, Ghana and Zambia.
I'll have to go to Egypt.
Okay. No, Ethiopia anywhere. Okay. Okay.
Well, we'll conclude with that. Thanks a lot. I want to thank the panelists. And we hope to have more of you and more of Africa here on the disrupt stage. And just to note, we have startup battlefield Lagos coming up in December, so they'll definitely be more a lot more TechCrunch in Africa and Africa with TechCrunch. Thank you very much.