Projections suggest that startups supported by Sawari Ventures will attract investments ranging from USD 350 M to USD 500 M over the next five years. Al Sanbati underscored the company’s ambition for Egypt to emerge as a pivotal investment hub in Africa and the broader region, noting that Sawari has invested in approximately 500 startups since its establishment in the Arab world. Approximately 35% of Sawari Ventures’ portfolio is allocated to the fintech sector, with a focus on digitising the Egyptian economy and reshaping financial inclusivity trends.

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The ARM Labs Lagos Techstars Accelerator second cohort, chosen from over a thousand applicants across Africa included 24Seven, Beauty Hut, Eight Medical, GetEquity, JumpnPass, One Plan, PBR Life Sciences, PressOne Africa, Rana, Surge Africa, Swoove and Veend.

Over the past 13 weeks, along with the USD 120 K each in investment, the startups received comprehensive training and mentorship from leading industry experts in the form of workshops on Go-to-markets Strategies, Financial Modelling, Customer Acquisition, Investment Readiness, People and Leadership, Legal and Governance, and Product Management. Additionally the select startups gained access to more than 300 perks, and will benefit from lifetime access to the Techstars worldwide network.

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Founded in 2024 by Microsoft and Google ex-employees Michael Moyo and Louis Murerwa, Ocular AI connects a company’s data from many apps, making finding and using information quickly easy. It is the first Zimbabwean startup to be admitted into Y Combinator. 

The post Zimbabwean AI Startup Ocular AI Selected For YC Winter 2024 Batch appeared first on WeeTracker.

The Nigerian government took action Tuesday, blocking the websites of major crypto platforms including Binance, Forextime, OctaFX, Coinbase, Kraken, FXTM, and others. The world’s largest crypto exchange Binance confirmed its website is inaccessible in Nigeria though its app remains functional for some users.

The Nigerian Communications Commission relayed the directive to telecom companies, reports local news outfit Premium Times citing presidency and telecom sources. The latest restriction placed on crypto sites signals a departure from recent moves that indicated Nigerian regulators were warming up to crypto after a previous lengthy ban.

Nigeria’s crypto scene was buzzing after the Central Bank lifted a three-year ban, signalling a positive turn for the industry. Startups like Yellow Card and Quidax celebrated the newfound freedom, planning expansion and offering promotions to attract users.

The move aimed to create a regulated environment, fostering trust and growth in the crypto space with Nigeria ranking high in terms of adoption globally, largely driven by the country’s economic woes as locals seek refuge from rising inflation, currency depreciation, and dearth of gainful employment.

However, the tide turned abruptly. The government justified its latest move to block crypto platforms by citing concerns of forex market manipulation and illicit fund movements, linking these activities to the depreciation of the local currency. The naira tumbled to an all-time low of NGN 1,900 per dollar at the parallel market on Tuesday, amid speculation and uncertainty about supply constraints in the markets. Government figures are convinced the currency plunge is tied to manipulation of rates on crypto exchanges.

“Binance, facing regulatory showdown in many countries, and causing disruptions in the currency market, should not be allowed to dictate the value of the naira, not on its crypto exchange platform. Other crypto platforms such as Kucoin and Bybit should be banned from operating in our cyberspace. FX platform Aboki should be re-banned”, Bayo Onanuga, Special Adviser on Information and Strategy to President Bola Tinubu, commented recently.

“The EFCC and the CBN should move against these platforms trying to manipulate our national currency to Ground Zero. Crypto should be banned in our country or else this bleeding of our currency will continue unabated,” he added.

Prior to the restriction, Binance, one of several crypto companies caught in the crosshairs, made an effort to mitigate potential issues by imposing limits on peer-to-peer transactions, particularly the USDT/NGN pair.  The company also issued a statement pledging cooperation, vowing to remove users engaging in manipulative behaviour, and working closely with local authorities to address compliance issues.

The latest clampdown on crypto players coincides with a broader directive from the National Security Adviser and the Central Bank to combat speculative activities in the foreign exchange market. This shift raises questions about the sustainability of the prior briefly favourable regulatory environment and its implications for the future of crypto in Nigeria.

Traders, now grappling with the restrictions, are seeking alternative platforms, noting the potential impact on stablecoin prices and expressing concerns about the overall stability of Nigeria’s evolving crypto industry.

Image Source: chormail/123RF // Image Effects by Colorcinch

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According to industry reports, private equity investments in Africa have been consistently increasing, with sectors such as technology, healthcare, consumer goods, and infrastructure attracting significant capital.

This increase in investment activity shows that investors have more confidence in Africa’s long-term growth prospects and the continent’s immense potential to offer attractive returns. This trend is expected to continue, which makes Africa an attractive destination for private equity investors who want to leverage the continent’s growth potential.

The value of investments made by private capital firms in Africa remained strong despite economic uncertainty throughout the year, closing 2022 with private capital firms reporting investments worth USD 7.6 B. The number of full exits made by private investors hit a remarkable 82 deals in 2022, the largest number of exits ever recorded in a single year on the continent. 

Although Africa presents some promising opportunities for private equity investors, the industry is not without its challenges. Regulatory complexities, political instability, currency risks, and inadequate infrastructure can pose significant hurdles for those operating in the region. Additionally, finding quality deals, conducting thorough due diligence, and managing portfolio companies in diverse and often unfamiliar markets require specialized expertise and a deep understanding of local dynamics.

Private equity activity in Africa is driven by the continent’s thriving entrepreneurial ecosystem, which is home to a wave of innovative startups and high-growth organisations. To understand how private equity firms make investment decisions in this continent, where business models are still being established, I spoke with Arul Thomas, Partner at Lightrock, a global investing platform that focuses on impact-driven growth equity, with operations across Latin America, Europe, Africa, and South Asia.

The Background

Lightrock is a global private equity platform that backs purpose-driven companies. Investing across five continents, Lightrock has a portfolio of 90+ companies and manages over USD 4 B of assets.

Lightrock has a dedicated team and leadership for Africa. The partners leading the Africa team have been investing on the continent for over two decades and are among the pioneers of private equity in Africa. The establishment of the team in Africa demonstrates Lightrock’s recognition of the continent’s importance in its broader platform, and its capital commitment indicates the opportunities available on the ground.

Lightrock typically invests at the growth stage, with a ticket size between USD 10-20 M, in commercial businesses that have a clear impact thesis built into their core fundamentals. Lightrock’s team spread across Nigeria and Kenya, works closely with the businesses it backs to help them scale.

The Lightrock portfolio includes several well-known names in the African ecosystem, such as M-Kopa, 4G Capital, Moniepoint, Copia Global, LulaLend, and MAX. These startups have collectively raised close to USD 2 B.

Navigating the African Landscape

Africa is a lucrative market with 1.2 billion people spread across 54 countries, but there are only about 4 to 6 attractive countries which can attract investments of sizeable amounts. So, the key to working in an investment environment that is still formative is that the PE funds need to work patiently, partnering with portfolio companies over longer durations and adopting a business-builder attitude. 

Arul, who has been with Lightrock since 2018, oversees its East and Southern Africa investments. Africa overall, and Kenya in particular, has witnessed incredible growth over the years, he shares. The state of infrastructure, the investment community, and the way companies have scaled up are highly contributing to a thriving PE landscape.

The private equity investor says he derives his experience from the growth trajectory Lightrock’s deals have followed. Lightrock has evolved its investment approach in Africa, initially focusing on high-impact earlier-stage investments, he explained, where at times, social impact was prioritised over commercial returns. “Some of the initial deals were meant to be patient capital that allowed for very innovative but untested models to be explored. This phase was very similar to how a venture capital (VC) fund operates by taking on some early-stage interest,” Arul shares.

As of today, though, Lightrock is cutting back on early-stage bets and supporting proven models. So, in a nutshell, Lightrock today invests in businesses that have positive unit economics and are on the path to getting to EBITDA positive, the investor explains, adding that they “come in at this stage with capital and expertise to help such businesses scale.”

Today, on the continent, there is a clear distinction between VC and PE. There are numerous early-stage VCs like Launch Africa and Kepple Verod, which are working right after the minimum viable product stage. And then there are the likes of Amethis, Adenia Partners and AfricInvest which are very much operating in the PE space. Lightrock and other growth investors form a key linkage between these two stages of investment.

The growth investors form the linkage between that USD 100 K to USD 1 M check and an Amethis or AfricInvest, that form the other part of growth investments, can deploy USD 50 to USD 80 M in a highly cash-generating business because their exit would be on an EBITDA multiple and not on a revenue multiple.

But Arul goes on to acknowledge,

“I think there is a bit of a gap in the growth space.”

This gap is precisely what Lightrock is trying to fill, together with the likes of Novastar and Norrsken, which are also playing the missing middle.

Lightrock’s Africa fund is smaller than its funds in South Asia and Latin America. “The ecosystem in Africa is a lot smaller than the other geographies” Arul opined, “If you look at the Indian ecosystem versus the African ecosystem or the Latin American ecosystem versus the African ecosystem, the size of the opportunities and the scale of the ecosystem are on completely different levels.”

The capital commitment is in line with the size of the ecosystem and the size of the opportunities it offers. The dealmaker notes that as of now, in Africa, a Series B ticket would hover around USD 10 M to USD 15 M. Whereas a similar Series B ticket in India could be around USD 50 M, and between USD 30 to 35 M in Brazil.

Investing in the continent also requires a certain level of flexibility and adaptability. The ecosystem itself, he notes, is not as large as Western Europe where there are several hundred VC firms, growth firms and PE firms. “Typically in such markets, companies tend to have the same distribution channels, probably the same suppliers, and perhaps even the same VCs because they’ve understood this model well. Thus, the scaling and growth patterns are more predictable if the companies simply keep replicating it,” Arul tells me.

“For African companies, however, there is hardly any reliable templatised growth model,” he adds, “and many startups in the growth phase are still perfecting the business models or hammering out product market fit.”

Eventually, terms like “Square of Africa”, “Amazon of Africa”, or “X of Africa”, while useful from a perspective of understanding the business model, hardly hold up in terms of building an operation or a scale-up strategy because the reality on the ground tends to be very different, the PE insider points out.

Also, there aren’t as many super niche opportunities, compared to Western European counterparts, Arul argues. “Evidently, fintech in the Western European market is addressing very niche pain points since the broader problems have already been addressed, whereas,” he says, “African fintech is heavy on credit-led models or payments-led models which form significant pain points in the market.”

But interestingly, there aren’t many differences between India, Latin America, and Africa outside of scale,” he contends. “These markets are scaling up at a different pace from their African counterparts. Scaling is unique in the African market as most companies think of scaling in two ways: scale in the current market or dip into the next market,” says Arul.

The investor also emphasises that as funding partners in the stated growth phase, a PE firm has to be more hands-on and on the ground with the startups.

“There are proven templates in India, and as an investor, one can kind of step back a little bit because there is a map that a founder can follow”. He adds:

“You need to really be in the passenger seat, and you can’t just be that board member who goes in once every quarter and tries to sound smart”.

2024 and ahead

After the unusual upswing in scaleup funding in 2021, deal flow got healthy for Lightrock and the platform has grown exponentially since then, the Lightrock Partner tells me. The brand recognition has also helped Lightrock grow its portfolio to 9 companies across Africa and over 90 companies globally.

What has emerged after 2021 massive funding numbers is also something worth noting. The recent macroeconomic headwinds have acted as a litmus test for companies in Africa as they face a squeeze in valuations, forcing them to focus on profitability. “What the African continent will experience is a phase of consolidation,” he opines. “In most markets, multiple players are trying to do the same thing without enough differentiation in the business models. This will lead to a lot more communication between companies and investors in trying to see how they can find commonalities and synergies.”

Recently we have seen a decrease in external fundraising as investors have, on the one hand, sought to double down on the best-performing companies in their portfolio and raise internal rounds or to support the promising but struggling companies where they can, on the other hand. 

The investor, however, thinks 2024 will be different. “With businesses looking inward and thinking about capital efficiency and operational improvements over the last 18 months, many more businesses have become profitable or are on the path to becoming profitable. This, combined with the fact that existing investors might be running out of dry powder, could lead to a raft of attractive new opportunities coming into the market this year,” Arul claims.  

The Lightrock executive also hopes to see a lot more debt activity because as business process improvements are happening, a lot more businesses are getting to a point where they can raise debt. “Moreover, given how valuations are uncertain right now, there will be a preference to raise non-diluted capital,” he adds.

He quips,

“In some ways, the current funding winter is good for the industry because it really separates the wheat from the chaff”.

Now, with geopolitical turbulence subsiding and macroeconomic conditions gradually improving, the appetite for emerging markets, including Africa, should grow. 

The post The New Playbook Behind Private Equity’s Quiet Boom In Africa appeared first on WeeTracker.

The report notes Kenya secured merely 8% of the continent’s fintech investments from 2019 to 2023. In contrast, Nigeria led with 39%, Egypt with 16%, and South Africa with 20%.

Possible factors contributing to Kenya’s lower fintech investment priority include the thriving green-tech sector, which has attracted 45% of Africa’s clean-tech investments since 2019. Stears also highlights Safaricom’s near-monopoly in the market, stating that the dominance of Kenya’s top telco in mobile money, via the ubiquitous M-Pesa platform, makes it unlikely for fintechs and banks in the country to displace Safaricom’s well-defended consumer payment empire anytime soon.

“The telco controls about 97 per cent of mobile money wallets market share, thus most fintechs would struggle to compete for the consumer market,” the report reads, thus making the consumer financial landscape less appealing to investors.

The report suggests fintechs and banks in Kenya face challenges beyond investor priority, including barriers for about 49% of local Micro, Small, and Medium-sized Enterprises (MSMEs) in accessing finance, exceeding the African average of 40%. Compliance constraints and funding issues contribute to the struggles of Kenyan startups.

“Close to 80 per cent of start-ups often die within the first year of operation, while only three to five percent make it beyond the one year period of survival,” the Communications Authority of Kenya noted last year.

Safaricom’s dominance in the consumer payment sector is expected to persist, with fintechs likely focusing on other areas, rather than competing directly. “Fintechs would then tend to focus on other critical user segments: Merchants, large enterprises and legacy financial institutions,” the report reads.

To remain relevant, the report emphasizes Safaricom’s need to collaborate with financial institutions to deliver advanced financial services like insurance, pensions, and asset management. The Communications Authority of Kenya suggests that partnerships across sectors can alleviate challenges for MSMEs, enhancing financial control and operational efficiency.

Featured Image Credits: Consultancy Africa

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Founded in 2014 by Nkem Okocha, Mamamoni provides low-income women in Nigeria with the skills to become financially independent. It plans to expand its agent network to more than 2,000 women by the end of 2024. It has also launched Herpay, a payments app targeted at women of all social and economic classes, where it intends to provide lower transaction fees and onboard 500,000 women by the end of 2024.

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Founded in 2013 by Femi Adeyemo and Kunle Odebunmi, Arnergy was launched as a provider of sustainable energy services intended to deliver clean and reliable energy for businesses or homes. The company’s energy systems are tailored to tackle intermittent and grid unreliability issues, enabling residential customers and businesses across hospitality, education, finance, agriculture, and healthcare to access and install affordable and reliable distributed energy systems.

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