economies Archives - Product Management Confabulation

December 20, 2021

Taptap Send raises $65M to build cross-border remittances focused on the most underserved markets

Cross-border remittances — when people living and working abroad send money back home to friends and family — continues to be a huge part of how those living in developing countries, off the global financial grid, can be helped. The World Bank estimates that some $589 billion will be sent this way 2021, according to research from the World Bank, up 7.3% on 2020, as parts of the global economy started to claw back growth after a tough 2020 due to Covid-19.

In one development of that theme, today, Taptap Send — one of the startups building tools to manage these money transfers — is announcing $65 million in growth funding as it continues its mission to enable remittances specifically to the most overlooked countries.

The company’s hook is that it charges no fee for the transfer (it makes its cut via foreign exchange rates), and believes that its service is the easiest on the market to use, and it integrates with whatever mobile money wallets are already being used locally, meaning recipients do not have to add anything extra to their devices, or learn any new techniques, to be able to receive money via the service. At a time when the global economy has been under pressure, Taptap Send saw business grow eight-fold, the company said.

The Series B is being led by Spark Capital, with participation also from Unbound, Reid Hoffman and Canaan Partners (both of which led its previous round, a $13.4 million Series A earlier this year), Slow Ventures, Breyer Capital, Wamda Capital, Flourish Ventures, and additional unnamed investors from the Middle East, Africa, Asia and Latin America. The company has now raised more than $80 million, and while it is not disclosing its valuation, PitchBook data notes that it is $715 million as of this round (which appears to have closed earlier in the year).

There are dozens, maybe even hundreds, of companies playing in the cross-border remittances field, from incumbents like Western Union through a myriad of tech players, some of which have gone public and some of which remain privately held. Taptap Send believes that its unique place in the market is that it has built not just the easiest, but the most reliable system to initiate, manage and receive those transfers.

“It’s quite easy to say remittances are crowded, but you could have said that for social networking or videoconferencing before TikTok or Zoom came along,” said Michael Faye, the CEO who co-founded the company with Paul Niehaus. “Remittances are a deceptively simple product on the surface, with an exceedingly complicated execution under the hood. There are 1,000 parts to get right and when you do you can deliver more value to users via price, speed and reliability.” He notes that a lot of the remittance services have been less than reliable, another area to improve for those looking to be more competitive.

“Remittances is one of the most sensitive things a person buys. It’s not like a shirt that you can touch and feel,” he said. “In remittances you are entering payment information and waiting and hoping that the money is getting to someone who likely needs it quite urgently. You need to have the utmost trust to take that money and send to someone else.”

The founders have arrived at their understanding of the market based on a long history in the field, having previously founded GiveDirectly (for charitable cross-border transfers) and Segovia (focused on B2B transfers). Segovia was acquired by Crown Agents Bank in 2019, and theoretically the product of Taptap Send was spun out from that ahead of the deal.

Taptap Send has been steadily growing and adding more countries to its list of served markets. It currently covers some 20 countries for receiving money, some of the very poorest and/or least developed places in the world including Bangladesh, Cameroon, DRC, Ethiopia, Kenya, Madagascar, Morocco, Nepal, Nigeria, Pakistan, Republic of the Congo, Sri Lanka, Vietnam, Côte d’Ivoire, Ghana, Guinea, Mali, Senegal and Zambia.

Its growth, as with many other remittance providers, has been predicated on the rapid rise of mobile technology, and the fact that even in the poorest communities, people will have handsets that can be used to initiate transfers and act as proxy-bank accounts, even if they are not smartphones.

“The change has been profound, and the number of countries where these domestic wallets are popping up around the world is shifting dramatically,” Faye said.

The company was attractive to investors in part because of its growth during what has been a challenging time for the industry, and in part because of the team and its ethos of bringing financial inclusion tools to as wide and unsexy a swathe of the developing world as possible.

We’ve looked at a lot of fintech companies in the space, and think Taptap’s team and community-led approach are best in class,” said investor James Kuklinski of Spark Capital in a statement. “We couldn’t be more excited to be joining them on our mission to bring low-cost, accessible, cross-border financial products to underserved diaspora populations around the world.”

“I invest for scaled global impact and team, and Taptap is among the best combinations I’ve seen, ” added Reid Hoffman.

November 5, 2021

With a Section 1045 rollover, founders can salvage QSBS before 5 years

Peyton Carr Contributor

Peyton Carr is a financial adviser to founders, entrepreneurs and their families, helping them with planning and investing. He is a managing director of Keystone Global Partners.

What is Section 1045?

Section 1045 allows a founder or stockholder whose company has been sold before the five-year holding period to defer the capital gains by rolling the sale proceeds into a replacement QSBS.

Benefits and opportunities

A 1045 rollover enables founders and investors to take advantage of multiple tax benefits and opportunities they would otherwise miss.

Extended tax deferral

With a 1045 rollover, the stockholder can defer taxes on the sale of the original QSBS by investing in a replacement QSBS. Under the right circumstances, tax can be deferred until the replacement QSBS is sold.

If the combined holding period is five years and other requirements (discussed below) are met, no federal capital gains taxes are due. But if the requirements are not met, then taxes will be due upon the sale of the replacement QSBS.

Shortened holding period

Typically, the holding period for all taxable exchanges will begin the day after the exchange. However, the holding period for the replacement QSBS includes the holding period of the original QSBS, avoiding a reset of the five-year requirement. This means a 1045 rollover shortens the next QSBS holding period requirement and allows the clock to continue ticking.

1045 Rollover. Image Credits: Keystone Global Partners

QSBS exclusion stacking

October 18, 2019

Kenyan telco Safaricom’s Alpha incubator faces uncertain future

Safaricom’s Nairobi based Alpha innovation incubator may have an uncertain future, according to sources.

With two high-level departures, and the passing of Safaricom’s CEO Bob Collymore, there are questions on how or if Alpha will continue to operate.

The space was established in 2017 to spur new product development for Safaricom, which is Kenya’s largest mobile operator and the provider of M-Pesa — East Africa’s most used mobile-money product.

As TechCrunch reported, one of the first objectives of Alpha was to build upon the success of M-Pesa.

As a telco, Safaricom has 69 percent of the Kenya’s mobile subscribers and generates around a fourth ($531 million) of its ≈ $2.2 billion annual revenues (2018) from M-Pesa. The fintech product has 20.5 million customers across a network of 176,000 agents.

While these stats have put Safaricom in a coveted position, the company’s former CEO Bob Collymore expressed concerns over the risk of too many eggs in one basket. For years, Collymore pressed his company to diversify product and revenue streams.

Through in-house development and partnerships, Safaricom added consumer and small business-based products, such as ride-hail app Little and website services, to its mobile and fintech network.

In 2017, Safaricom’s Chief Innovation Officer and first head of Alpha, Kamal Bhattacharya echoed Collymore’s mission to diversify the company’s offerings.

“We’d actually like to move beyond M-Pesa by leveraging its power as a social network to connect people to other product solutions,” he told TechCrunch.

Bhattacharya — who’d come to Safaricom after senior positions at IBM Research Africa and a stint restructuring Kenyan innovation center iHub — recruited a team for Alpha, led by founder and computer scientist Shikoh Gitau.

From a market perspective, Alpha was something to watch since corporate incubators in Africa were (and continue to be) a relatively new component across the continent’s tech ecosystem.

Alpha staff in 2018

In a space purposely set up away from Safaricom’s HQ, Alpha’s team of innovators set to shaping new digital offerings.

In 2018, the incubator rolled out its first product, a social networking platform called Bonga, to augment M-Pesa.

Safaricom rolls out Bonga social networking platform to augment M-Pesa

Since M-Pesa was already established as a commercial network, the idea was to amplify that by creating more social media type transactions around it — channeling Facebook, YouTube, iTunes, PayPal, and eBay in one platform.

With Bonga, Alpha appeared to have some momentum into 2018, before the innovation incubator lost two of its biggest backers.

First, Kamal Bhattacharya, exited Safaricom and his position of lead of Alpha in October 2018. The reason given by the company was a bit of corporate say-nothing-speak: “leaving to pursue other interests.”

The real reasons for Bhattacharya’s sudden exit were unclear. There was, however, plenty of scuttlebutt about powers within Safaricom — resistant to the brand of bureaucracy rattling change Alpha could bring — conspiring to push him out.

After losing its head, Alpha lost another key ally in Bob Collymore when he passed away in July of this year after a fight with cancer.

Alpha said farewell to another senior figure in August when Huston Malande left. It also rebranded Bonga to Zwuup this year — though Safaricom’s last two annual reports don’t indicate how the product has fared under either name, with no mention of Bonga, Zwuup, or Alpha.

What’s next for Alpha?

Several sources close to Safaricom (speaking on background) expressed doubt that it would have the support within the company to continue with Collymore’s passing.

One source suggested Alpha would more likely be morphed into the larger Safaricom bureaucracy rather than shut down completely, to avoid negative news that an abrupt closure would bring.

TechCrunch asked Safaricom directly on the future of Alpha, and specifically if it would confirm or deny reports the innovation incubator could shutdown. A Safaricom spokesperson said it could not comment on anything related to Alpha’s products or performance before Safaricom’s next earnings reporting, scheduled for November 1.

So Kenya’s tech community will have to wait a couple more weeks to see if Safaricom sticks to its experiment to spur inside innovation by creating an outside incubator — or not.