Tag: Sequoia Capital China

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African tech took center stage in 2021

Two years ago, the African tech ecosystem saw newfound attention from global players that translated to the continent’s best year of receiving venture capital. From varying sources, it is estimated up to $2 billion went into African tech startups in 2019.

With high-profile visits from the most famous Jacks (Ma and Dorsey), a long-awaited first IPO by e-commerce giant Jumia and massive $100 million rounds, it was a sign of things to come for African tech.

But two months into 2020, the pandemic did an excellent job of lowering expectations as investment activities from local and international investors slowed down.

It wasn’t a bad year, though. African startups nearly raised $1.5 billion and saw a couple of fascinating exits: Stripe-Paystack and WorldRemit-Sendwave.

Entering 2021, the bullishness of African tech stakeholders returned — and why not? As businesses reopened globally and the pandemic drove people to adopt new habits in e-commerce, work, spending money, online delivery, and learning, venture capital into various industries was poised to increase immensely, and Africa would not be exempt.

Predictions were made on how much the continent’s startups would raise in December. AfricArena, a tech ecosystem accelerator, pegged deals to close between $2.25 billion and $2.8 billion. Stephen Deng, the co-founder and partner of DFS Lab, a firm that invests in digital commerce startups, serially compared the 2016 Southeast Asia funding landscape to where Africa might be in 2021, at $3 billion.

Venture capital investment in Africa predicted to reach a record high this year

These predictions weren’t entirely off the mark. In the end, information from the likes of Maxime Bayen and Briter Bridges made 2019 numbers look like child’s play. 2021 was when African tech reached an inflection point and took center stage as companies raised over $4 billion (more than they got in 2019 and 2020 combined).

From minting five unicorns to witnessing more million-dollar raises by female CEOs, we spotlight some of the events that shaped this pivotal moment in African tech.

What’s a record year of funding without some unicorns?

Attaining unicorn status — a privately held company with a valuation of $1 billion — is undoubtedly one of the vainest achievements for any startup, yet it remains the most coveted.

In Africa, the first two unicorns were Jumia (in 2016) and fintech giant Interswitch (in 2019). As Jumia went public on the NYSE in 2019, it ceased to be a unicorn and became a typical billion-dollar publicly held company.

It’s a similar case with Egyptian payments company Fawry. It went public on the Egyptian stock market (the first indigenous tech company to do so on African soil) in 2019. However, unlike Jumia, Fawry only reached a billion-dollar valuation a year after going public. So, it isn’t and technically wasn’t a unicorn.

Interswitch was the continent’s sole unicorn until five more were minted this year. Four are fintechs: Flutterwave, OPay, Wave and Chipper Cash, while one is tech talent marketplace Andela.

Flutterwave got its horn in March at $1 billion; OPay in August at $2 billion; Wave and Andela the following month, at $1.7 billion and $1.5 billion, respectively; Andela in September raised at a $1.5 billion valuation; Chipper Cash in November at $2 billion. Meanwhile, Interswitch, the sole unicorn between 2019 and 2021, is worth $1 billion.

A couple of reasons are behind this sudden surge in unicorn numbers on the continent. More experienced founders exist and specific markets, particularly in the Big Four (Nigeria, South Africa, Egypt and Kenya), show a mix of matured but still open-for-disruption traits.

Also, sectors such as fintech keep opening up in ways never seen before and there’s a rush of foreign money from first-time investors in early and later stages, simultaneously.

International investors participated from pre-seed to Series E stages

While global investors have previously invested in African startups, their activity seemed more prominent in 2021, probably because of their participation across the board.

For instance, investors such as Berlin-based VC firm Target Global and renowned investment firm and hedge fund Tiger Global cut checks across early and growth stages.

Target invested in both Series A rounds of Kuda and Mono (including the Series B round of the former). The European VC also led the pre-seed rounds of Kippa and Edukoya. On the other hand, Tiger led Union54’s seed round, Mono’s Series A and later rounds in FairMoney and Flutterwave.

Other deals where growth firms participated in early and growth stages included Sequoia in Telda’s pre-seed; Wave’s Series A, via stealthy wealth management fund Sequoia Heritage; and OPay’s Series C, via its subsidiary fund Sequoia Capital China.   

Faster deals, less diligence: The African startup market mirrors its larger rivals

There was also action from other investors, such as Dragoneer, FTX, Fidelity, SVB Capital and Sam Altman, who got involved in single large deals for the first time. It was routine for other firms like Tencent as it invested in the growth rounds of uLesson, Ozow and TymeBank– and SoftBank, who, via its Vision Fund 2, led two of the continent’s many nine-figure rounds in 2021: unicorns Andela and OPay.

African startups raised more $100M+ rounds this year than ever before

OPay had one of the three nine-figure deals in 2019 after raising a $120 million Series B round. Others included Andela’s $100 million and Interswitch’s $200 million deals. So imagine the surprise the following year when no nine-figure deal took place (just as the continent didn’t produce any unicorn).

The draught didn’t last long, as Africa not only had its highest unicorn year but also recorded the most nine-figure rounds (11 from 10 startups) in a single year.

Let’s start with the unicorns: Flutterwave’s Series C was $170 million; OPay raised a $400 million Series C; Wave and Andela each picked up $200 million. Then Chipper Cash did the double: a $100 million Series C and a $150 million extension for its unicorn round months later.

Others include TymeBank’s $180 million Series B, Jumo and MNT-Halan’s $120 million rounds, TradeDepot’s $110 million and MFS Africa’s $100 million.

The only non-fintech deals were Andela and TradeDepot (although the latter has an embedded finance play). Also, all but two deals were solely equity-based: TradeDepot and MFS Africa raised a mix of equity and debt.

A handful of local acquisitions and a monumental exit

Digital payments gateway MFS Africa is one of Africa’s few corporate investors and acquirers. Over the past five years, the company has made strategic bets across overlooked startup regions in Africa, investing in Julaya, Maviance and Numida. And in terms of acquisitions, Beyonic and, most recently, Baxi.

Last year, the trend of seeing local companies buy each other played out and continued into 2021. Some interesting acquisitions include TLcom-backed Kenyan consumer experience platform Ajua buying WayaWaya; Nigerian bus booking and Techstars-backed Treepz expanding into Ghana and Ugabus after getting Stabus and Ugabus; and Flutterwave making a foray into the creator economy space with the Disha acquisition.

Others include Jiji’s acquisition of Cars45, Egypt’s B2B e-commerce platform MaxAB purchasing YC-backed Waystocap, thus expanding into Morocco, and Cheki selling its businesses in Kenya and Uganda to Nigeria’s Autochek.

Like the MFS Africa-Baxi deal — which both parties claimed to be the second-largest fintech acquisition in Africa after Stripe-Paystack — the other acquisitions listed were undisclosed. 

Why African startups don’t disclose their acquisition figure is a topic for another day. Personally, reporting such deals may not be appealing going forward (if they remain undisclosed) unless they involve international expansion plays. Case in point: Nigerian healthtech Helium Health acquiring UAE’s Meddy (the first of its kind between sub-Saharan Africa and the GCC) and Australian BNPL player Zip buying up South Africa’s PayFlex.

And international expansion via acquisition gets more exciting when a figure is attached; for instance, data center Equinix announced that it would acquire Nigeria’s MainOne, for $320 million. The news was the highlight for this year’s acquisition deals, not only for its size but also because MainOne is a female-led company, with Funke Opeke as its CEO.

More female-led startups raised million-dollar rounds

Funke Opeke is one of the very few founders to have come this far: running an African tech company to the point of exit. She’s also probably the only female founder on the continent to have raised nine figures cumulatively for her business.

Opeke’s experience is an outlier. In Africa and globally, funding doesn’t come easy for female-led companies. A report by Briter Bridges from the middle of this year looked at 1,100+ companies to have received VC money between 2013 and May 2021 (pegged at $20 million or less).

Per the report, only 3% of the $1.7 billion raised within this period went to all-female founding teams compared to 76% for all-male teams.

So, it’s great news when female-led startups raise a million dollars or more in Africa. And it indirectly contributes to how well the region performs, as we can attest to this year which recorded more than ten deals, signalling an improvement in VCs (both gender-focused and gender-agnostic) sourcing for female-led teams to invest in.

The female-led startups that raised a million dollars or more this year include Shuttlers, Bankly, Lami, Okra, Klasha, Akiba Digital, Ejara, Kwara, Edukoya, Reelfruit and Jetstream.

MainOne CEO Funke Opeke says Equinix is buying her company for the right price

Local investors — and founders — stepped up their game

Alitheia IDF is an investor in Reelfruit and Jetstream. The women-focused firm, led by principal partners Tokunboh Ishmael and Polo Leteka, is a $100 million private equity fund for gender-diverse businesses in Africa.

It’s also one of the local funds that raised huge sums of money this year to write checks for African startups across different stages. Others include Ventures Platform, LoftyInc Capital, Voltron Capital and 4DX Ventures, all sub-Saharan-based VC firms with a pan-African strategy.

Up north, investors such as Sawari Ventures and Algebra Ventures pulled their weight backing startups, particularly in Egypt, where startup innovation and investment has taken off astronomically.

Local and Africa-focused investors also took up entire seed to Series A rounds of some companies in sub-Saharan Africa (Appzone, Payhippo, to name a few), which rarely happened in previous years. Future Africa, Kepple Africa, Launch Africa, and others continued with their pace from 2020 and wrote many new and follow-on checks this year.

We even noticed how active founders like Flutterwave CEO Olugbenga’ GB’ Agboola, Paystack founders Shola Akinlade and Ezra Olubi, and Chipper Cash founders Ham Serunjogi and Maijid Moujaled took part in some early-stage rounds too.

Nigeria became the unicorn capital; Egypt, a powerhouse

In November 2019, three fintech companies, Interswitch, OPay and PalmPay, raised a cumulative $360 million from American and Chinese investors. That announced Nigeria as Africa’s unofficial capital for fintech investment and digital finance startups.

Fintech opportunity in Nigeria is the largest on the continent. With over 40% of Nigerian adults having bank accounts and digital payments hitting more than $250 billion in 2019, it’s no surprise that the startups facilitating transactions for the unbanked (OPay) and providing gateways (Interswitch and Flutterwave) are now worth more than $1 billion.

The three companies, including Andela, started operations in Nigeria’s commercial city, Lagos, earning Nigeria the status of Africa’s unicorn capital in 2021.

For a long time, Nigeria has been one of the three countries that receive the bulk of local and international venture capital, including Kenya and South Africa. The three countries present Africa’s most connected populace and growing economy; the perfect environment to attract foreign capital before others.

But then Egypt stepped into the picture in 2017, and with time, the North African country became part of the “Big Four” as the country began attracting venture capital eyeballs. And after quietly spending the last couple of years at the rear, Egypt picked up impressively in 2020 and this year surpassed Kenya to become the region’s third most active investment region.

As this report aptly put: “Seemingly from nowhere, Egypt is suddenly on the radar as a key African startup funding destination, highlighting the prospects for continental growth of the nascent sector.”

Egypt also has bragging rights in producing the first SPAC deal on the continent. In July, Cairo and Dubai-based ridesharing company Swvl announced that it was going public via a merger with Queen’s Gambit Growth Capital. It’s a deal that will value Swvl, one of the country’s success stories, at almost $1.5 billion once completed.

With a large population and impressive GDP per capita, the North African country raised almost $600 million this year. While it’s less than what Nigeria and South Africa raised at over $1.4 billion and $830 million, respectively, some observers predict that Egypt will surpass South Africa by next year if it keeps up with its pace.

There are a few reasons behind this thinking. In Nigeria, South Africa and Kenya, fintech is the sector that receives the most funding. The major sector is e-commerce and retail in Egypt, but the country is a hot spot for fintech, too, evident in holding the highest pre-seed rounds in both categories (Rabbit’s $11 million and Telda’s $5 million rounds).

When I wrote this piece earlier this year, the largest pre-seed round at the time was Autochek’s $3.4 million. Rabbit’s eight-figure pre-seed is thrice that amount. Sources recently told TechCrunch that another Egyptian startup will close a pre-seed round that high next year.

Mindblowing pre-seed investments like these are one of the many indicators of how fast venture capital has picked up in Africa. The continent’s startups raised over $4 billion this year and minted five unicorns. No one knows what to expect in 2022, but there’s a nuanced sanguinity that we would see “more of everything” including some IPOs (I might be reaching here) so brace yourselves.

How African startups raised investments in 2020

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Airwallex raises $100M at a $5.5B valuation to expand its business banking and payments platform globally

E-commerce and other online businesses are becoming increasingly global in their operations and customer bases, and a startup called Airwallex — which has built a banking solution that addresses the opportunity to provide cross-border financial services — has been seeing a massive surge of activity. To capitalize further on that opportunity, today the company is announcing growth funding.

Hong Kong and Melbourne-based Airwallex has raised $100 million, capital that it will be using to continue building out its banking and payments businesses into more markets, and to invest expanding its products.

The funding — which is being led by Lone Pine Capital, and joined by 1835i Ventures (the venture arm of ANZ, the Australia and New Zealand Banking Group) and Sequoia Capital China, all previous investors — is an extension to the company’s Series E that it announced only in September; and it brings the total of the round to $300 million.

The valuation is also being extended with this latest injection: Airwallex is now worth $5.5 billion (compared to $4 billion in September). From what we understand, the company was getting term sheets as high as $7 billion from outside investors (that outside interest was what prompted the round in the first place).

Airwallex today has around 20,000 customers spanning areas like e-commerce, tech/SaaS companies and professional services. It also has 500 large platform customers (Papaya Global and GOAT are two examples) that have embedded Airwallex’s services within their own services to power transactions for their own customers.

That business has seen a big boost of activity as a result of a few key developments in the world.

For starters, the Covid-19 pandemic has led to a big shift towards more e-commerce among both consumers and businesses. In turn, businesses have needed to extend their financial infrastructure to accommodate more customers. And because e-commerce has broken down the barriers of where you can do business, they’ve also had to extend their financial reach to touch customers in ever-wider geographies. Covid-19 has also massively disrupted supply chains, so businesses have also had to become more enterprising in how they manage these: they may now have to work with more partners, and potentially be agile enough to pay different people month-to-month.

All of these present the kinds of use cases that speak to the kinds of services that Airwallex offers. Jack Zhang, Airwallex’s co-founder and CEO, said that revenues at the company grew 100% in Q3 over Q2. Its annualized revenues in that most recent quarter were $100 million. “We had a target to achieve that at the end of the year, but we delivered it a quarter earlier,” he said.

It also means a number of other companies are also looking to serve this need: competitors to Airwallex across its different services include Stripe, PayPal, Revolut (via Revolut Business), and more.

Airwallex built its company originally around business banking — its thesis was that companies had a lot of banking options when it came to doing business in their own markets, but for those who worked across borders, it offered domestic and international accounts that worked as easily as domestic ones, along with card issuing, transfers and foreign exchange, payouts and so on. More recently, the company has moved into payments to complement that. The plan will be to add more services natively to that stack, as well as integrate with third-party providers by way of an app store that it is now developing. That will launch potentially next year.

Zhang also said some of the funds will be used for M&A, as part of the inevitable consolidation that we’re going to continue seeing in fintech.

“We’ve now raised $800 million in the last 6 years, with $600 million in the last two years, and we still have $600 million in the bank right now,” he told TechCrunch. “A very large part of that is going to be used for M&A purposes.” Features that Airwallex wants to have as a native part of its stack it might buy instead of building itself include subscription payments; software to automatically calculate stamp duty depending on the market where items are being sold; and more data analytics to help customers analyze their revenues better. “I think there will be consolidation in the next period. But it won’t be just two players. The [fintech] space is big enough for a dozen winners.”

And it looks like Airwallex is setting itself up to be one of those winners. Zhang confirmed to me that Stripe — which today is a key competitor of Airwallex’s — approached the company to acquire it around 2018/2019, when Airwallex was significantly smaller but already developing a strong presence in Asia Pacific, which is still its biggest market, even as Airwallex moves deeper EMEA and North America. (It would have been a big step for Stripe into the region, which is has instead taken on its own steam.)

Zhang said that another big fintech, currently valued at around $20 billion, also approached Airwallex more recently. Nothing has come of that, either — partly because Airwallex is now too expensive, he said.

“I think we are probably to big for others to buy us,” Zhang added.

As for what is coming next on the liquidity front, an IPO “is not on the agenda,” but is something that the company will think about potentially for 2023 or 2024.

“Airwallex’s achievements in the last quarter alone showcase the strength of the company’s business model and its unique ability to meet their customers’ evolving needs in a competitive digital payments market,” said David Craver, co-chief investment office at Lone Pine Capital. “The future is bright for Airwallex, and we look forward to helping its team unlock greater growth opportunities.”

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Airwallex raises $200M at a $4B valuation to double down on business banking

Business, now more than ever before, is going digital, and today a startup that’s building a vertically integrated solution to meet business banking needs is announcing a big round of funding to tap into the opportunity. Airwallex — which provides business banking services both directly to businesses themselves, as well as via a set of APIs that power other companies’ fintech products — has raised $200 million, a Series E round of funding that values the Australian startup at $4 billion.

Lone Pine Capital is leading the round, with new backers G Squared and Vetamer Capital Management, and previous backers 1835i Ventures (formerly ANZi), DST Global, Salesforce Ventures and Sequoia Capital China, also participating.

The funding brings the total raised by Airwallex — which has head offices in Hong Kong and Melbourne, Australia — to date to $700 million, including a $100 million injection that closed out its Series D just six months ago.

Airwallex will be using the funding both to continue investing in its product and technology, as well as to continue its geographical expansion and to focus on some larger business targets. The company has started to make some headway into Europe and the UK and that will be one big focus, along with the U.S.

The quick succession of funding, and that rising valuation, underscore Airwallex’s traction to date around what CEO and co-founder Jack Zhang describes as a vertically integrated strategy.

That involves two parts. First, Airwallex has built all the infrastructure for the business banking services that it provides directly to businesses with a focus on small and medium enterprise customers. Second, it has packaged up that infrastructure into a set of APIs that a variety of other companies use to provide financial services directly to their customers without needing to build those services themselves — the so-called “embedded finance” approach.

“We want to own the whole ecosystem,” Zhang said to me. “We want to be like the Apple of business finance.”

That seems to be working out so far for Airwallex. Revenues were up almost 150% for the first half of 2021 compared to a year before, with the company processing more than US$20 billion for a global client portfolio that has quadrupled in size. In addition to tens of thousands of SMEs, it also, via APIs, powers financial services for other companies like GOAT, Papaya Global and Stake.

Airwallex got its start like many of the strongest startups do: it was built to solve a problem that the founders encountered themselves. In the case of Airwallex, Zhang tells me he had actually been working on a previous start-up idea. He wanted to build the “Blue Bottle Coffee” of Asia out of Hong Kong, and it involved buying and importing a lot of different materials, packaging and of course coffee from all around the world.

“We found that making payments as a small business was slow and expensive,” he said, since it involved banks in different countries and different banking systems, manual efforts to transfer money between them and many days to clear the payments. “But that was also my background — payments and trading — and so I decided that it was a much more fascinating problem for me to work on and resolve.”

Eventually one of his co-founders in the coffee effort came along, with the four co-founders of Airwallex ultimately including Zhang, along with Xijing Dai, Lucy Liu and Max Li.

It was 2014, and Airwallex got attention from VCs early on in part for being in the right place at the right time. A wave of startups building financial services for SMBs were definitely gaining ground in North America and Europe, filling a long-neglected hole in the technology universe, but there was almost nothing of the sort in the Asia Pacific region, and in those earlier days solutions were highly regionalized.

From there it was a no-brainer that starting with cross-border payments, the first thing Airwallex tackled, would soon grow into a wider suite of banking services involving payments and other cross-border banking services.

“In last 6 years, we’ve built more than 50 bank integrations and now offer payments 95 countries payments through a partner network,” he added, with 43 of those offering real-time transactions. From that, it moved on the bank accounts and “other primitive stuff” with card issuance and more, he said, eventually building an end-to-end payment stack. 

Airwallex has tens of thousands of customers using its financial services directly, and they make up about 40% of its revenues today. The rest is the interesting turn the company decided to take to expand its business.

Airwallex had built all of its technology from the ground up itself, and it found that — given the wave of new companies looking for more ways to engage customers and become their one-stop shop — there was an opportunity to package that tech up in a set of APIs and sell that on to a different set of customers, those who also provided services for small businesses. That part of the business now accounts for 60% of Airwallex’s business, Zhang said, and is growing faster in terms of revenues. (The SMB business is growing faster in terms of customers, he said.)

A lot of embedded finance startups that base their business around building tech to power other businesses tend to stay arm’s length from offering financial services directly to consumers. The explanation I have heard is that they do not wish to compete against their customers. Zhang said that Airwallex takes a different approach, by being selective about the customers they partner with, so that the financial services they offer would never be the kind that would not be in direct competition. The GOAT marketplace for sneakers, or Papaya Global’s HR platform are classic examples of this.

However, as Airwallex continues to grow, you can’t help but wonder whether one of those partners might like to gobble up all of Airwallex and take on some of that service provision role itself. In that context, it’s very interesting to see Salesforce Ventures returning to invest even more in the company in this round, given how widely the company has expanded from its early roots in software for salespeople into a massive platform providing a huge range of cloud services to help people run their businesses.

For now, it’s been the combination of its unique roots in Asia Pacific, plus its vertical approach of building its tech from the ground up, plus its retail acumen that has impressed investors and may well see Airwallex stay independent and grow for some time to come.

“Airwallex has a clear competitive advantage in the digital payments market,” said David Craver, MD at Lone Pine Capital, in a statement. “Its unique Asia-Pacific roots, coupled with its innovative infrastructure, products and services, speak volumes about the business’ global growth opportunities and its impressive expansion in the competitive payment providers space. We are excited to invest in Airwallex at this dynamic time, and look forward to helping drive the company’s expansion and success worldwide.”

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African fintech OPay valued at $2B in SoftBank Vision Fund 2-led $400M funding

Chinese-backed and Africa-focused fintech company OPay raised $400 million in new financing led by SoftBank Vision Fund 2, Bloomberg reported Monday, valuing the company at $2 billion.

The round, which marks the Fund’s first investment in an African startup, drew participation from existing investors like Sequoia Capital China, Redpoint China, Source Code Capital, and Softbank Ventures Asia. Other investors, including DragonBall Capital and 3W Capital, also took part in the new financing round.

This news comes three months after The Information reported that the company was in talks to raise “up to $400 million at a $1.5 billion valuation” from a group of Chinese investors. The new financing also comes two years after OPay announced two funding rounds in 2019 — $50 million in June and a $120 million Series B in November.

In an emailed statement, OPay CEO Yahui Zhou said OPay “wants to be the power that helps emerging markets reach a faster economic development.” The company, founded in 2018, had an exclusive presence in Nigeria before last year.

While the company started with providing customers with digital services in their everyday life from mobility and logistics to e-commerce and fintech at cheap rates, those super app plans have been largely underwhelming.

Right now, it’s the company’s mobile money and payment arm that thrives the most. By simply allowing unbanked and underbanked users in Nigeria to send and receive money and pay bills through a network of thousands of agents, OPay has grown at an exponential rate.

The company plays in an extremely competitive fintech market. Nigeria is Africa’s most populous nation, and with a large share of its people underbanked and unbanked, fintech is the most promising digital sector in the country. The same can be said for the continent as a whole. Mobile money services have long catered to the needs of the underbanked. Per GSMA, Africa had more than 160 million active mobile money users generating over $495 billion in transaction value last year.

Parent company Opera reported that OPay’s monthly transactions grew 4.5x to over $2 billion in December last year. OPay also claims to process about 80% of bank transfers among mobile money operators in Nigeria and 20% of the country’s non-merchant point of sales transactions. Last year, the company also said it acquired an international money transfer license with a WorldRemit partnership also in the works.

Per Bloomberg, the company’s monthly transaction volumes exceed $3 billion at the moment.

African fintech OPay is reportedly raising $400M at over $1.5B valuation

 

Last year, OPay expanded to Egypt, and according to the company, that’s an entry point to the Middle East market.

In a statement, Kentaro Matsui, a managing director at SoftBank Group Corp, said, “We believe our investment will help the company extend its offering to adjacent markets and replicate its successful business model in Egypt and other countries in the region.”

SoftBank joins a growing list of high-flying investors (Dragoneer, Sequoia, SVB Capital, among others) that have cut their first checks in African ventures this year. As the continent continues to show promise, fintech remains its poster child. This year up to half of the total investments raised have emerged from the sector; it contributed to more than 25% last year.

In addition, fintech has produced the most mega-rounds so far. TymeBank raised $109 million in February, Flutterwave bagged a $170 million round in March, while Chipper Cash secured $100 million in May.

OPay’s fundraise is the largest of the lot in terms of size and value, making it the second African fintech unicorn after Flutterwave and the third African unicorn after e-commerce giant Jumia. The three make up the five billion-dollar tech companies on the continent, which includes Interswitch and Fawry.

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African fintech OPay is reportedly raising $400M at over $1.5B valuation

Chinese-backed and Africa-focused fintech platform OPay is in talks to raise up to $400 million, The Information reported today. The fundraising is coming two years after OPay announced two funding rounds in 2019 — $50 million in June and $120 million Series B in November.

The $170 million raised so far came from mainly Chinese investors who have collectively begun to bet big on African startups over the past few years. Some of them include SoftBank, Sequoia Capital China, IDG Capital, SoftBank Ventures Asia, GSR Ventures, Source Code Capital.

In 2018, Opera, popularly known for its internet search engine and browser, launched the OPay mobile money platform in Lagos. It didn’t take long for the company to expand aggressively within the city using ORide, a now-defunct ride-hailing service, as an entry point to the array of services it wanted to offer. Since then, the company has tested several verticals — OBus, a bus-booking platform (also defunct); OExpress, a logistics delivery service; OTrade, a B2B e-commerce platform; OFood, a food delivery service, among others.

Opera’s Africa fintech startup OPay gains $120M from Chinese investors

While none of these services has significantly scaled, OPay’s fintech and mobile money arm (which is its main play) is thriving. This year, its parent company Opera reported that OPay’s monthly transactions grew 4.5x last year to over $2 billion in December. OPay also claims to process about 80% of bank transfers among mobile money operators in Nigeria and 20% of the country’s non-merchant point of sales transactions. Last year, the company also said it acquired an international money transfer license with a partnership with WorldRemit also in the works.

OPay plays in an extremely competitive fintech market. Nigeria is Africa’s most populous nation, and with a large share of its people underbanked and unbanked, fintech is arguably the most promising digital sector in the country. The same can be said for the continent as a whole. Mobile money services have long catered to the needs of the underbanked, and per GSMA, Africa had more than 160 million active mobile money users generating over $495 billion in transaction value last year.

While fintech upstarts like OPay and Paga are trying to capture as much market share as possible, telcos like MTN and Airtel, with operations in multiple African countries, are spinning off mobile money service arms as billion-dollar businesses to compete as well.

With the money OPay has raised so far, it’s quite surprising that the country until last year December was only present in Nigeria. None of its plans to expand to South Africa and Kenya (countries it expressed interest in during its Series B) has come to fruition yet. Although the company blamed the pandemic for these shortcomings, it has set up shop in North Africa by expanding to Egypt earlier this year. This next raise, likely a Series C, will be instrumental in the company’s plans for geographical and product offerings expansion. Per The Information, OPay’s valuation will increase to about $1.5 billion, three times what it was worth back in 2019.

We reached out to OPay but they declined to comment on the story at this time.

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Shein overtakes Amazon as the most installed shopping app in US

Shein‘s quiet rise has reached a crescendo as the fast fashion e-commerce app takes the crown from Amazon as the most downloaded shopping app on iOS and Android in the United States, according to data from app tracking firm App Annie.

Its ascent is quiet because the startup, despite reportedly exceeding a $15 billion valuation, maintains an unusually low profile and doesn’t try to make itself known to the media. The app, dubbed the “TikTok for e-commerce” by China-focused internet analyst Matthew Brennan in this thorough piece on the startup, manufactures in China as many apparel retailers do.

The difference is Shein controls its own production chain, from design and prototype to procurement to manufacturing. Each step is highly digitized and integrated with another, which allows the company to churn out hundreds of new products tailored to different regions and user tastes at a daily rate. The strategy is not unlike TikTok matching content creators with users by using algorithms to understand their habits in real-time.

China’s Black Lake raises $77M to give factories a digital upgrade

On May 11, Shein became the most installed shopping app on Android in the U.S., and six days later took the top spot on iOS as well. It briefly topped the Android chart in late April.

The origin of Shein, which was previously named “She Inside,” is little understood. On its official website, it describes itself as an “international B2C fast fashion e-commerce platform” founded in 2008. There is no mention of its founder and CEO Chris Xu. In a 2018 corporate blog posted on WeChat, it wrote that it was headquartered in Nanjing, an eastern Chinese city home known for its historical heritages and home to Chinese appliance giant Suning. It also opened offices in other major Chinese cities as well as the U.S., Belgium and the United Arab Emirates.

Shein’s low profile is perhaps expected in times of geopolitical tensions and heightened regulatory scrutiny over China-related tech companies around the world. Shein owns its sales channel and user data, which distinguishes it from the swathe of generic consumer brands relying on Amazon for customer acquisition without meaningful access to user data.

Last June, the Indian government banned Shein among 59 apps, including TikTok and WeChat, that it deemed “prejudicial to sovereignty and integrity of India, defence of India, security of state and public order.”

As of May 17, Shein was the top iOS shopping app in 54 countries and ranked top in the category on Android devices across 13 countries.

Shein has not announced who its investors are, but Chinese media reports have listed Capital Nuts, JAFCO Asia, Greenwoods Asset Management, IDG Capital, Sequoia Capital China, Tiger Global, and Xiaomi founder’s Shunwei Capital among its backers.

We’ve reached out to Shein for comments on the story. Sequoia Capital China confirmed it’s an investor in Shein.

This is a developing story.

Prime today, gone tomorrow: Chinese products get pulled from Amazon

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Crypto asset manager Babel raises $40M from Tiger Global, Bertelsmann and others

Three years after its inception, crypto financial service provider Babel Finance is racking up fundings and partnerships from major institutional investors. The startup said Monday that it has closed a $40 million Series A round, with lead investors including Zoo Capital, Sequoia Capital China, Dragonfly Capital, Bertelsmann and its Asian fund BAI Capital, and Tiger Global Management.

For years, traditional investors were reluctant to join the cryptocurrency fray. But in 2020, Babel noticed that many institutions and high net worth individuals began to consider crypto assets as an investment class.

Babel, with offices in Hong Kong, Beijing, and Singapore, wanted to capture the window of opportunity and be one of the earliest to help allocate crypto assets in investors’ portfolios. But first, it needed to win investors’ trust. One solution is to have reputable private equity and venture capital firms on its cap table.

“It’s more of a brand boost so we can attract more institutions and build up credibility,” Yulong Liu, Babel’s head of global partnerships, said of the financing which is a strategic round as Babel had “reached profitability” and “wasn’t actively looking for funding.”

To vie for institutional customers and wealthy individuals, Babel plans to spend its fresh proceeds on product development, compliance and talent acquisition, seeking especially banking professionals and lawyers to work on regulatory requirements. It currently has a headcount of 55 employees.

Mainstream investors are jumping into the crypto scene partly because many see bitcoin as a way to hedge against “solvency and credibility risks” amid global economic uncertainties caused by Covid-19, said Liu. “Bitcoin is not something controlled by the government.”

The other trigger, Liu explained, was what shock the industry in February: Elon Musk bought $1.5 billion in bitcoin and declared Tesla would begin accepting the digital token as payments. That sparked a massive rally around bitcoin, sending its price to over $40,000.

Babel’s evolution has been in line with the trajectory of the industry. In its early days, the startup was a “crypto-native” company offering deposit and loan products to crypto miners and traders. These days, it also runs a suite of asset management products and services tailored to enterprise clients around the world. It’s applying for relevant financial licenses in North America and Asia.

As of February, Babel’s crypto lending business had reached an outstanding balance of $2 billion in equivalent cryptocurrency, the firm says. It has served more than 500 institutional clients and sees about $8 billion in direct trading volume each month. 80% of its revenues are currently derived from institutions. The goal is to manage one million bitcoins within four years.

With backers like Tiger Global, LatAm crypto exchange Bitso raises $250M at a $2.2B valuation

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China’s EV startup Xpeng pulls in $500 million Series C+

Xpeng, an electric vehicle startup run by former Alibaba executive He Xiaopeng, said Monday it has raised around $500 million in a Series C+ round to further develop models tailored to China’s tech-savvy middle-class consumers.

The announcement followed its Series C round of $400 million closed last November. A source told TechCrunch that the company’s valuation at the time had exceeded the 25 billion yuan ($3.57 billion) round raised in August 2018.

The new proceeds bring the five-year-old Chinese startup’s to-date fundings announced to $1.7 billion.

Investors in the latest round include Hong Kong-based private equity firm Aspex Management; the storied American tech hedge fund Coatue Management; China’s top private equity fund Hillhouse Capital; and Sequoia Capital China. The other existing big-name backers are Foxconn, Xiaomi, GGV Capital, Morningside Venture Capital, IDG Capital, and Primavera Capital.

Despite the sizable round, Xpeng is headed for a slew of challenges. Electric vehicle sales in China have shrunk in the wake of reduced government subsidies set in motion last year, and the COVID-19 pandemic is expected to further dampen demand as the economy weakens.

Xpeng’s Chinese rival Byton, which counts heavyweights backers like Tencent, FAW Group, and Foxconn, is already showing signs of strain as it furloughed about half of its 450 North America-based staff citing coronavirus impact. In June, the company put the brakes on production for internal reorganization.

Xpeng’s other competitors seem to have proven more resilient. In April, Nasdaq-listed Nio secured a $1 billion investment for its Chinese entity, while Li Auto ventured to file for a U.S. public listing in July.

Xpeng claims it has so far been able to withstand coronavirus challenges. In May, the company obtained a production license for its fully-owned car plant in a city near its Guangzhou headquarters, signaling its reduced dependence on manufacturing partner Haima Automobile.

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Chinese online learning app Zuoyebang raises $750M

Zuoyebang, a Beijing-headquartered startup that runs an online learning app, said on Monday it has raised $750 million in a new financing round as investors demonstrate their continued trust in — and focus on — Asia’s booming edtech market.

U.S. investment firm Tiger Global and Hong Kong-based private equity firm FountainVest Partners led the six-year-old startup’s Series E financing round. Existing investors including SoftBank’s Vision Fund, Sequoia Capital China, Xiang He Capital, Qatar Investment Authority also participated in the round, which brings the startup’s to-date raise to $1.33 billion.

As we have previously noted in our coverage, Zuoyebang’s app helps students — ranging from kindergarten to 12th-grade — solve problems and understand complex concepts.

The app, which offers online courses and runs live lessons, also allows students to take a picture of a problem, upload it to the app, and get its solution. The startup claims it uses artificial intelligence to identify the question and its answer.

Zuoyebang has amassed 170 million monthly active users, about 50 million of whom use the service each day, the startup said in a post (in Chinese). More than 12 million of these users are paid subscribers, it said.

The announcement today further illustrates the opportunities investors are seeing in the online education sector in Asia. Last week, Indian edtech giant Byju’s announced it had received fresh funds from Mary Meeker’s fund, Bond.

SoftBank counts Zuoyebang among its 88 portfolio startups that have demonstrated growth in recent quarters. Zuoyebang was founded by Baidu in 2015. A year later the Chinese search giant spun off Zuoyebang into an independent startup.

Zuoyebang competes with a handful of startups in China, including Yuanfudao, which offers a similar service. In March, Yuanfudao said it had secured $1 billion in a financing round led by Tencent and Hillhouse Capital. The startup was valued at $7.8 billion at the time. Reuters reported earlier this month that Zuoyebang could be valued at $6.5 billion in the new financing round.

According to research firm iResearch, the online education market in China could be worth $81 billion in two years.

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Will China’s coronavirus-related trends shape the future for American VCs?

Rocio Wu Contributor
Rocio Wu is a second-year MBA candidate at Harvard Business School and a venture capitalist.

For the past month, VC investment pace seems to have slacked off in the U.S., but deal activities in China are picking up following a slowdown prompted by the COVID-19 outbreak.

According to PitchBook, “Chinese firms recorded 66 venture capital deals for the week ended March 28, the most of any week in 2020 and just below figures from the same time last year,” (although 2019 was a slow year). There is a natural lag between when deals are made and when they are announced, but still, there are some interesting trends that I couldn’t help noticing.

While many U.S.-based VCs haven’t had a chance to focus on new deals, recent investment trends coming out of China may indicate which shifts might persist after the crisis and what it could mean for the U.S. investor community.

Image Credits: PitchBook

Just like SARS in 2003 coincided with the launch of Taobao and pushed Jingdong to transform from an offline retailer into online giant JD.com, there may be dark horses waiting to break out when this pandemic is over. Paraphrasing “A Tale of Two Cities” — this is the worst time, but also maybe the best time.

In addition to obvious trends about food delivery, digital content, gaming and other sectors, I have identified five other trends that are closing the most deals in Q1 on the early-stage side that could define the post-pandemic environment: e-commerce, edtech, robotics and advanced manufacturing, healthcare IT/life Science and AI/enterprise SaaS.

1. E-commerce