The face of Nigerian business is starting to change as the country’s young tech-savvy entrepreneurs launch successful fundraisings attracting global investment.
Fintech payments company Flutterwave, just five years old, was valued at over $1bn in March after capital-raising netted $170m from investors, including Tiger Global Management, the US hedge fund and investment firm. The fundraising brings the total investment in Flutterwave to $225m.
The new valuation has led to Flutterwave’s designation as a “unicorn” – a privately held startup company valued at $1bn, and the second unicorn to come out of Nigeria. The firm serves more than 290,000 businesses including customers like Uber, Flywire, Booking.com and Facebook. The firm will use the capital to acquire more users, expand into new markets and build an app.
Nigeria’s Interswitch became Africa’s first unicorn in late 2019 after US payments technology corporation Visa acquired a 20% stake in the company for $200m.
Flutterwave, founded in Nigeria and based in San Francisco, has become one of the fastest-growing payments companies in the world. By 2021 it had processed more than 140m transactions worth more than $9bn across 33 African countries. It enjoyed compound annual growth of 226% from 2018 to 2020. The company will soon set up shop in more Francophone and North African markets including Egypt, Tunisia and Morocco.
Other firms in the Nigerian fintech market are also making waves with international investors. Paystack, a payments provider for businesses, was acquired by US-based digital payments giant Stripe in October for $200m in the biggest startup acquisition yet.
The deal, which will allow both companies to operate independently, formed part of Stripe’s shift into Africa amid international expansion plans sparked by its own $600m funding round in 2020. Paystack, like Stripe, went through Y Combinator, the Silicon Valley-based startup incubator in 2016, the first ever startup out of Nigeria to do so. Stripe, which led Paystack’s 2018 $8m Series A funding prior to making the acquisition last year, counts Amazon, booking.com, Facebook, Shopify, Paypal, Zoom, Jobber and others among its clients.
At the time of the deal, Paystack had about 600,000 customers. CEO Shola Akinlade, co-founder of the company with Ezra Olubi, says, “Paystack was not for sale when Stripe approached us. For us, it’s about the mission. I’m driven by the mission to accelerate payments on the continent, and I am convinced that Stripe will help us get there faster.”
A growing fintech hub
The deals have boosted Nigeria as an African fintech hub to rival Egypt, Kenya and South Africa. Together, the four countries make up about 85% of total fintech investments on the continent.
Many of the companies leading the charge are just a few years old and have benefited from a spike in investor interest since 2018, when funding into African fintechs nearly quadrupled to $357m. Global giants such as Visa and China’s Tencent regularly appear in the funding rounds of growing African fintechs.
The pandemic has had a broadly positive effect, driving an increased public acceptance and uptake of online transactions as consumers avoid physical cash and face-to-face contact with retailers. Flutterwave CEO Olugbenga Agboola says revenues grew more than 100% in 2020 due to the pandemic.
Policymakers are keen to encourage the trend. The Central Bank of Nigeria has a target of financial inclusion of 95% by 2024, but analysts believe it will need the growth of fintech companies, products and funding to get close to achieving this target.
Fintech is not the only game in town when it comes to serious fundraising. Innovation across the board is helping to solve longstanding problems in Nigeria, unlocking growth and improving livelihoods. Helium Health, a company that specialises in digitising medical records and offering tech solutions for administration as well as digital payments, last year raised $10m in a fundraising round.
It has spurned acquisition offers, according to media reports, and opted to expand its services to North and East Africa, particularly in the wake of a significant shift to online business because of Covid-19.
“It’s really about tackling three core problems that we see in the healthcare sector in Africa: inefficiency, fragmentation and a lack of data,” says CEO and co-founder Adegoke Olubusi. “I’m hoping this coronavirus crisis will be a period that forces everyone to rethink what we’re doing on healthcare.”
The company is capitalising on a migration to online services among healthcare providers. The head of the Nigeria Centre for Disease Control, Chikwe Ihekweazu, says automating a range of services has helped the organisation to manage Covid-19. “Almost everything we’re doing right now, from logistics to managing the outbreak itself, is being migrated onto different technological platforms.”
Many of Nigeria’s new entrepreneurs have gained experience in international companies. Helium Health’s Olubusi did stints with Goldman Sachs, eBay and PayPal before coming back to Nigeria. Flutterwave was founded by serial entrepreneurs Iyin Aboyeji and Agboola, supported by a team of African payments, technology and banking specialists drawn from companies such as Standard Bank, Google Wallet, Andela and PayPal.
The startups are challenging the status quo of Nigeria’s corporate landscape by taking on the big banks that have dominated the financial services landscape for decades. That, in turn, has spurred innovation in the traditional financial sector. GTBank is hunting for fintech talent in its own startup company, Habari Pay, which is due to start operations in 2021, while Access Bank has established a tech accelerator, the Africa FinTech Foundry, to build digital talent for itself and the industry as a whole.
Some of the large banks and other corporates in Nigeria are already working with newly emerging fintechs in an effort to improve their own services and develop new services to help them modernise. With the changes brought about by the pandemic, these fast-growing companies and the profusion of new entrepreneurs are charting a new course for the Nigerian economy.