OPay is just a year old in Nigeria, but the startup is already making waves. Nigerian road users would be familiar with the green livery motorbike hailing startup ORide, which is a part of the OPay business. Founded by Norwegian browser company Opera, OPay, the Africa-focused mobile payments startup has raised $50 million in new funding.
A Look At The Funding
A large chunk of the investment came from investors including Sequoia China, IDG Capital, and Source Code Capital. Opera also joined the round in the payments venture it created.
OPay intends to use the capital (which wasn’t given a stage designation) primarily to grow its digital finance business in Nigeria — Africa’s most populous nation and largest economy.
OPay will also support Opera’s growing commercial network in Nigeria, including its motorcycle ride-hail app ORide and OFood delivery service.
Opera founded Opay in 2018 on the popularity of its internet search engine. Opera’s web-browser has ranked number two in usage in Africa, after Chrome, the last four years.
The Startup’s Statistics
On the payments side, OPay in Nigeria has scaled to 40,000 active agents and $5 million in transaction volume in 10 months.
The $50 million investment in OPay is more than just another big round in Africa. It has significance for the continent’s tech-ecosystem on multiple levels.
To start, OPay’s raise tracks greater influence in African tech from China — whose engagement with African startups has been light compared to China’s deal-making on infrastructure and commodities. OPay founder Opera was acquired in 2016 for $600 million by a consortium of Chinese investors, led by current Opera CEO Yahui Zhou.
The majority of the investment for OPay’s raise comes from Chinese funds and sources, including Source Code Capital, Sequoia China, and GSR Ventures. There’s not a lot of statistical data on the value of Chinese VC investment in Africa, but a large portion of $50 million to a fintech venture stands out.
This New Investment May Mean A Major Shift For Nigerian Digital Payments Startups
OPay’s VC haul also has significance vis-a-vis digital-finance in Nigeria. In tandem with other trends, it could support the shift of Nigeria surpassing Kenya as Africa’s digital payments leader. For years Kenya has outpaced Nigeria in P2P digital payments volumes and digital financial inclusion, largely due to the rapid adoption of mobile-money products, such as Safaricom’s M-Pesa.
Some of this is due in part to Nigeria’s Central Bank limiting the ability of non-banks (including telcos) to offer mobile payment services. The CBN eased many of those restrictions earlier this year. This opens the door for mobile-operators like MTN, with the largest phone network in Nigeria, to offer mobile-money products. In addition to fintech regulatory improvements, there’s been a gradual increase in VC flowing to Nigerian payment ventures.
The country’s leading digital payment company, Paga, raised $10 million in 2018 to further expand its customer base that now tallies 13 million. OPay’s $50 million backed commitment to grow mobile money in Nigeria should provide another big boost to digital-finance adoption across the country’s 190 million people.
And not to be overlooked is how OPay’s capital raise moves Opera toward becoming a multi-service commercial internet platform in Africa. Part of the $50 million investment includes diversifying country and product offerings. “Geographic expansion of OPay and other services is a key part of our plans,” Opera CEO Yahui Zhou told TechCrunch via email.
This could place OPay and its Opera supported the suite of products on a competitive footing with other ride-hail, food-delivery, and payments startups across the continent. It could also mean competition between Opera and Africa’s largest multi-service internet company, e-commerce unicorn Jumia.
Charles Rapulu Udoh
Charles Rapulu Udoh is a Lagos-based Lawyer with special focus on Business Law, Intellectual Property Rights, Entertainment and Technology Law. He is also an award-winning writer. Working for notable organizations so far has exposed him to some of industry best practices in business, finance strategies, law, dispute resolution, and data analytics both in Nigeria and across the world.
South African crypto-based startup Wala has come to its end. The startup’s premises, after 4 years of being in operation, are no longer open for business. Founded in 2015, Wala initially provided access to transactional banking, remittances, loans, and insurance, working with specialist providers to offer a full suite of financial services.
However, the startup became crypto-focused in 2017 with the launch of utility crypto-token Dala, which Wala hoped would support the operationalization and further development of scalable, blockchain-enabled financial platforms for emerging markets. It did this by raising funding from Newtown Partners and then bagged US$1.2 million in addition through a token sale.
Here are the key reasons why the startup closed down
Funding
Initially, Wala was coasting home clean. The startup which won the Zambezi Prize late last year, secured over 150,000 users, mainly residing in Uganda, within months, but founder and chief executive officer (CEO) Tricia Martinez said it soon ran into problems.
“We had little funding and limited resources while tackling a massive global problem. With over 150,000 Dala wallets and more and more partners wanting to work with us we had a lot on our plate with limited resources,” said Martinez.
However, when it became time to fundraise again, Wala was not successful, in spite of its team believing its rapid growth would make it attractive to investors.
“I began fundraising at the start of crypto winter, which certainly didn’t help. For whatever reason, not many investors wanted to back a crypto company, let alone a startup focused on African markets,” Martinez said.
“For eight months I traveled across the globe, pitching investors in blockchain, fintech, impact, African-focused… I met and engaged with over 100 investors, and despite our early growth numbers, we couldn’t secure the necessary financial support we needed to continue growing and operating.”
Wala began cutting back, turning off deposits and laying off most of its team, but on June 24 it turned off its app entirely.
Martinez also said activities of scammers and infrequency of service supply from the startup’s partner networks also contributed to the downfall of the startup.
“Rewards attracted scammers or people who figured out how to take advantage of a rewards system. This led us to change our rewards model multiple times and have to remove users who were abusing our system,” she said.
“The biggest problem we ran into was infrastructure. Our partners’ systems upwould regularly turn off due to internet problems or their own poor infrastructure, which meant our users were unable to transact, which was the biggest use case for Dala. This crushed our user engagement and most importantly trust in our system. It also forced us to expand the scope for Dala. We had to build even more infrastructure than we anticipated at the start,’’ she said.
A Ruined and Devastated Startup
The startup expressed shock over this reality.
“Our team was devastated to say the least and our users were upset. We provided a free financial payments system to consumers that solved a huge problem for them, but we didn’t have the funding to scale operations and solve the infrastructure problems that existed in these markets,” said Martinez.
Charles Rapulu Udoh
Charles Rapulu Udoh is a Lagos-based Lawyer with special focus on Business Law, Intellectual Property Rights, Entertainment and Technology Law. He is also an award-winning writer. Working for notable organizations so far has exposed him to some of industry best practices in business, finance strategies, law, dispute resolution, and data analytics both in Nigeria and across the world.
At only 26, William Elong has already written his name in the book of African geniuses by launching the first drone made in Cameroon. William Elong created this feat by launching the first civilian drone service made in Cameroon.
The promoter of the Cameroonian startup Will & Brothers and Algo Drone, whose holding company is based in Germany, wants to challenge the giants of the sector in the international sky. To achieve this, the young entrepreneur who graduated in strategy and economic intelligence from the Paris School of War announced last January that the startup had raised of 2 million euros, a little over 1.3 billion CFA francs in funding.
No Degree In Robotics
William Elong was categorical when he spoke with the French online magazine, Sputnik on the sidelines of the week digital innovation in Yaoundé recently, that he had no previous background in robotics.
“I have absolutely no degree in robotics or embedded system,’’ he said. ‘‘I did business studies instead. However, I worked for companies in the security sector for a few years: Nexter (a manufacturer of armored vehicles) where I was an economic intelligence consultant and Thales Cameroon that offers cyber security services. It is through these field experiences in the field of security that I understood what were the issues related to the issue of drones and the management of satellite data; which allowed me to start my own business.
When it comes to evoking his passion for robotics, William Elong said that:
“It’s like asking someone who loves the piano where his passion for the piano comes from. Sincerely, I do not know. The environment maybe, because I had a lot of chances to be interested very early in everything related to robotics. It was done alone. I would say its innate.“
The well-nourished passion allowed Elong to embark on entrepreneurship as early as 2015. To make his ambition happen, he created Will & Brothers, a startup specialized in economic intelligence and specialized technological innovation; then Drone Africa to realize his dream of developing drones 100% Cameroonian.
“Apart from the Startup Will and Brothers, there is another named Algo Drone which was originally called Drone Africa. It has become a company present in several countries. So we set up an office in Germany, which allowed us to reach Europe and not just focus on Africa, because we think the global market is large, “he said.
Thanks to the creation of these two structures, William Elong finally realized his dream of developing the Drone Africa app: launching the first civilian drone service in Cameroon. This innovation earned him a place as one of the most formidable African geniuses. In 2016, he was among the top 30 most promising young African entrepreneurs, in a ranking published by the famous American magazine Forbes.
“Drone Africa is a team work made up of young engineers recruited from some of the Faculties of Industrial Engineering in Douala and others in Yaounde. It is gets a lot of self-learning through lessons available on Youtube and Open Source. From this workforce and our skills, we have embarked on a production phase. We also knew a lot of failures, but we got up and today our service offer is functional, “he said.
The drone surveillance service offered by William Elong is increasingly adopted in various sectors of activity in Cameroon, particularly in agriculture, tourism, communication, meteorology, defense or mapping.
“More than 80% of our activity is carried out with institutional actors. For example, farmers who want to do mapping on several hectares with the drone. Others solicit us for the promotion of tourist sites. We have covered sites of some stages of the African Cup of Nations in Cameroon. I can mention the Olembe stadium, which we shot during the construction. We also have clients in Congo or Senegal. In Africa the solicitations are going well, “he said.
Concerning the components of his devices, the promoter however specified that all the parts are not manufactured in Cameroon.
“I am often asked if the components of my drones are made in Cameroon. No, of course. Even when you buy your phone made in France all components are not manufactured in France. We have components that come from different suppliers around the world and sometimes assembly is done in Cameroon. The important point is the know-how that we sell to our customers, “he reassured.
”The size of the market and the scale of the needs in Africa are elements that have attracted our first funders”
But William Elong is also an ace of crowdfunding. To succeed in these different challenges, Will & Brothers was able to mobilize $ 200,000 from various investors at the launch of his project. In January 2019, the young entrepreneur managed to raise 2 million euros (1.3 billion CFA francs) of funds announced in early 2018. Funds that come mainly from foreign investors even if William would have liked more involvement of Cameroonian partners
“I submitted my project to investment funds that could be interested in our sector of activity. It works pretty well. Unfortunately, we have very few local investors. Too bad. The size of the market and the scale of the needs in Africa are elements that have attracted our first funders and still attracting today, “he told Sputnik
Among the difficulties encountered by the young entrepreneur in the development of his drone and artificial intelligence services is the newness of this technology in Cameroon.
“Given that we are specialized in a high-tech sector like artificial intelligence and drones, the general public has a hard time really understanding what we are doing. To fight against this basic incomprehension, we organize information and awareness workshops to demystify the subject. Because of the technical complexity, we are often faced with misinformation. Each time, we have to go back over certain points to better enlighten them and make them understand,’’he said.
With this local experience, William Elong is now eyeing the international sky.
“We are actively preparing for the conquest of the international market with our drones. However, there are other areas of activity that we are aiming to explore. I can speak in particular about Finetech, it is an area that interests us particularly, cybersecurity especially. Because there is only one step between drones, data transmission and cybersecurity issues, “he said.
Besides his many activities, this geek also works to share his experience with young people in Cameroon.
“We accompany young people to encourage them to start their own businesses. In this sense we have set up an association called “Cameroon Flying Lab”, an association that promotes robotics among young people through actions in schools, universities and others. I can also talk about the “Phoenix Lab” a non-profit organization based in Douala that offers support to young entrepreneurs who are looking for capital, “he said.
As he continues his rise to conquer the international market, William Elong firmly believes that artificial intelligence can contribute to the digital transformation of Africa and its development.
Charles Rapulu Udoh
Charles Rapulu Udoh is a Lagos-based Lawyer with special focus on Business Law, Intellectual Property Rights, Entertainment and Technology Law. He is also an award-winning writer. Working for notable organizations so far has exposed him to some of industry best practices in business, finance strategies, law, dispute resolution, and data analytics both in Nigeria and across the world.
Glovo now exists in Kenya, Morocco and Cote d’Ivoire, with plans to expand to Ghana, Nigeria, and Tanzania. The startup which was co-founded by the 26-year-old Barcelona -based Oscar Pierre in 2015 has raised over $340 million since it was founded and is already displacing major players in the crowded delivery industry.
Here Are Quick Facts About Glovo:
Barcelona-based Glovo is the on-demand delivery app that allows customers to order anything — restaurant meals, groceries, flowers — from more than 1,000 participating businesses and have it delivered in less than one hour.
Simply put, the startup is known as the “anything” delivery app.
Glovo makes profit by charging a service fee, plus a commission on their partners, depending on the cost of the product or item.
The most interesting fact about Glovo may be that despite being founded only about 4 years ago in 2015, the company already has a presence in 178 cities across 23 countries.
The startup’s vision is to be a lifestyle app with all urban services available easily through its smartphone application.
Food delivery service remains its most popular service. Other services available on the app include Groceries, Pharmacy, Desserts, Courier, and Quiero (anything).
While most companies are very focused on food only, Glovo can, however, deliver everything.
The food business allows users to find and place orders with their favorite restaurants which is picked up when ready and delivered to the user’s doorstep. Today, more than 85% of Glovo’s orders in Europe are for food.
Unlike the other couriers — namely the UK-based Deliveroo and US-based UberEats — Glovo couriers don’t just pick up food for customers of the app. They’ll also buy them a particular dress in a size 12 from Zara, or grab some painkillers from a pharmacy if the customers so request.
While this model continues to be its flagship service, the company is reportedly experimenting with CloudKitchens and Grocery Darkstores.
In fact, the startup has become so successful that Bloomberg said Glovo could now be worth €650 million ($730 million)
The firm’s revenue jumped from €18 million ($20 million) in 2017 to €81 million ($91 million) last year.
Over 200 key players are defining the Barcelona startup tech ecosystem
‘‘We…Found Our Gap’’
Glovo is not the first delivery app out there. Oscar knew this. In fact, at the time of starting up Glovo, there was already the US firm Postmates (which inspired him) that delivers anything a city-dweller might need or want, as well as Uber and Amazon’s Deliveroo that do similar things. This means the startup is already in direct competition with those companies. Thus, it is rather surprising that Glovo would make such quick success.
‘‘It makes the market more difficult,’’ Oscar told Spanish online magazine Viaempressa. ‘‘We have found our gap; we are the only platform in Europe that supplies the user with anything in the city, and I think that this is the key; the offer is broad. It doesn’t scare us that the competitors are large, being small is a competitive advantage because it means we can react quickly to these monsters. They are very powerful, but they move slowly. A clear example is our partnership with McDonald’s, for which we competed against Uber Eats and Deliveroo. We got it because we were the quickest to come up with a model that McDonald’s needed, it is specific for them on a technological and logistical level. When you are a startup, you bargain more easily.’’
Pierre also said there are many differences between Glovo and other national or international startups.
‘‘Our freelancers will buy for you whatever you want,’’ he said . ‘‘Another major difference is that our service is based on immediacy. We have a totally different model compared to other apps dedicated exclusively to transport people or deliver food. In addition, we are not a logistics company, nor do we want to be. These companies are only dedicated to collect and deliver while we put a whole city open to anyone.’’
Getting The Timing Right is Crucial
Getting into a crowded market could be easy but staying successful would remain the toughest game startups will face. Oscar Pierre, however, said getting the timing right is crucial. Glovo doesn’t come on board a country where there are already two dominant players (which is the case in Mexico, Colombia, and the UK), he said.
‘If we went to the UK today it would be super tough or impossible to become one of the main food delivery companies. It’s a snowball effect; as you don’t have the volume, you don’t reach to the top chains or restaurants which doesn’t give you the growth,’ Oscar told Sifted, a new FT-backed website that launched early 2019.
Again, the startup succeeded in Spain mostly because it brought big brands such as McDonald’s and KFC onto its app and this led to ‘massive growth’. Before then, competitors like Deliveroo refused to meet the big companies’ demands. This was an opportunity Glovo held onto. ‘‘We literally built anything they wanted,’ Pierre said.
Today, Glovo is the biggest food delivery service in Spain (where it is profitable and takes around one million orders per month)
Oscar said: ‘Every single city needs between six to nine months to reach operational break-even. Structure-wise, it’s been super interesting You have to delocalize — otherwise the company stops. You need to find super strong regional teams. In Buenos Aires, Argentina, we have a very senior team, with almost a CEO and CMO, and they take all of the decisions.’’
‘‘We pitched to 118 funds, and all of them said ‘no.’ ’’
Oscar said building the startup did not come without a fight. He said the startup pitched to 118 funds before its current progress.
“For our series B round, we pitched to 118 funds, and all of them said ‘no.’ We were very close to going bankrupt, maybe a month away. All our competitors were huge. Two years ago, there was no way to convince investors that we’d really be competing face-to-face with Uber Eats or Deliveroo. There was very little conviction about food delivery back then.
Being from Barcelona was always very tough because when you only operate in Spain, you don’t have access to the VCs in London or in France. The Spanish ecosystem of VCs is very small and very risk-averse,” he said.
In 2017, Glovo raised $30 million in a series B funding round led by the Japanese tech giant Rakuten. Rakuten ended up being a company with a famous connection to Barcelona that came to Glovo’s aid.
‘‘One day, Rakuten came out of the blue and decided to invest in us,” Pierre said.
Since then, two other funding rounds have followed, the latest of which, totaling 150 million euros, or $170 million, was led by the early Spotify investor, Lakestar, in April, 2019 taking the startup’s total funding to $340 million.
Glovo renders delivery services for anything the city has to offer and is learning, growing and improving fast.
Remembering those periods in the startup’s story, Pierre said he didn’t know if he were doing a rational thing then.
‘I have to say, I don’t know if it was a very rational investment at that moment — when you have over 100 smart investors saying no, it might mean something,’ he said.
Oscar said the most important factor that has guaranteed the startup’s continuous growth is its quest to remain profitable.
‘‘Only those who focus on profitability get funding,” he said. “We make sure we are not only growing, but that the cities are not in negative numbers for many months. We know there are cities that need only six months to show losses and others, 12 months, because it all depends on size; but we know that sooner or later we will get good numbers. In Spain we have seen more than 10 proposals similar to ours and many of them have failed. The margins are small and if you do not look after them well, it will not work,’’ he said.
Focusing on profitability has helped the startup to steer clear of loss. In 2016 Pierre said the startup obtained 1.1 million net euros in profit, which represents the commissions from their partners and shops along with what the user paid for the service, and that meant tenfold growth. In 2017, barely two years and two months old, the startup took a millionth order. The number has since doubled.
‘When a sector is overfunded…investors disappear’
Pierre said the urge for startups to get funded almost always comes with a price — a sudden disappearance of investors.
‘‘Delivery is a complicated sector. Between 2010 and 2012, there was overfunding in Barcelona. It was new and grew quickly because it clearly had value. A lot of projects were funded that began to close down in 2014 and that went on for another couple of years. That was just the moment when we began looking for funding. The investors saw that the sector was in fashion, but that it had problems. And what happens when a sector is over-funded is that the investors disappear,’’ he said.
The Best Way To Confront Fund-Raising
Pierre said the best way to confront fund-raising is by being humble.
‘Our most important core value is humbleness. I tell it to the team a lot. I’ve seen companies burst because of lack of humbleness,’ he said.
‘Every time I go to the board, I’m like, “Oscar man, if you’re not taking big steps you’re not going to be the best CEO for this company.” So I just keep that in my mind all the time.’
Charles Rapulu Udoh
Charles Rapulu Udoh is a Lagos-based Lawyer with special focus on Business Law, Intellectual Property Rights, Entertainment and Technology Law. He is also an award-winning writer. Working for notable organizations so far has exposed him to some of industry best practices in business, finance strategies, law, dispute resolution, and data analytics both in Nigeria and across the world.
The Kwik app comes with an integrated geolocation system and offers an efficient transportation service for small packages (up to 25kg) or documents.
French start-up firm, Africa Delivery Technologies has launched an app on both Apple Appstore and Google Play aptly named the Kwik (https://KWIK.Delivery/) which aspires to quickly become the Number #1 of last-mile delivery services in Nigeria.
“Kwik aims to become the first platform for last-mile delivery in urban areas in Nigeria before extending its scope to neighbouring countries. We’re targeting 100,000 deliveries per day in three cities before 2021”, explains Romain Poirot-Lellig, Founder & CEO of Africa Delivery Technologies (ADT), developer of the Kwik app.
Kwik connects independent delivery partners, either owners and/or drivers of a vehicle, with customers who need reliable, affordable and flexible delivery solutions. The Kwik app comes with an integrated geolocation system and offers an efficient transportation service for small packages (up to 25kg) or documents, following the same model as Go-Jek, Uber or Taxify.
Kwik’s value proposition is simple and straightforward: to ensure the fast, reliable and efficient delivery of a package or envelope in Lagos, Nigeria’s business capital. Currently, Kwik’s competitors offer a service that takes 12 hours and costs between 2,000 and 3,000 nairas (4-8 euros) per delivery from Lagos to Lagos. Kwik promises to offer a service of higher added value within 2 hours and for a third of the price, with integrated geolocation and proof of a delivery system that offers the highest degree of security available on the market.
The service offered by the company is available through the Kwik app or via a web browser. The couriers are geo-located in real-time. The payment can either take place beforehand by credit card via the Nigerian fintech Paga’s system (12 million users) or in cash. Kwik focuses particularly on B2B clients and allows them to create tour deliveries on the fly, set up recurring delivers; manage users, and so on. Additional insurance services are currently under development.
Kelechi Deca
Kelechi Deca has over two decades of media experience, he has traveled to over 77 countries reporting on multilateral development institutions, international business, trade, travels, culture, and diplomacy. He is also a petrol head with in-depth knowledge of automobiles and the auto industry.
Nigeria is set to launch its economy back on track. The Central Bank of Nigeria is now making it mandatory for money deposit bank in Nigeria to maintain loan to deposit ratio of 60% effective September 30, 2019.
The statement from the bank reads as follows:
In order to ramp up growth of the Nigerian economy through investment in the real sector, the Central Bank of Nigeria (CBN) has approved the following measures:
All DMBs are hereby required to maintain a minimum Loan to Deposit Ratio (LDR) of 60% by September 30, 2019. This ratio shall be subject to quarterly review. 2) To encourage SMEs, Retail, Mortgage and Consumer Lending, these sectors shall be assigned a weight of 150% in computing the LDR for this purpose. The CBN shall provide a framework for classification of enterprises/businesses that fall under these categories.
3) Failure to meet the above minimum LDR by the specified date shall result in a levy of additional Cash Reserve Requirement equal to 50% of the lending shortfall of the target LDR.
The CBN shall continue to review development in the market with a view to facilitating graeter investment in the real sector of the Nigerian economy.
This is The First Time The Central Bank of Nigeria Is Weighing In On Minimum Lending Ratio
Previously, there Nigeria had no rule on minimum loan-to-deposit ratios. However, many Nigerian lenders have pegged ratios of about 40%.
However, Nigerian banks are so reluctant with lending to businesses and have resisted lending to businesses and consumers and instead piled their cash into naira bonds, which yield 14.3% on average, one of the highest rates globally.
Lenders worry that with inflation at more than 11%, extending more credit could endanger the financial system through an increase in non-performing loans, or NPLs.
That makes some analysts skeptical of whether the new measures will work.
“Forcing banks to lend under the current macro-economic situation will only result in a buildup in Non-performing loans,” analysts at Lagos-based CSL Research, including Gloria Fadipe, said in a note to clients.
“This could pose a risk to financial stability.”
CSL estimates it could result in an additional 1.4 trillion naira ($3.9 billion) of lending if the central bank gets its way.
Bad Loans
Non-performing loans as a percentage of total credit in the Nigerian banking industry declined to 11% in the first quarter from 14% a year ago, according to the National Bureau of Statistics. Past experience with such measures isn’t encouraging. The central bank last year allowed banks to use their statutory cash reserves to fund manufacturers on the condition that such loans were at a maximum interest rate of 9% and a minimum maturity of seven years. The lenders didn’t take advantage of the policy due to credit risk and high returns on government bonds, according to Michael Famoroti, an economist and partner at Stears Business.
The Implication of This To Businesses
With this move, it is expected that Nigerian money deposit banks are going to loosen up money to Nigerians. For businesses desiring to raise funds, this is the best time to laugh as more banks would be rushing after them. However, it remains whether Nigeria’s commercial banks would not fight back, by either setting up SPVs or lending to more stable corporations, in which case the vision of the CBN may have been defeated.
So businesses should dust up their loan procurement files and get set for September 30, 2019.
Charles Rapulu Udoh
Charles Rapulu Udoh is a Lagos-based Lawyer with special focus on Business Law, Intellectual Property Rights, Entertainment and Technology Law. He is also an award-winning writer. Working for notable organizations so far has exposed him to some of industry best practices in business, finance strategies, law, dispute resolution, and data analytics both in Nigeria and across the world.
Barely 8 years since its life began in 2011, TransferWise, the UK-based money transfer startup launched by Kristo Käärmann and Taavet Hinrikus with headquarters in London and offices in a number of cities including Tallinn, New York, and Singapore, recently reached a $3.5bn valuation, making it Europe’s most valuable startup. Good news for the startup, but for the co-founder and CEO of Europe’s most valuable startup Kristo Käärmann, it takes one thing to start a business but a lot to get it going.
TransferWise, his brainchild has today has gone from bootstrapping to saving users over $1 billion a year when transferring money. The startup did this by tackling a common problem and taking action on it. Käärmann and his co-founder, Taavet Hinrikus, have gone from zero to a multi-billion dollar business in just a few years.
Here are a few insights about how he took the startup from zero to monumental success.
Originally from Estonia, and armed with a college degree in Mathematics and Computer Science and a Masters Degree in Microbiology, and job stunts at PwC and Deloitte, Kaarmann said his experience as a consultant in one of the Big-Fours in London took a new turn when he discovered he was billed so much for sending money back home to the new newly independent country — Estonia.
‘‘I had a great salary in the UK at my new job,’’ he said. ‘‘But my savings account was still back in Estonia. I was regularly moving pounds into that savings account. When I did a larger transaction, I found out that less money arrived my Estonian account — And when I say a lot less, it was like 500 euros less. I started looking into this and found out that each time I made a transfer to my Estonian account, HSBC, my bank in the UK used an exchange rate that was 5% less than what I see on Reuters or Bloomberg. The message out there was that they were saving cost and were only charging 12 pounds transaction fee at the time.
What really happened was that in addition to these 12 pounds, the banks hid some fees into the exchange rate. This way, they made money. So when I was first hit by the loss of 500 euros, I was so angry and sad.’’
Kaarmann said he found a solution when he met his co-founder, Taavet Hinrikus who had similar issues. Taavet was moving money from Estonia to London and was being charged excessively. Although he was still paid in euros from his Estonian bank account, Taavet was literally living on expenses. Meeting Taavet was a bit of luck because it appeared both of them were from Estonia and faced with the same problems.
‘‘We’re both Estonians. Estonia is a nation of about 900,000 people. That means that every year, about 200 dudes are born and about 200 girls. We’re one of the 200. And we both moved to London. It’s almost impossible not to meet. This is to give you an idea of how small a nation we are. So if there are people your age and they end up in London, roughly both interested in the same things, discussions may begin from there,’’ he said.
‘’I think a lot of startups start on a hypothesis’’
Kaarmann said TransferWise took shape from the hypothesis he formed with his co-founder.
‘‘We started on a hypothesis. We thought this transfer problem was not just Estonians in London’s problem. We thought it would probably apply to the Spanish in London, or maybe to the Romanians in London, maybe the Americans in London and then maybe also to Australians in Brazil. So it was really a hypothesis. I think a lot of startups start on a hypothesis. It’s something that is needed,’’ he said.
Kaarmann said they also raised questions on how they would handle trust especially since they were about to deal with other people’s money. This was 2011 when the term Fintech did not really exist.
They also raised questions on whether people would trust the service that they were providing.
‘‘And lastly,’’ he said, ‘‘are we going to make it work? It may work between a couple of people, but can we make it work for hundreds, thousands, and after that, millions of people?’’
‘‘From the very beginning, it was pretty clear that this challenge is bigger than just the two of us.’’
Kaarmann said on the 24th of January, 2011, TransferWise launched with a simple blog post on a startup website.
‘‘On the same day, I got so many emails from people around the world who reached out to me,’’ Kaarmann said. ‘‘Most of them said they had exactly a similar idea with their friends back in the university. But they never really did anything about it; they never really built it into a product. It was pretty cool to see that it’s not just us. The problem is that there are lots of others out there with similar challenges and a lot of them had actually come to a similar solution informally between themselves.’’
Kaarmann said with that confidence, he searched through his phone contact that first day to find someone they could hire. They immediately followed that up in the same month with a few more people.
‘‘So we started hiring pretty quickly realizing that this is something that people need. We realized that after the launch people are trusting us with their money. The real transactions were happening on the first day,’’ he said
On whom they hired precisely, Kaarmann said their bait caught software engineers who would help them build the startup.
‘‘We hired in the operations department as we are increasingly dealing with large amounts of money. We needed people who would help us run the shop. So, we had someone join us as an operations lead. Then we started out building out a team of payment operators and treasurers. We were also convinced from day one that we needed to support our customers. We were at a time when it was quite common for tech companies to get asked if they do have any support at all. We had a phone number on the front page of our website from the very beginning. We also needed people to handle the queries and help folks get used to this new way of moving money between countries,’’ he said.
‘‘Almost everything is a challenge’’
Kaarman said almost everything is a challenge in running a business such as his startup.
‘‘If you’re at this stage,’ he said, ‘‘imagine how you’d feel when the code or the system you had built hoping it would last for as long as six months because you had 50 times the volume of transactions now, suddenly get overwhelmed with amounts of more volumes coming in. The challenge is mostly from the operational side because the startup was still trying to comprehend what growth meant. On the other side, there is the challenge of people who were looking for a transfer solution, when they suddenly stumbled upon transferWise. Till date, we still have a majority of people, business owners and CFOs who don’t really know about those hidden fees charged by banks.
They believe that banks charge 25 bucks for a wire. The problem is real; I’ve experienced it myself many times,’’ he said.
‘‘Let’s make sure that we have plenty of cash to operate…that’s the approach that we’ve taken.’’
For the 8 years-old startups, staying afloat is the deal. Kaarmann said so much is done tracking the startup’s finance to ensure it doesn’t run aground. To that effect, the startup is constantly raising funds to keep the business afloat.
‘‘Let’s not run out of money. Let’s make sure that we have plenty of cash to operate with and to keep growing so that we don’t run out of money. That kind of worked well for us,’’ he said. ‘‘That’s the approach that we’ve taken. As we started, and as we got going, we realized that actually the size of the problem depended on the size of both international transfers in the first place and on the hidden fees. Those transfers are really enormous.
I think over time, we started to realize how many problems we were really beginning to solve. We have been able to put about a billion pounds a year back into our customers’ pockets because when they use TransferWise, they avoid those bad exchange rates with banks and the wire fees. Roughly, we have been able to save about 1 billion pounds a year for our customers compared to their bank.’’
However, when we look at what banks still make globally from people in businesses making cross border transfers, it’s around 200 billion. If you put that into the context, we’ve really only come about 0.5% success in the way do. We haven’t really gotten anywhere.’’
Today, TransferWise Is So Competitive
Kaarmann said the best way to consider TransferWise’s success is to look at it in multiple different ways.
‘‘The easiest way to look at it is in the number of dollars or pounds that TransferWise got put back into our customer’s pockets,’’ he said. ‘‘That’s competitive. It can also be looked at from our people who are now 1,500 in number, working from different offices around the world, due to the nature of the business. There are now 71 nationalities working in TransferWise. This is so because we have to support everyone who is using passwords. They do that in their own language. There are lots of transfers in currencies to underpin all of that volume.’’
‘‘People Don’t Shut Down Their Business Because They Run Out of Cash.’’
Although already successful, TransferWise did not come to this point without putting up a fight.
‘‘I’m probably quite lucky that we haven’t run aground. The closest we got to was actually before we raised our first funds. That was in late 2011,when we had bootstrapped the company together with Taavet.
Then, we were paying the salaries for our earlier employees from our own salaries and from our own savings. We even got to the point where we could not go any further unless we raised some funds. Raising money in Europe was possible in theory, but not a lot of people were doing that, especially for a new sector that didn’t exist. We wasted more time on this than we had wanted. Eventually, we flew to New York where we raised some funds from small fund ventures in New York. They gave us the seed round and helped us put it together. That was probably the closest we thought would probably be the end of us. We would have had to drastically rethink how we’re going to build the startup if we hadn’t fund-raised around that.’’
Kaarmann said people don’t shut down their business because they run out of cash.
‘‘They do so because they run out of energy. Those moments really take a lot out of out of you,’’ he said.
‘‘Many times we just want to have the perfect product, but at the end of the day, there is nothing like having it on the market’’
Kaarmann said looking at his young self at Deloitte, where he first worked today, he probably would have advised him that there is no shortcut.
‘‘No short cut. Even with what we went through, it’s quite hard to imagine that there would have been a magical shortcut to avoid.
I think in the early days during Deloitte times, we probably spent six months deliberating on the idea whether to launch this thing that we had devised. The time we spent on polishing version one probably was about six months too long.
For someone who has never done this before, I would definitely advise them not to over-think their idea in the beginning. Many times we just want to have the perfect product, but at the end of the day, there is nothing like having it on the market and being able to listen to your customers and optimize as you go.’’
Will Digital Currencies Disrupt TransferWise?
Kaarmann said it is not probable that digital currencies such as cryptocurrencies or libra would drive him out of business
‘‘I don’t know if the governments would be willing to give up anytime [on fiat currency] soon,’’ he said. ‘‘I think the most interesting thing that’s happening with currencies is its actually Eurozone. It is very incredible how a group of countries have decided to give up their national currencies and unite under a common euro. This hasn’t been easy. It has brought problems that European countries and their central bankers have to work through. But it is very incredible. We’ve seen that in recent years as well. I think Latvia and Lithuania joined. I joined quite recently.
I can’t think of any other examples other than eurozone. There are not a lot of other currency unions out there. And it’s very hard to see where that would be going in the short term.’’
‘‘I’d love to see more focus on building the product’’
Kaarmann has some advice for young entrepreneurs.
‘‘When some young entrepreneurs reached out to me, they asked me about fundraising. I found that really awkward. I mean from my perspective, it looks like they really seem to be thinking about the next funding when especially in the early days you should be thinking about how to build a product that customers want and that customers are willing to pay for. Once you have that, I think investors are going to be to running to you.
I still see, perhaps, a little too much focus on fundraising from early founders. I’d love to see more focus on building the product, putting it out there and getting customers 100%. I think there is nothing like product market fit. With that everything will fall into place.’’
What ended up being the business model of transferwise?
Kaarmann described how TransferWise works:
‘‘We help people and now businesses to move money across borders. The traditional way of doing this is by going to your bank and then making an international wire. In Europe we call them international transfers. And in the US, they’re called wires and it usually means typing the destination account number in a different country and then the bank makes the currency conversion. Here is the thing: they usually do two things: they charge you for a wire and that costs 25 bucks, 35 bucks, 50 bucks.
But where they are really making money is through a terrible exchange rate which includes their margin for converting the currency. So whenever you use your bank to convert currency, you usually lose something between 3 to 5% or in some cases even more. We started with the idea that when we send dollars to Europe from US in euros, there are going to be lots of people who also send money from Europe to the US. So rather than sailing with bags of cash across the ocean, we could use the euros that are being sent from the Europe to pay out recipients in US.’’
In the same vein, we use the dollars that we’re collecting in the US to pay out to the recipients those Europeans who are sending money to the US. By doing this, we almost remove the need for moving the money. We just reroute the money locally. So that’s how we really started operating in Europe. We collect money in the eurozone. When we collect such money in the UK, we use the funds that we collect to pay out in the right currency.’’
Charles Rapulu Udoh
Charles Rapulu Udoh is a Lagos-based Lawyer with special focus on Business Law, Intellectual Property Rights, Entertainment and Technology Law. He is also an award-winning writer. Working for notable organizations so far has exposed him to some of industry best practices in business, finance strategies, law, dispute resolution, and data analytics both in Nigeria and across the world.
Kenyan startup d.Light is never leaving any stone unturned in its quest to scale its business and expand its operations. The startup is the latest on the continent to raise funds. The solar kit solution has just received Sh1.84 billion capital injection from a consortium of lenders to help accelerate its growth in Africa.
A Look At The Funding
The investment came from two responsibility-managed funds: SunFunder, DWM, and SIMA.
The startup hopes to use the funds to expand its product line and enter new markets to reach more customers.
The new capital is coming barely a few months after three European government funds committed Sh4.1 billion into d.Light.
The company said the financing was organized by Inspired Evolution, an Africa-focused investment advisory firm specializing in the energy sector.
d.Light At A Glance
Although started by the Americans Sam Goldman and Ned Tozun, the Kenya-based startup provides solar-powered solutions — ranging from lights, phone chargers, radios, and even televisions — which are sold in over 60 countries.
In April, it opened a regional office and service center in Eldoret, Kenya as part of the company’s expansion strategy to reach and impact 100 million lives globally by 2020.
Located at KIPPS Plaza, Iten road, the office, and service center has been opening daily including weekends and public holidays.
The center offers sales services and after-sales services for d.Light’s products including solar home systems and portable solar powered lanterns.
The startup has 1,000 employees and 3,000–5,000 commissioned agents, is generating about $100 million of revenue a year, and experiencing 40–50% growth annually.
Solar Energy Ventures in Africa
“Significant amounts of capital are required to enable us to continue providing these financing plans for our customers as we grow.
“We are thankful for the continued support of our funding partners to enable us to create a brighter future for the families we serve,” said d.light chief executive and co-founder Ned Tozun in a statement on Monday.
For the startup co-founder and chief executive Ned Tozun the funding by SwedFund, Norfund, and Dutch Development Bank FMO would give d.Light some new impetus to expand into new markets and increase product lines to reach more customers.
This Investment Is A Major Win For A Startup That Had A Humble Beginning
For a startup that started off struggling to raise funds, this is a big moment for it. Early investors in the startup did not believe investing in its high-risk, unproven proposal and hence were uninterested.
“I was someone who doesn’t like public speaking. I’m more of an introverted person; I was like a coder and stuff,” Ned told Forbes in a interview. “So, going out and pitching to venture capitalists, I was so nervous the first times. But, as with anything, if you do it enough, and if you really believe in the business that you’re doing, you’ll get better and better.”
This is after a series of rejection from venture capitalists too.
“You guys will fail. Please don’t waste your life on this,” one investor told them.
The startup came to its turning point when d.light won the Draper Fisher Jurvetson Venture Challenge and earned a $250,000 check from the well-known VC firm.
Inspired by the win, Guy Kawasaki’s Garage Technology Ventures doubled their $250k winnings. Buoyed by this in-pouring of funds, Ned relocated with his wife to China to figure out how to build solar-powered solutions that were affordable, high quality, and at scale. At the same time, his co-founder, Sam Goldman, moved to India to figure out how to sell and distribute the products.
Today, more than a decade since starting d.light, the startup has raised a little over $100 million in equity and debt financing. This is roughly a 50/50 mix of both.
‘‘Having the brand name of Stanford really helped. So did meeting VCs lecturing at school, and cold emailing investors,’’ Ned said.
Of course, once those initial investments came in, fundraising became a lot easier for Ned and his team.
‘‘I always say that, as a founder, you’re swimming in an ocean full of sharks, the sharks being investors. Eventually, one of them is going to bite, and then everyone else will want to bite.
You just need to stay afloat until then. You need to topple that first domino, and then the rest will come,’’ Ned said in the interview.
Charles Rapulu Udoh
Charles Rapulu Udoh is a Lagos-based Lawyer with special focus on Business Law, Intellectual Property Rights, Entertainment and Technology Law. He is also an award-winning writer. Working for notable organizations so far has exposed him to some of industry best practices in business, finance strategies, law, dispute resolution, and data analytics both in Nigeria and across the world.
The growth of e-commerce has already transformed the retail landscape and with double-digit annual growth predicted into the next decade
Canon, world-leader in imaging solutions, deciphers the importance of the settings and ambiences of physical shops as they become more than just a buying space, an opportunity for the brand to build and maintain relationships with its customers. We know that customers are becoming more and more demanding and that is why brands must be able to quickly develop their concept and this adaptability is made possible thanks to digital printing.
The growth of e-commerce has already transformed the retail landscape and with double-digit annual growth predicted into the next decade, this disruptive force shows no signs of abating. Yet although almost a third of consumers report shopping in-store less often, just under 90% of worldwide retail sales still take place in physical stores, reflecting their enduring appeal for both retailers and consumers.
For retailers, physical stores play a role in sales 79% of the time and excel at converting interest to sales and increasing the value. For consumers, shopping in-store provides things digital cannot; the atmosphere, face-to-face customer service and the ability to see and try products.
From the perspective of the consumer, shopping is about customer experience, not channels. This is why the movement of consumer spending from bricks-and-mortar retail to e-commerce doesn’t mean the end of physical retail. In fact, it is driving the transformation of physical retail into an immersive experience and opening opportunities for specialty print service providers (PSPs).
The new role of physical retail
Most retailers that continue to thrive are those embracing ‘omni-channel’ strategies; focusing on delivering a seamless customer experience across every channel where they have a presence – physical stores, catalogues, e-commerce, mobile, social media and more.
In this omni-channel scenario, physical and digital touchpoints must complement one another to deliver a unified journey. This, combined with customer expectation of greater personalization and preference for experiences over things, is driving a fundamental change in the role of the physical store. Clever retail brands capitalize on their stores’ ability to engage shoppers with the emotional and multi-sensory experiences that are missing from online purchases.
For design professionals and service providers active in retail décor, physical retail’s new role represents an exciting opportunity to create spaces where customers want to spend time.
From functional store to immersive brand experience
‘Retailtainment’ and ‘the experience economy’ are concepts that originated almost three decades ago but have only really begun to transform the retail landscape in the last 10 years. With retailers increasingly competing on the basis of ‘time well spent’ instead of just product or service offering, the retail landscape is moving towards showroom-style environments that encourage consumers to experience products or stores in which cafés, events or workshops invite shoppers to linger.
Cycling brand Rapha, for example, calls its 22 stores around the world ‘clubhouses’. They are cafés that screen live cycling, have programmes of events and rides and also sell the brand’s high-end cycling clothes and accessories. Italian food brand Eataly’s stores provide a space in which people can eat, shop and learn about Italian food, combining groceries and kitchenware with a café, restaurant and cooking school in more than 20 stores globally.
The vital role of décor in an immersive retail
Delivering both atmosphere and sensory appeal, interior décor is an essential consideration when creating an immersive experience that encourages consumers to spend time as well as money in-store. 59% of shoppers want an inviting ambience in-store and 51% of consumers are more likely to buy from brands whose stores are ‘interesting or different’, rising to 63% for consumers aged 18-34.
Driving footfall
Retailers seeking to stimulate repeat visits from consumers and attract new clientele need to refresh store environments regularly to make them visually enticing, keep up with changing fashion trends and maintain the surprise factor to encourage footfall. The flipside is that tired retail interiors can quickly turn off consumers and send them to competitors.
Encouraging dwell time
The décor of physical stores and pop-up retail spaces is becoming an important part of the customer journey. In addition to ensuring that shopping in-store is visually consistent with every other touchpoint where customers interact with a brand, décor has an unparalleled ability to create a welcoming ambience and make a space a pleasant place to spend time. Indeed, unless a brand specifically wants to lead with convenience, the best store designs are those that make consumers want to stay.
This is why we’re increasingly seeing décor being used more to create a branded experience and encourage dwell time than to directly drive sales. If you look at children’s clothing retail, examples run from a life-sized doll’s house in French brand, Bonpoint’s, children’s store to a playground that runs through the displays in Spanish brand, SuperMoments’, Valencia shop. In both these examples, retail décor is simultaneously creating an experience reflecting the ‘personality’ of the brands, and encouraging consumers to spend more time in the brand environment.
Enabling connected experiences
Almost half of the consumers’ inspiration for purchases today comes from social media, but its power is even greater when you consider that the most persuasive source of information for shoppers is recommendations from family and friends – that’s who make up most consumers’ social networks! So it’s no surprise that retailers are trying to engage shoppers on social media while in-store.
Mobile-empowered shoppers are taking more photographs in-store, so retailers are incorporating design features that encourage social sharing – from purpose-built selfie opportunity areas to ‘shareworthy’ fitting rooms. London department store Selfridges, for example, promotes “selfie sticks and Instagram-worthy backdrops” in the fitting rooms of its third-floor Designer Studio. This phenomenon also demands that interiors are regularly updated and kept looking fresh.
The opportunity for print
Retailers need pragmatic solutions that can create a particular ambience or reflect what is ‘trending’, but with minimal disruption and waste and often within tight budget constraints.
This plays to the strengths of digital print in terms of flexibility, turnaround time, cost-effectiveness and sheer diversity of materials. In turn, this creates exciting opportunities for PSPs, whether they come to retail décor from a background producing retail display graphics or bring décor expertise from other segments such as hospitality.
With contemporary media, digital print and finishing technology, PSPs can offer a diverse range of creative and functional retail décor applications from bespoke branded wallpaper and creative pop-up displays and features, to comprehensive retail refits comprising wall coverings, window and floor graphics, and branded surface décor on counter tops, changing room doors and so on.
The PSP’s ability to realize the retail brand owner’s creative vision and ensure that the décor elements can withstand the physical stresses of the retail environment should mean that customized printed décor is a key element in creating more welcoming, immersive and captivating in-store experiences
Kelechi Deca
Kelechi Deca has over two decades of media experience, he has traveled to over 77 countries reporting on multilateral development institutions, international business, trade, travels, culture, and diplomacy. He is also a petrol head with in-depth knowledge of automobiles and the auto industry.
Startups in Zambia don’t have field days raising funds, like their counterparts in Nigeria, South Africa or Kenya. WidEnergy appears, however, ready to break this jinx. The startup has secured an undisclosed amount of funding from the Germany-based GreenTec Capital to expand its operations.
A Look At WidEnergy
WidEnergy is a woman-led for-profit social enterprise which is dedicated to female empowerment and the expansion of affordable energy access. It leverages an innovative pay-as-you-go (PAYG) model to provide solar-powered homes and appliances.
The company’s name is an acronym for “Women in Development,” reflecting its goal of engaging women as active participants in Africa’s energy transition.
WidEnergy works with 80 female sales agents to distribute renewable energy solutions across Zambia, focusing on core competencies in lending and distribution to develop a high-quality lending portfolio with minimized default risks.
The numbers that show Africa is buzzing with an entrepreneurial spirit
It has developed partnerships to be the Zambian distributor for d.light, Greenlight Planet, and Little Sun solar appliances and home systems, and expects to connect more than 1,250 households connected by next month.
It has now secured funding from GreenTec Capital to assist it as it develops its approach and model. WidEnergy recently completed an integration with MTN-backed mobile-money payments into its platform.
The investment is GreenTec’s seventh in Africa so far, and its second this year.
Charles Rapulu Udoh is a Lagos-based Lawyer with special focus on Business Law, Intellectual Property Rights, Entertainment and Technology Law. He is also an award-winning writer. Working for notable organizations so far has exposed him to some of industry best practices in business, finance strategies, law, dispute resolution, and data analytics both in Nigeria and across the world.
