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Fast growth, big capital, and how Moniepoint is building a fintech unicorn in Africa | E2036
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- [00:00]
A
A nine figure fintech round in 2024 and the startup in question has a focus on the African market. I bet you don't know who I'm talking about, but you're about to. I'll see you in a second. This Week in Startups is brought to you by openphone. Create business phone numbers for you and your team that work through an app on your smartphone or desktop. Twist listeners can get an extra 20% off any plan for your first six months at openphone.com twist. Lemon IE hire pre vetted remote developers. Get 15% off your first four weeks of developer time at Lemon IO twist and linear. Linear helps product teams focus on what they do best, planning and building great products, streamline issues, projects and product roadmaps in a tool your team will actually enjoy using. Get 25% off at linear app Twist. Welcome back to this Week in Startups. I'm so excited about today. I have Tosin anya LaRunda, the CEO and co founder of Moneypoint just raised a $110 million Series C that everyone covered and the company is now reportedly a brand new unicorn. Please welcome Tosin to the show. Tosin, how are you?
- [01:13]
B
Hi Alex. Thank you very much for having me on the show. Excited to be here.
- [01:18]
A
I'm very glad to have you. And you get three points for being a CEO that managed a very quick planning and schedul scheduling turnaround. So 10 to your team. We really appreciate it. I want to get to the present moment in a second but I also want to go back in time because moneypoint and this was a new learning to me actually started off life for the first, I think four years as a company called Team Apt. So I'm hoping you can tell me just a little bit about the start of the company up until the point in 2019 when you launched Moneypoint.
- [01:47]
B
Yeah, of course, Alex. All right, so Moneypoint started as team act. Like you mentioned, it was founded in 2015. It was founded when I and my co founder left our previous place of work where I was an engineering manager and a product manager and he was a software engineer and we formed TeamAppt and TeamAppt was a software company where we're building white labeled software solutions for banks. These were digital banking solutions, for merchants, for businesses, for consumers, sometimes back office operations, reconciliation systems, assets and liability MIMS system. So it was a software shock and we did that for about four years and this was a critical period for us because it was a critical period where we learned a lot about profitability and running a company. On, not necessarily on a deficit. We've always figured out that at the end of the day, what matters is to have a very large pie and next is to have a good portion of that pie. So we focus on having a business that's going to be worth a lot before now figured out how to raise funding for it. So since the first four years it was a software business when we were not so confident that this was something we should raise funds for. And in 2019, we decided to pivot that business business model into something we felt like could be far larger.
- [03:27]
A
I want to pause you there because when I was learning about Team Apt, just prepping for our chat today, you guys ended up supporting something like 26 out of the top 30 banks in Nigeria. And I read that you scaled the revenues of TMAP to seven figures, so it didn't seem like that business struggled. So I'm curious about the gap between the results and your stated, you know, lack of confidence in it. What am I missing there?
- [03:52]
B
Yeah, I mean, it's like, you know, a software business is a service business and in a service business, it does not have recurring revenue. It's based on winning compliance as first thing. The second thing also was we were going to be restricted generally to the total addressable market of banks. And I felt like we should choose an industry where the serviceable and addressable markets are far larger. And more importantly, we could see the gaps in the services that the banks were giving to their customers and we knew that these services could be better. So that's why we decided to do the pivots.
- [04:34]
A
But here, here's the thing that I have as a question there, because it feels like you guys went from servicing and helping the banks become more digital and more modern, and then you decided to, in a way go out there and almost challenge the banks. Is that a, is that a fair kind of like encapsulation of the pivot in 2019?
- [04:50]
B
Fair enough. Actually, that's what it is. We made it a mandate that we're going to be one of the biggest financial service providers in the, in the country. So, yeah, fair enough.
- [05:02]
A
I absolutely love that. But tell me a little bit about kind of like day two. So you guys decide 2019, we're going to change the business. It's also the year you went on, raised your first external capital. I think it was a $5.5 million round. How hard was it to kind of put aside what you had done and had take that leap of faith into essentially a net new business?
- [05:21]
B
Because we Were resolute about making that pivot. We knew there was no way back. And what we essentially did was split the organization into two. There's a part that was business as usual. Just make sure that all our contracts close properly. Nobody comes after us, nobody sues us, maintain it and close all our projects. The second part, they focus on the new things. And I push my own personal attention into the new things. And I mean, we did a couple of experimentation of what do we think the industry will like? What we stick. We attempted to launch merchant acquiring online and offline. The rest is history.
- [06:07]
A
So let's, let's talk about that early history because Moneypoint seemed to grow very quickly from 2019 after you founded it. I think that by 2021, you guys have onboarded 30,000 agents and were doing about 23 million transactions a month. So one, how did you get such insane volume so quickly? And can you explain to people who may not be familiar what an agent does in the Money Point context?
- [06:30]
B
Of course, Alex. An agent is a human, is a human financial service provider. That's the way you should see it for people that don't know what an agent is. So think of it like a single man bank where someone could go meet this individual who operates as a business in locations that are close to where people live or do or work. And they offer micro financial services. And these financial services are like cash withdrawals, cash deposits, bill payments, airtime purchase, account opening, and in some cases, account support services like debit card issuance. And these agents are pretty important because they bridge the cap for financial inclusion where they can allow people to earn trust and access digital financial services that otherwise they would have needed to go to a bank branch to access. So you could think of them as miniaturization of bank branches done by entrepreneurs that are close to where people work or leave.
- [07:44]
A
Is there a, a need to help people who may have less of a technological background make the jump from cash to a digital banking situation? And that's why having a human agent helps, because it puts a human face on effectively the cloud.
- [08:02]
B
Alex, you got it right. So these are like trust centers where people are like, oh, okay, I know this guy and this guy opened the account for me. Hence I now put my money in this account. I don't need to carry cash around. And of course, when I need cash, I can go to him to withdraw some cash. And when I want to put money into it, I go to this guy. So I don't need to really go to a big branch. That's 10km away. I bank with this guy that's close to me. So that's what agents represent. And this, of course, the services that they give are digital financial services. Right. Because their customers are actually digital customers. The customer coming to them will typically have a bank account and a debit card. But for them to now access, for example, cash withdrawal and cash deposits, they go to an agent, they want to get a card, they go to the agent. So they're essentially mini bank branches where people get digital financial services.
- [08:57]
A
Are these agents your employees or are they separate people that run their own effectively small business?
- [09:05]
B
They are business owners. They're small businesses.
- [09:08]
A
Well, I mean that matters because, you know, just learning more about moneypoint. Prepping for our chat, I learned that you guys have a pretty serious SMB and kind of mid market focus, at least at the start. So not only were you servicing those types of companies, you were also helping to build up new ones. I kind of like that kind of full circle moment.
- [09:27]
B
Exactly, exactly. And I mean what moneypoint does is what we help. We power small businesses. So these agents were some of the small businesses that we got initially. And like, like. And one of the major reasons they came to us was that for them to be able to offer cash withdrawal services, they needed to have a point of sale device that people can use to withdraw cash. So it's almost like if they were in the US they would have gotten a square device where people, where they can use to charge cards and give cash to people. Essentially humanitarians.
- [10:00]
A
And going back in time when you were team apt, you guys actually built a point of sale acquiring solution. So you already had some pos bona fides, if you will.
- [10:10]
B
Exactly. And as an engineering manager and as a product manager, I was pretty exposed to point of sale systems, just like my co founder, also Felix. So we already had the experience in the market, knew what some of the problems were, some of the things that we needed to give to the market. So these were pretty clear prior to that.
- [10:30]
C
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- [11:39]
A
So how hard was it to launch a new brand and scale it inside of the Nigerian market, where I believe the majority of moneypoint's business still is? Because I know of Nigeria as one of the most populous nations, you know, rapidly digitizing, pretty quick economic growth. I have a whole list of stats in the bottom of my note sheet about the country. But what I don't know is how competitive its banking sector is or how hard it would have been for moneypoint to grow initially. So tell me a little bit more about that.
- [12:06]
B
Absolutely. It was a challenging period. I should, I would not want to hold that back, but it was for us. A it's a we have at the beach and we've burnt our ship. We have no other way than to win the battle. We had no other way than to survive. And we were competing against pretty well funded startups, which we still compete with by the way. One of them includes probably one of the most funded startup in Africa. And we were also competing against banks and many other startups that had similar ideas. But of course, ultimately superior products, superior distribution always wins and we focus heavily on having a great product at an accessible price point innovated on that and made sure that we had an excellent distribution network to distribute this product to our businesses.
- [12:59]
A
You did it with very little money. So I want to go back to the point about bootstrapping because before you guys pivoted towards moneypoint, you had essentially self financed the company and reinvested profits into it. Why did you decide to leave that behind and instead go out there and raise successively larger venture capital rounds.
- [13:18]
B
Of course. So I mean, like I said, ultimately the way you would look at the value you are creating for yourself is the value of your, of your stake in whatever the pie is. Like how, how large is my piece in this pie? There's no point being a small pie that you own everything. So I rather want to partner, take venture capital, grow the pie and however retain a good portion of the pie for, I mean for me and my co founders and my stakeholders. And that's exactly what we did. What was however, quite important to us is that while we were building this pie and making it larger, we never wanted to be at the mercy of venture capital or private equity. And what that meant was profitability. As long as you're profitable as a business, you are not under any pressure to raise an extra funding. You essentially only raise funding when you need it. There's a diminishing return to production. You should only inject extra factors of production when it is needed. If you raise more than is needed, there's a diminishing return to it. So we always wanted to grow every other factor of production. Every like label, product, market, fit. All those things were clear and we knew that what was just remaining was going to be to inject extra capital. And that's the philosophy that we keep till today.
- [14:47]
A
So often though, when a company raises more money, when a startup raises more venture capital, they tend to expand their headcount, marketing, whatever. They increase their expenses and often burn a little bit more. Does moneypoint after raising around, accept a period of unprofitability as the capital is invested or do you guys try to remain profitable even after a new venture capital round?
- [15:12]
B
The philosophy is to always be profitable. So it's a balance between growth and how much you bond for growth. Right? And money pointers for the max. We've ever been unprofitable was six months in the first six months of our first fundraiser and we quickly went back to profitability because we simply could not bear that risk. I think that in markets where you think it is pretty easy for you to raise funds, it's not going to be a problem. I think it's fine if you want to go quite unprofitable. But if you run a business that you are not pretty sure how long the next fundraise is going to take you, if you are going to get there, you are taking a pretty huge risk. And we are. It's a business that's based in Africa. It's a business where venture capital is not as rich as what you're going to find in the western countries as well as also a B2B business that is fundamentally unit economics positive. The only reason why you'll be unprofitable is burn. It's just simply opex. So as long as you can reach the growth target that you have Set for yourself with a bond rate that is less than what you have, that is less than your gross profit, you're fine. Essentially attempt to burn everything that every other, every other margin that you're making. Just make sure that you're not in a position that you're at the mercy of anybody. I think it's a pretty straightforward philosophy.
- [16:45]
A
I like that because it's external capital, very useful. Having someone else own your future, less attractive. I mean, let's be honest, who wants that? And if you're profitable, you can tell your investors to go take a hike because what are they going to do?
- [17:00]
B
Exactly, exactly. I mean it's a risk, it's a risk exercise if you are. So if you think that you want you to burn everything and more, maybe you're fighting some tough battles and you have a very clear path to how you're going to raise. Maybe you're just extra capital is just a single simple folk away make that risk. But majority of the startups are not in that position and they simply follow a philosophy of where oh, we must be unprofitable. And I think another fear that most people have is that when you are unprofitable, companies are forced to be valued on the basis of gross profit or revenue as multiples of gross profit or revenue. And typically you are not yet held to any accountability that comes with EBITDA positivity and this generally leads to inflated valuations. But when you start getting profitable and there's an expectation of the bottom line, you start getting EBITDA multiples, which is inevitable. It's quite inevitable as you start getting matured because ultimately people, investors want to return. So I feel like that's another reason why a lot of startups take that approach. But like I said, it's a different thing if you have easy access to cash, burn where you need to burn for growth.
- [18:16]
A
Well, I mean I think everyone thinks they have easy access to cash. I mean every startup that raised 100, 150 million in 2021 thought they were the next Microsoft and that the next capital was always going to be there. So even I think in markets with the most developed venture capital networks, be it California or pick your favorite, I mean the risk is still there. But I want to underscore what you just said by talking about the results of the business because it's been pretty impressive. You guys shared data with the Financial Times regarding your historical growth in both 2023 and 2024 and Tosin in 2023 for the period of 2018 to 2021, you guys had a compound annual growth rate of 321% which is pretty insane. And then you added another year. So from 2019 to 2022 it was 332%. It actually went up. Those are some of the highest numbers I can recall seeing on a compound basis. So I have to ask, is this one of the fastest growing startups in the world right now? It's cool to have hard numbers. I don't usually get such, you know.
- [19:31]
B
I mean these were exercises that were done on the basis of, you know, I believe audited accounts or management accounts. I'm not sure what we shared. I mean all I could say is that we were insanely lucky and we worked extremely hard. At the same time. The insane luck that we had was we rode a massive wave of digitalization which is a strong tailwind. It's a combination of people really needing to adopt digital payments because it's more convenient, it's more secure. And there was also a serendipitous moment where Nigeria pulled an India where in a short period of time the central bank wanted to mop change cash demonetization.
- [20:21]
A
Famous in India to remove the higher rupee notes from circulation.
- [20:25]
B
Beautiful. So Nigeria pulled that same which led to a massive influx of of people adopting digital payments in a very short period that banks could not handle. So a lot of banks failed. The infrastructure were not set up for such massive increases in volume. And of course we being a fintech company, tech first hosted in the cloud were able to absorb such massive inflows. So this also led to an establishment of the brand and a strong brand equity. To say moneypoint is associated with reliability. Of course this compounded growth and at the same time increases the general digital payments volume in the ecosystem. The hard work there is being prepared for it and whatsoever.
- [21:18]
A
Yeah, well, I mean preparation is how luck is made. Preparation, opportunity, meet luck comes out of it. But I will say I had. I'm surprised by your answer because I thought you were going to say the COVID 19 pandemic pushed people towards a more digital banking environment. But you had an entirely different answer. So I'm curious, was Covid a factor in the company's growth?
- [21:40]
B
You're right, so I missed that. And that started of course in the COVID years. The COVID years were also massive uptick in digitalization where it was driven by the fact that people couldn't go far and they needed to adopt digital payments either directly to merchants or through agents. So there was a massive as much as just like Most fintechs saw a massive increase in their volumes. Covid happened. Then also demonetization happened.
- [22:11]
A
So when I was looking at the list of all the fastest growing African companies which you guys took part in, I was really impressed by all the numbers. But I just want to go back to that increase in your compound annual growth rate from 2018-21 to 2019-22. Has the company managed to stay in the triple digit growth pace since 2022? Because my data stops about 22 months ago. So I'm curious what's happened since those numbers.
- [22:39]
B
Yeah, of course we've managed to continue growing that way. I will not know what the compounded number looks like unless I do the calculation. But we have actually managed to continue keeping the growth. We are still onboarding more and more businesses daily. We have added more services. We now have a digital bank customers, not just small businesses. Essentially we're now closer to what Square and Cash App is now where we are building both sides of the equation. We launched Cash advance working capital floats or businesses where you could access short term loans to be able to finance your business. Launch business tools which is we're launching business tools which is inventory management and other tools as a business that you need to operate. We launch debit cards, we launch savings. So these are extra products and we're launching cross border payments. So these are all, you know, extra services that we launched. As, as, as you may know, as a country's company is growing, keeping the same growth rates becomes harder because you have stronger base. It's easy to increase $10 million revenue to 20 million. It's not the same to increase 300 million to 600. So but one thing that we would love to keep adding will be the growths, the same growth rates that we've been maintaining in the past.
- [24:03]
A
And to make a point about the numbers you just brought up, according to the same data set shared by the Financial Times and Statista Money points, revenue in 2022 was just under 149 million. Which you know, honestly puts you at even a couple of years ago IPO scale. Add in a couple more years of growth to that. Nembertosin. Are you guys considering an IPO anytime in the near future or is that still pretty far out for money Point?
- [24:32]
B
I mean yes. I mean obviously we are bunch backed by venture capital and private equity. They want at a point in time they will want to return fund and an IPO is one of the parts to get liquidity for them to return funds. So it's something that we will consider in the nearest future. For now, we still just want to hunker heads down, continue making our customers happy, launch to more geographies, launch more products, continue growing growth rates. Profitable growth is something that's extremely, extremely important for us as much as the impact that we're also having on the society.
- [25:11]
C
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- [26:40]
A
So one thing we talked about actually before we we hit record was the, the makeup of the moneypoint office setup. You guys have a UK office, you have a US corporation, you're kind of a micro multinational in the way that I think of it. If you guys were to list and go public, you have a variety of options. And I'm just curious, I know this is me just having fun, but would you want to float in an African index in Europe, in the U.S. where would you kind of look first?
- [27:07]
B
I think by the time we might be taking a look at an exit that may look like an ipo, we show the multi geography and at that time that opens up a lot of the typical places to float for such businesses. It would be hard to see anyone, to be honest right now without consulting the lawyers or saying.
- [27:30]
A
That is a very responsible answer. That's the good question. But I don't want to get in trouble when I hang out.
- [27:37]
B
So it's a bit hard to say that right now, but I know that all the options you mentioned are all up for consideration. Okay. Yeah, yeah.
- [27:48]
A
I just think it'd be cool to see more dual listings in like the US and Africa or across the Atlantic or, you know, whatever. I think it's cool when companies that have roots in different parts of the world list in more than one place, but we don't see it too often. I think just because the American markets are so deep, if you go public on the New York Stock Exchange, it's going to be fine, but it's a little boring, you know. So I'm hoping that when we talk in, you know, 18 to 24 months, when it is IPO time, we'll have, we'll have some fun things to add in there. But Tosin, we have to go back really quickly to your point about adding consumer banking because moneypoint did very well on the S and B on the business side of things. And then you guys decided to open up to just regular folks. And to me that feels like a pretty big change in, I mean your focus because selling to individuals is harder than selling to businesses. So why was that the right move for moneypoint?
- [28:38]
B
Oh yes, of course. Focus. First of all, let me state unequivocally that our focus is still on businesses, especially small businesses and the launching of the consumer business is just a way to also continue in that line. And we launched consumer business in Nigeria when we saw that. For us to also continue servicing our businesses well, customers also need to have access to digital payments at a real time and instant. I'm pretty sure it's a similar thing that Cash App is doing as an ecosystem play against Square and the infrastructure for launching such a product which will require you to have onboarding, kyc, aml, action processing systems, distribution networks and as well as a brand already existed and we didn't need to do a lot of extra work but also bring this to market. So launching that we launched it in a couple of months. As a matter of fact it was like a six weeks to eight weeks of work to launch the first version of the consumer banking app. And basically we've seen a massive growth and a massive defense also of our business in there because this also allows us to be able to have a bit of, you know, both sides. So yes, our core focus remains businesses, especially the small businesses, small to mid sized businesses. And the consumer business is launching a consumer app is just in line with that so that we can help our businesses have customers that will accept more, that will pay more digitally. And for us, it did not cost us too much to add that as as an extra product because the existing infrastructure that we have for the businesses are similar to the same infrastructure we're using for the consumers.
- [30:30]
A
In the TechCrunch article covering Moneypoint's latest fundraise, they wrote that the reason foray by Moneypoint into personal banking markets has seen 20x customer growth over the past year. I presume it's from a very modest base. But has that relatively quick growth trajectory persistent this year?
- [30:49]
B
Yes, absolutely, absolutely. We're doubling down on the on that side we are adding more and more customers. We're also rapidly becoming one of the top consumer banking or digital banking wallets in the country. As at our last ranking, I'm pretty sure we're top three now Founders if.
- [31:08]
C
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- [32:03]
A
App Slash Twist doesn't I want to dial in to your recent fundraise, the series C110 million because I don't see that many fintech rounds of that size in 2024. And also we've seen venture capital numbers for African focused companies come down. So I I'm very curious, how hard was it to raise this round?
- [32:23]
B
I I would say it's probably not the easiest round for a couple of factors. I think we have quite a good cohort of course of potential investors inbounding, outbounding. What a great investor. Investment banker. But I think the part that took a bit of time is how to value and it's also mostly because you need to also understand the opportunities and the risk and that you'll be exposed to for example currency devaluation risks. What does that mean? How do you get comfortable with that and expect the company to, to outgrow whatever currency risk you may have? And of course private equity deals are typically longer because it's you know, not quite venture capital style. So I will say, you know, finding the best investors are investors that understand your business and also have the capital to back it up. And we were lucky in the ones that we found who understands the business and also you know, intending to support us through to making massive returns back for them. So yeah, it is.
- [33:38]
A
So on the, on the currency risk point, I know that inflation in Nigeria is somewhere around 30% right now, but I also just kind of assumed that if you were raising in dollars you would probably hold capital raised in non local currencies and that would essentially de risk the business from a currency perspective. But am I misunderstanding how that works for moneypoint?
- [34:03]
B
Yeah, so I mean the investment is a dollar based investment and return is also expected to be dollar based. And how we got comfortable with the inflation and whatever currency devaluation risk exists is because money point business, money point payment business and credit business has a bit of hedge against these risks because it's a natural hedge. This because inflation generally leads to increase in prices of goods and services and we this simply means that revenue also increases based on the take rates that we charge. So there's a bit of a hedge on the revenue. It's not a perfect hedge but it's a quite effective hedge. And this is one of the major reasons why investors, you know, got comfortable with that. Plus having a management team that they can bank on who will you know, work really hard, attempt to make the best decisions, remain prudent and capital efficient, be very growth driven. Combined with the fact that we have a Pan African ambition to also expand outside Nigeria and go into more countries which is something that we are working hard on. Seriously. It's a pretty sound, it's a pretty sound thesis for a lot of them to be able to better. Now we're excited. I'm proud to have attracted the best of them. Dpi, Google, ifc, Proparco, potentially one of the. There's also an interesting strategic I don't think I can mention yet that's coming on the round.
- [35:50]
A
No, all that absolutely tracks with me. I guess I'm just interested in the price discussion because you mentioned that took a little time and when I think about the company's growth and success I'm a little surprised. And I say this with respect that the business wouldn't have evaluation that would be two to three times higher than what I read, just given its revenue base and growth history. And I'm kind of curious, do you think that because the company has a focus on a region that many venture capitalists are not based in and don't understand as well that you're not getting as much credit for progress as you might have in say, Palo Alto?
- [36:32]
B
Yep, absolutely right. That's absolutely right. I think ultimately valuations is a science and an art and it's a, it's a willing buyer, willing seller. What pushes valuations up will be generally demand. And if there's a lot of supply, if there's a lot of demand with limited supply, prices go up. So same math. So the moment you have more demand for equity, this will naturally put push prices up. So right now you could say being able to raise such a quantum, which was also quite a demanded round, we had some bidders and this was basically what we landed on. You could say that being able to raise such a quantum is quite an important milestone for us.
- [37:21]
A
And.
- [37:23]
B
We also raised from private equity. And private equity typically, you know, set up to value matured companies that are growing at a slower rate and they will value on EBITDA basis. And this were, you know, things that we also had to contend with, but I am fine with because what this eventually means is your public market will eventually value that way and the closer you are today and you start already preparing for that. So that was a fair enough justification that we had that we know that if, when we, if we eventually take this to public market or whichever buyers market that's eventually a similar basis in which you're going to be valued typically start going towards price by any ratio or whatever ratio they're going to be using to value. So it is what it is. But ultimately, yes, if we're based in Silicon Valley, I'm pretty sure this is many multiples of the valuation given the revenue and the growth rate. But ultimately it's a, it's a willing buyer, willing seller market.
- [38:29]
A
Yeah, no, no, I'm not saying that you got hosed, but it just struck me as if I saw these numbers for like, I don't know, an AI enterprise company from Seattle or whatever. It would be a, it would be a pretty, pretty high number. Now I want to go back to your point about your aspirations of spreading across Africa and just kind of the state of startups in the continent. I've had the pleasure of covering the growth of venture capital activity in Africa through 2000, 2021. I've also had the pleasure of covering it as it's come down. And so I'm kind of curious if you can just give us some on the ground vibes, you know, how is startup life in Nigeria and the other kind of big four countries in the continent? Are people encouraged, are they discouraged? What's it like?
- [39:15]
B
Of course it's vibrant. It's pretty vibrant. Lots of energy, lots of entrepreneurs that want to make a change. You know, you, you know, fighting a little bit more infrastructural forces, a little bit more macro forces, but much more vibrant than ever. Of course the top funded countries include Nigeria, Kenya, Egypt, South Africa and the likes. Yes, there you go. Beautiful. And of course Ghana coming up, Benin. There you go. So, and the energy also that you find in these places also are, you know, this is in 2024 is, does this include Money point?
- [39:59]
A
I don't think this does. This is through Q3. If you're not watching the video, we have a chart on the screen right now showing the region, the national breakdown of venture capital raised through Q3 of this year in Africa and Nigeria comes in third place and then some other countries. But no, this is not including your route.
- [40:17]
B
Yeah, absolutely, absolutely. And of course Nigeria is going through a bit of a macro turnaround and essentially there have been, there are fundamental changes being made to economy. So you could say Nigeria is going to be quite an attractive destination in the future. Going back to the startups and, and what the market looks like. It's, it's quite interesting. So the same themes that you're seeing everywhere are the same themes that are playing back. So you'll be seeing merchant acquiring themes, payment gateway themes, credit consumer credit themes, business banking themes. So the most attractive themes are generally going to be merchant acquiring online and offline. That would be the likes of us, the likes of Pay Stack that was acquired by stripe. You will then also see a lot of cross border payments. That's where you see the likes of Flutter wave, flutterwave on Africa. Then you see quite a lot of consumer banking. That's where you see the likes of OPAY and see the likes of, you know, Cuda that you mentioned. So same things, the same chimes, the same squares, the same stripes. You, you're saying, you know, the same themes are what are coming up. You could say maybe, maybe Africa might be like five years or maybe seven years behind in some countries, maybe five years. Nigeria maybe five years behind in some other African countries. Maybe you could say seven or Seven or eight years behind.
- [41:48]
A
Yeah.
- [41:49]
B
Africa is probably similar to, you know, about maybe three, four years behind. So I mean, same themes that are pretty familiar. But of course with the twists, a couple of twists that comes with all the different markets, regulatory twists, currency controls. Yeah, you saw those twists also.
- [42:14]
A
I know you guys raised a lot of this money from other regions. But I'm curious, what's the very early stage scene like in Nigeria and Kenya and Egypt? Are there a lot of incubators, angel investors, places where people kind of congregate and make a community? I guess. I know that there's capital, I know that there's cool companies, but at the very earliest stage, I don't have great visibility into what's going on.
- [42:38]
B
YC has quite a quarter of them.
- [42:41]
A
That's true. Well, I thought the geographic diversity of Y Combinator batches had come down since they went back to a. An in person setup.
- [42:51]
B
No, I think we see quite interesting cohorts coming in yearly from many of different regions. So YC is great also. There are also some local startups or local accelerator hubs too. There's also, I think techstars. I think. Yeah, that's not local too, but that's also techstars. So the part you typically see is a founder based in any of those four countries sees a thesis, begins to think about it, build something, apply to some of these accelerators, if they get admitted, typically supercharges them, try to go prove it out, you know, a similar path. And now that they are also seeing, you know, much more successful startups that are reaching later stages, Series C, Series D is also leading to a bit of angel investing that is coming back from this. You know, founders who could, you know, give angel investing as well as advisory at the same time.
- [43:53]
A
Yeah.
- [43:54]
B
You're also seeing family offices also setting up a small arm of their business of their family office to also do some angel. For example, our first round was from a family office in Nigeria.
- [44:06]
A
Yes. Was that, was that Quantum Capital Partners or is that Oui Capital?
- [44:11]
B
That's Quantum Capital.
- [44:12]
A
Okay.
- [44:12]
B
Yeah. Okay.
- [44:15]
A
On the angel investing point though, Tosin, I was gonna ask you this literally next, so thank you for the perfect segue. In the States, you know, where I know the market the best, a lot of founders after they've reached a certain scale do begin to angel invest back really early companies. Is that something that you've been involved in?
- [44:31]
B
Yes, yes, yes, I've been involved in it. I've actually put some of my funds in a bit of some startups and See, to help them grow, I will call myself a measured investor.
- [44:45]
A
Okay.
- [44:46]
B
Which means if I would love to put my money into something, something that I would love to understand a bit and angel investor is close. Angel investing is closer to gambling than.
- [44:59]
A
Well, angel gambling then, if you want.
- [45:01]
B
Exactly.
- [45:02]
C
Yeah.
- [45:03]
A
Investing might be a little bit much, but it's still, it's still important capital though. It's still very important to have those first, you know, $25,000 checks or whatever because it, it opens up more, more chances for luck.
- [45:16]
B
Exactly. And listen, gambling, investing is gambling. Let's, let's face it, I mean, if you could see the future, then it's not gambling. But the more matured you are, the lesser, the more it is closer to mathematics than it is to gambling. And you begin to move from the spectrum of gambling all the way into logic and mathematics. So my risk tolerant tolerance and my level of, you know, well, love to put money is sit somewhere in between. So I would generally love to have a reason, a clear reason why I think this is going to be successful and would love to take the risk that I feel I can contribute into what, which makes me have a stronger selection of people I would want to personally work with. Unfortunately, I'm still pretty busy in what I'm doing right now, so this means a smaller cohort of startups that I can possibly work with. But that's my style.
- [46:13]
A
I don't think having focus on your day job is a bad thing. When you're the CEO of a growing startup, I think that's pretty reasonable. It's the people who don't seem to do their day job that I begin to worry about. Tosin, before I let you go, I'm curious why people don't pay more attention to startups that focus on Africa. Because you guys are doing really well. There's a number of other companies that I've been tracking for a long time that are also doing well. The pay stack exit was a big deal. Why isn't the world paying more attention to people that are building for a continent with 1.5 billion people, give or take, rapid digitization, a young population, it just seems like to me such an obvious place to go deploy capital to build technology companies. And yet it doesn't seem to be the case when I, when I think about, you know, the investors that I speak to. So what's, what's the world missing?
- [47:01]
B
You know, that's the same. That's the same. You echo the same sentiment that Jamie Dimon made when he was in Nigeria a Few like think last week or two weeks ago and we were actually, you know, I was actually in the same, we were in the same roundtable where he had a cohort of interesting startups that he was making and a couple of comments that we all came to conclusion were on where we need to tell our story. If people are aware, their perception of risk starts going down. We assign as humans a lot of risk to obfuscation or things that you feel like you can't control and know. And I think that's a fundamental problem. You could say in a way Latam gets more attention especially in the US belt, in North American belts than and I think awareness also time zone closeness, they are all sort of related. You could say Africa gets more attention from Europe also. And that's also because it's closer, it's just a few hours flight, you're on similar time zones. So I feel like we need to do a lot more work as Africans or as the North America to also be able to understand the continent. Where is the next frontier, where the next growth is, which has risks or these are risks that you can underwrite. And when you understand this market a lot more, you will feel comfortable investing. We've been lucky to have US investors already invested in winners. QED is one of our investor. QED is a very well known, respected, fintech only investor and I think we're their first deal in Africa and I think this is something that makes them proud. So I will simply encourage a lot of investors to and you know, and to generally Africa. We should tell our story more. And thanks for having me to tell a bit of this story.
- [49:06]
A
Well, I mean, absolutely. I talked to so many people from the United States, from Canada and I just, I saw you around it. I'm like, we have to get them on the show. I have to learn more about this. So Tosin, we'll have you back on in six months or a year and talk to you more about progress and so forth. But congrats on the success thus far. And if you're an investor and you're watching this and you want to go to Nigeria, call Tosin, he'll know where to send you and who to talk to because my God, we shall at least do some trips and get to know one another.
- [49:31]
B
Beautiful, thanks a lot.
- [49:32]
A
All right, this has been this week in Startups. My name is Alex. We'll talk to you soon. Bye everybody.
- [49:38]
C
Okay, I host every six months or so a workshop called Angel University. And this is where I teach people how to become professional Angel Investors. And the next time I'm teaching the course is on November 6th and I teach it with my pal Mike Savino. He's a partner here at Launch, one of my best friends. And it's based on my book. But everything I've learned since then, obviously, you know, I've invested in over 400 startups and if you've met me for more than five minutes, you know that Uber, Robinhood. Com are amongst the ones that I've hit that have gone super nova. In fact, Uber is considered the, the, the greatest investment over the last decade or two in Silicon Valley. Robinhood, you know, doing fantastic as well, and calm. Not yet public, but another great company. In this course, I teach you the fundamentals, my personal philosophy. And then I compare and contrast it to what other people say. And the most important thing is how do you source and decide which companies to invest in and then how to evaluate those companies? I have a criteria. I have 13 reasons to invest in a company and about 30 reasons to not invest in them. We call those pink or red flags. Pink flag and it's something you can clean up. Maybe the cap table is a little messy. You know, red flag could be, you know, a patent lawsuit that you don't think they could ever get out from under. And when we talk about those criteria for when you're picking a company, we'll also go into adding value as an investor in startup and then portfolio construction scenarios like how many investments do you need to have a chance at hitting an outlier? If you haven't read the power law, you don't know what the power law is. The Pareto principle, go ahead and look it up. We talk about securing pro rata, very important, getting investor updates, what information rights are and just so much more. We had 1200 individuals join us for this workshop last year. We did four of them, so 300 people at each. Many of these accredited investors have also joined my angel investing syndicate, which is the syndicate.com and you get to see our deal flow. The workshop is open to all investors whether you're retail or accredited. And all the proceeds of this go to charity. You can see a full list of the donations we've given at Angel University, slash charity. You can sign up at Angel University. So whether you're an accredited investor or non accredited or you're just interested in learning, visit Angel University to learn more and register again. The next class is November 6th. I'm going to be moving to twice a year for this because my schedule is very busy. So if you don't get in on November 6th, you're going to have to wait six months, clear your schedule, unless it's something really important for your family. You can take a couple hours and learn about how I make decisions and our team make decisions on, on which of these early startups to invest in. And it's not like investing in public companies where you can see how many subscribers Netflix has or, you know, how many Uber rides were taken or how many doordash deliveries occurred last quarter versus a year ago. No, this is a whole different set of criteria when you're dealing with a company in years one or two or even in year zero. So I hope you come. It's for a good cause. Again, angel university slash charity, to see where all the proceeds go. I'm very proud of the work we've done, Mike and I and the team over the last, I don't know, six or seven years of doing this. We've inspired people to find this new career. People say it's changed their lives and they love being an angel investor. A lot of times it's young people who sold their company or it's young people who are professionals making a little bit of money. They're making 200 grand or 300 grand working at Google or something, and they just want to learn how to do this. And then all of a sudden it becomes a path to becoming a venture capitalist. Because think about that. If you have no venture capital experience and then you go apply to be a venture capitalist. And then I apply and I've made 15 angel investments and two of them have done well. And the founders speak highly of me. Who's the venture capitalist going to hire? The person who took the initiative to make 15 bets or the person who just wants to be given a chance?
- [53:20]
B
Right.
- [53:20]
C
You're going to pick the person with more real world experience. And then, you know, a lot of people who are retired in post money, they're 50, 60, 70 years old and they're sitting there at home on a mountain of cash and they want to do something fun. We know it's a lot of fun to hang out with people who want to change the world. They're called entrepreneurs and they're lunatics in the best sense of the word. They have crazy dreams, dreams, crazy ideas. And when you're an investor, an angel investor, you get to spend time with them, but you don't have to drag yourself to an office. You don't have to put in 60 hours a week, you can put in 5 hours a week, you can put In 50 hours a week or anything in between. Being an angel investor, you make your own schedule. You meet the most interesting people in the world. Sometimes you hit a big winner, sometimes you lose. And that makes it just so exciting. And so I think it's a better pursuit than going to Vegas and playing blackjack or betting on sports. I love the idea of betting on startups because you get all these non financial rewards that come with it, which is you get to see where the world's headed. You get to see and you get to hang out with inspiring people and see their plans to change the world. It's just an awesome fun career and pursuit hobby however you want to look at it. I hope you come Angel University.