Lateral Frontiers
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Lateral Frontiers

IPOs, payments and offline strategies caught our attention

From our March 2019 newsletter issue. You can subscribe here.

Thoughts & Themes

  • An African unicorn is born? Despite challenges in the e-commerce space, Jumia, the pan-African ecommerce business, filed its initial IPO on the NYSE this month and announced a pricing range. Jumia appointed, Andre Iguodala a seasoned venture investor, and a member of the NBA’s Golden State Warriors, to its Board of Directors. Mr. Iguodala has invested in over 40 startups including Twitter, Facebook, Tesla and Zoom. This IPO marks a possible exit for Rocket Internet, Jumia’s parent company. Since Alibaba’s IPO five years ago, the company has tripled in value, becoming, by some measures, the world’s largest online marketplace. In many ways, Jumia resembles pre-IPO Alibaba in an African context, only with stronger indicators, such as a much higher revenue to Gross Transaction Value (GTV) ratio. While Jumia’s IPO has received mixed responses, we view the first IPO of an African ‘unicorn’ as a positive development for the African venture ecosystem and is likely to galvanize similar IPOs of African startups in the near term.
  • While we’re talking billions… Africa startups continue to grow and thrive. Over US$1bn in VC funding was raised in 2018, representing 108% YoY growth. Y Combinator saw 7 Africa-focused startups (6 from Nigeria alone) join their Winter 2019 class; the largest selection of African-focused companies to date, indicating the growing significance of African ventures. Kenya, Nigeria and South Africa remain dominant hubs for the African startup ecosystem, jointly receiving 78% of total funding. Following the trend of increased Western interest in the African startup environment, French President Emmanuel Macron, in partnership with Proparco and AFD Group announced a new initiative, Choose Africa, to devote EUR2.5bn to finance and support African start-ups and SMEs by 2022. As the ecosystem continues to mature, we expect to see further investment in early-stage businesses providing improved opportunities for global strategic partnerships and acquisitions.

Portfolio News

  • Koko Networks and SparkMeter have both closed up-rounds in the last month in which Lateral Capital participated. Koko Networks is now preparing for hard-launch across Kenya. Similarly, SparkMeter is preparing to launch at scale across multiple markets. 4G Capital continues to raise its Series A round. We are excited about the prospects of these businesses and look forward to reporting more positive performance over the course of 2019.

What else caught our attention:

  • Payments is a recurring theme globally: PayPal CEO, Dan Schulman predicts that payments could grow into a $100 trillion market. Global trends are moving towards collaboration and consolidation as players understand the market is large enough for multiple players. In a rare move, OneFi, the Nigerian online lending startup and parent company of Paylater, acquired MEST-backed payment processing solutions company, Amplify. We expect to see more consolidation in the fintech space as startups move away from single product companies to full suite banking services or platforms.
  • Offline complements to pure tech strategies: In their first foray into East Africa, Ghanaian startup, mPharma, a 6-year old VC-backed company, has acquired Haltons, a PE-backed company and Kenya’s second largest pharmacy chain with 20 stores across Kenya. mPharma, improves pharmaceutical supply chains using its Vendor Management System and this acquisition will enable customer experience control and pricing insights, which mPharma can leverage across their franchise pharmacies. Our long held view is that pure tech-strategies are challenging to execute in Africa, but now the intersection of offline business supported by technology strategies provides a unique, long-awaited investment window that the African VC scene can take advantage of.

As always we welcome thoughts and feedback — get in touch

Ochuwa // Lateral Lagos

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