How do you analyze the announcement of the takeover of Paystack by Stripe?
I told myself, "It started!" Because, today, the whole community interacting with the African ecosystem knows there is a huge potential: the market is significant, the degree of tech is interesting, we have promising entrepreneurs. Buyers already working in this ecosystem want to see the market take off. Therefore, having a validation like this one, done by recognized stakeholders, specialists performing in the sector, is necessary. It shows that a startup can develop locally, evolve in this ecosystem, hold by local stakeholders, grow, extend its market, include high-level technologies to become the target of American and European investors.
If it happens once, there will be others. It confirms Africa can produce those giants, thanks to youngsters, and international investors consider Africa a real market where they can develop by betting on entrepreneurs' dynamics.
For me, it's the beginning of a process. Others will want to try. There will be other acquisitions.
What does it say about the fintech sector, more attractive than ever? Does it reach a degree of maturity?
I won't say it reaches a degree of maturity, but it shows a validation by the global fintech environment of Africa's capacity to integrate this technology. Because in the African ecosystem, even if the company is big and has the best technology, it won't work if the population doesn't use it. But here, it is a validation of the integration capacity by the African ecosystem for technology.
Then it also confirms the execution capacity by local teams of technologic implantation, and this is important.
The third point, it's clear they focus on Nigeria because it's a big market, but when they talk about their ambitions, they talk about developing the startup on the whole continent. They are integrating Nigeria, but they are interested in the continent perceived as a potential market.
Another aspect I think is interesting, and not many people talk about it: they went beyond the currency's risk. In Nigeria, we have the naira, a local currency, so there is a risk. But they decided to invest anyway in a company working with a local currency betting on the future. They do believe in the reinforcement of African currencies. This is very interesting.
One last thing about what it is saying about international investors: there is a significant change in Africa's investment risk perception. Of course, the Paystack operation has been thought, studied. They were already investors [Editors' note: Stripe already invested in Paystack in 2018], so they had time to analyze, integrate some processes, etc. They realized it was possible to work with a local team and develop the market. They managed to reduce the risk perceived on investment in Africa and considered only the real risk because they did this work. They decided on a factual basis, with clear and substantiated market data.
Finally, the best investment opportunity is what people will do and are doing: to invest in an environment that seems risky, but where the real risk is lower. This is when we do a good deal. By entering into the company, they quickly realized this gap. Of course, it is a 250 million investment, but if Paystack were a European company, the risk would have been shallow, and the envelope would have been different. When I look at investment in Africa, I always ask myself: if the society was based in Europe, what would be the level? Opportunities are there. Investors understand that.
This issue is dear to me, and I'm working on the investment risk perceived in Africa. Because people who work in the sector see opportunities on the opposite of others. It means there is a significant issue concerning the external stakeholders' capacity to evaluate and give credibility to news coming from Africa and to do like Stripe: we analyze data, and we decide to invest. This is why GreenTec will set up a tool to demystify the risk. If we decide to demystify the risk, we will have more Stripe.
Finally, does the pan-African tech ecosystem is expecting that: more takeover by international groups?
The reality is this one: in Africa, we don't have enough investments for the numerous companies we have and that have success. Today we know we need more than 300 billion dollars funding for SMEs in Africa, startups included. This amount is not in Africa. The only way to get it is to go outside. The question is not to think "it's usual international stakeholders come to buy startups" but to consider: there is a need, it is essential to establish a dynamic for investors to come from abroad to support the African companies' growth, which is impossible from the inside.
I see this as an opportunity, and it is clear there will be an adjustment about transparency, information structure and quality, and in the collaboration process. As soon as this movement starts, we'll find solutions. Today, everybody praises Paystack because it is the first one. If we project ourselves in ten or twenty years, when 50 other takeovers like this will have occurred, the hundredth will not be as enjoyable.
But this is a signal. The ones who are not watching Africa, be careful it is starting! And if we tend what happened in the past, there are always irreducibles who decide to invest, after a while, like Facebook, which invested in a Kenyan startup in e-learning [Editors' note: BRCK] and thought: we'll try with a little bit of cash to test. It's the first sign. We saw then American incubators who said: we start by presenting American stakeholders and then buying them. The process is on, a process to develop the private sector market. It is not the first time it happens. This is what we can see in this takeover.
So it is a normal evolution part of the process... What interests in the pan-African ecosystem?
It is an important message. When you are a foreign investor, the first question you ask yourself is: how do I use my money? When we see giants buying, it's reassuring. The question now is who the winners are? Because those are the first takeovers, and there will be others. Who are the ones capable of supporting the winners? This is what will make more people invest in mature startups, and then for financial gain, they will take more risks because they will understand which way is the winning one, and it will create a virtuous circle that will improve the level of the ecosystem and the quality of companies.
During the next step of the process, will we see African investors invest in African startups?
The people with a capital in Africa are the older generation. When we look at the fund set up, people who invest are always young entrepreneurs who succeeded in digitalization and reinvest because they understand the value process. The problem is not "African don't want to invest," but the older generation doesn't understand the process and doesn't bet on it. But there is a generational process establishing when youngsters who understand the process will arrive, and simultaneously, the risk perception in Africa will decrease.
For me, the moment when there will be a boom will be when the risk perception will have reduced, and the new generation will arrive. At this time, we'll see a massive contribution of investments toward the continent that will correspond to the ecosystem's maturity to integrate information and capitals.
Do you see this convergence happening in the short or medium-term?
I won't say when but how I will try to contribute to accelerating the process. Because of the position of GreenTec, my efforts will focus on flows coming from outside of Africa to reduce the perceived risk and accelerate the flow incomes process. We should release a new solution helping that by three months, to support the process. For the rest, other stakeholders will do that better than us. The question is not when. We can't control that. We see that today with the global pandemic, factors change everything.
The pandemic finally had a positive effect on the pan-African tech ecosystem...
Indeed, the pandemic had been positive for Africa. The pandemic was global, and Africa had experience in pandemic management. We saw the risk changed side. Africa has always been the riskier continent. Today the risk is in Europe. I think all those elements make this moment particularly important, and everything is shaken: The visibility on growth potential, of investment impact in Africa, and the digital card creating impact levers different from those in Europe or America. In Africa, it is enormous. This is why I think it will happen. I can't say when, but as an ecosystem stakeholder, I want to be sure it will happen as soon as possible.