Alao, a digital marketer based in Lagos, was searching online for a car to buy. He eventually found someone he thought was a credible seller located in Abuja. After a few conversations, they agreed to the price and other terms of the transaction. Alao paid the money and had a friend in Abuja stationed at the car dealership where the car was situated.

Unfortunately, for Alao, the car dealership never received any payment as the person who received it on behalf of the dealership never remitted it or wasn’t affiliated with them.

“When the car dealership said no money had arrived, my ears just perked up immediately and I figured out that it was a bad deal,” Alao said. The guy [seller] then stopped picking up my calls within an hour or two later.” 

The experience felt like déjà vu to Alao. Before making the purchase, he had anticipated the possibility of being duped and asked around for a product that provided an escrow service. However, he was unable to get a tangible response.

“I asked around, even asking my friends in finance if there is a product where the money can be stored and then released after I confirmed receipt of the item but they didn’t have any answers for me,” Alao said. 

This sad experience inspired Alao to team up with Bridget Yadua-Soremekun and Emmanuel Obute to start Peppa, a social commerce platform that is making it safer for Africans to buy items on social platforms through the use of payment protection.

Alao believes that Peppa is best suited for social media not just because of his experience, but because scam incidents are most prevalent on these platforms.  

In Africa, almost 400 million Africans use social media platforms, with many making their first online purchase through these platforms.  This large number of users has spurred social commerce to gain momentum in Africa. In 2022, social commerce in Africa and the middle east was estimated to be a $9 billion market. The industry is expected to grow at a compound annual growth rate (CAGR) of 55.2% from 2022 to 2028. 

Despite this impressive growth, social media is also a hotbed for fraud and scams. More than one in four people who reported losing money to fraud in 2021 said it started on social media with an advert, a post, or a message, according to the US Federal Trade commission. Almost 100,000  people reported about $770 million in losses to fraud initiated on social media platforms in 2021.

“When you think of the opportunities this market offers, you also think of the fact that people are afraid of using it,” Alao said.

To reduce the lack of trust that exists on social media platforms, Peppa offers an escrow service, which protects merchants and their customers by acting as a safe deposit to collect and hold payments from customers until the customers confirm that the products they have received are satisfactory, at which point the payment is released to the merchant. The escrow service ensures that buyers and merchants keep to their ends of agreements and helps to boost trust and increase sales. 

Peppa, which is backed by Techstars, also provides merchants with a variety of tools to display their products in an online store. 

Peppa generates revenue through two sources. It takes a commission of 1-2.5% from the payments made by buyers. For sellers, the startup offers paid subscription services that give them access to unlimited uploads of products, door-to-door delivery for orders, insights and reports, and notification of orders via SMS and email. Peppa is also working on including a micro-pension plan for its sellers to which the company will contribute a portion. 

According to Peppa, in the eight months since the startup began operations, it has processed millions of Naira worth of Gross Merchandise Value. The platform has about 1,000 sellers and predicts that it will host over 100,000 sellers and about 300,000 buyers by the end of 2023. Peppa has already signed a partnership agreement with First Bank to integrate its offerings into its mobile money service. 

Alao believes that one of the key differentiating factors that Peppa has compared to other social commerce platforms is that it doesn’t need users to use its stores.  People can simply use its escrow payment service when they want to make a purchase over a direct message. 

“You can conclude your conversation in the DM and then when you want to make payments and you’re having second thoughts, that’s where we come in. This is one of the major differences between us and competitors,” Alao said. “People don’t have to go through the behavioural change of moving from DMs to using storefronts.”

After two weeks of regular treatment and care, Teni had made significant progress in recovery. Dr Ugonna Fakile and her team who attended to Teni felt it was time to discharge the teenager. But there was a challenge: Teni’s mood wasn’t improving and there were concerns that there might be something else wrong with her. 

“We noticed that when we suggested that she should go home, she’ll just be dull and unresponsive,” Fakile, a consultant Haematology Paediatrics Oncologist at LUTH, told TechCabal over a call. “This was concerning because ideally, patients have to be ready to be discharged from the perspective of the doctor and the patient. When you notice that the child’s mood is still down, you don’t want to seem like you’re pushing the child, so you ask the child to stay and you pay attention in case you’re missing anything.” 

Fakile kept on paying attention to Teni’s low mood, hoping for a positive change. This change finally came after a particular hospital exercise. Suddenly, Teni was more responsive and ready to go home. What changed? 

Teni had participated in a virtual reality (VR) exercise organised by the Arts In Medicine Projects. The outreach which was led by Kunle Adewale, the founder of Arts in Medicine projects, offered the patients in the pediatrics ward the opportunity to tour countries like Canada, India, and the US, perform guided dance and meditation sessions, as well as swim with dolphins. 

These experiences stimulated the teenager’s mind more than the books and TVs in the hospital wards, improving her mood. 

“What we noticed from our outreaches is that the opportunity for patients to walk around and see the sun is a deeply cherished experience,” Adewale told TechCabal. “Because when you’re trapped within the four walls of a hospital where all you’re used to is cries, it affects your mood and recovery process.”  Three days after Adewale’s outreach, Teni was discharged.

Although it is mostly associated with the gaming and entertainment scene, the use of VR is becoming more prevalent in other fields, including healthcare. Medical practitioners are exploring novel ways that VR can assist patients and health providers to achieve better treatments and outcomes, including in surgery, pain management, physical and cognitive rehabilitation, mental health, and more. 

Here’s how it works: Once a patient puts on a motion-sensing VR headset (sometimes with handheld controllers), their perceived environment is replaced with a 360-degree virtual world that they can move around in and interact with.

The patient suddenly finds themselves in the ocean surrounded by dolphins, with the sun shining through the water’s surface. In another instance, the patient can find themselves in the streets of New York or at the Abu Simbel Temples in Egypt. 

This experience, which is often therapeutic, serves as a distraction from the pain or stress the patient is going through, as it’s difficult for the brain to focus on other stimuli, such as negative ones like pain and anxiety during the VR experience. While the patient might intellectually know that they’re not underneath the ocean or in New York, the brain has to focus on one reality at a time. The realistic nature of the experience boosts the positive emotions the patients feel, and the effect of the experience can remain for many hours and days after the exercise is over.

Tunde*, another patient undergoing dialysis treatment for renal disease, had a similar experience after the VR session. Fakile noticed that the 12-year-old became more active and responsive to treatment after participating in the VR session.

“The truth is that for any treatment to work effectively for people here with sickle cell, cancer or some terminal disease, their minds need to cooperate,” Fakile said. “When a child is experiencing a sickle cell crisis, many thoughts and existential questions run through their minds. These are children and adolescents that are thinking about their mates in school or siblings at home eating.”

Fakile added that it’s difficult for patients with low moods to communicate with doctors and nurses about what’s wrong with them, making it difficult for the healthcare providers to understand and give them the care they need.

The introduction of the use of VR technology is a welcomed development for Fakile, who first experienced virtual reality in 2015, during training on the childbirth process at the Lagos University Teaching Hospital at LUTH by a foreign facilitator. Seven years later, Adewale and his team, a group of artists and educators, introduced a different use case of this immersive technology.

Adewale started out as a visual artist but over the past few decades, he has expanded his expertise in using art to solve healthcare problems. He obtained certificates in Understanding Dementia and Arts, from University College London, and Medicine and the Arts: Humanising Healthcare, from the University of Cape Town, South Africa.  

In the early days, all Adewale had was a desire to use art in a different way. Today through his work, he has reached thousands of people and even has a day named in his honour in Cincinnati.

Connecting the dots: Art and Health

After graduating with a degree in Fine and Applied Arts from Obafemi Awolowo university in 2010, Kunle Adewale had one question on his mind: what could he do differently as an artist?

In 2012, while working as an art teacher in a primary school, Adewale noticed that a dyslexic student was always coming around the art studio because she found comfort there and saw it as a place where she wouldn’t be looked down on. This experience and many others exposed Adewale to the benefits of arts in the healthcare space.

This led Adewale to begin exploring the therapeutic benefits of art in 2013, by founding Tender Arts Nigeria, a social enterprise that focused on art therapy, art education, and community development. He later founded Arts in Medicine Projects in 2016.

Over the past seven years, the project has worked with different groups of people (children and adults) living with sickle cell anaemia, cancer, dementia, Alzheimer’s, mental illnesses and neurological disorders. 

“These outreaches first started with normal artwork and then when VR started gaining traction from the days of Google cardboard, we experimented with it.  Since then we’ve moved to use more powerful headsets like Oculus and many other devices,” Adewale told TechCabal.

Helping elders relieve older memories

The Arts in Medicine Project outreach has also been expanded to adult homes.

In his outreach programmes, Adewale uses VR to help young people have new experiences. But for the elderly, he helps them relive past memories. In September 2022, he visited Heirs Home Care Solutions, an elderly home care service founded by Modupe Agusto. 

When Agusto started offering the residential elder home care service in 2020, one of the challenges she noticed was that it was difficult to engage the elders. 

“One of the things we struggle with is activities. We have games, and we encourage the elders to come around but after some exercise, they want to sit down. They’re not too interested in watching TV,” Agusto told TechCabal. “We’re mindful of this because with old age comes depression because they’re lonely.” 

The introduction of virtual reality was a welcomed alternative. At first, the elders were sceptical about the unfamiliar-looking devices but Agusto and her team had to convince them first by wearing them and then by getting some of the elders to wear them.

Once they got a hang of it, the response was positive as the elders were excited, dancing and smiling as they were immersed in their new virtual world.

“There was an 80-year-old man, who said he was the first DJ in Nigeria. We gave him the opportunity to attend a concert through VR and he was elated,” Adewale said. “Another woman got to visit New York again because her children were there and she couldn’t travel to visit them. She was actively involved in naming streets and monuments.”

The cost of improving healthcare

In 2016, when Adewale began his work, the cheapest VR headset was the Google Cardboard – a $9.99 box made out of cardboard. But the demise of Google’s first iteration has meant that decent lower-end VR headsets go for $50, while mid-range devices cost $300-$600, and the premium ones go for about $1,000 and above.

The pricey nature of these headsets implies that Adewale’s outreach programmes, which are currently free, should typically cost about $20 for a session with 50 people. A rather steep price considering that 63% of the Nigerian population lives below the poverty line.

“We’ve decided to make it free for participants because access is a privilege and equity is a major thing in what we do,” Adewale said. “Some of these people have sold their properties to treat their loved ones and you want us to go there to ask for money to make them happy? No, we don’t do that.”

Fortunately, sponsorship from organisations such as Alzheimer’s Association, Alzheimer’s Society, Global Brain Health Institute, the Atlantic Institute and others help in covering the purchase of higher-end headsets such as the Oculus Quest 2 and Oculus GO headsets. In addition to this, Adewale leverages existing content to offer a variety of options, as opposed to creating new content from scratch, which is more expensive.

“I believe technology is a leveller. When I first started this, there were times when people used to ask me whether I knew what I was doing as an ordinary art teacher, but today you can see the impact of my work,” Adewale said.

Dealing with the side effects

A popular criticism against VR is the risk of escapism and addiction—concerns that soon people will prefer to live in a virtual world instead of the real one. This concern is supported by a 2022 study at the University of China that found VR gaming 44% more addictive than traditional gaming. 

Adewale’s response to this is that “the extreme usage of anything has side effects.” He acknowledges that VR can be addictive and advocates that it should be used sparingly. 

“If anyone is experiencing any dizziness or side effects, they should take a break from using the VR until they are okay,” he said. 


*Name changed to protect the person’s identity.

Both his parents came separately to the United States, from Kingston, Jamaica, in the late 1960s and early 1970s, in order to pursue better financial opportunities. 

“My father was the oldest of seven children, and at age 15 he apprenticed as an electrician because he had no father and he had to help support his family,” Dixon told TechCabal over a call. “After working as an electrician in Jamaica he came to the United States to make more money. My mother came to the United States to further her education.”

Growing up, Dixon was surrounded by family members who were all small business owners. This spurred his desire to become an entrepreneur. He grew up in a family where there was a strong belief that if you want to eat, you have to work.

He studied finance at William and Mary University, the second oldest university in the US. In 1997, he returned to get a doctorate degree at the William and Mary law school. A specialisation in law and finance meant that Dixon got to work at different law firms doing early-stage venture capital financings, corporate counselling, and merger and acquisition deals for public companies. 

While doing this he also tried to start a few businesses that mostly didn’t work out.

“Along the way, I invested in real estate. I tried starting a couple of other companies on the side, including a T-shirt business, which was a total failure,” Dixon said. 

2012 was a turning point for Dixon when a close friend from college spoke to him about starting a business that builds and operates premium sports and wellness centres. They began discussions in 2012 to start a business called The St. James, and in 2018, after raising capital and building a team, they launched the first location. The St. James has since then grown to have three locations in the US with almost 300 employees.

During the pandemic, Dixon felt compelled to start an investment syndicate, the Global Black Syndicate (GBS), to support black startup founders. 

“The global black syndicate is really an outgrowth of my personal journey. I took time to reflect on conversations and encounters that I had with many other black entrepreneurs on the challenges they had and how they can be supported,” Dixon said.

Today, GBS which has invested in 8 startups with an average cheque size of $75,000–$150,000, is keen to invest in more startups founded by black founders across the globe.

Daniel Adeyemi: Why does the GBS exist?

Craig Dixon: In a lot of ways, the idea of a syndicate is no different from some of the rotating savings-and-lending associations that exist in the black diaspora and in different countries. In Jamaica, we call it partner, and in other countries, they call it a susu. This is the way my parents bought their first house, and how many people were able to fund their businesses. So I looked at this and thought there’s an opportunity to band together a bunch of very small cheques to write bigger cheques to support businesses that are overlooked. 

When you think about the distribution of black people across the planet in terms of the number of us that exist on this earth, there’s a tremendous amount of human potential that’s underutilised and overlooked. I also look at the impact black people have on culture and different aspects of the economy and it’s very clear that there is a lot of untapped value there.

DA: How does the syndicate work?

CD:  We identify investment opportunities, conduct due diligence on them, negotiate a set of terms, and then present those opportunities to the rest of the syndicate.

Individual investor participants assess deals on a deal-by-deal basis and they can choose to invest or not based on their own preferences and comfort level. We don’t have a fund. It’s really all about being a part of a network that allows you to get access to deal flow that you can choose to invest in based on your preferences and your comfort level.

We conclude deals within a 45–60 day window.

DA: How does the syndicate support startups beyond money?

CD: I always start with the fact that as an entrepreneur who is still building a company every day, I can really relate to what these founders are going through, have been through or will go through. So I think having somebody who can relate to them in that regard, and who really understands how difficult it is to build a business is very important. We make introductions to investors and people with expertise to help founders and companies achieve their objectives. 

DA: What’s your investment thesis?

CD: We’re sector-agnostic but we have a preference for businesses, that I like to call shovel-type of businesses. And that metaphor is really referencing the California Gold Rush in the United States, where you had a bunch of people who went to California to go strike for gold and then some of them got rich, but the people who really got rich were the ones who supplied the picks and shovels—essentially, the infrastructure necessary to support the exploration of gold. We’re really looking at businesses that are focused on infrastructure, capturing the network effects associated with a trend that many people are going after. 

I believe they are more likely to find success, and even if the company doesn’t become a unicorn, they tend to end up having assets that are valuable that somebody else might want to acquire. 

DA: Can you share some examples of startups the syndicate has invested in?

CD: Sure! I’ll share two examples. One of them is Kinley (formerly known as First Boulevard), a US-based neobank that’s focused on the black consumer.

The company was founded by Donald Hawkins during the aftermath of the social unrest in the United States in 2020 following George Floyd’s death. Hawkins and his team were trying to focus on harnessing the power of the black dollar in the United States for wealth creation. I thought it was an opportunity that also resonated from a values perspective, not just from a financial perspective.

The other one I would highlight would be Bond, which is a marketplace that helps match the client service representatives that work in high-end fashion boutiques like Louis Vuitton, Hermès and others. Before Bond, if you worked at Hermès and I worked at Louis Vuitton, when a client who comes to you regularly for Hermès items is trying to style a certain outfit or look, they don’t necessarily want to wear Hermès from head to toe. They want a mix of different brands. You have the option to only sell Hermès items and leave the client to go look for the Louis Vuitton items.  But with Bond, you can aggregate inventory across brands. So you can search for this inventory at a nearby Louis Vuitton store through Bond and offer that to the client. This way you get a part of the commissions from the sale that the Louis Vuitton store might not have gotten without you.

Bond is simply taking advantage of inefficiency in the marketplace where there isn’t transparency about the availability of different goods.

It’s important to note that if Bond had been a new brand that was going to create and design fashion items, that would not be something that I would be qualified to invest in.

But they’re building digital picks and shovels for fashion that allows people to get access to high-quality goods from multiple brands in a way that’s highly innovative.

DA: What do you look out for in startups you invest in?

CD: First we make sure that the company has at least demonstrated, at some level, product-market fit. Beyond having an idea, it has to be getting some validation, either through some early sales or beta testing or focus grouping, that informs the product or service features. We also look at the company’s economic model and technology stack. In terms of founders and teams, we’re really looking for people who not only know their subject area but demonstrate a level of grit and determination that will carry them the distance, because it’s hard to start a company. And it’s even harder to sustain a company. 

If you think about all of the companies that get started and fail, in many instances, the company didn’t fail because they had a bad idea. They failed because the founding team or the founders were not able to go the distance and push through the challenges that come with starting any new endeavour.  

DA: What are some red flags you look out for?

CD: ​​Companies with no traction. Founders who don’t really want to take the time to answer questions and provide information. Those are two big red flags. There may be other things that come up in the course of conversations that you can’t quite put a finger on, but something wouldn’t feel right. 

DA: What are some trends you’re seeing in the market right now?

CD: It’s a much more challenging investment environment because capital is not flowing as freely as it did for the past two or three years. I continue to believe that fintech is an important sector that will only increase particularly from a global perspective. Proptech is also a noteworthy sector as the real estate industry as a whole is fairly low in terms of its adoption of tech. I think there will be a significant change coming from some of the proptech innovation that is digitising the real estate experience, including how people live and interact with real estate.

“Today, over 100 million households are sharing accounts—impacting our ability to invest in great new TV and films,” Netflix said in a blog post.

With this new plan, users in these countries will be asked to set a “primary location” for their Netflix accounts. Standard plan subscribers and premium plan subscribers will be allowed one and two “subaccounts”  respectively for users who don’t live in that home-base household. 

Going forward, subscribers with paid sharing have a couple of choices. They can pay to add the extra member to their account which currently costs CAD$7.99/mo per person in Canada, NZD$7.99 in New Zealand, €3.99 in Portugal, and €5.99 in Spain. Otherwise, they can suggest the member get their own account and kick them off their service. 

Netflix now offers a new “transfer profile” for the user getting kicked off that allows them to move their viewing history, watch list, and personal details to a new standalone account.

All users of the paid sharing service will have to log into the Netflix app on their home network (Wi-Fi) at least once every 31 days or risk having their account access blocked. 

Last week, Netflix also announced the introduction of Netflix spatial audio and increased the number of download devices from four to six for Premium members.

This new move, otherwise known as Netflix’s crackdown on password sharing, will impact friends and families using a shared plan from different locations. It’ll also affect people who travel for work.

Across social media, Netflix subscribers have expressed their anger over the changes and how they would soon be forced to pay for the extra people on their accounts.

As the new plan rolls out, it’ll be interesting to see how it will be implemented in Africa where the streaming giant is still struggling to acquire new users. Netflix, which is competing with the likes of Showmax and Amazon Prime Video, will have to factor in that the African audience is price-conscious and stick to playing the long game.

The announcement was made by Sundar Pichai, CEO of Google and Alphabet in a statement shared with TechCabal. 

Google has described Bard as a “conversational AI service” that combines the depth of the world’s information with the power, intelligence, and creativity of its large language models to help deliver answers to inquiries. Similar to ChapGPT, Bard uses online information to give new, high-quality responses. 

This announcement has been much anticipated in the wake of the launch of OpenAI’s long-form question-answering AI, ChatGPT, which answers complex questions conversationally.

A key difference between Bard and ChatGPT is that Bard is capable of providing information on recent events, while ChatGPT is unable to comment on events later than 2021.

During Google’s earnings call last week, CEO Pichai underlined that AI has been a focus for the company in the last six years. From presenting Transformers, the grandmother of contemporary languages, in 2017 to introducing the state-of-the-art big language model, LaMDA, in 2021, Google has continued to put AI at the core of its efforts. 

The advent of Bard will mean that its various AI-powered features will be brought to Search, helping billions of Google search users who perform 5.6 billion searches per day and approximately 2 trillion global searches per year. 

Google will first release the lightweight model version of LaMDA, which requires significantly less computing power, as this will allow Bard scale to more users and receive more feedback. Presently, Bard is only accessible to trusted testers ahead of its general release in the coming weeks. 

Over the next few months, Google plans to unveil more AI tools and give access to individual developers, creators and enterprises. 

Beyond this staggering $6.5 billion figure, a closer look at the different components that make up this figure reveals insights on Africa’s fundraising parade, the performance of different markets and sectors. For instance, investment in the fintech sector dropped by a whopping 40%.

“As you go one layer down into each of these data, you find fascinating insights about the ecosystem. People can miss a lot by just focusing on the headlines,” Tidjane Dème, a general partner at Partech, told TechCabal over a call.

Over a conversation with Dème, we took a closer look at the numbers as he explained why funding increased in 2022 despite the economic downturn, the rationale behind the reduction in funding in the fintech sector, whether the increase of funding in the cleantech sector is a fluke and his forecast for 2023. 

Daniel Adeyemi: I’ll start with an obvious question. Why was there an increase in funding, despite the economic downturn?

Tidjane Dème: The increase is a bit nuanced because here we are talking about the total equity plus debt, which led to an increase of eight percent over the figures of 2021. And if you go by the recent trajectory of funding in Africa for the last four or seven years, an eight percent increase is not significant. From 2020 to 2021, the total funding went from $1.5 billion to $5 billion; the compounded aggregate growth rates have been at about 50% over the last few years. So an eight percent growth is relatively flat when we are talking about this market. 

But if you look further, you’ll find that equity funding actually decreased slightly by six percent and the only reason we’ve seen the total grow is because of debt. Venture debt has more than doubled compared to last year, growing by 102%. And it’s an essential point because it seems startups are now more open to this new way of funding that is non-dilutive. It’s great news and ultimately the reason why the ecosystem is growing instead of decreasing.

DA: I know you hinted at it, but why the increase in debt funding?

TD: It’s an important point because if you look at the normal trajectory of startups, they start in a very risky position where the only way for them to fund their activity and their growth is through VC equity. But over time, once the product-market fit and operating model are validated, the startup starts showing stable growth. To fuel that growth, startups typically need much more cash not only to invest in technology and infrastructure; they also need working capital.  This applies a lot in the fintech space, by the way. 

It’s ideal to fund that working capital with debt without diluting the founders and all investors. But access to debt has been problematic. There are not enough players providing depth at the venture stage in Africa. And there’ve been very few startups that have reached the level where they could access that debt. 

So what this increase in debt funding means is that more startups are reaching maturity levels where they can access this debt. In addition to this, these startups are also finding out that across the table there are more players providing debt. We hope 2022 is not a fluke and that it’s a trend that continues. 

DA: Larger investment rounds ($100m and above) decreased last year. Why?

TD: 2021 was an outlier because global investors were going around signing very big cheques everywhere. And then when the downturn hit, most of them refocused their activities in their core markets. This means that those large tickets disappeared, which had an impact on many countries. Nigeria, for instance, in 2021 had six deals above $100 million, which accounted for $1.1 billion out of the 1.8 billion that was raised by startups in Nigeria. 

In 2022, there was only one deal above $100 million from Nigeria, but it’s important to note that there were more transactions in Nigeria, so the transaction count went from 185 to 189. It’s just these big deals disappeared, which means total funding in  Nigeria went down from $1.8 billion to $1.2 billion. 

While it may sound drastic, it’s just a few very big deals that disappeared. Notably, in countries where there weren’t mega deals the total amount of fundraising increased in those markets.

The total amount of funds raised in  Egypt grew by 20% from $650 million to  $756 million; in Kenya, it increased from $570 million to $758 million. So even if you take out the big deals, the ecosystem has been growing. 

We can also look at it from the angle of sectors. The fintech sector accounted for 69% of the deals made in Africa in 2021. 

With the absence of those mega deals, the total funding to fintech startups fell from $3.2 billion in 2021 to $1.9 billion in 2022, decreasing by 40%. But at the same time, other sectors such as funding for cleantech grew by 347%, ecommerce grew by 125%, enterprise grew by 110%, and mobility grew by 87%. So you can see that the ecosystem is still growing, it’s just that those big deals disappeared. 

Also, if you look at tickets of less than a million dollars to about $20 million, you will see the ecosystem has been growing in terms of transaction count, and in terms of the total amount deployed.

DA: Investment in fintech dropped by 40%. Why?

TD: I’d like to state that for the purpose of this report, companies that we categorise as fintech are companies whose core business is fintech. It’s true that many companies have a fintech component—for instance, B2B ecommerce companies like Trade Depot, have a fintech component, but we don’t regard them as a fintech company. 

Despite the drop in investment, fintech is still king. It’s the most attractive sector because the “fintech flywheel”, as we often say, is complete. This means that fintech deals have gone from the seed round all the way to growth stage and exit. So as an investor, you know that if you invest in fintech, you have a sense of how it’ll play out. This is not yet proven, for instance, in mobility or in edtech. So it is normal that fintech keeps attracting more investment and more investors.

Also what we’re seeing here in the downturn is, all sectors are also going through the same stages that fintech went through. They’re just lagging behind.

I’m not saying there will be any one sector that’ll take over from fintech because even if you look at very mature markets in the US and Europe fintech is still king. But we expect that other sectors grow and take a larger part of the whole investment part.

With that said, I’ll say that the performance of fintech in 2022 was Unusual. I don’t think this will hold up in the coming years, but the trend that other sectors are catching up should hold up. 

DA: Cleantech had an amazing year driven by a few mega deals. Is that a fluke?

TD: No. If you look back at our report in 2017, there was a surge back then in pay-as-you-go solar services and they accounted for the bigger part of the whole investment space in 2016 and 2017. 

But then they disappeared and we didn’t hear from them for a few years. Now, this happened not because these types of startups lost their appeal but because they switched to a different funding mechanism because people realised quickly that these companies were raising a lot of money to fund equipment and infrastructure.

And you should not fund that with VC money. What they should have done is to create a vehicle on the side, where you can raise debt or where you can securitise this, but you don’t put that funding in the same structure. So that’s why they disappeared, but these companies have been around. 

What is noteworthy this time around is that the new class of cleantech startups are different. This new class of cleantech companies are more in line with the times of what’s going on in terms of the drive to invest in impact in environmentally friendly technology or technologies that enable more environmentally friendly policies. It is not just solving energy for poor Africans in the village who needed solar power, it’s really about clean tech on a global stage.  

There are a few mega deals like d.light and Sunking. Outside of these deals, there were 50 deals that were less than $100 million. This means it’s not just a few deals driving the narrative. Also, in terms of the number of deals, cleantech went from 20 deals in 2021 to 43 deals in 2022.

DA: Outside the big four countries in Africa, Ghana, Algeria, Tunisia, and Senegal seemed to perform well. What does this imply?

TD: When I typically look at these things, I look at the total number of deals, not the amount because it signals activity in the country. And if you look beyond the top-level number, there are about six other markets that have seen 10 deals or more. These markets include Senegal, Ghana, Morocco, and Tunisia. Cote d’Ivoire also is coming up. 

What this implies is that these countries are the next markets to track. A lot of them are French-speaking countries because the francophone markets have been underserved for a while, so we expect them to catch up.

Algeria was an outlier because there was this one deal: $150 million raised by Yassir. It’s important to note that when a very big deal happens in the market, like what happened in Algeria in 2022 and what happened in Senegal in 2021, it clearly signals to everybody that you can build a big valuable business in that market. And what happens typically after that is that investors take more interest in the market. You see more deals happen in the market. Clearly, Senegal benefited from that Wave investment because, all of a sudden, Senegal went from having two to three deals per year to 15 or 16 deals.

We look at it as a very good signal that it is possible to build a large business in this market. It means you have a deep market, a talent pool, and a business environment that’s not completely prohibitive.   

I’m happy for Algeria because it was not on the map at all. Over the last five years, the total deal count in Algeria was five, which includes the one deal in 2022. To put that in context, Morocco has seen 55 deals in the last five years, Ghana has seen, Ghana 85, and Senegal about 43 deals.

DA: Gender diversity growth appears to be flat. What’s happening?

TD: It is. I call it the depressing part of the report every year. I don’t think tech compares favourably to other sectors because it is a known fact that in Africa, the percentage of companies started or run by women is actually usually higher than in more mature markets.  But this isn’t the case in tech. 

This means that the fact that it’s been flat for the last few years probably hints at something, a fundamental cause, that needs to be unlocked. This is because the ecosystem has been making a lot of effort to increase diversity. Women have gone to create the right groups, we now have a few funds dedicated to female entrepreneurs, there’s been a lot of advocacy, and a lot more emphasis put in the VC space on funding women founders. And it’s still not moving the needle. So it means we have to do more than what we’re doing. 

It probably correlates to lower female involvement in STEM or the correlation between women having technical skills and starting companies. These two need to come together for us to see more women-led startups founded. 

We need to continue removing the bias in the ecosystem because tech investors have been mostly men-lead teams. Now everybody has been making some effort to balance this out; lot of the VCs are hiring more women to run their operations in Africa. 

In all, the reason is probably deeper and people need to dig further and find out.

DA: Looking ahead, what do you expect to happen in 2023?

TD: Last year was difficult for everybody across the board; the deal flow was low because a lot of companies chose not to raise in this environment. It means there is a lot of pent-up demand for capital that we hope will drive better deal flow this year. Investors who are holding out, waiting for the market to land somewhere to know where the valuations will adjust, by now have had enough time to know this and should be ready to deploy. 

We expect 2023 to be better in terms of the number of transactions. I don’t know what it will look like in terms of the amount of funding; this is impacted mostly by downturns. We say, among investors, that this is a very good environment to deploy capital because the companies are cheaper. Many startups have gone through a few quarters of economic downturn and most of them have adjusted in terms of efficiently running their businesses and using the capital. So it means cheaper and better companies. 

The lagos-based programme which is focused on building early-stage African fintech and proptech startups has chosen a cohort of 10 Nigerian and 2 Kenyan startups, with 50% female CEOs.

Startups that applied for this programme went through several interviews with members of the Techstars global team, and a final interview with Techstars Managing Director, Oyin Solebo and a 15-member screening committee. Some members of this committee included Ashim Octerra Managing Partner, Octerra Capital; Olumide Soyombo, Partner at Voltron Capital; Charlene Chen, former COO of AZA Finance, among others. 

“After a competitive application process, we have chosen entrepreneurs who have the capacity to be exceptional founders, startups that have the potential to be industry leaders, and a cohort that is collectively capable of bringing innovation and change to Africa and the world,” said Solebo.

The programme which began in December 2022 will see the 12 startups go through a 13-week bootcamp programme where they’ll be taught and mentored on the rudiments of building a startup. The sessions are delivered in a hybrid manner with the startups participating in physical sessions at least three times a week.

“We’ve curated content and sessions based on what every founder needs and their specific market,” Solebo said. “The startups will attend sessions on understanding your customer and your unique value proposition, creating a financial model, scaling, recruiting and retaining top talent.”

The programme which began in December has hosted speakers such as Tunde Kehinde, Co-founder and CEO, Lidya (previously Co-founder & Managing Director, Jumia); Bode Abifarin, COO, Flutterwave;  Amandine Lobelle, COO, Paystack and many others. 

In addition to this, the startups have access to 95 industry experts as mentors. Within the first month of the programme, the startups had two weeks of speed dating sessions (mental magic) with the 95 different mentors to select who they wanted to work with to help accelerate their business.

The startups also receive the Techstars standard deal of $120,000—$20,000 equity upfront and an optional $100,000 convertible note investment in exchange for 6–9% equity.  

“As ARM partners with Techstars to launch an accelerator program that provides funding, mentorship, and access to networks and resources, our goal is to unearth the next set of Unicorns out of Africa,” said Ina Alogwu, Group Director, Digital Transformation, ARMHoldCo.

This inaugural programme ends in March with a demo day event where the startups are invited to pitch their product to investors and provide a demo.

Meet the 12 startups

alphabloQ

alphabloQ is a real estate investment platform founded by Trevor Kimani and John Mbui. The startup’s mission is simple – to reduce the entry barrier for real estate investors by enabling investors to purchase a fraction of income-generating properties.

Peppa.io

peppa.io, founded by Banky Alao, Bridget Yadua-Soremekun and Emmanuel Obute, is making it safer to buy on social platforms for Africans through the use of payment protection.

CDcare

CDcare is making it easy for Africans to own gadgets, appliances, cars and more at zero interest, through smart installment plans. The company was founded by Tobi Odukoya and Deji Farohun.

Cladfy

Founded by Ebby Gatamu and Kibe John, Cladfy provides microfinance lenders with credit profiling, digitised loan management, and access to affordable, reliable financing.

Flick

Flick is building PayPal for Africa; enabling users to connect multiple bank accounts and pay directly from one source, making payments 7x faster. Ruth Olojedeand Dipo Gbadebo are the founders of the company.

Keble

Keble, founded by Emmanuel Oballa, Agulanna Josemaria, Adebisi Borokinni and Valentine Offiah, enables Africans at home and abroad to purchase fractional shares of global real estate for as low as $10.

Keza Africa

Keza is powering smartphone financing by enabling people to buy brand-new and certified pre-owned smartphones on a flexible payment plan. Keza Africa was founded by Aisha Hussaini.

Salad

Salad was founded by Chikodi Ukaiwe and Seunfunmi Omotunde and is providing employees with access to financial services and benefits beyond their monthly paycheck.

Sidebrief

Sidebrief simplifies the process of starting and scaling a business across borders, with its one-stop solution for registration, banking and regulatory compliance. The company was founded by Eunice Olopade, Abdulwaheed Yusuf and Usman Sotunde, 

Towntalk

Towntalk, founded by Folake Edun, Disun Vera-Cruz and Tomiwa Erinosho, is building Area!–a protection platform giving companies peace of mind when moving goods and people from point A to B, by providing real-time location and behavioural analytics, vehicle tracking and access to insurance providers.

Vittas

Vittas is a digital lender for healthcare providers, using machine learning, partnerships and embedded 3rd party SaaS solutions to provide loans for the purchase of medications and medical equipment.Vittas was founded by Sulav Singh, Collins Uche and Eric Okemmadu.

Oystr Finance

Founded by Ifedolapo Lawal, Olusola Onajobi and Omotayo Iginla, Oystr is democratizing credit in Africa. The company provides lenders with an infrastructure to help them launch low-risk micro-loan products, grow their portfolios and expand into new markets in less than 30 minutes.

The event also doubled as the unveiling event of its new logo and brand name: Mcom. It’s important to note that these events weren’t the commercial launch as potential users cannot access or experience MCom’s 5G services yet. The company shared that the date for its commercial launch will be disclosed in the near future.

“As the second operator to launch 5G in Nigeria, Mcom expects more coverage for Nigerians and acceleration of broadband services,” Dr. Musbahu Bashir, chairman and founder of  MAFAB, said at the event in Lagos.

He shared that the deployment will commence in six cities: Lagos, Abuja, Port Harcourt, Enugu, Kano, and Kaduna. The timeline for the deployment in other cities will be shared later.

The governor of Lagos state, Babajide Sanwo-Olu, represented by the state’s commissioner for science and technology, Hakeem Fahm, applauded MAFAB for the 5G launch.

“I am now very much optimistic that we will achieve resounding success because of the opportunity that MAFAB 5G network represents,” Sanwo-Olu said. 

MAFAB Communications Limited was registered on July 8, 2020, according to the company’s website and TechCabal’s findings on the Corporate Affairs Commission (CAC) site.   It claims to provide and operate local Interconnect and International carrier services; there’s no information about clients on its website.

The company is led by Musbahu Muhammad Bashir, the chairman of the Althani Group, an Abuja-based holding company that oversees a group of companies, including Eman Homes & Estate, Althani Investment Limited, Salam Takaful Insurance, and MAFAB Communications.

5G is all about data

During the launch event, Adebayo Onigbanjo, the corporate communications manager, explained that the company, which wouldn’t be offering any 2G, 3G, or 4G services, would focus on providing data starting with the fixed wireless access market. A strategy that correlates with the fact that consumer spending on data will soon outstrip that of voice service. 

To achieve this roll-out, the company shared that it will rely on partnering and sharing existing telecom infrastructure to achieve nationwide coverage, although it didn’t disclose how much investment it has made in physical infrastructure. For its voice service, Mcom would leverage the national roaming strategy to ensure voice services across cities.

Within the next decade, the building became a shared workspace for young companies and went on to house successful companies such as Google, PayPal, and Logitech.

The building, which was located in Silicon Valley, enabled the company to meet some of the world’s most notable startups at an early stage and invest in them, often collecting equity instead of rent for the use of the space.

In 2006, these early success stories led Saeed Amidi to create the Plug and Play Tech Centre, a global innovation platform, with the aim to connect early-stage investors, startups, and the world’s largest corporations.

Today, the company is an ecosystem, which has notably brought together over 50,000 startups and over 550 world corporations. As of 2021, Plug and Play had 1,500 active portfolio investments that have raised $9 billion in venture funding.

In Africa, Plug and Play is one of the most active investors. The firm did 18 deals in 2022—an average of two deals per month—investing an average of $100,000–$150,000.

In this edition of Ask an Investor, I spoke to Diego Arias, an investor at Plug and Play who invests across multiple verticals and markets in Africa. 

After a two-year stint at Wikifactory, a Spanish-based hardware startup, as growth lead, Arias joined Plug and Play in January 2021 as a healthcare analyst. In September 2021, he joined the Morocco office to work on their Smart Cities programme and launch a healthcare and agritech programme. More recently, he helped set up Plug and Play’s Cairo office.

Over the course of the conversation, we discussed Plug and Play’s multifaceted approach to supporting startups and innovation on the continent. 

Daniel Adeyemi: What’s Plug and Play? Is it a VC firm, an accelerator or what?

Diego Arias: Think of Plug and Play as three separate spheres—corporate innovation, acceleration, and investing—that are all interconnected. In simple terms, we’re a one-stop shop for innovation.

On the one hand, Plug and Play is a corporate innovation platform. We help connect corporate partners with startups, and we help them access and de-risk innovation by building a completely free accelerator programme for startups under the verticals that they focus on. 

We work with different corporations such as the OCP group, the largest fertiliser company in Morocco, the ministry of IT, and the National Bank in Egypt. In South Africa, we work with the World Bank Group, and Habitat for Humanity, with a focus on sustainability and shelter tech.

This is how the first bucket, which is corporate innovation, connects to the accelerator aspect. I don’t like to use the accelerator word to describe us because we’re not really an accelerator. It’s different. We don’t do cohorts like Y Combinator, we don’t take equity, and we don’t take fees for this programme. We’re completely free for startups. 

This gives us the flexibility to work with startups that are either more mature or looking to expand to a new market. For example, we’ve helped a Series B company to expand into Egypt, and we also help accelerate startups that have raised less than $200,000. 

DA: When you say it’s completely free for startups, who pays for it?

DA: The corporations. Let me give you one of our favourite case studies: Mercedes partnered with Plug and Play in Germany to run an accelerator programme solely focused on automobile technology. One of their key focus areas was getting better voice recognition technology for their cars. We helped connect them with a startup that’s now providing that voice recognition service for them. 

We work with corporations and help accelerate startups in their focus areas. And then we’re also able to invest in the best ones. That’s why the programme is free. We have the flexibility to work with multiple companies or multiple startups across different stages, but we’re not bound to promise them that we’ll invest. 

On the investment side, our ticket size is flexible, depending on the stage and round size. But we’re able to move fast and then bet on the companies that we have market validation and demand from either the market or our corporate partners. We invest out of two pools: the family offices and funds under management. Our family offices do early-stage deals, and then we have specific funds like our industry-specific Future of Commerce fund or $25.5 million mobility and logistics fund.

DA: Wow, that’s a lot going on!

DA: Yeah I can imagine, but for us it’s a great way to create value across segments because in a way if you think about these three buckets, startups can come from anywhere and move across the buckets. For example, we can start working with a startup to accelerate it and then we notice them a bit too early, so we introduce them to a corporation, so they can sign up for a pilot programme to offer their services. If it converts and we think the startup has potential, we can go on to accelerate or even invest. It could also go a different way where we invest in a startup, accelerate it to a certain stage, and then introduce it to a corporation. We have endless possibilities to create value. The same approach applies in expansion across the continent where we can take companies from Morocco to Egypt to South Africa. 

With our healthcare and agritech programme in Morocco, we took companies from South Africa, to Nigeria and from Kenya to Turkey. 

DA: Do the different funds you have target different sectors?

DA: Yes, there are different programmes. Our Morocco and Egypt offices are focused on smart cities while South Africa is focused on sustainability, ending plastic waste and access to sustainable housing. In Egypt, we have more flexibility to do mobility or access to healthcare or financial inclusion. Of course, Plug and Play has about 48 locations globally, so there are global programmes such as the global healthcare programme. We also have an aerospace programme in Italy.

DA: What type of startups do you invest in?

DA: n Africa, we’re industry-agnostic, so we’re able to work with companies in any sector, with the most common being healthcare, fintech, retail and logistics sectors.

We’re looking for startups that are solving a problem that can scale. We ask questions such as, how big is the problem, and how much value can we provide? Is this a proven solution? Can we help scale this? What does the traction look like?

Then we look at the team and what the fundraising looks like. We don’t lead rounds, so we really collaborate with other investors. Because we’re very active, we did about 20 deals last year; some of them were not announced.

Another thing we really look into is providing value and collaborating with other co-investors, and then seeing how our network can be used to support these companies. For me, one of the most important things is to look into building a portfolio. 

For example, when investing in a company that does KYC, we’re also going to look for fintech companies that require KYC services and can integrate with this portfolio company. It’s a way of double-betting and vetting. 

DA: You don’t lead rounds—why?

DA: When I say we don’t lead rounds, I’m mostly referring to establishing the investment terms and investing the larger volume.  

Ultimately, we are a very high-volume fund. In Africa, we’re among the most active investors. Globally, we make between 200–300 deals every year. We don’t have the capability to lead rounds with that deal volume, unless you’re like Tiger Global which outsources its due diligence to Bain. We’re able to invest across multiple industries and geographies, and then follow on with our growth funds, so that we can then double down on the winners and help them with corporate partnerships.

If I get a deal that is promising and is in a market that we’ve never invested in, we tend to rally around to get other investors to invest.

When I led our first investment in Cameroon in a startup called Waspito, we began speaking when the round was about 40% filled up and I helped in sharing with other investors. When the round reached 75% completion, we invested. It ended up being an oversubscribed round!

DA: How long does it take to decide on whether to invest in a startup?

DA: It depends on the scenario. In a best-case scenario, where we love the idea and the team, and the round is about 75% complete with a familiar lead investor, we can jump from the first call to commitment, excluding legal due diligence, in three to four weeks. The fastest I’ve done is two days, which was a rare outlier.

But in another scenario, if we meet a startup and really like them, we can help connect them with other investors to help drive a bit of excitement and help them expand to a new market. All of this can take about two or three months. This is a medium-case scenario.

On average, I would say we take four to six weeks for due diligence.

DA: You mentioned helping companies to expand into new markets. What’s the catch?

DA: We don’t get a cut. We’re ecosystem builders and this ties directly to our work of building a stronger startup ecosystem. We work with corporations to help them access startups. The stronger the startup ecosystem is, wherever we work, the stronger our value offering is. So we’re actually de-risking our own future by helping startups expand to new places. When we opened in Morocco, the country was receiving less than $15 million a year in VC investment in 2020. The following year the amount increased to $30 million.

The fact that the amount doubled, which was mostly driven by one of our portfolio companies that raised a lot of this money, implies that we’re building a stronger offering and helping the ecosystem develop. 

This company that has attracted international investment is generating visibility for other companies that will be coming up one or two years later down the line. The head of product at that company can later leave and found another startup, which will also attract funding. 

So that’s why we’re able to work with startups at no cost. I know it sounds like there’s a hidden trick, but there’s no trick because, ultimately, we work with corporations to help startups. 

DA: What are some red flags you look out for?

DA: We ask ourselves, does this opportunity have the potential to scale? Can this provide a 10–20x return? We see great entrepreneurs working on things that make a lot of sense but they just don’t provide a potential case for a venture-scale return. A 2x return is not enough. We’re not private equity, we’re not investing $100 million; we’re investing $100,000 

We have to see a clear path to exit and how it can fit within our portfolio.

We also value straightforward communication. For example, I remember speaking with this startup about whom we were on the fence about whether we’d invest or not because we were still doing due diligence. Then they told another VC that we were committed, which wasn’t the truth. That was a turn-off. We don’t invest in hardware or biotech—projects that require many clinical trials. 

The startup also has to be stable financially. We don’t want to invest in companies that raised about $500,000 and they have about a $100,000 burn rate; it makes no sense. 

We need to see that everything checks out from a financial perspective. Reasonable burn rate, clear cap table, no heavy debt, and no over-dilution. 

This growth can be attributed to many factors such as the country’s stable political climate; strong macroeconomic factors, with its economy growing by more than 6% per year from 2014–2018; and different programmes by the government to support entrepreneurship notably Délégation de l’Entrepreneuriat Rapide (DER).

Délégation de l’Entrepreneuriat Rapide (DER), which loosely translates in English to General Delegation for Rapid Entrepreneurship of Women and Youth, has been described by many as one of the catalysts behind the growth of the Senegalese entrepreneurial and tech ecosystem.

“DER has created a template for other African countries who want to stimulate entrepreneurship,” Haifa Ben Salem, a programme officer at the International Trade Centre, told TechCabal.

The state-backed investment and support programme, which started in 2018, has invested over 60 FCFA billion (~$10 million) in over 400 startups including logistics startup PAPS, e-commerce platform Elmadeal, B2B agri-food platform Afrikamart, and B2B SaaS platform LAfricaMobile. What makes this programme effective and different from many others? 

A brainchild of President Macky Sall’s government, the Senegalese president has described the programme as one which “stems from an act of faith, proof of pragmatism and a perpetual quest for efficiency in public action, draped in a republican ideal”.

A listening ear that actually listened

In 2014, when Malick Diouf started LAfricaMobile, a platform to facilitate communication between companies in Francophone Africa, there was little to no knowledge of startups in Senegal.

“Back then there was nothing. The different regulatory authorities didn’t fully understand what a startup means as well as the risks and difficulties associated with running one,” Diouf told TechCabal over a call. “There were no startups, incubators or accelerators. It was only in 2016 that the hype around startups began here.” 

After building an MVP version of the product and attaining product-market fit, it was time to raise money and there weren’t any viable options available in Senegal. So Diouf turned to friends and people in France to raise capital. 

“These people didn’t know much about Senegal but they trusted me. They didn’t really give the money to the company but instead gave it to me, Malik,” Diouf said.

The initial capital raised helped get LAfricaMobile off the ground, but a few years later the company needed to raise more money to scale.  

In 2018, Diouf heard about the DER project. Unlike other programmes, he noticed that something was different about this one: they listened.

“What set DER apart from others was that they didn’t come to say this is what we want to do. They came with a listening ear asking entrepreneurs for the obstacles we faced, “ Diouf said. “They told me when they came to me that they’re not here to make money but to help.  However, they asked for some form of commitment and guarantee from us too.”

For Diouf, who needed additional funding, it was perfect timing for him and many other entrepreneurs with insufficient funds to scale their businesses. Banks, which were the main source of funding in Senegal, weren’t keen on funding startups because their business models were unconventional, according to Diouf. 

Diouf’s company received $40,000 in debt funding from DER which he used to grow his business to a point where he could raise funding from investors. 

“With the $40,000 we were able to meet some investors and show them that we have people investing in us. This made them take us more seriously and help us raise $500,000,” Diouf said.

The funding was crucial to building out the product and hiring great people to sell the product.

“We had built a great product and focused on that at the beginning of the company, but we realised we needed to sell the product more, even to clients in other countries,” Diouf said. “Finding a good salesperson costs a lot of money and it’s a competitive market.” 

After this fundraise, LAfricaMobile, which started in Senegal, expanded to other neighbouring francophone African countries such as Mali, Guinea Conakry, Guinea-Bissau, Mauritania, Côte d’Ivoire, and Benin. It also helped the company multiply its revenue by a factor of six within two years, according to Diouf.

Less than half of the startups funded have shut down

LAfricaMobile is one of 415 companies that DER has invested in within the last five years. The programme is sector-agnostic, investing between 1 million CFA ($1,500) to 50 million CFA  ($100,000). This funding is often through debt at low interest, quasi-equity, or equity.

“We invest at an early stage, and once these companies get that financing, they can get other investors with higher tickets,” Papa Mady Sidibe, an investment officer at DER told TechCabal.

The programme also provides support such as integration into other programmes and accelerators, business development opportunities and also trips to international conferences like VivaTech through local partners such as the Startupbootcamp, and LaStartup Station. Companies backed by DER also have access to use the organisation’s office space for work or events. 

These startups can be funded multiple times by DER. “The only condition we require is that they pay back the money that they were given, and they’ve made significant progress for us to be comfortable with giving them more money at a later stage,” said Sidibe.

Fifty-four percent of African startups founded between 2010 and 2018 have shut down, according to the 2020 Better Africa report. Over the past five years since the programme commenced, less than half of the startups’ DER funded have shut down, according to Sarietou Dieng, a business analyst at DER.

“This failure rate is common among startups who sometimes don’t have access to funding,” Dieng told TechCabal. “We try to support them by giving them financing at a very early stage, but if they don’t have the capacity to get further investment from elsewhere, the startup might end up dying.” 

A one-stop shop for startups

DER’s decision to invest small sums in startups is also noteworthy. Despite the presence of the investment firms such as Partech and Orange ventures in Senegal earlier on, there was a mismatch between their offering and what the Senegalese startups needed. 

“These big VC firms came offering $1 million-size cheques, but for startups, in a small country with less than 15 million people it was too much for us. We didn’t need that much in the early days,” Diouf said. “On the other hand, DER came and quickly provided the $10,000 or $100,000 that many entrepreneurs were asking for to accelerate their startups.” 

This gave a signal to other investors that there was activity in the Senegalese ecosystem and influenced them to provide smaller cheque sizes. Beyond funding, DER became a one-stop shop for people with entrepreneurial ideas in Senegal.  The state agency takes an ecosystem-building approach backed by a strong belief that entrepreneurs operating in strong ecosystems can grow faster and better than those in unstructured environments.

“Now all startups in Senegal know that if they have a problem they can go to DER. Even investors who’re looking for reputable startups to invest in can now find these startups through DER,” Diouf, said.

For Lin Deejean Yun, a partner at Transcendance VC who’s based in Senegal, one noteworthy attribute she’s looking out for among Senegalese startups that pass through DER’s programme is a distinct business model that’s not reliant on lavish funding.

“While DER is doing a wonderful job in showing how a country that wants to build competent entrepreneurs can go about it. They need to showcase a few successful companies that can generate profits and grow without first needing to pump in a lot of money like the conventional silicon valley model because we already have tons of them in Asia, Europe and the US,”  Dejean Yun said. “Investors don’t need to come here to get that.”