Tag: africa

How Mobile Money Changed Africa

Venmo, Cash App, and Zelle are familiar names in the world of mobile-based digital payments in the West, having revolutionized how money is transferred and received by millions of people.

But did you know that Africa has been ahead of the game with its own mobile money systems since as far back as 2007?!

That’s right.

Today, we take you on a journey of how Africa became the biggest mobile money player in the world.

Where it all began

Once upon a time, not too long ago, accessing financial services was a challenge for many Africans. Unlike in the U.S. or Europe, traditional banking services were often very limited, especially in remote and rural areas.

But then mobile money.

In 2007, Safaricom, a leading mobile network operator in Kenya, launched a mobile money service called M-Pesa. Little did they know that this innovative concept would spark a digital revolution that would sweep across the continent.

M-Pesa, meaning “mobile money” in Swahili, allowed users to save, send, and receive money using just their mobile phones. This groundbreaking innovation proved to be a game-changer, enabling people without bank accounts to participate in the formal financial system.

In 2007, Safaricom, a leading telecommunications company in Kenya, launched a mobile money service called M-Pesa. Image credit: African Markets

The initial idea behind M-Pesa was to create a convenient way for Kenyans to transfer money securely. The service quickly gained popularity, as people in remote areas, where traditional banking services were scarce, embraced it as a means to conduct financial transactions with ease.

By 2011, over 50% of the Kenyan adult population had an M-Pesa account, rising to 90% in 2016.

In no time, mobile money took root and started to grow, not only in Kenya but also in neighboring countries.

M-Pesa was launched in Tanzania the following year and is now present in at least 10 countries.

So, what made mobile money so popular?

Well, let’s unravel its magic!

Imagine a scenario: a hardworking individual in a rural village wants to send money to their family in the city.

Historically, this would involve a long and costly journey, with the risk of loss or theft. But with a mobile money account, a few taps on a phone screen can instantly transfer funds to their loved ones, efficiently.

One of the key factors that contributed to the rapid adoption of mobile money was its simplicity: all you needed was a basic mobile phone, and suddenly, you had a bank in the palm of your hand.

No more long queues or complicated paperwork. Money transfers could be done with a few simple clicks.

For deposits and withdrawals, mobile money agents, often found in local shops, act as the bridge between the digital and physical worlds, allowing users to convert cash into digital currency and vice versa.

An M-Pesa agent attends to a user. Image credit: HBS Digital Initiative

By 2010, M-Pesa had acquired 10 million active users and by 2016, it served almost 29.5 million active customers through a network of more than 287,400 agents. In the same year, the service processed around 6 billion transactions, peaking in December at 529 transactions every second.

The success of M-Pesa in Kenya sparked a wave of enthusiasm. As word spread about the convenience and reliability of mobile money, its impact began to reverberate throughout the continent.

Impressed by the service, other African countries eagerly jumped on the mobile money revolution, building theirs in M-Pesa’s image.

Over the next few years, the service spread to countries like Uganda, Ghana, Rwanda, and South Africa as mobile network operators and financial institutions started realizing the immense potential of mobile money.

MTN launched its MoMo service in Uganda in March 2009 and in Rwanda in February 2010. Telesom ZAAD in Somaliland in 2009 and Hormuud launched EVC Plus in Somalia in 2011.

By 2011, more than 100 mobile money services were operating in Africa, reaching people who previously had limited access to formal financial services.

Africa continues to lead global adoption

Fast forward to today, more mobile money services have emerged in Africa while mobile money accounts and transaction value on the continent continue to skyrocket.

Africa accounted for up to 70% of the world’s $1 trillion mobile money value in 2021 after mobile money transactions on the continent jumped 39% from $495 billion in 2020 to $701.4 billion.

Last year, that rose a further 22% to a jaw-dropping $836.5 billion (bigger than the GDP of Nigeria, Africa’s largest economy!) but its share of the global $1.26 trillion mobile money value fell to 66.4%.

Per GSMA’s 2023 State of the Industry Report, mobile money is growing faster in sub-Saharan Africa than in other regions except for the Middle East & North Africa.

However, it’s not just about the numbers

Perhaps its greatest achievement, mobile money has brought financial inclusion to millions of Africans who were previously excluded from the formal economy.

Data from the World Bank shows that around 45% of people living in Sub-Saharan don’t have access to a bank account. But mobile phones are widespread across the continent and are helping to bridge the financial gap.

As of 2022, Sub-Saharan Africa had up to 763 million registered mobile money accounts, more than double the figures in the next closest region, and more Africans now enjoy access to a whole range of financial services that were previously out of reach.

The innovative service has empowered women entrepreneurs, allowing them to take charge of their finances and contribute to their families’ well-being; facilitated access to education and healthcare; paved the way for exciting innovations such as mobile banking apps and digital wallets.

Beyond money transfers…

Mobile money services in Africa have also quickly evolved beyond simple person-to-person money transfers and cash in-cash out.

Providers have continually expanded their services, introducing innovative features to meet the diverse needs of their users.

For instance, mobile micro-loans and savings accounts empower individuals to access credit and save money, fostering entrepreneurship.

In Kenya, M-Shwari allows users to save money and access micro-loans directly from their mobile wallets, creating opportunities for entrepreneurs and small business owners.

Partnerships between mobile money providers and other companies have expanded the range of services available, with users now able to pay their electricity and water bills via mobile money and purchase airtime from network operators.

Health organizations have integrated mobile money into their operations, enabling payments for medical services and health insurance premiums.

Mobile Money also promises to transform cross-border money transfer and international remittances in Africa, driven by companies like MFS Africa, Mama Money, and Paga, to name a few

More innovation on the horizon

Despite its transformative effect across the continent so far, it’s clear that the mobile money revolution in Africa is far from over.

Innovations continue to emerge, including interoperability between different mobile money platforms, making transactions even more convenient.

The potential for digital lending, savings, and insurance services on mobile money platforms holds great promise for the future.

As the mobile money landscape continues to evolve, so is the competition. Telecom companies, financial institutions, and fintech startups are all in the race to capture a share of this rapidly expanding market.

This healthy competition will only lead to improved services, lower transaction costs, and increased accessibility for users.

The growth of mobile money in Africa is nothing short of awe-inspiring.

From humble beginnings in Kenya, it has spread like wildfire, empowering individuals, driving economic development, and transforming societies across the continent.

As mobile money continues to evolve and expand its horizons, it remains one shining example of how technology is being harnessed to drive positive change in Africa.

December 23, 2023
CleanTech Drives FDI Flows to Africa

Africa’s CleanTech landscape is experiencing an unprecedented boom, fueled by a combination of abundant renewable resources, a growing green consciousness, and significant international investment.

But clean energy investments remain concentrated in just a handful of countries while much of the continent’s clean energy potential remains untapped. The IEA estimates that Africa requires $2 trillion in investment to close this gap.

Foreign investors are keenly aware of this opportunity. In 2022, the sector led foreign direct investment into Africa, according to the Africa Attractiveness Report by global consulting giant EY, further cementing the technology industry’s central role in driving investments into the continent.

Tap here to read our summary of the report

December 10, 2023
Why Should You Invest in Africa?

Africa is not only rich in cultural heritage and breathtaking landscapes but also offers incredible investment opportunities.

But investing in the continent requires patience as strategies that succeed in one country may not work in others.

In this post, we explore five compelling reasons why you should consider investing in Africa, even if you reside outside the continent.

A young and fast-growing market

Africa has over 1.3 billion people and is the world’s youngest region, with almost 60% of its population under 25 years old while the median age is 19.

The continent also boasts a rapidly growing population and an expanding middle class. According to the World Economic Forum, by 2030, over 40% of Africans will belong to the middle or upper classes, and there will be a higher demand for goods and services.

By that time, household consumption is expected to reach $2.5 trillion, more than double that of 2015 at $1.1 trillion.

With increasing urbanization and rising disposable incomes, it presents an untapped market ready for investors to tap into a vast consumer base, which offers tremendous growth potential across various sectors.

Innovation and entrepreneurship

Africa is witnessing a remarkable surge in innovation and entrepreneurship. From fintech startups to renewable energy solutions, African entrepreneurs are harnessing technology to solve local challenges and create scalable businesses.

The continent has produced at least seven unicorns—private companies worth $1 billion or more.

One such startup is Flutterwave, a Nigerian fintech unicorn revolutionizing digital payments across the continent. Another standout is Andela, a pan-African company connecting skilled software developers with global companies.

These innovative startups demonstrate Africa’s increasing prominence in the global tech landscape, fueling economic growth and driving technological advancements across the continent.

By investing in African startups and venture capital funds, you can support these innovative minds while potentially benefiting from their future successes.

Rapid digital transformation

Africa has witnessed a rapid digital transformation in recent years, revolutionizing various sectors.

With increasing internet penetration, mobile connectivity, and innovative solutions, the continent has embraced technology in all facets of life.

According to GSMA, Africa will add nearly 100 million new subscribers by 2025, bringing the total number of subscribers to 613 million – almost half of the region’s population.

More so, the contribution of the mobile industry to its GDP will grow to almost $155 billion.

From mobile banking to e-commerce platforms, Africa’s digital revolution is empowering individuals, bridging the digital divide, and creating opportunities for socio-economic development across the continent.

The abundance of natural resources

Africa is blessed with an abundance of natural resources that contribute significantly to its economic potential.

With vast mineral deposits, the continent holds a substantial share of the world’s reserves of gold, diamonds, platinum, and other precious metals. It is also rich in oil and gas resources, with countries like Nigeria, Angola, and Algeria being major producers.

Additionally, Africa possesses extensive reserves of timber, fertile agricultural land, and a diverse range of flora and fauna.

These resources present immense opportunities for economic growth, industrial development, and foreign investment.

With the right investment strategy, you can benefit from the continent’s rich resources and contribute to its sustainable development.

Stronger and more dynamic economies

Africa is experiencing a remarkable shift towards diverse and stronger economies. With a focus on innovation, entrepreneurship, and sustainable development, several African nations are making significant strides.

The continent has witnessed a surge in technological advancements, fostering digital transformation and leapfrogging traditional infrastructure barriers.

Countries like Nigeria, Kenya, and South Africa have emerged as tech hubs, attracting global investments and nurturing homegrown startups. African governments are also supporting sectors like agriculture, renewable energy, and manufacturing to stimulate economic growth and reduce dependency on commodities.

Regional collaborations, such as the African Continental Free Trade Area (AfCFTA), are promoting intra-African trade, opening up new markets, and encouraging economic integration.

Africa’s total exports are projected to reach approximately $952 billion by 2035, driven by the growth of regional trade and enhanced connectivity, according to a new report by Standard Chartered.

This momentum towards diverse and stronger economies is poised to unleash Africa’s immense potential, empowering its people and offering investors exciting opportunities across the continent.

Investing in Africa presents a world of opportunities for those outside the continent.

With an untapped market, abundant resources, growing infrastructure, a vibrant entrepreneurial ecosystem, and favorable policies, Africa is poised for economic growth and development.

Disclaimer: This material has been presented for informational and educational purposes only. The views expressed in the articles above are generalized and may not be appropriate for all investors. The information contained in this article should not be construed as, and may not be used in connection with, an offer to sell, or a solicitation of an offer to buy or hold, an interest in any security or investment product. There is no guarantee that past performance will recur or result in a positive outcome. Carefully consider your financial situation, including investment objective, time horizon, risk tolerance, and fees prior to making any investment decisions. No level of diversification or asset allocation can ensure profits or guarantee against losses. Articles do not reflect the views of DABA ADVISORS LLC and do not provide investment advice to Daba’s clients.

October 16, 2023
Why Big Tech is Building Data Centers in Africa

A rapidly growing digital economy in Africa is drawing investments from the world’s biggest tech companies into the continent’s data center market, which is largely untapped.

For over a decade, Africa has been experiencing a massive boom in mobile internet adoption, outpacing other regions globally.

This fast-growing mobile economy has enabled the emergence of several mobile-led tech solutions on the continent, such as mobile money and online shopping.

And the startups providing these services have drawn attention, and billions of dollars in venture funding, from the world’s biggest tech companies and investors.

In 2022 alone, African startups secured $6.5 billion in venture funding, an 8% increase from the previous year, while global VC investments declined -35%.

But it’s not just startups and software solutions pulling investments in Africa’s digital economy.

Foreign capital has also flown into digital, hardware infrastructure, especially data centers.

Oracle, Microsoft, Amazon, Equinix, and Huawei are some big names building or buying data centers across Africa.

Regional operators such as MainOne, Africa Data Centers, Raxio, Icolo.Io (Digital Realty), and IXAfrica as well as the likes of Telecom Egypt, NTT Global Data Centers, Paratus Namibia, Rack Centre, Teraco Data Environments (Digital Realty), and Wingu are also big players in the space.

In 2022, the market also witnessed the entry of investors like Vantage Data Centers, Airtel Nigeria, Cloudoon, Open Access Data Centres, and Kasi Cloud.

For instance, Open Access Data Centres opened more than 20 data center facilities in South Africa and Nigeria.

Together, they’ve invested well over $4 billion in data center projects across Africa since 2021 at least.

But, what exactly are data centers, and why are big tech players racing to build them in Africa?

US-based Equinix acquired West African data center and connectivity solutions provider, MainOne, for $320 million in 2022. Image credit: The Guardian Nigeria

The backbone of the digital world

The first things that come to mind when we hear words like “online”, “digital”, “digital world” or “technology” are probably the internet, social media, mobile apps, business software, etc.

But have you ever wondered where all the information on the internet we access through smartphones or computers is stored?

Well, data centers are like giant warehouses that store and protect all the data we see online.

They’re super crucial for the internet to work smoothly and are the major enablers of online services—think digital banking, social media, streaming services, video calls, and about everything we do online.

Just as a library stores and organizes books for easy access, data centers store and manage an immense amount of digital information.

And with the increasing amount of information and data to store as the digital economy continues to grow rapidly, they have become even more critical.

How does this concern Africa?

There’s a massive opportunity to build these data centers on the continent and make lots of money from it!

Nairobi-based East Africa data center, a subsidiary of Liquid Telecom Kenya. Image credit: ESI Africa

The data center opportunity in Africa

Emerging technologies such as AI, IoT, or cloud computing are not new in Africa.

But there has been a recent surge in the adoption of such enterprise digital solutions, especially among mid-to-large businesses across several sectors—a trend mainly induced by the Covid-19 pandemic.

In South Africa alone, the use of cloud computing is expected to grow 25%, generating up to $1.5 billion by 2024.

And seeing this growth, global cloud services providers such as Amazon Web Services, Microsoft, IBM, and Oracle are expanding their presence in Africa with new cloud regions being set up.

Be it enabling consumers to buy food or clothes online or make money transfers via mobile apps, these activities generate huge volumes of data that need to be stored adequately.

This, in turn, creates a higher demand for data centers.

For investors, this presents a great opportunity to fill significant gaps, as most of Africa’s data is currently stored outside the continent.

That leads to slower connections and data privacy concerns.

Messages sent from the continent’s southern tip to Europe and back can take as long as 180 milliseconds, causing frustration for individuals trading stocks or playing video games, per The Economist.

But significant multi-billion dollar investments in data centers are set to change this scenario.

These investments will significantly reduce internet latency and bring it much closer to African users, paving the way for a remarkable advancement in the continent’s digital economy.

More so, African governments are keen to build their data centers to ensure data sovereignty and stay competitive in the increasingly AI-powered world.

How a data center looks from the inside. Image credit: CIO

Investments in data centers skyrocket

As investors increasingly realize the opportunity in Africa’s data center market, the continent has seen a flurry of activities in the space over the last few years.

This ranges from the launch of new or expansion of data centers to millions of foreign investments pouring into operators.

Data from ReportLinker, an AI-driven market intelligence platform, indicate the sector recorded up to $2.6 billion in investments in 2021, including $200 million in debt and equity raised by WIOCC.

Around $5.4 billion is expected to be invested in the next four to five years alone but going by investment trends last year, the continent might smash those estimates!

In 2022, Vantage launched a $1 billion campus in Johannesburg to house three data centers.

Khazna Data Centers is entering Egypt with a $250 million hyper-scale data center.

And in April, Raxio Data Centres secured up to $170 million—from Proparco and the Emerging Africa Infrastructure Fund—for data center projects across multiple African countries.

Acquisitions are also growing…

Alongside huge capital raises, Africa’s data center market has also been seeing major investments in the form of mergers and acquisitions.

One such example is the $320 million acquisition of West Africa operator MainOne by US-based Equinix in 2021.

In the same year, Digital Realty bought Nigeria-based Medallion Data Centers and South Africa’s Teraco Data Environments.

Meanwhile, African Infrastructure Investment Managers (AIIM), a private equity firm, acquired Ngoya Etix Data Centers, all for undisclosed sums.

Most of these deals go unnoticed as digital infrastructure such as submarine cables, fiber optics, telecom towers, and data centers belong in the not-so-shiny segment of the tech ecosystem.

But they’re crucial to the continued functioning of the digital world as most people know it.

Impressive figures, but not nearly enough

Despite the investment deals and figures, Africa still needs way more data centers to match other continents than is currently being built.

Currently, Africa has 17% of the global population but only about 2% of all colocation data centers globally—quite a gap!

For a better perspective, the continent has only 0.1 data centers per million internet users, far behind the global average of 0.9.

And as of last year, it only had five more data centers than the Indian city of Mumbai alone.

To reach the global average, Africa needs around 450 more data centers and 1,500 more to match North America or Europe.

In addition to the growing demand for cloud-based services among businesses, more of these facilities are needed to support Africa’s growing digital population.

The existing data centers on the continent are also very much concentrated in a few African countries.

For instance, Nigeria, Kenya, and South Africa together host about 60% of sub-Saharan Africa’s commercial data centers.

The latter alone has the most data centers in the region and is expected to account for the bulk of Africa’s $5 billion data center market by 2026.

The major data center markets will continue to attract the lion’s share of investment into the sector.

But the good news is that smaller economies such as Ethiopia, Morocco, Algeria, Ghana, Cote d’Ivoire, Zambia, DRC, Namibia, and Rwanda are starting to attract noticeable funding.

They’ve received up to $700 million of capital investment annually for two years now, per research firm Xalam Analytics, which closely monitors the industry.

Big tech’s increasing investments in Africa’s data center capacity expansions indicate significant growth potential for the market.

And it comes as Africa’s digital revolution needs more capacity to support its growing smartphone and internet users, 4G expansion, and 5G rollout.

The increasing number of data centers across the continent also creates new opportunities for telecom players.

It’s a huge opportunity for investors that big tech companies are moving fast to capture, as the numbers show.

An exciting future

Amid a rapidly growing digital economy, we can expect more data center capacity expansion across various countries in Africa.

And as large numbers of data centers along with large power capacities come up, Africa can be called—and rightly so—the next frontier of the data center industry.

July 29, 2023
Orange CI IPO: A Lucrative Opportunity Through Daba

Daba, a ground-breaking mobile investment app in Africa, has changed the African investment landscape, particularly for retail investors. Its recent achievement of enabling individuals to participate in the December 2022 initial public offering (IPO) of Orange CI underscores Daba’s commitment to democratizing access to African investment opportunities.

The Orange IPO, a milestone in the African telecommunications sector, seemed initially exclusive to institutional investors. However, Daba, a leading African investment platform, bridged this gap. Through our user-friendly mobile investment app, retail investors effortlessly connected with the IPO. This access to private company investing in Africa promises rewarding dividends from the renowned telecom operator.

Users found navigating the IPO process on Daba’s mobile investment app a breeze. From registering interest to purchasing Orange shares, the simplified process negated complexities usually linked with such investments. As such, investing in African companies, particularly tech and fintech companies, has become more accessible.

“I couldn’t have participated in the Orange Cote d’Ivoire IPO if it weren’t for Daba. They offer unique African investment strategies and opportunities, and I am excited for more,” one user said. Another added, “As an Ivorian, Daba allowed me to invest safely and easily in one of my favorite companies before it went public.”

Now, with the announcement of dividends, retail investors who trusted Daba’s solution are anticipating substantial African investment returns. After realizing a profit dividend of 153.485 billion FCFA in 2022, Orange CI decided to offer 126 billion FCFA to shareholders. This allocation represents 82% of the group’s profit, promising each Orange CI share a net dividend of 752.76 FCFA. Given the share price of 9,575 FCFA on May 31, that’s a yield of 7.86%.

Daba’s transformative impact on the African investment landscape is significant. By democratizing access to IPOs, this innovative startup has leveled the playing field in African capital markets. It’s broken down barriers and opened a world of opportunities for those previously excluded from such ventures.

As dividends roll in, Daba continues to pave the way for retail investors in emerging African markets. Our platform allows anyone with a smartphone to capitalize on lucrative African investment trends and secure a brighter financial future.

Ready to join the future of investing in Africa? Download Daba, your gateway to investment opportunities in Africa, and start your investment journey today!

June 7, 2023
Raisons d investir dans les marchés émergents d Afrique 🌍
Le continent africain devient rapidement l’une des nouvelles destinations les plus prometteuses pour les investisseurs des marchés émergents.

En fait, depuis plus de 20 ans, le Forum économique mondial a identifié que plus de la moitié des économies à la croissance la plus rapide dans le monde se trouvent sur le continent. Avec des ressources naturelles abondantes, une main-d’œuvre jeune et de plus en plus éduquée, une stabilité politique relative et des perspectives indéniables de croissance économique, il n’y a aucun doute sur la vitalité pour les investisseurs.

De bout en bout, l’Afrique fait partie des rares marchés émergents à l’échelle mondiale ; l’expression, inventée par des économistes au début des années 1980, définit l’investissement dans les pays en développement. Comme toute décision d’investissement, il y a des risques inhérents, mais voici cinq raisons pour lesquelles notre direction croit que l’Afrique mérite une chance :
1. Potentiel de croissance 📈
Actuellement, l’Afrique représente environ 17% de la population mondiale, mais seulement 3% du PIB mondial. Ces données attestent non seulement d’un échec historique à exploiter le potentiel de développement du continent, mais mettent également en évidence les formidables opportunités à venir. Si l’Afrique continue de maintenir et d’accélérer ses réformes structurelles, beaucoup croient que le continent peut imiter la montée rapide de la Chine au cours des 50 dernières années.
1. Innovation 💡
Les révolutions industrielles, qu’elles soient entraînées par la vapeur, les chaînes de montage ou les ordinateurs, ont historiquement été lentes à balayer le continent africain. Cependant, l’ère de l’Industrie 4.0, de l’énergie propre, de l’intelligence artificielle et de l’innovation numérique promet d’être différente. Contrairement aux précédentes vagues de changement industriel, avoir une part dans l’ère numérique ne nécessite pas une expertise étendue ou des investissements massifs en capital. Au lieu de cela, les innovateurs et les entrepreneurs des marchés émergents sont en position de puiser dans les flux de talents et de connaissances numériques et de les convertir en biens, services et modèles commerciaux.
1. Valorisations plus basses 📉
Au cours de la dernière décennie, les actions africaines n’ont pas été une success story – du moins pas par rapport à des régions similaires. Les indices MSCI US et MSCI Developed World ont augmenté respectivement de 232% et 159% au cours des dix dernières années, tandis que le MSCI South Africa et le MSCI EFM Africa ex. South Africa n’ont gagné que 33% et 23%. Cela dit, certains se demandent si les actions africaines ont été à la traîne à cause de problèmes sur le continent. La réponse courte : pas vraiment. Cependant, cela présente une opportunité unique pour les investisseurs – une plus grande part de capital dans les entreprises dans lesquelles vous choisissez d’investir.
1. Diversification 📊
La diversification est la pratique qui consiste à répartir les investissements afin de réduire l’exposition aux risques associés à un seul type d’actif. Cette pratique vise à réduire la volatilité de votre portefeuille d’investissement au fil du temps. Si vous attendiez patiemment une opportunité d’investir dans des actions internationales, l’Afrique se présente comme une option digne.
1. Classe moyenne en augmentation 💼
Selon le Forum économique mondial, d’ici 2030, plus de 40% des Africains appartiendront aux classes moyennes ou supérieures ; en conséquence, il y aura une demande accrue de biens et de services. Sans parler du fait que la consommation des ménages devrait atteindre 2,5 billions de dollars (oui, billions), plus du double de celle de 2015 qui était de 1,1 billion de dollars. Une augmentation du capital ne peut signifier que plus d’opportunités de croissance économique et de développement à travers le continent, ce qui amène de plus en plus d’investisseurs à se tourner vers l’Afrique.

C’est là qu’intervient daba. Notre plateforme simplifiée fournit ce que nous appelons des « investisseurs de tous les jours » avec des analyses d’investissement et des ressources pour la création de richesse, afin de rendre leurs décisions d’investissement dans les marchés de capitaux privés et publics africains durables.

Pour en savoir plus sur daba et comment rejoindre notre communauté mondiale croissante d’investisseurs, visitez dabafinance.com ou connectez-vous avec nous sur LinkedIn !
May 22, 2023
An Angel Investor’s Guide to Startup Investing
With startups making the news and causing a ruckus for raising ridiculous amounts of funding and the VCs all swooping in to have a piece these last years, there has been a lot of talk on “startup investing” and how to go about it.

This article is here to help you break it down and thoroughly understand what it is and how to get the maximum benefit from it with daba.

Startup investing like a VC but cheaper

What is a startup?

A “startup” refers to an early-stage company founded and owned by one or more entrepreneurs, often with a new product or service and an untested business model. After finding a product-market fit, the goal is often to grow and expand rapidly, therefore, startups generally start with high costs and limited revenue. To achieve this, they look for capital from a variety of sources such as venture capitalists.

For a long time, investments in private companies like startups were reserved for ONLY accredited investors (people with a high net worth or an investment company e.g., venture capital firms) due to the large amounts required for startup investments and the high risk involved.

But with the advent of crowdfunding and law changes in lots of countries, people 18 and older can now invest in startups and gain high returns.

Why startups?

Startup investing, though risky like every other type of investment, has the potential to produce very high returns on investment if proper research and due diligence are done.

An example is Paystack, the Nigeria-based payments startup that makes it easy for businesses to accept secure payments from multiple local and global payment channels.

In 2020, US payment company Stripe acquired Paystack in a deal worth over $200 million. The angel investors who invested in the seed round of Paystack in 2016 made approximately 1,440% ROI, 14.4x their investment in just five years.

These show that although investing in startups could be risky, it could also be rewarding.

Now imagine if you had invested in 2017…..

How do you value a startup?

Before investing in a startup, it’s important to know the company’s value in actual figures. This provides insight into its ability to use the new capital to grow, and meet customer and investor expectations.

But deducing a startup valuation can be difficult. This is because company valuation is done using historical financial performance. However, most startups don’t generate profits or even revenue for a few years after starting, thus using traditional metrics for early-stage valuations doesn’t apply.

Generally, a startup valuation accounts for factors like your team’s expertise, product, assets, business model, total addressable market, competitor performance, market opportunity, goodwill, and more.

Valuing a startup is both an art and a science and some of the best ways to go about it include the cost to duplicate, market multiples, discounted cash flow, and valuation by stage.

Ways to invest in early-stage startups:
1. Equity investment: investors purchase shares in a startup at a fixed price
2. Investing in convertible securities: the investment amount is eventually converted to equity
3. Use a trusted investment platform like daba, sign up here for African startups
How do I choose startups to invest in?

Before investing in startups, it’s necessary to conduct your due diligence; a series of checks an investor might run on a startup to confirm that the investment is a good strategic fit and to identify potential red flags. Due diligence allows investors to make informed investment decisions and mitigate risk.

How do I get a return on my investment?

Startup investors can get returns when:

i) The company is bought by a bigger organization

ii) The startup goes public

iii) Dividend payments (if the business is successfully trading, and the founders are not looking for an exit via sale or IPO, they may reward investors by paying out regularly or through a one-time special dividend)

iv) Selling your stake in the company

v) Revenue from the day-to-day running of the startup

Startup investing is very risky (90% of startups fail in their first five years) but can be highly rewarding for investors willing to sit tight until the startup matures.

As the saying goes in finance; the riskier the asset, the higher the return. This is evident in the technology sector. An example is Cisco’s $3.7 billion purchase of AppDynamics, app management, and analytics tool in 2017. The latter was launched in 2008 and had been through five funding rounds, suggesting several investors got sweet returns from the deal.

It’s important to note that the return on investment you get as an investor depends on the size of your stake in the startup and the valuation it’s based on.

How to get started?

There is no need to worry about how to source for startups, their valuation, founders, how much to invest, and monitoring your investment, daba can help you get started.

daba has created a simple app to access custom investment strategies and build wealth by investing in Africa’s best private and public market opportunities.

In addition to this, daba offers resources help you sharpen your knowledge and make more informed investment decisions.

Register to get early access to daba here.
September 1, 2022
Social Commerce in Africa: The $28bn Opportunity
Today, a lot of buying and selling is done over social media platforms like Facebook, Instagram, Twitter, and WhatsApp.

In emerging markets, this brand of e-commerce (called social commerce) has grown over the years.

Facebook and Instagram are used for online shopping more than e-commerce marketplaces by Africans, per a 2019 GeoPoll survey, and social commerce accounts for the majority of e-commerce activity on the continent, according to GSMA and UNECA. Beyond just shopping on social media, buying decisions are also influenced by online social communities.

An underlying reason for this growth is that these channels don’t require much digital expertise and are easily accessible for less tech-savvy vendors in Africa.

Small-to-medium formal businesses also set up stores on social platforms to promote and sell to all sorts of buyers, where they already spend several hours per day.

Image from Later.com

By the numbers
- 3.6 billion: The number of people that use social networking sites globally
- 34%: The share of Africa’s population using the internet as of 2018.
- 233 million: Total Facebook subscribers in Africa as of December 2020.
- 18%: Average increase in the number of online shoppers in Africa between 2014 to 2018, against 12% globally
- 92%: SMEs in Kenya that used social commerce as of June 2020.
- 87%: E-commerce shoppers that strongly agreed that social media influenced their purchase decisions in a 2018 report.
The opportunity: Social commerce does a great job blending content sharing, messaging, and selling into one, helping businesses shorten the sales cycle. But most of the processes through which transactions happen—from product discovery and selection to order placements and payments—are crude and inefficient. Put simply, social networks aren’t built to support end-to-end online shopping experiences, meaning users need third-party support for the logistics and payments side of things.

6 Startups to watch and why

Image from daba

Many African startups currently offer solutions that help improve social commerce processes for vendors. Below are a few;

Catlog

The Nigeria-based startup offers vendors a simple way to create an online store on its platform, add their products, and create a custom link they can share on social media with deals finalized on WhatsApp.

ANKA

Ivorian SaaS player provides merchants with an omnichannel dashboard through which they can monitor their sales and inventory across all several channels—Afrikrea, social media, and websites—and manages payments and logistics for vendors.

Chooya

Which brands itself as the “TikTok for e-commerce”, digitizes word-of-mouth marketing, allowing consumers to recommend sellers and get rewarded for it.

Tendo

Offers the average individual an opportunity to tap into Africa’s e-commerce boom by selling online with zero upfront inventory. Ghanaian sellers on the platform are able to source products and resell items using social commerce tools such as WhatsApp, arrange delivery, and get paid, all through the app.

Rabawa

Enables Nigerian entrepreneurs to leverage social media for curating, promoting, and selling their products. Its social sharing integrations include WhatsApp, Facebook, Twitter, and Instagram, allowing vendors to earn from their social networks such as friends and family.

Tushop

Works with “community leaders” to make access to groceries more affordable and more convenient for Kenyans through community group buying. The leaders register with the startup, collate orders from their neighbours and manage door-to-door deliveries all through its platform.

Elloe AI

Is a Kenya-based AI-powered, conversational commerce platform that allows small businesses to manage customer interaction and sell products online across various messaging platforms such as Facebook Messenger and WhatsApp.

Image from the Wfanet.org

The challenge: Limited access to the internet presents potential challenges to the ability of startups in the social commerce space to scale. In addition, selling products via social media platforms alone has its disadvantages, such as when Facebook, Instagram, and WhatsApp experienced lengthy outages last October.

The future: Social commerce continues to blur the lines between social interaction and online selling while accounting for an increasing share of e-commerce sales. We expect to see more growth in the collective social commerce sub-sector in emerging markets as more people come online. More so, Africans are more likely to patronize people they interact with on social media. As a result, social commerce on the continent has a very promising future.
May 17, 2022