Sequoia Heritage, Stripe and others invest $200M in African fintech Wave

Francophone Africa This is the first unicorn, and if you’ve been following the technology on the continent, you’d be very surprised to hear that it’s coming from the world of fintech.

US and Senegal-based mobile money provider Wave has raised $200 million in a Series A round of funding. The investment is the largest Series A round ever for the sector, and it values ​​Wave at $1.7 billion.

Four big-name backers jointly led the round – Sequoia Heritage, a private investment fund, and a subsidiary of Sequoia; Founder’s Fund; paid upstart Stripe; and Ribbit Capital. Others in the round include existing investors Partech Africa and Sam Altman, former CEO of Y Combinator and current CEO of OpenAI.

The mobile currency market is growing in sub-Saharan Africa with speed. This past year, up to $500 billion has been transferred through the accounts of 300 million active mobile money users in the region. But despite being one of the largest alternative financial infrastructures known globally, it represents only a fraction of the overall market.

The International Monetary Fund says that as of 2017, only 43% of adults in sub-Saharan Africa were “banked” through a traditional bank or mobile money account. When it comes to raising that ratio, however, mObil Money – based on simple technology and with an easy onboarding process – wins, and it is poised to capture a greater market share than traditional banking in the region. And investors, especially foreign ones, are excited and want to join the board.

(Neobanking based on mobile technology also falls somewhere in between the two).

from sandwave to wave

If you’re wondering why you haven’t heard of Wave, it may be because you didn’t know that it’s a spinoff of Africa-focused remittance provider SendWave..

Drew Durbin and Lincoln Quirk founded Sendwave in 2014 to offer little or no fee remittances from North America and Europe to select African and Asian countries.. The YC-backed company became a subsidiary of WorldRemit last year after the global fintech paid $500 million in cash and stock for Sendwave.

Wave

LR: Drew Durbin and Lincoln Quirky

but before that the team covertly Worked on a mobile money product that is described as no account fees and “Instantly Available and accepted everywhere

In 2018, the product operated as Wave in Senegal, but was still within the SendWave ecosystem. When WorldRemit acquired Sendwave, Durbin and his team turned their attention to Wave.

“We saw an opportunity to make a bigger impact by trying to build a better, more affordable mobile money service than telecommunications companies in sub-Saharan Africa,” Durbin told in an interview.. “We didn’t see any companies other than telcos trying to solve that problem.”

going against the officials

Telecom operators and banks have been early entrants into the mobile money space, not least because they control much of the infrastructure in the process, from allowing mobile customers to use handsets on their networks to building financial services. Manage money and payments. Back end, and everything in between.

third-party providers, More tar Fintech has tried to grab some market share from these incumbents.. Wave, However, wants to interrupt.

Durbin tells that unlike M-Pesa, the mobile payments provider led by Safaricom, and other products from telecom operators such as Orange and Tigo, Wave is building a mobile money service that will “Original cheap

The platform runs an agent network similar to PayPal (with mobile money accounts, not bank accounts) that uses its cash on hand to serve Wave users.. According to the company, users can make free deposits and withdrawals and can charge 1% fees whenever they send money.

Durbin says it’s 70% cheaper than telecommunications-led mobile money and refunds whenever transfer problems occur. are making Instantly, Unlike the official where users may need to wait for a few days.

Wave’s technology also differs from that of telecommunications-led mobile money. While incumbents mostly focus on On USSD (although there are provisions for the use of applications), Wave is Lonely application based. For users without a smartphone, Wave also offers a free QR-card to transact with an agent.

By building its own infrastructure – agent networks, agent and consumer applications, QR cards, business collection, and disbursements – Wave has been able to drive growth of several million monthly active users and billions of dollars in annual volume..

Wave

image credit: Wave

The two-year-old startup claims to be the largest mobile money player in Senegal and has more than half of the country’s adult active users. It estimates the number of users to be between 4 million and 5 million, and Wave is looking to replicate this growth in Ivory Coast, its second market. officially extended to last year.

Such growth is putting pressure on telecom operators. This has indeed been the case for Orange, the leading telecom operator in both the regions. In In June, the telecom operator blocked users in Senegal from purchasing Orange airtime through Wave’s mobile application.

According to this report, Wave argued that Orange was implementing an anti-competitive strategy by banning it from selling. straight or through an approved wholesaler. Orange said it had made offers “in line with what its other providers have made” and that Wave wanted special treatment.

To arrive at a fair decision, both the parties are working with the regulatory body in-charge, the Regulatory Authority for Telecom and Posts (RATP).. And if the regulator is not able to resolve the issue, BCEAO, the regional bank of the francophone countries, is next in line to resolve the dispute.

According to Wave’s CEO, the bank’s regulatory approach is one of the reasons why Wave has been able to take on telecom operators in the first place. But of all the West African countries where mobile money is prevalent, why start with Senegal, an emerging market?

“Senegal is a big enough market that we have to work” Really Difficult potential win the market But even such a small market that if we are doing well, we can win the market faster than if we were in a huge country. And so the combination of those two things made it like a good place to start,” Durbin remarked.

Following this fundraising, Wave will deepen its presence in Senegal and Ivory Coast and grow its already 800-strong team in product, engineering and business.. with this, Wave will expand to other markets that it looks like are regulatory-friendly, like Uganda.

I feel There are a wide range of countries that have strong central banks and clear rules open to new players, or even new players who want to come in and try to compete with telecoms.. and so we have a lot of licenses that are in progress, and we will trying to do Priority Countries where we take longer, we are able to get started sooner than those countries

a unicorn after two rounds

While some reports said Wave had previously raised $13.8 million, Durbin declined to comment on the figure when asked. However, he mentioned French conglomerate Partech, along with an African fund, invested in a seed round with Founders Fund and other investors such as Stripe.

with this For Sequoia and Sam Altman, the same crop of investors also participated in this monster Series A round.

In a market where innovation is usually lacking, Tidgen Dame, general partner at Partech, says the investment will help Wave improve its service..

“Since 2018, we have supported Wave because we were convinced Mobile money is still an unsolved problem in Africa,” he said in a statement. “Wave has great product design, great execution and a strong financial trajectory. We are proud to see it become Senegal’s first unicorn.

In May, Sequoia Capital invested in Egyptian fintech Telda, its first major deal on the continent. NS The Wave investment, meanwhile, is coming through subsidiary Sequoia Heritage and the latter’s first investment in an Africa-focused startup.

In a call with , Altman said that Wave ticks the boxes it considers before investing – strong founders, a significant problem in the larger market, working products and traction.

“I’ve known these founders for a long time, and I feel They are as good as off the charts. I’ve been very impressed by their ability to know what users want and how to proceed. Thinking The company is solving the most pressing problem of money transfers and inefficient agent networks in Africa

The largest venture round for any enterprise in Africa is OPay’s recent $400 million fundraising and Jumia’s equivalent in 2016. Both were Series C rounds. The next largest round includes a $200 million investment from Visa to Interswitch and Flutterwave’s $170 million Series C.

All In Companies attained unicorn status after their respective rounds. The same goes for the Wave but more spectacularly, the company has achieved it in the Series A round, crossing territory and having one of the biggest A-rounds globally this year.

Wave connects OPay and Flutterwave as Newly This year mined unicorns in Africa – that is, startups worth over $1 billion – and the fourth African unicorn after Interswitch. Other billion-dollar companies include publicly traded Jumia and Egyptian fintech Favry.

The funding round in Africa is getting bigger and the continent has reached an inflection point. However, some skeptics have questioned previous unicorn valuations; Ripple will be no exception.

The argument would be why Wave commands such a high valuation, with two major telecom operators, for example, Airtel and MTN, listing their mobile money businesses between $2 and $6 billion despite being in operation for several years. want. Diverse African countries.

Yet like any investor optimistic about a portfolio company, Altman doesn’t believe the wave. is more valuable. In fact, he thinks that the company is underestimated.

“The opportunity before the company is huge. But too many times, I’ve got it wrong, so you never know. However, I have had the privilege of making a number of great investment and I feel Wave has as good a shot as you can ask for,” he said. “Africa is going to be the fastest growing and most important market for many companies in the coming decades. I feel People are realizing how big the market opportunity is and how much it’s going to be worth to be made And we’ll see many more things like this happen.”

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