Sequoia Heritage

Sequoia Heritage, Stripe and others invest $ 200 million in African fintech Wave technology with a valuation of $ 1.7 billion – TechCrunch

Francophone Africa has your first unicorn, and if you’ve been following tech on the continent, you won’t be surprised to learn that it comes from the fintech world.

Wave, a mobile money provider based in the US and Senegal, has raised $ 200 million in a Series A funding round. The investment is the largest Series A round ever conducted in the region and values ​​Wave in 1.7 billion dollars.

Four renowned sponsors jointly led the round: Sequoia Heritage, a private investment fund and a Sequoia subsidiary; Founders Fund; Stripe upstart payments; and Ribbit Capital. Others in the round include current investor Partech Africa and Sam Altman, former CEO of Y Combinator and current CEO of OpenAI.

The mobile money market in sub-Saharan Africa is growing exponentially. Last year, up to $ 500 billion was moved 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, this 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. However, when it comes to increasing that ratio, mMobile money, based on simpler technology and with an easier onboarding process, wins and is set to capture more market share faster than traditional banking in the region.. And this has investors, especially foreigners, excited and eager to participate.

(Neobanking, also based on mobile technology, if you are in the middle of the two.)

From Sendwave to Wave

If you’re wondering why you haven’t heard of Wave, the reason could be because you don’t know it’s a spin-off from Africa-focused remittance provider Sendwave..

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

From left to right: Drew Durbin and Lincoln Quirk

But before that, the team stealthily worked on a mobile money product described as having no account fees and “instantly available and accepted everywhere. “

In 2018, the product was tested as Wave in Senegal, but it was still within the Sendwave ecosystem. When WorldRemit acquired Sendwave, Durbin and his team focused on Wave.

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

Facing the headlines

Telecom operators and banks have been the first to enter the mobile money space, not least because they control much of the infrastructure in the process, from having mobile subscribers using phones on their networks to building the financial services to manage money and payments in the market. backend, and everything else.

Third party providers, mainly fintechs, have tried to capture part of the market share of these incumbents. Wave, Nevertheless, wants to interrupt you.

Durbin tells TechCrunch that unlike M-Pesa, the mobile payments provider led by Safaricom, and other products from telcos such as Orange and Tigo, Wave is building a mobile money service that is “radically accessible. “

The Dakar-based platform is similar to PayPal (with mobile money accounts, not bank accounts) running a network of agents that use their available cash to serve Wave users.. According to the company, users can make free deposits and withdrawals and charge a 1% fee each time they send money.

Durbin says this is 70% cheaper than telecom-led mobile money and whenever there is a transfer problem, refunds They are facts instantly, unlike headlines where users may need to wait a few days.

Wave’s technology also differs from mobile money powered by telecommunications. While the headlines mainly focus on in USSD (although there are provisions for using apps), Wave is only app-based. For users without a smartphone, Wave also provides a free QR card to transact with an agent.

By building its own full-stack infrastructure (agent network, agent and consumer applications, QR cards, merchant collections, and disbursements), Wave has been able to drive growth to several million monthly active users and billions of dollars in annual volume. ..

Image credits: Wave

The two-year-old startup claims to be the largest mobile money player in Senegal and that more than half of the country’s adults are active users. That sets the number of users between 4 million and 5 million, and Wave wants to replicate this growth in the Ivory Coast, the second market that officially extended to last year.

This kind of growth pressure on telecom operators. In fact, that has been the case for the leading telecommunications operator in both regions, Orange. On In June, the telecom operator blocked Senegal users from buying Orange airtime through Wave’s mobile app.

For this report, Wave argued that Orange was applying anti-competitive tactics by restricting its sale directly or through an authorized wholesaler. Orange said it had made proposals “in line with those offered to its other suppliers” and that Wave wanted special treatment.

To reach a fair decision, both parties are working with the regulatory body in charge, the Telecommunications and Postal Regulatory Authority (RATP).. And if the regulator is unable to resolve the problem, BCEAO, the regional bank of Francophone countries, is next in line to resolve the dispute.

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

“Senegal is a large enough market that we would have to work Really hard to potentially win the market. But also a market small enough that, if we did well, we could win the market faster than if we were in a giant country. And that combination of those two things made it seem like a good place to start, ”said Durbin.

Following this fundraiser, Wave will deepen its presence in Senegal and Côte d’Ivoire and grow its team of already 800 people in products, engineering and business.. What’s more, Wave will expand to other markets it considers regulatory friendly, such as Uganda..

“I think There is a fairly wide range of countries that have strong central banks and clear regulations that are open to new players, or even want new players to come in and try to compete with telcos.. Therefore, we have many licenses in progress and attempt prioritize the countries where we can start earlier than the countries where it takes longer. “

A unicorn after two rounds.

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

What’s more For Sequoia and Sam Altman, the same crop of investors also participated in this monstrous round of Series A.

In a market that has typically lacked innovation, Partech’s general partner, Tidjane Deme, says the investment will help Wave improve its service..

“Since 2018, we have supported Wave because they were convinced mobile money remains an unsolved problem in Africa, ”it said in a statement. “Wave has a great product design, stellar execution and a strong financial track record. We are proud to see him become Senegal’s first unicorn. “

In May, Sequoia Capital invested in Egyptian fintech Telda, its first big business on the continent. the Meanwhile, the Wave investment is made through subsidiary Sequoia Heritage and is the latter’s first investment in an Africa-focused startup.

In a call with TechCrunch, Altman said that Wave checked the boxes it considers before an investment: strong founders, a major problem in a large market, functional product, and traction..

“I have known these founders for a long time and I think They are like off the charts. I’m very impressed with their ability to figure out what users want and how to grow, ”he said. “I. to think the company is solving the biggest problem around money transfer in Africa and fixing inefficient agent networks. “

The biggest rounds of risk for any company in Africa remain OPay’s recent $ 400 million fundraiser and that of Jumia. equivalent in 2016. Both were rounds of Series C. The next major rounds include the $ 200 million investment from Visa’s Interswitch and the $ 170 million Series C from Flutterwave.

Alles thesis the companies obtained unicorn status after their respective rounds. The same goes for Wave, but more spectacularly considering the company bagged it in a Series A round, it is transcending the region and is one of the largest A rounds globally this year.

Wave joins OPay and Flutterwave as the newly unicorns minted in Africa this year, that is, startups valued at more than a billion dollars, and the fourth African unicorn after Interswitch. Other multi-billion dollar companies include publicly traded Jumia and Egyptian financial technology Fawry.

Funding rounds in Africa continue to grow and the continent has reached a tipping point. NeverthelessSome skeptics have questioned previous unicorn ratings; Wave would be no exception.

The argument would focus on why Wave is so highly valued when, for example, two prominent telecom operators, Airtel and MTN, are looking to list their mobile money businesses between $ 2 and $ 6 billion despite being in the operations for several years. multiple African countries.

However, like any investor optimistic about a portfolio company, Altman does not believe that Wave it’s overrated. In fact, he believes that the company is underrated.

“The opportunity that the company has is enormous. But many times I’ve been wrong so you never know. However, I have been fortunate to do a number of big investments and I feel Wave has as good a shot as you can ask for, ”he said. “Africa will be the most important and fastest growing market in the coming decades for many companies. I think people are realizing how big the market opportunity is and how much value it is going to be created and we will see that many more things like this happen. “

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