‘Phone Pressing Nigerian Youths’ Develop Paystack App, Sell It To Stripe For $200M



The Oasis Reporters



October 19, 2020

Photo credit: Paystack




…Stripe Plans Expansion Into Africa




The Oasis Reporters team had witnessed how then SARS operatives accosted a Nigerian youth at Abe Bridge, Iwo Rd in Ibadan who was making a call with a seemingly expensive phone. First they violently collected his phone, handcuffed him and bundled the visibly frightened youth into their vehicle before zooming off. It’s anybody’s guess what they may have done with the young man.




When youths acquire expensive phones or laptops, the assumption is that they are criminals on the prowl. It is not always so.

[Also read what some derisively called lazy phone pressing Nigerian youths are doing:


http://www.theoasisreporters.com/how-imaginative-chinedu-echeruo-used-infotech-to-invent-hopstop-travel-app-and-got-1b-in-the-us-video/ ]



With the outdated education they get in most Nigerian Universities when their professors are not on long strikes, youths upgrade their education through world class gadgets and join the A-team of inventors and disruptors around the world for a bright future.

Take Shola Akinlade for example who runs a start-up company that got its start back when he, just for fun (!) built a quick way of integrating a card transaction into a web page, and it was the simplicity of how it worked that spurred him and his co-founder to think of how to develop that into something others could use. That became the germination of the idea that eventually landed them at YC and in the scope of Stripe.

“We’re still very early in the Paystack payments ecosystem, which is super broken,” said Akinlade. The company today provides a payments API, and it makes revenue every time a transaction is made using it. He wouldn’t talk about what else is on Paystack’s radar, but when you consider Stripe’s own product trajectory as a template, there is a wide range of accounting, fraud, card, cash advance and other services to meet business needs that could be built around that to expand the business. “Most of what we will be building in Africa has not been built yet.”

And where did such an innovative idea start from ?

The much derided phone pressing. What anti-robbery police know nothing about, such that they terrorized youths with expensive phones. Unknown to them, these youths are inventing the future to make life better for everyone.



Stripe is acquiring Paystack, a startup out of Lagos, Nigeria that, like Stripe, provides a quick way to integrate payments services into an online or offline transaction by way of an API.

Paystack currently has around 60,000 customers, including small businesses, larger corporates, fintechs, educational institutions and online betting companies, and the plan will be for it to continue operating independently, the companies said.

Terms of the deal are not being disclosed, but sources close to it confirm that it’s over $200 million. That makes this the biggest startup acquisition to date to come out of Nigeria, as well as Stripe’s biggest acquisition to date anywhere. (Sendwave, acquired by WorldRemit in a $500 million deal in August, is based out of Kenya.)

Stripe raises $600M at $36B valuation in Series G extension, says it has $2B on its balance sheet




Then take a look at the Anambra State government budget, which due to declining expectations on revenue streams, was scaled down to N114.9bn by Gov. Willie Obiano. Before then, the Anambra House of Assembly had passed N137.1 billion budget for 2020 on 25 Oct 2019, an equivalent of $360.99 million. Compare it’s proposed budget with what Stripe had previously announced earlier this year that it had picked up. Another $600 million in funding, and one big reason for the funding was to expand its API-based payments services into more geographies. Today the company is coming good on that plan in the form of some M&A. Notice what it is shelling out to purchase a Nigerian Start-up, by phone pressing Nigerian youths !


TechCrunch leads us on in this report by saying
It’s also a notable shift in Stripe’s strategy as it continues to mature: Typically, it has only acquired smaller companies to expand its technology stack, rather than its global footprint.

The deal underscores two interesting points about Stripe, now valued at $36 billion and regularly tipped as an IPO candidate. (Note: It has never commented on those plans up to now.) First is how it is doubling down on geographic expansion: Even before this news, it had added 17 countries to its platform in the last 18 months, along with progressive feature expansion. And second is how Stripe is putting a bet on the emerging markets of Africa specifically in the future of its own growth.

“There is enormous opportunity,” said Patrick Collison, Stripe’s co-founder and CEO, in an interview with TechCrunch. “In absolute numbers, Africa may be smaller right now than other regions, but online commerce will grow about 30% every year. And even with wider global declines, online shoppers are growing twice as fast. Stripe thinks on a longer time horizon than others because we are an infrastructure company. We are thinking of what the world will look like in 2040-2050.”

For Paystack, the deal will give the company a lot more fuel (that is, investment) to build out further in Nigeria and expand to other markets, CEO Shola Akinlade said in an interview.

“Paystack was not for sale when Stripe approached us,” said Akinlade, who co-founded the company with Ezra Olubi (who is the CTO). “For us, it’s about the mission. I’m driven by the mission to accelerate payments on the continent, and I am convinced that Stripe will help us get there faster. It is a very natural move.”

Paystack had been on Stripe’s radar for some time prior to acquiring it. Like its U.S. counterpart, the Nigerian startup went through Y Combinator — that was in 2016, and it was actually the first-ever startup out of Nigeria to get into the world-famous incubator. Then, in 2018, Stripe led an $8 million funding round for Paystack, with others participating, including Visa and Tencent. (And for the record, Shola Akinlade said that Visa and Tencent had not approached it for acquisition. Both have been regular investors in startups on the continent.)

In the last several years, Stripe has made a number of investments into startups building technology or businesses in areas where Stripe has yet to move. This year, those investments have included backing an investment in universal checkout service Fast, and backing the Philippines-based payment platform PayMongo.

Philippines payment processing startup PayMongo lands $12 million Series A led by Stripe




Collison said that while acquiring Paystack after investing in it was a big move for the company, people also shouldn’t read too much into it in terms of Stripe’s bigger acquisition policy.

“When we invest in startups we’re not trying to tie them up with complicated strategic investments,” Collison said. “We try to understand the broader ecosystem, and keep our eyes pointed outwards and see where we can help.”

That is to say, there are no plans to acquire other regional companies or other operations simply to expand Stripe’s footprint, with the interest in Paystack being about how well they’d built the company, not just where they are located.

“A lot of companies have been, let’s say, heavily influenced by Stripe,” Collison said, raising his eyebrows a little. “But with Paystack, clearly they’ve put a lot of original thinking into how to do things better. There are some details of Stripe that we consider mistakes, but we can see that Paystack ‘gets it,’ it’s clear from the site and from the product sensibilities, and that has nothing to do with them being in Africa or African.”

Stripe, with its business firmly in the world of digital transactions, already has a strong line in the detection and prevention of fraud and other financial crimes. It has developed an extensive platform of fraud protection tools, but even with that, incidents can slip through the cracks. Just last month, Stripe was ordered to pay $120,000 in a case in Massachusetts after failing to protect users in a $15 million cryptocurrency scam.

Now, bringing on a business from Nigeria could give the company a different kind of risk exposure. Nigeria is the biggest economy in Africa, but it is also one of the more corrupt on the continent, according to research from Transparency International.

Stripe debuts Radar anti-fraud AI tools for big businesses, says it has halted $4B in fraud to date




And related to that, it also has a very contentious approach to law and order. Nigeria has been embroiled in protests in the last week with demonstrators calling for the disbanding of the country’s Special Anti-Robbery Squad, after multiple accusations of brutality, including extrajudicial killings, extortion and torture. In fact, Stripe and Paystack postponed the original announcement in part because of the current situation in the country.

But while those troubles continue to be worked through (and hopefully eventually resolved, by way of government reform in response to demonstrators’ demands), Paystack’s acquisition is a notable foil to those themes. It points to how talented people in the region are identifying problems in the market and building technology to help fix them, as a way of improving how people can transact, and in turn, economic outcomes more generally.




There are several other successful entrepreneurs in the country, Tunde Kehinde, who wisely noted that more exits of promising startups — either by going public or getting acquired — will help lift up the whole ecosystem. In that regard, Stripe’s move is a vote of confidence not just for the potential of the region, but for those putting in the efforts to build tech and continue improving outcomes for everyone.

In The Oasis Reporters write-up on Chinedu Echeruo who has been introduced in the media as “a serial entrepreneur who has dared to invent the future: In 2005, he founded HopStop, the pioneering travel app that helped millions of users navigate public transportation in major metropolitan areas around the world. Apple acquired HopStop in 2013 and subsequently incorporated much of HopStop’s functionality into Apple Maps. Chinedu also founded Tripology, a lead-generation and referral business for the travel industry. Tripology was acquired by Rand McNally and later owned by USA Today. Chinedu believes that individuals, empowered by imagination and information, can solve virtually any problem.

Echeruo’s break came at just 16 when his father took him to the US, faraway from his Anambra home state where Awkuzu is, a place with an unenviable reputation with the now disbanded SARS. What would have been his fate if SARS had caught him fiddling with phones ?

By the way, he got $1billion for selling his travel app. Older Nigerians and the SARS police do not know all these. So they deride and degrade youths inventing a new tomorrow.



TechCrunch
The Oasis Reporters in-house team
Tunde Kehinde
Shola Akinlade
Ingrid Lunden
Greg Abolo







Greg Abolo

Blogger at The Oasis Reporters.

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