Africa’s crypto startups face extinction
The short: Crypto startups in Africa are biting the dust.
Falling stars: In 2021, 24.5 million people held crypto assets in Nigeria, Kenya, South Africa, and Egypt – skyrocketing Africa’s ranking in peer-to-peer services globally.
However, an unending series of shake-ups fueled by FTX’s collapse has rocked Africa’s crypto industry, making investors apprehensive and tightening their purses.
In November last year, Quidax and FTX-affiliated Nestcoin laid off staff. The same month, promising crypto Lazerpay struggled to keep employees on payroll after a lead investor dropped out in their seed round, culminating in the startup taking a bow this week with an open offer for its IP.
Bear market problems: The speculative nature of the market has caused deep losses for industry players, with crypto assets now holding less value over time. For example, in Nigeria, Quidax raised $3 million in an Initial Coin Offering (ICO) through the sale of its token, “Quidax Token,” today, the token’s value is down 80% from its opening value.
Everyone love(d) Paxful: Nigeria accounted for 40% of the nearly $3 billion in trading volume on Paxful, a popular startup and peer-to-peer marketplace for Bitcoin. But, in recent shocking news, Paxful announced it would shut down.
Paxful’s CEO Ray Youssef claimed stricter regulation was a significant factor that led to the decision, but Coindesk painted a scandalous picture of drugs, money laundering, and feuding founders.
Over-regulated and misunderstood: While some governments in Western countries are co-creating regulation with the crypto industry, their peers in Africa are taking a beating in challenging regulatory environments – but it’s not all bad news.
South Africa recently declared crypto assets as financial products and requires platforms to obtain licenses, but countries like Cameroon and Ethiopia have banned crypto altogether.
With African governments creating legal hurdles for crypto startups and investors clawing back investment volumes, the weight of this burden rests on the back of the industry’s shaky balance sheets.
Final thoughts: For the demise of crypto startups these days, it’s a matter of when not if. If there was a time to amplify the narrative about crypto’s utility and lessen the quick-rich schemes, it’s now.
Hopefully, Vitalik Buterin and his cohorts will quickly scale crypto’s utility to make it great again.
VCs make a comeback
The short: Funding is slowing down, but Africa’s VC keeps the lights on.
Why it matters: Africa’s funding drought overstayed its welcome like a longest-ruling head of state, but it’s trying to make a comeback.
Despite the economic downturn last year, Africa’s tech ecosystem broke records in the number of startups funded and the number of investments – passing the $3 billion milestone. In 2021, the influx of funding to fight off Covid losses found its way to Africa, where we saw a 206.3% growth from 2020.
By the sectors: The top ten funded companies from Q1 provide an insight into where VCs are putting their money.
Usual suspects – fintech tops the chart:
- MNT-Halan and Lulalend raked in $435 million.
- Mobility startup Planet42 secured $100 million.
- The gaming industry’s Carry1st raised $35 million for African gamers.
- Smile Identity raised $20 million for digital KYC and identity verification.
- Naked raised $17 million for AI-based insurance.
- Yodawy got $16 million for healthcare.
- Powered by People and Jetstream raised 13.6 and 13 million each for wholesale and supply chains.
- Almentor secured $10 million for ed-tech.
Final thoughts: Africa’s growing economy presents opportunities for emerging startups and the rise of tech talents. The funding drought will take a while to end, but it paints an optimistic picture for startups if investors are willing to back them.
Jumia hires a new Kenyan CEO, again
The short: Jumia’s Kenya HQ has a new CEO.
Three people have held the CEO title in sixteen months.
- In November 2021, Betty Mwangi took over from Sam Chappette following a decline in growth, which led Mwangi to focus on business growth as the company expanded its footprint throughout the country.
- In July 2022, Juan Seco took over the role and strategically partnered with BILITI Electric to introduce electric tuk-tuks to Jumia’s delivery fleet in Kenya.
- And this week, the office welcomed a new CEO, Charles Ballard – whose primary goal should be to ensure stability in the CEO’s office.
Is Ballard the answer?: Jumia’s turbulent journey to profitability leaves the company’s future uncertain. The company recorded a loss of $207 million last year and projects it will lose between $100 and $120 million in 2023.
For Jumia’s survival, Ballard has an opportunity to grow the business and expand its customer base to drive the adoption of JumiaPay in Kenya’s untapped market.
Final thoughts: It’s been a bumpy few years for the publicly traded company. Africa’s macroeconomic conditions go head to head with Jumia’s ambitions, but they are determined to turn a profit, and I hope they achieve that without a new CEO shakeup.
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