Top of mind: Happy Sunday!
We’re back with our Day One series spotlighting emerging founders and startups. To kick this off, I spoke to Paul Damalie, the founder and CEO of Appruve about a significant acquisition announcement that broke the headlines and made waves in the ecosystem this week. We had a conversation about the moments that led to this acquisition.
In other news – banks want a slice of fintech revenue, and Spleet launches a significant partnership.
Let’s get into it.
3 big things:
– Big acquisitions
– Fintech startups have a new competitor
– Spleet lands in the UK
The incredible story behind Africa’s latest acquisition
The short: Smile Identity acquired Appruve – a product which makes it easy for fintech companies in Africa to verify their users.
You’ve probably interacted with Appruve’s software. If you’ve taken a selfie for facial identification, uploaded personal documents and entered personal information to verify yourself after signing up to a fintech or banking app in the five markets Appruve covers. There’s an 80% chance Appruve powered that process in that case.
Paul tells an incredible story of serendipity, which started with the creation of Appruve, and onboarding Smile Identity, a competitor. Then, becoming partners with said competitor and eventually being acquired by the competitor – all in four years.
Read Paul tell it.
The problem found him: Paul’s first brush with identity verification problems in Africa started right after his first job out of high school. He worked at an insurance firm and earned commissions based on onboarding customers – and quickly lost money because customer identities could not be verified.
Losing money was a good motivator.
Paul: I was paid based on commissions. Before you get paid, the company has to do KYC (Know Your Customer – guidelines and regulations in financial services to verify customers). Unfortunately, most national databases were disjointed and digital access wasn’t readily available. So the customers I onboarded couldn’t be verified, and it annoyed me because I was losing money.
Building intentionally: After graduation, Paul joined MEST, a technology entrepreneur training program. He co-founded Loystar, a loyalty and retail platform during that time, before launching Appruve in December 2017 and onboarding their first client, Smile Identity.
Paul: I’ve always been determined, especially after high school. I set big goals and knew I always wanted to be in tech. I knew I wanted to be an inventor. I wanted to be someone who picked and chose the kind of problems I wanted to solve.
Closing the deal: The four-year relationship with Paul and Mark Straub, CEO of Smile Identity, was the backbone of this acquisition – a cash-and-stock deal, which came with a significant portion of Appruve’s staff. Appruve chose to sell rather than pursue a seed round. Motivated by data over ego and the opportunity to create the industry’s largest KYC compliance and ID verification entity, Paul closed the deal.
Paul: Mark and I maintained a strong relationship over the years and saw frequently. As a result, we have a deep mutual respect.
My team and I had to weigh whether it was a good time to sell, given we were four-years old. Sometimes decisions about waiting could be driven by ego. Do we go ahead with our seed round? Do we wait longer, potentially become more valuable and eventually sell higher? Or do we pay attention to the data and join forces with Smile Identity to expand our market share?
We chose data over ego and closed the deal.
Sailing in São Tome & Principé: Some folks like Drake score a major win and think rest is futile, and work must continue. And there’s Paul, who believes in reward for hard work. And this time, he’s seeking rewards in an Island nation on the coast of Central Africa.
Paul: I’m not a founder who doesn’t take vacations. I believe you should create time for rest while you work hard. I have a foundation on an island called São Tomé and Principé. It’s a one-hour flight from Accra. So I’ll be going back there. I sail, so I will do that with a bunch of friends.
Final thoughts: An acquisition of this kind is a testament to the value of the ecosystem beyond fundraising announcements. The merger between Smile Identity and Appruve will solidify them nicely as Africa’s largest KYC and verification business.
And, in a lot of ways, it’s still Day One.
Traditional banks want some of that fintech money
The short: Nigerian banks are gunning for the fintech market.
The road map: Guaranty Trust Holding Company (GTCO) has left clear footprints on its path to infiltrate fintech – where players like Flutterwave and Piggyvest are having a heyday.
In 2021, Guaranteed Trust Bank (GTB) morphed into a holding company and became GTCO. The Central Bank of Nigeria (CBN) prohibits commercial banking and non-banking financial services businesses from running concurrently, making the transition important for GTB’s planned digital makeover.
Going digital: Other big banks, such as Access Bank, First Bank, and Sterling Bank, have joined the holding company craze, with Zenith Bank being the latest addition just last month. These banks began launching digital solutions.
For example, Access Holdings Plc has a payment subsidiary called Hydrogen Payment Services Company Limited. Wema Bank operates a digital-only bank named ALAT. Sterling offers digital lending through a platform called Specta. Last year, HabariPay, GTCO’s fintech subsidiary, launched Squad, which provides payment processing, accounting, and e-commerce services.
The banks are targeting fintech markets, and startups will have more formidable competitors.
Final thoughts: It’s a nail-biter to predict who will come out on top between startups and banks. The fintech subsidiaries allow the banks to test and roll out services faster because of pre-existing regulatory partnerships.
But don’t count out fintech startups. They’ve raised more money than any other sector in the country, and the market is just as big for both players to operate without the fintech ecosystem declaring bankruptcy.
Spleet’s big partnership
The short: Relocating to the UK just became easier with Spleet’s new partnership.
The partnership: Last week, Spleet, a Nigerian prop-tech startup, announced its collaboration with Repit, a UK-based rental assistance service, to make relocation and property search easier for migrating Africans. Through this partnership, users will receive a 5% discount from Spleet to use Repit’s services, which include relocation support, property search, viewings, referencing guidance, paperwork negotiations, and settling-in advice.
A masterplan: The deal boosts Repit as it onboards more customers to its offerings. For Spleet, it opens up its services to a new demographic of new customers and ushers in its UK expansion.
Landlords can upload their spaces in Spleet’s marketplace and verify renters’ identities. This deal also creates flexible payment structures for renters, including a “rent now, pay later” offering.
Spleet is onto something: This partnership ushers in an expansion with an untapped market of the immigrating demographic. In addition, it provides Spleet with an array of new customers to usher in and solidify its UK expansion.
It’s perfect timing for Spleet. The mass influx of Africans, Chinese and Indians into the UK has increased rent prices. Immigrants are seeking affordable rent options and battling a student and residential accommodations shortage.
This partnership could be the most thoughtful way for Spleet to have launched its expansion, and it’s created an opportunity for the startup to take on UK’s rental market with its friendly payment models.
Final thoughts: Spleet’s UK expansion could be one of the smoothest partnerships from an emerging startup. Following its $2.6 million raise last year, it hinted at an East African expansion. However, the thousands of Africans struggling with settling in the UK proved an attractive monetisable opportunity for the startup.
Thanks for reading! We’d love to hear your thoughts about this week’s issue.
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