The Nigerian fintech Flutterwave has become a household name in Africa’s start-up scene. Now it is preparing a big IPO on the tech-heavy US exchange Nasdaq. What does the move have to say about Europe?
Capital News Africa: From the Trading Floor – Week 36-2022
The announcement was hardly noticed by the media and investors in Europe. But in Africa, it is probably the biggest financial event of the year: The Nigerian fintech Flutterwave is preparing to list on the tech-heavy US stock exchange Nasdaq. It also wants to do so at a valuation that many other IPO candidates in Europe and the US can only dream of.
Flutterwave has become somewhat of an icon in Africa. It was the continent’s first “unicorn” that reached a valuation of more than USD 1 billion. This was achieved last year, when the company took in an additional USD 170 million from private investors in a so-called “Series C” funding round.
Flutterwave’s start goes back to 2016, when the young Nigerian entrepreneurs Olugbenga Agboola, Iyinoluwa Aboyeji and Adeleke Adekoya joined together to revolutionise payments processing in Africa. Today, their San Francisco-based company is active in Nigeria, Ghana and South Africa as well as in several other countries.
In underbanked Africa, there is huge potential for a payments services firm like Flutterwave that doesn’t require a bank account. According to Flutterwave, it has already processed over 200 million transactions worth over USD 16 billion. It also says that it serves more than 900,000 businesses, including Uber, Flywire and Booking.com.
Flutterwave’s clearing of the USD 1 billion mark in valuation terms was an achievement that got it even more noticed in private equity circles. As a result, in February of this year, the fintech took in another USD 250 million from private investors and was ultimately valued by them at USD 3 billion. The list of those who have funded Flutterwave reads like a “who’s who” of private equity investors. They are: Visa Ventures, Mastercard, Tiger Global Management, B Capital Group, Alta Park Capital, Whale Rock Capital, Lux Capital, TPG, Avenir Growth Capital and Y-Combinator.
Building the Flutterwave business has been a huge achievement of the three Nigerian entrepreneurs, who include CEO Olugbenga Agboola. But there is something odd about Agboola’s background. Although it is known that he earned an MBA from MIT Sloan School of Management, it is not known when exactly he was born. The dates given are either 1984 or 1985.
Moreover, things have not always gone that smoothly for Flutterwave. At the end of July, Kenya’s central bank announced that it had not been granted a licence to operate in that country. The move followed a decision by a Kenyan High Court to freeze more than KES 6.2 billion (EUR 52 million) in assets held by Flutterwave amid allegations that the money was from credit card fraud and money laundering. Flutterwave firmly denies any wrongdoing in Kenya. But the allegations are casting a shadow over the company.
Indeed, the timing of Flutterwave’s IPO is surprising considering its setback in Kenya and the overall bearish market. Company CFO Oneal Bhambani is defiant, however. He told the Business Post: “The listing is an initiative of the payment company that is reaching the scale and trajectory comparable to what other investors seem to invest in the public markets.”
It is hardly conceivable that Flutterwave will list at a valuation under USD 3 billion, for that is the number that its private investors have accepted. On the other hand, it is entirely unclear whether new equity investors will accept that valuation as part of the IPO. Should Flutterwave’s listing succeed, it would be a big boon for Africa’ start-up scene, which is currently busy developing new fintechs and associated apps.
Meanwhile, the payments company has announced that it is expanding into the lending business. According to a Bloomberg report, the fintech aims to provide collateral-free, digital loans to business owners in Nigeria. To underscore the growth potential of Africa’s fintech sector, Bloomberg cited a study saying that their revenue could reach USD 30.3 billion by 2025. This would be eight times the figure for 2020. However, past experience with fintechs reflects that investors should treat such forecasts with extreme caution.
At any rate, Flutterwave’s success is good news for Africa’s fintech scene. Those fintechs will benefit from the fact that international ventures will take more notice of them. The question remains, however, whether investors will find Flutterwave’s IPO attractive or not. The answer lies in its ultimate valuation.
We also feel that like big US investors, those in Europe should start to take notice of Africa’s fintech and start-up scene. Its relative success shows that Africa is changing fast and no longer succumbs to the clichés that continue to be widely believed in Europe.