Nelson Mandela come outside!!!! it’s called Omopiano now. 🇳🇬
Congratulations to the Super Eagles for defeating Bafana Bafana yesterday to set up a place in the Finals of this year’s AFCON against hosts Côte d’Ivoire. ⚽️
India’s UPI Launches in France, over to you NIBBS.
PayTM was ordered to stop accepting deposits due to lax KYC and Fraud prevention protocols.
JPMorgan Chase to open 500 new branches over the next 3 years.
Hello, if you missed Part 1 of this series, please feel free to catch up here. Today’s post will focus on opportunities for business maturity, and ecosystem dynamics. Let’s get right to it.
Business Maturity and Opportunities
1. Lateral product expansions
This may seem strange to suggest in light of the funding winter we are experiencing, but for the last few years, folks have burnt money on the altar of African expansions.
While we await the postmortem on these sojourns, what is clear is that investors and decision-makers believe expansion is the key to survival and improvement of margins.
We have actually seen a few companies build new healthier(?) atoms and molecules businesses that were tangentially different from their core public facing sexy bits and bytes business (SharpHire, Ladda, Sycamore, Pennyvest all ventured into real estate and food verticals).
Now, it's time for more lateral product expansions, the skill set is there within these companies, all that is left is the commitment and will to venture into these complementary products and build an Amazon-style flywheel. (Idea: More Fintechs should beta test payroll services, or storefront creation. I mean the banks did this, that's an obvious low-hanging fruit. Revolut has even announced plans to do this, so you can too.)
2. Virtual card providers will need to pivot and deliver concrete value
Virtual cards suck simple. Virtual card providers in Nigeria have also proven to be unreliable, and inconsistent. This is not a judgement on them, but a judgement on their business model, and the macro environment they’re trying to operate in. They exist in Nigeria to provide access to already scarce USD payments, only to repeatedly run into issues stemming from fraud, supply, settlement, and charges on failed attempts.
People are using Privacy and Curve for so much more across the world, but my people are dealing with low-quality problems, such as the easiest and cheapest way to pay USD-denominated subscriptions and bills.
A cursory search on the app store reviews and social media complaints of various virtual card providers here has shown that the median half-life of any virtual card service is 6-8 months. And that is before users run into issues and scramble for the next provider.
People please, save yourself the stress and open USD accounts with your local Nigerian banks, or, if you’re a big boy/girl, a Monzo, Wise, Revolut, or BoFA account.
In the meantime, new entrants should maybe learn from Grey, Cleva, and Geegpay on how else to deliver access to the global financial infrastructure.
Virtual cards are not a business model in this market. Heck, Brex has shown us that there is no long-term sustainable business to be built on Cards as a USP (A sentiment that has been shared by Blake Murray, the former CEO of Divvy who just timed his exit right).
The team at the Open Africa Podcast has a whole episode on this, yet people keep doubling down on this unstable sinkhole of a solution. I blame YC at this point for this.
3. Bumpa reaches maturity
Achieving maturity by enabling commerce for Nigerian online/offline SMBs can come in different ways. Selar's maturity here is impressive, and I believe Disha would have also achieved this before their acquisition.
My thesis on Bumpa being the next up, stems from my experience in setting up and managing storefronts. A significant number of Nigerian digital businesses rely on Shopify.
If we consider the relentless rise and volatility of the FX rate in Nigeria and the growing monthly cost of maintaining a Shopify storefront nearing sub-NGN 200K levels for the average seller, I see an opening for Bumpa to step up as a more mature platform and attract numerous native Shopify-powered digital businesses in Nigeria.
4. There’s an opportunity in the HR space
No one likes their HR Software. New entrants know this and try to cordon off a portion of the market to fix with a superior product, only to run into growing pains for those parts they ignored.
The HR software landscape seems to offer two options: either remain small and specialized or become large and weighed down by excess features.
Global brands like Workday, Personio, and SAP receive both praise and criticism for the same reasons. On the local level, Seamless has become too big to meet everyone's needs.
A few years ago, Bento had a product that just worked, while catering to a specific niche. Somehow, they managed to snatch defeat from the jaws of victory, allowing Pade, a new player in the market, to gain traction and even compete against larger products.
It's uncommon for both employees and employers to react to HR products with anything other than frustration, yet it seems like these two companies found a way to elicit positive emotions from their customers.
The current economic downturn should lead to the creation of more businesses that will be looking for cheaper SaaS solutions. I see HR services becoming a commoditised space, with intense competition and a race to the bottom.
Ecosystem Dynamics
1. Herbert is inevitable
Banking dons in Nigeria operate on a healthy level of competition, which can be stripped down to “Identify one aspect of the industry you like, decide it is your hill to die on, then run your organisation towards making you #1 there”.
It works really and has led to some of the innovation and growth in the industry.
Most of the growth (and fugazi growth metrics) in the industry is fuelled by the egos of these CEOs.
For the last 10 years, Segun wanted and owned retail banking, Jim owned institutional banking, and Tony had the public sector.
While some Oxford-trained ones occasionally publish medium posts about how their employees’ $500 three-piece suits are the cause of the excessive Naira depreciation, everyone else who is serious about their job aligns themselves and fights to be #2 across other categories.
It’s a new era, we have a new president and governor, Mr. Wigwe has smelt blood in the water, and he wants everything, he has repeatedly mentioned how he wants to be #1 in everything by 2027, and he is acquiring the elements to build his ecosystem. He is going to get it, no need to bet against him.
2. Cross Border payments and FX handling will keep sucking people in
Let's face it, the Float saga should have never happened. Float wanted to be a one-stop cashflow management OS for businesses. There was no need to be smart and attempt to get sucked into the world of FX trading and arbitrage, yet they did, leading to smart and desperate people getting burned.
With the Nigerian currency experiencing a period of volatile depreciation, more people are going to get sucked into the lure of profiting off providing FX services to take advantage of this situation.
It's going to end badly for a lot of people. This business is a money burner. People need to quit trying to be smarter than their markets. The problem with the currency, and cross-border payments is that of political will and trading economic indices.
Technology will not and cannot leapfrog this critical step. YC needs to revise its Nigeria thesis at this point. We need to, as a matter of urgency and collective self-preservation, beg as many people who care to listen to not touch FX. This perverse hunt for cheaper rates and arbitrage opportunities will keep minting new suckers.
3. Cloud and SAAS departures become the order of the day
I am a fan of most of DHH’s writing, and he spent the bulk of last year writing about and leading the charge for companies to return to the good old days of reducing SaaS spend, racks and self-hosting.
I am young enough to remember when some of the sexy Nigerian companies of today were hosted on a 2013 Macbook Pro or a maxed-out HP. People cut their teeth and can tell war stories of their crude unscalable self-hosting exploits back in the day.
Azure, AWS, and Google Cloud, while being game changers with their free credits and DevOps capabilities, have made us lazy and wasteful.
While it is easier to build and scale an internet company now thanks to them, it is also just as easy to liquidate the entire company with an unchecked instance.
Our currency is not helping us, and these services cost real USD to pay for.
The same argument can be made for SaaS tools. Most people are already declaring cloud bankruptcies, and we are going to get more complaints and more moves away from costly software and cloud tools this year.
Sadly, there is no scalable local alternative (yet). And this is why the market for local clones of SaaS solutions will be hot this year.
Please bring back real DevOps.
4. Blogs come back
This is an easy follow-up to the previous point. I miss the days when Engineering blogs were updated on a routine basis, sharing and learning from the experiences of others when it came to engineering and scaling infrastructure. Now we seem to have relegated blogging to only product launches and marketing campaigns, rather than an avenue to share best practices and showcase your skill. Kudos to Muyiwa of Techpoint and the team at Sycamore for sharing their best practices so far. I expect more of this to happen this year. It's the cheapest form of marketing and recruitment.
5. Employee led investments return
Between 2019 and 2022, quite a few Nigerian employees working in tech attained financial liberation. It seemed like most people had finally made it.
Between remote work and COVID-19, the Interswitch and Paystack transactions, Flutterwave, Andela, and Moniepoint’s raises. Regular employees touched lump and seemingly outrageous sums of money in their lives for the first time all within the same period.
This sadly led to people having more money than sense, becoming angel investors via numerous collectives designed to find a home for excess employee liquidity and fund a bunch of new startups.
I believe lessons have been learned from this experiment, and everyone has finished paying whatever version of school fees they were left with.
I still maintain that most equity in Nigerian startups are not worth the paper they’re drafted on. But I can concede that it is time for these employee-led investments to make a big comeback.
This year should see more employees working in tech invest in traditional brick-and-mortar businesses.
I also see lots of DevTools and SaaS products being seeded and funded by many of these employee and collective-led rounds. Even if you burn money, these products should significantly be better than most of the crap that was funded via collectives in the last 3 years.
If you want to invest in a brick-and-mortar business or have one that needs funding from tech employees looking for where to deploy capital, the team at AssetBase has something sweet and new for you as well. Just take my word for it.
A few things I am reading
Visa, Mastercard, and the fight for the future of fintech in Africa
‘Meme-lord’ Litquidity reveals his true identity
See you again tomorrow, as we round this up with regulation and crypto.