Fintechs acquiring fintechs

Each week during Season Two of The Flip, we’re going to publish an essay that corresponds with that week’s podcast episode. This week is Season Two, Episode Five: A Fintech Exit – Inside the MFS Africa Acquisition of Beyonic, featuring Dare Okoudjou – Founder and CEO of MFS Africa, Luke Kyohere – Founder of Beyonic, Carina Rumberger – CEO of Beyonic, and Rachel Balsham – Deputy CEO of MFS Africa. 

This acquisition is a story we are especially excited to tell, and in particular, to discuss what it means, both for the two companies and their stakeholders and for the ecosystem as a whole. What does it mean for the ecosystem that one African fintech is acquiring another African fintech? And is this an exception, or perhaps something we can expect to see more prevalently in the future?

A prevalent theme in our discussion is the alignment between MFS Africa and Beyonic – alignment, importantly, of not only culture and mission, but also of product and service offerings. It is this alignment that both parties feel will allow for successful integrations and will enable the combined team to build something substantially bigger and more far-reaching than each individual company would have been able to do on their own. 

Beyond the upside of greater alignment, perhaps we ought to consider tech consolidation a necessity in our ecosystem, as a function of both sub-scale markets and a scarcity of exit opportunities, as we wrote about last week. Here’s what Dare had to say – 

Most markets in Africa are sub-scale. So winners will need to be multi-market to be able to get to something that is sizeable and matters in the long run… I think from that perspective consolidation will play a big role, and the ability for fintech companies to think laterally about combining resources at some point to be able to achieve that scale faster. 

This quote and the opportunity – or even necessity – of consolidation has me thinking about this at an ecosystem level. Should we think about building complimentarily? We can imagine plenty of areas – of both geography and product – where building adjacent to the big, well-financed growth-stage companies is a smart strategy. 

Ecosystem building and weak link theory

I often think about the African tech ecosystem in the context of strong versus weak link theory. We can use sports as an analogy. 

In basketball, given the nature of its gameplay, having a superstar is considered more important than having a well-balanced team. Lebron James can dribble the ball the length of the court, take on double or triple teams, and single-handedly score against his opponents. Basketball is a strong link sport. 

Meanwhile, in soccer, a team’s success is predicated on how good the team’s worst player is. Rarely can Christiano Ronaldo take on a team entirely on his own – he is more reliant on his team not making mistakes than Lebron James is. In fact, this is empirical – research conducted by Chris Anderson and David Sally, authors of The Numbers Game: Why Everything You Know About Soccer Is Wrong, showed that professional teams would be more successful if they upgraded their worst player instead of their best players. Soccer is a weak link sport. 

And in soccer, success is gained, in part, by off the ball movement. Doesn’t the same logic apply in building ecosystems? Everyone has an individual role to play. 

It’s something that Dare acknowledged, as well, 

I think subconsciously we are still trying too hard to please people outside of Africa and not hard enough to look at our own possibilities around here. And subconsciously, obviously, we all shout, “Hey there’s not enough funding,” and so on, but we are still trying too much to run a playbook that is not ours. And one of the things that for me is different in our environment is that it’s unlikely that the people who start the race are going to finish the race. And we have to just make sure that we pass this on and we build it enough that the next person can stand on the shoulders of giants, but only the next person will see above the wall. And that should be okay with us, as a success, as well. Not necessarily getting all the way to ringing the bell on New York Stock Exchange. It should be absolutely saluted that Dan [Kleinbaum] and Luke [Kyohere] have built a business that can be rolled into another business. And if tomorrow MFS Africa has to do that, I will be absolutely prepared to do it, if that’s what it takes to actually create the prosperity, why we started the whole thing in the first place.

Perhaps this is the most important implication of the Beyonic sale to MFS Africa, from an ecosystem perspective. In solving problems that are bigger than any one company, for many, the journey will only take you so far. But if we broaden the set of exit opportunities the outcome can still be positive and lucrative, and may even extend the journey beyond what was possible individually.

And for Beyonic, while it was initially unexpected, it’s a welcome and exciting outcome. Said Carina,

If I’m being completely honest with you, I don’t think I saw this one coming. I didn’t have this exit in mind as the future path, which is a great example of why it’s important to be open to new possibilities because after seeing it start to take shape, I can’t imagine a better path.

Beyonic played their role – domestic collections and tools for SMEs – and together with MFS Africa – whose role is international remittances, and who acknowledged that they are not well-equipped to move into the SME space in spite of the opportunity they saw to do so – the combined team is now much stronger together. 

And perhaps, herein lies the opportunity, that this acquisition demonstrates and broadens the scope of what is possible –  and who, as acquirers, can create these possibilities – in the African tech ecosystem. 

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