Two recent pieces of news stand out.

First, Chinese ride-hailing behemoth DiDi announced last month its launch in South Africa. Their customer acquisition strategy thus far involves significant subsidies.

This race to the bottom is made possible by significant and unending access to capital. It's the blitzscaling game. And 100% discounts are an especially drastic version of the game.

Meanwhile, news also broke this week that OPay is reportedly raising a $400 million round, valuing the company at $1.5 billion.

OPay launched in Nigeria less than three years ago, in August 2018, as a multi-service superapp backed by Opera, whose mobile browser is second in market share in Nigeria. Less than a year later, OPay launched ORide with similar subsidies as DiDi is currently employing in South Africa. The startup blitzscaled their way to significant user growth of their fintech business before shutting down their ride-hailing service just eight months later, amidst the COVID pandemic.

During that time, OPay raised a $120 million Series B from some of China's biggest tech companies and investors - Meituan Dianping, Sequoia Capital China, SoftBank Ventures, and Source Code Capital (backers of ByteDance), amongst others - and grew its agent network and transaction volume significantly. It was recently reported in Opera's quarterly report that OPay processed a gross transaction value of $1.4 billion on its platform, and its agent network has grown to over 300,000.

As Victor Asemota posited in a recent Twitter thread, OPay has the structure and partners, the investors - who themselves have participated in China's meteoric economic development - and, perhaps most importantly, the capital to experiment with and scale what works in the markets in question.

There has likewise been a lot said in our nascent ecosystem about the congruity of the blitzscaling, growth-at-all-costs strategy in markets with price-sensitive, low-income consumers. The commonly held belief by investors, founders, and even pastors (in remarkable Twitter threads), is that it doesn't work in markets like Nigeria.

But I'm starting to wonder if the discourse is misplaced, and if we're failing to identify the rules of the game.

The "growth-at-all-costs", unlimited-access-to-capital game may work for OPay, but not for "you". Most tech founders in Africa do not have OPay-like access to an unending pool of capital. Home-grown ride-hailing startups are not Uber or DiDi. They're playing different games entirely.

I found a recent Twitter thread from Uber's former Head of Business Ops particularly illuminating and relevant. Perhaps there is such a thing as too much capital, he argues. Or, at least, a scarcity of capital allows startups to uniquely and strategically better serve customer segments than their well-funded competitors employing what he calls a "peanut buttering" of strategy.

The point being, a startup is very explicitly one or the other - and most African tech startups or growth-stage companies do not have anywhere close to "too much capital".

And recall Morgan Housel's words from above,

Being swayed by people playing a different game can also throw off how you think you're supposed to spend your money.

There's a million ways to build a successful tech business. But in every case, I think it's by playing a game that works best for you.

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Thanks for reading 🙏

Justin

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