On Thursday, the African tech ecosystem got a piece of news we’ve all been waiting for:
While it’s entirely exciting, it’s not altogether that surprising after Stripe led Paystack’s Series A two years ago. Meanwhile, Stripe has also been busy on the expansion front, having launched in five European countries earlier this year, bringing their country count to 39, which includes markets in North America and Europe, as well as Latin America and Asia. It was only a matter of time before Stripe turned its sights on the continent.
There are so many reasons to be excited about this deal – from the economic significance, to the near term opportunities unlocked for Paystack, to the long term commitment from Stripe of African markets, to an opening of eyes that may lead to an expected increase in angel investment activity (both from the continent and outside of it), to the intangible significance of a homegrown startup, founded by two homebred founders, exiting at this scale.
Paystack’s CEO Shola Akinlade – a self-proclaimed product guy – is well known to have kept the company maniacally focused on fixing the problem at hand. “Payments are broken,” he says. A well-resourced Paystack working to fix payments in Africa will unlock an innumerable amount of second-order effects for all of those building on top of Paystack (and Stripe’s) infrastructure.
But what I am perhaps most excited about is the explicit and accelerated application of Stripe’s strategy, from an infrastructure and ecosystem building perspective, that will undoubtedly have an immeasurable impact on entrepreneurs, startups, and markets across the continent.
As Stripe has stayed busy on the investment front, Paystack is the company’s ninth acquisition. Their M&A mandate is explicit – empower developers, support new lines of business (like in-store payments), and promote internet-focused entrepreneurship.
Stripe’s early acquisitions largely focused on making internet developers’ lives simpler. In 2013, the company bought Kickoff, a chat and task management app, and in 2016 it purchased RunKit to supplement existing developer prototyping tools.
Following the acquisition, Runkit founder Francisco Tolmasky said, “I was already aware that Stripe had a history of investing in development, but Patrick made clear that lowering the bar to development is fundamentally aligned with Stripe’s interest in increasing the leverage of developers around the world.”
Support new lines of business
In July 2017, Stripe acquired Payable, a platform that simplifies the process of managing and paying contractors and freelancers. It also allows businesses to generate 1099 tax forms for contractors. Following the acquisition, Stripe (not surprisingly) further prioritized solutions targeted at the gig economy, integrating into the Stripe Connect product.
In March 2018, Stripe acquired Index, an in-store POS system startup. Index provides software for in-store payments systems, like the PIN pads used to pay with a debit or credit card. Six months later, Stripe announced Stripe Terminal, a programmable point of sale for in-person payments.
In 2019, Stripe acquired Touchtech payments, an Ireland-based startup that helps banks build Strong Customer Authentication (SCA) verification processes.
Promote internet-focused entrepreneurship
In 2017, Stripe acquired Indie Hackers, a knowledge-sharing platform for entrepreneurs. The rationale was “to simply ensure that the site becomes as successful as possible. The Stripe upside we’re hoping for is that more companies get started and that they’re more successful,” according to Patrick Collinson.
Much of the above is nicely aligned with what Paystack is already doing in Nigeria, and crucially, are activities vital to the development and proliferation of the African tech ecosystem.
The obvious opportunity for Paystack is in seeding their future customers, many of whom we may reasonably expect to grow into $100 million-plus businesses themselves. It’s well known the renown and preference Paystack has within the startup community and amongst product-led companies. The likes of PiggyVest, CowryRise, BuyCoins and many others would undoubtedly not have comparable success to date without Paystack’s infrastructure to build on top of. It is exciting to imagine how many more businesses can be built with a strategic investment from the company.
We previously unpacked the MFS Africa acquisition of Beyonic – a deal that is largely about broadening the breadth of customers MFS Africa can serve with Beyonic’s SME-focused products. MFS Africa’s CEO, Dare Okoudjou feels strongly about the necessity of fintech consolidation given the fragmented nature of African markets.
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.
When investors ask where the exits will come from, perhaps a lot more startups in the fintech space can now say Paystack.
Additionally, embedded finance is the term for the strategy behind non-fintech companies moving into financial services offerings. In other words – everybody is a fintech. The scope of companies Paystack can serve, either as customers or investees or acquisitions, is wider than ever.
Lastly, Paystack is already a leader in promoting and enabling internet-focused entrepreneurship, particularly through their marketing and growth strategy and their endeavor to learn and share with their customers.
It’s something I spoke with Paystack’s Head of Growth, Emmanuel Quartey, about in a recent episode of The Flip. There is perhaps no one better to be more well resourced so they can do more of what they are already doing so well.
And put simply, the African startup ecosystem needs more openness, transparency and knowledge sharing. I hope that Paystack’s investment in this space will allow for more to occur for the benefit and acceleration of the ecosystem.