22 minute read
I How Two Africans Overcame Bias To Build A Startup Worth Billions
By Jeff Kauflin
CONTRARIAN • TECHNOLOGY/ INNOVATION
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Photograph by Ethan Pines for Forbes
How Two Africans Overcame Bias To Build A Startup Worth Billions
A pair of twentysomethings from Uganda and Ghana thought there was a fortune to be made bringing transnational financial services to Africa’s 1.4 billion people. With 5 million users, San Francisco-based Chipper Cash is just getting started.
I
It was the summer of 2018, and Ham Serunjogi, a 24-year-old Ugandan immigrant, thought the pitch he was making to a Palo Alto venture capital firm was going well. He had explained how his fintech startup, Chipper Cash, would enable African consumers to send money to each other, across national borders, more cheaply and easily than the antiquated banking system—a sort of Venmo for the continent.
Then came a question from one of the partners: “Why don’t you go look for donations and grants to fund this?” Because, Serunjogi replied, this will be a profit-making business. The clueless partner persisted: “Why don’t you talk to Unicef or an impact investing firm?” Serunjogi discreetly declines to name the firm, or to say which VC later told him that “regardless of what the metrics are, I have to apply a discount to this business because it’s in Africa.”
Those memories still sting, even though Chipper Cash has now raised $300 million from a roster of blue-chip VCs, most recently in November at a $2.2 billion valuation. “These were things I’d have to take with a straight face. But it was outrageous, and it still is,” Serunjogi says from the San Francisco office where he, cofounder Maijid Moujaled and nearly a fifth of the company’s 350 employees are based. The two founders each have an estimated 10% stake in Chipper, translating into paper fortunes north of $200 million.
Sheel Mohnot, a former partner at 500 Startups— Chipper Cash’s first backer—chalks up some early investor resistance to ignorance about Africa. “No one was investing in Africa at the time,” he says. That has changed. Per CB Insights, venture capitalists invested $1.5 billion in African fintech companies last year, up sevenfold from 2020. Sub-Saharan Africans today have 605 million registered mobile money accounts—with which they can send cash via text message—up from 469 million in 2018. That makes the area fertile ground for more advanced consumer financial apps.
Four years after its founding, Chipper Cash has 5 million registered users in seven countries, including Uganda, Ghana and Nigeria. It offers not only lowcost money transfers but bill payment, crypto trading and the ability to buy U.S. stocks. Excluding crypto transactions, it booked more than $75 million in revenue in 2021, compared with $18 million in 2020.
The idea for Chipper Cash was seeded when highschool-age Serunjogi saw the problems his father encountered trying to move money through Africa’s ossified banking system. Serunjogi’s family lived in
The idea for Chipper Cash was seeded when high-school-age Serunjogi saw the problems his father encountered trying to move money through Africa’s ossified banking system.
TECHNOLOGY/ INNOVATION • CONTRARIAN Gayaza, a Ugandan town 10 miles outside Kampala, the capital. His parents owned a farm, and his father also ran an IT operation helping local businesses set up networks. Though hardly rich, the family sent Serunjogi and his two brothers to a private high school and enrolled them in a competitive swim club. In 2010, Serunjogi, then 16, made the Ugandan Youth Olympic team. After having problems completing a bank transfer, his father was forced to fly to South Africa with an envelope
Follow the Money Chipper president Maijid Moujaled (left) and CEO Ham Serunjogi (also shown on page 37) in their San Francisco headquarters, where they located for access to venture capital. When they brainstormed ideas, though, Moujaled says, their goal was always to do something for their home countries.
Little Big Picture CASH CAPITALS
Morocco
• Population (2020): 36.9 million • 29% banked • Most popular banking app: CIH (Crédit Immobilier et Hôtelier) Mobile
Egypt
• 102 million • 33% banked • NBE (National Bank of Egypt) Mobile
Nigeria
• 206 million • 40% banked • Kuda, mobile banking
Kenya
• 53.7 million • 82% banked • M-Pesa, mobile money service owned by Vodafone
South Africa
• 59.3 million • 69% banked • Capitec, mobile banking
Only about 40% of Africa’s 1.4 billion people are considered “banked”—meaning they have access to, and use, a bank—making the continent rich territory for fi ntech startups looking to bring fi nancial access to hundreds of millions of African mobile phones. Here are some of the most and least fi nancially served nations— and the apps they’re banking on.
full of cash to pay his son’s swim coach while they were training there.
After high school, Serunjogi followed his older brother to Grinnell, a small liberal arts college in Iowa known for its strong academics, where both swam varsity. At Grinnell he met Moujaled, a Ghanaian computer science major who had started a popular student coding group. Almost immediately, the two began talking about developing an African money transfer app. But first they wanted real-world tech experience and needed work visas. So during his junior year Serunjogi sent cold emails to Mark Zuckerberg and Sheryl Sandberg and snagged an internship with Facebook, which turned into a fulltime job in Dublin after he graduated in 2016.
In the spring of 2018, Serunjogi texted Moujaled, who was working as a software engineer in San Francisco, to say it was time to get going. Serunjogi quit his job and moved into Moujaled’s studio apartment, sleeping on an air mattress in the kitchenette. The two used their combined savings of less than $30,000 and Moujaled’s ongoing salary as seed capital. They launched a test version of their app in July 2018, letting customers send money from Uganda to Ghana for free.
They took pitches to more than 50 VC firms until, in November 2018, 500 Startups agreed to invest $150,000. Before the papers were signed, Mohnot wired $40,000 to Chipper after Serunjogi told him he was about to miss rent. “I will be eternally grateful to him for that,” Serunjogi says.
Chipper’s free, easy-to-use app was a big improvement over the available alternatives. For example, Kenya’s M-Pesa, which launched in 2007, charges 1% to 2% for many domestic transfers.
By mid-2019 Chipper Cash was available in Uganda, Ghana, Kenya and Rwanda. It soon expanded to Nigeria, Africa’s biggest market with more than 200 million people, and by the end of the year, it had 600,000 customers. It also introduced a foreign-exchange markup fee of 2% to 5% to start generating revenue. As bitcoin rose from $14,000 to $20,000 in the fall of 2020, Chipper began to let users buy and sell bitcoin and ether, establishing a second lucrative line of business: trading fees. It reached a $2.2 billion valuation in late 2021, with investment from firms including Sam BankmanFried’s FTX, Ribbit Capital and Bezos Expeditions. Transactions grew from $200 million in the first quarter of 2021 to $1.6 billion 12 months later.
All that growth comes with added high-stakes challenges. One is liquidity: Chipper needs to make sure it has enough funds in each country to support instant transfers. When it doesn’t, transaction times can slow to a full day or longer. Money can solve that problem. A bigger worry is competition. Senegal-based startup Wave offers similar services (albeit in different countries so far) and notched a $1.7 billion valuation last year. Other remittance companies such as Remitly and Wise don’t yet let people send money from one African country to another, but there’s nothing stopping them from entering the market.
For now, Serunjogi is focused on maintaining Chipper’s steep growth, moving to profitability—and helping Africans while doing so. Customers benefit, he says, when they can move money easily and have new ways to invest and build wealth. “I’m a deep believer in the role of entrepreneurship and capitalism in improving the lives of people who live in developing countries.”
HOW TO PLAY IT
By Jon D. Markman Growing smartphone adoption in Africa is creating a big opportunity in financial technology. The best way to play this trend is PayPal. The San Jose, California–based fintech operates in 200 markets globally. Through its subsidiary Xoom, African members can send money online and transfer funds directly to banks and debit cards. The company reported in April that first-quarter total payment volume surged to $323 billion, up 13% versus a year ago. Net revenue reached $6.5 billion, up 8% year over year. Based on global fintech growth, shares are attractive at $77.18, down from $309 last July.
Jon D. Markman is president of Markman Capital Insight and editor of Fast Forward Investing.
FINAL THOUGHT “THERE IS LITTLE THAT BUREAUCRATS HATE MORE THAN INNOVATION.”
—Frank Herbert
• COVER STORY •
POWERHOUSE
Saeed Mohammed Al Tayer, Managing Director and CEO of the Dubai Electricity and Water Authority (DEWA), led the utility provider to raise $6.1 billion in an IPO in April, making it the largest company on the Dubai Financial Market. IPO activity among state-owned companies is heating up in the Middle East.
BY JAMILA GANDHI
IMAGE BY FORBES MIDDLE EAST FORBESMIDDLEEAST.COM
Saeed Mohammed Al Tayer, Managing Director and CEO of the Dubai Electricity and Water Authority (DEWA)
On April 12, 2022,
the Dubai Electricity and Water Authority (DEWA) became the largest company on the Dubai Financial Market (DFM), raising $6.1 billion in a long-awaited IPO and giving the firm a market cap of $33.8 billion.
“The IPO was 37 times oversubscribed, indicating institutional and retail investors’ confidence in DEWA as a leading global utility company,” says Saeed Mohammed Al Tayer, Managing Director and CEO of DEWA.
At the time of the listing, DEWA’s IPO was the largest in Europe, the Middle East, and Africa since Saudi Arabia’s Aramco raised $29.6 billion in late 2019. The Dubai government sold 18% of its stake in the state-owned utility firm, equating to nine billion shares, at $0.68 per share. The IPO attracted a total of $85.8 billion from sovereign funds, private funds, and over 65,000 individual investors.
Days after DEWA’s market debut, its neighboring counterpart, the Abu Dhabi National Energy Company (TAQA), became the top-ranking publicly-listed utility company in the Arab region, with a market capitalization of $41.9 billion based on its share price on April 19, 2022. Globally, the market size for utility companies is expected to grow by nearly 9%, from $5.5 trillion in 2021 to $6 trillion in 2022, according to a report by ResearchAndMarkets. The market is anticipated to reach $8.1 trillion by 2026.
For investors, DEWA is a good bet. It posted revenues of $1.4 billion in Q1 2022, a 15% increase compared to the year before. And 2021 also recorded strong financials, with revenues up 5.8% by the end of the year to reach $6.5 billion. According to the company, growth was driven by a resurgence in hospitality and commercial activities in Dubai as Covid-19 measures eased. As of July 19, DEWA had 11,048 employees serving over 3.5 million Dubai residents. Energy demand in Dubai during the first half of 2022 increased by 6.3% compared to the same period in 2021, reaching 23,096 GWh compared to 21,729 GWh the year before. As Dubai’s only electricity and water services provider, DEWA currently has an installed capacity of 14.1 megawatts of electricity and 490 million imperial gallons of desalinated water per day.
For the CEO, however, its latest evolution is not just about raising capital, but transforming the energy sector. DEWA is investing hard in renewable and sustainable energy. In May, the industry veteran even traveled to the World Economic Forum Annual Meeting 2022 at Davos, which gathered nearly 2,500 leaders to debate global issues and find solutions to the world’s most pressing challenges, including the ongoing geo-economic shocks and climate change.
Accelerating the Middle East’s transition to renewable energy has implications for investment across many other environment, social, and governance (ESG) areas. “By generating more energy from renewables, governments and companies in the region will help legitimize additional investment,” explains Samer Kamal, Chief Sustainability Officer at
Saeed Mohammed Al Tayer
U.A.E.-based Averda. “As investors begin to understand how to make money from environmentally positive investments, they will invariably seek more. This will have a cascade effect on other environmental issues, putting a spotlight on issues relating to waste, water, and food.”
For Raja Atoui, Partner at Bain & Company Middle East, cleaner power can enable increased electrification of transport and industry for consumers and businesses that wish to reduce their carbon footprints. “These plans entail major investment and the need to ensure localization across the value chain to develop renewable generation capacity, reinforce the electric grid, and build energy storage solutions,” stresses the ESG investment expert.
Regionally, the Middle East will host two installments of the UN climate change conference over the next two years, with COP27 held in Sharm el Sheikh, Egypt, in November 2022 and COP28 in Abu Dhabi in November 2023. Overall, energy investments in MENA are expected to surge by 9% reaching $870 billion over the next five years, according to the Saudi-based Arab Petroleum Investments Corporation (APICORP), underlining how the energy transition is among the highest priorities for Middle East policymakers.
To help achieve Dubai’s clean energy and net-zero targets for 2050, DEWA has been investing in developing several mega projects. These include the world’s largest single-site solar park, the Mohammed bin Rashid Al Maktoum Solar Park, with an estimated production capacity of 5,000 MW by 2030 and investments of up to $13.6 billion. “The clean energy capacity share is currently around 11.5% of Dubai’s energy mix and is expected to reach around 14% by the end of 2022,” Al Tayer forecasts. Upon completion, the solar park will save over 6.5 million tons of carbon emissions annually.
DEWA’s other initiatives include a 250MW hydroelectric power plant in Hatta and the Green Hydrogen project, the first of its kind in the MENA region to use solar power to produce hydrogen. Al Tayer is placing his bets on hydrogen as being the most impactful clean energy mode in the future. “Green hydrogen is a promising energy source for the
future, but it is still underdeveloped for commercial use,” he adds.
Kamal agrees, highlighting the opportunities to link green hydrogen production and carbon capture to recovery and treatment. “In the mid-term, I believe solar power has great potential to impact our energy mix and drive down our carbon emissions,” he says. “That being said, I am quite excited by the rise of hydrogen in power generation. Hydrogen as an energy source has huge potential, much of which has not been considered yet.”
His projection is also echoed by data insights from APICORP, forecasting that blue and green hydrogen will dominate across the MENA region in the near term. In May, oil giant BP Plc confirmed its plans to develop a clean hydrogen
DEWA’s initiatives include a 250MW hydroelectric power plant in Hatta and the Green Hydrogen project, the first of its kind in the MENA region to use solar power to produce hydrogen.
project with two of the U.A.E.’s biggest energy firms—ADNOC and Masdar—as oil producers seek to build alternative fuel solutions to curb carbon emissions.
But the U.A.E. is not alone in its aggressive targets. The Gulf’s oil producers are on a mission to spearhead a global energy transition away from fossil fuels. “Governments across the Middle East have shown commitment towards achieving ESG leadership, and this can be illustrated by the various net-zero announcements made over the past year,” says Atoui. “For state-owned companies, it is imperative to lead by example and fully embed ESG measures in their business.”
DEWA’s performance has been surpassing major European and American utilities in several indicators. In 2021, the utility firm’s water network losses dropped to 5.3%. This is one of the leading records globally and compares to North America, where water losses stand at around 15%. DEWA’s losses from electricity transmission and distribution networks were 3.3% compared to around 6-7% in Europe and the U.S. DEWA also raised the efficiency of fuel and production units by 90%, which is among the highest percentage worldwide, according to the company.
And while energy prices spike globally, Al Tayer says that the rise in costs will not impact the company’s operations due to long-term purchase contracts in place. “DEWA is subject to a regulated tariff and framework that helps serve the interests of various stakeholders in a balanced manner,” he explains. “Tariffs have remained stable, and no review has been found necessary for over a decade, so we don’t foresee any changes in tariff in the near future.”
Al Tayer’s journey with DEWA started before the company was even created. He was previously the deputy general manager of Etisalat, when the Dubai government selected him to become the general manager of what was then the Dubai Electricity Company, as well as director general of the Dubai Water Department, which was a separate organization at the time. He was tasked with improving efficiencies and examining the possibility of a merger between the two. Al Tayer eventually submitted a merger proposal to the board, which was approved and led to DEWA being formed in 1992. “Initially there were many challenges,” he remembers. “We were subsidized, overstaffed, operating inefficiently and without systems and clear procedures. The electricity and water network required better planning.” Al Tayer undertook an organizational restructure, hired new staff,
established a KPI-based management model, and introduced strategic planning and enterprise-wide ERP systems. “The results are there for everyone to see,” he adds.
Among Al Tayer’s other current posts, the CEO is also vice-chairman of the Dubai Supreme Council of Energy, vicechairman of Emirates Global Aluminium, chairman of the Emirates National Oil Company, and chairman of the Dubai Future Council On Energy. “In my 35-year career in the fields of telecommunication, energy, infrastructure, oil, and gas, it is the experience of leading DEWA that I cherish most,” he says.
As the CEO leads DEWA into its next chapter as a listed company for
DEWA has been investing in developing several mega projects. These include the world’s largest single-site solar park, the Mohammed bin Rashid Al Maktoum Solar Park.
the first time in its 30-year history, it joins DFM at a time when the Dubai bourse is bracing for another year of record listings. In November 2021, the Deputy Ruler of Dubai, Sheikh Maktoum bin Mohammed bin Rashid Al Maktoum, said his government approved establishing a market-maker fund worth up to $544.5 million. The committee will also launch a $272.2 million fund to support tech firm IPOs and encourage innovative financial products and solutions. In June 2022, Dubai businesspark operator, the TECOM Group, became the second of 10 planned listings as part of the government’s plans to list state-owned companies to boost trading volumes to $816.8 billion, catching up with Abu Dhabi’s ADX and Saudi’s Tadawul. Emirates Global Aluminium, Empower, and Dubai road toll firm Salik are among the anticipated upcoming IPOs for 2022.
Recent IPOs in Abu Dhabi and Riyadh attracted a flood of cash in Q1 2022. The U.A.E. capital saw the listing of the Abu Dhabi Ports Group, which mobilized $1.1 billion from its share sale in February. Meanwhile, Saudi-based Nahdi Medical Co. raised $1.4 billion in its share offering in late March, while Al-Dawaa secured $496.4 million through its IPO in the same month. Tadawul received 50 applications from companies for floating IPOs this year.
However, Dubai is hot on the heels of MENA’s most active IPO markets. “We are proud to offer investors the opportunity to participate in DEWA’s future as it supports Dubai’s growth and energy transition to carbon neutrality,” says Al Tayer.
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MENA’s Biggest Utilities Businesses
Forbes Middle East’s ranking of the region’s top 100 listed companies ranks the biggest public companies based on their reported market value, sales, assets, and profits. These five utilities companies featured on the 2022 list. Financial data is as of as of April 21, 2022.
Rank Company Country Sales Profit Assets Market value
7 Saudi Electricity (SEC) Saudi Arabia $18.5 billion $3.8 billion $126.6 billion $29.8 billion
SEC is the region’s biggest utility company.
10 TAQA Group U.A.E.
13 Dubai Electricity and Water Authority (DEWA) U.A.E.
$12.4 billion $1.6 billion
$6.5 billion $1.8 billion
57 ACWA Power Saudi Arabia $1.4 billion $198 million
$49.1 billion
$46.1 billion
$12.2 billion
81 Qatar Electricity & Water Company (QEWC) Qatar $680 million $409 million $5.1 billion
$41 billion
$38.8 billion
$26.4 billion
$5.4 billion
TAQA Group was established and listed on the Abu Dhabi Securities Exchange (ADX) in 2005.
DEWA made its debut on the Dubai Financial Market (DFM) in April 2022.
ACWA Power develops, invests, and operates power, water desalination, and green hydrogen plants.
QEWC is the main supplier of electricity and desalinated water in Qatar.
U.A.E. Consumers Embrace Digital Payments
Mastercard’s J.K. Khalil, Cluster General Manager of MENA East, reveals the payment trends emerging in the U.A.E., with digital front and center.
The technology fueling the future of payments is already here and consumers across the globe are opening up to new and exciting ways to shop, transact, and manage their money. Delving deep into the topic, Mastercard’s New Payments Index 2022 has unearthed a trove of valuable findings, with all things digital taking center stage.
In the MENA region, the United Arab Emirates is a case in point. According to the Mastercard study, U.A.E consumers are not just aware of emerging payment methods, they are increasingly and actively using them in their everyday lives, with 88% having used at least one in the last year. Of these consumers, 39% used a tappable smartphone mobile wallet, 29% used Buy Now Pay Later (BNPL), 20% used cryptocurrency, and 18% used a payment-enabled wearable tech device. Consumers are also making purchases in increasingly diverse ways, including through voice assistants and social media apps.
These findings point to an emerging landscape where digital payments are on the rise and the use of cash is declining, but the Mastercard New Payments Index 2022 is far more nuanced than that. Interview responses from more than 35,000 adults world-wide have revealed a number of global trends
and detailed insight into J.K. Khalil, the drivers of customer Cluster General Manager, behavior in the U.A.E. Mastercard MENA East High awareness of BNPL installments as a budgeting tool The majority of U.A.E. consumers have heard of BNPL with 87% saying they are familiar with the concept, and almost half are already comfortable using it today. Consumers want the flexibility and convenience of BNPL, but with the sense of security associated with a trusted provider like a bank or payment network. Those that have used BNPL find it useful for emergency and big-ticket purchases, as well as increased purchasing power. Consumers also find BNPL useful for unique use cases, including as a budgeting and financial planning tool.
Deeper understanding of blockchain is key to expanding the use of cryptocurrency and NFTs Broad awareness of cryptocurrency and non-fungible tokens (NFTs) exists, but 74% of U.A.E.
consumers agreed they would use cryptocurrency more if they understood it better. Still, about two thirds of consumers in the U.A.E. concur that NFTs and other digital assets could be good investments, and 67% have undertaken at least one crypto-related activity in the past year.
Receptiveness to more direct account-to-account (A2A) payments The majority of consumers are seeking greater agility to optimize bill payments, prioritizing control, flexibility, convenience, and integrated payment technologies. Most are open to direct account-toaccount payment options, by linking their account to a merchant site for future purchases, while 83% of U.A.E. consumers already using A2A payments have either maintained or increased their usage in the last year.
What’s more, seven in 10 consumers agree they are interested in a bill payment option that allows them to change the date they pay their monthly bills, mostly due to an irregular income. Bill payment options that allow them to pay over a period using a BNPL solution is also of interest, as well as automatic payments for their household bills. concerns. In the U.A.E., 81% of consumers know about open banking, and are using it to pay their bills, do their banking, secure or refinance loans, and make BNPL payments. Over half also feel safe using apps to send money to people or businesses from their phone, while 50% are willing to share
financial data with apps in order to gain access to payment tools that help them manage their money.
Biometrics offer convenience and security, though concerns remain Consumers recognize the convenience that biometrics can offer, with 71% agreeing it is easier to make payments using biometrics than a card or device. The potential for security optimization is also evident to consumers, with seven in 10 agreeing that biometrics technology is more secure than twofactor authentication when it comes to payments.
Consumers do have some concerns about what entities have access to their biometric data, but they are still open to using it given the time it saves. In fact, nearly two thirds have used biometrics for at least one purchase in the last year and 87% of consumers have used, or plan to use, their fingerprint to make a payment. Other popular biometric methods include facial recognition, palm or hand, retina scans, and voice recognition.
Consumers turning to fintech and open banking to meet everyday finance needs Consumers are relying on digital finance options for their everyday financial tasks, with benefits like speed, convenience, and transparency, outweighing security Emerging payments have strongest traction among more digitally native generations Younger generations have gone more digital in their purchasing
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and payments behavior, and their engagement in and usage of emerging digital payments is accelerating at a faster rate than older audiences. They are also more open to exploring emerging payment approaches like crypto, or buying virtual products in the metaverse. While security and data privacy remain a concern for them, it is less heightened than for older consumers, and they are more likely to perceive digital tools as secure.
Across the U.A.E., Gen Z is the least likely consumer base to use cash or make in-person purchases and payments. Gen Z consumers are proactively seeking out new payment methods, and nearly two thirds of them in the U.A.E. are likely to have obtained a new digital payment alternative, such as a digital wallet or click-to-pay account, compared to only 22% of Boomers.
As consumers transact digitally more than ever before, Mastercard continues to strengthen its digital payment capabilities in the U.A.E. and wider region. Its trusted technology solutions are being used for new use cases, brought to market through various partnerships with fintechs, governments, financial institutions, digital giants, and telecom operators. By tapping into multi-rail capabilities to create competitive localized solutions, Mastercard is accelerating the transfer of value in new ways, thereby advancing a bright future for inclusive commerce.
