Stripe Acquires Nigeria’s Paystack for $200M

Stripe Acquires Nigeria’s Paystack for $200M+ to Expand into the African Continent

By Ingrid Lunden

WHEN STRIPE ANNOUNCED

EARLIER this year that it had picked up another $600 million in funding, it said one big reason for the funding was to expand its API-based payments services into more geographies. Now the company is coming good on that plan in the form of some M&A.

Stripe (https://stripe.com) is acquiring Paystack (https:// paystack.com), a startup out of Lagos, Nigeria that, like Stripe, provides a quick way to integrate payments services into an online or offl ine transaction by way of an API. (We and others have Ezra Olubi and Shola Akinlade sold their fi ntech company for over $200 million. Photo credit: Nairametrics Source: UGC referred to it in the past as “the Stripe of Africa.”)

Paystack currently has around 60,000 customers, smaller companies to expand its technology stack, including small businesses, larger corporates, rather than its global footprint. fi ntechs, educational institutions and online betting The deal underscores two interesting points companies, and the plan will be for it to continue about Stripe, now valued at $36 billion and regularly operating independently, the companies said. tipped as an IPO candidate. (Note: It has never

Terms of the deal are not being disclosed, but commented on those plans up to now.) First is sources close to it confi rm that it’s over $200 million. how it is doubling down on geographic expansion: That makes this the biggest startup acquisition to Even before this news, it had added 17 countries date to come out of Nigeria, as well as Stripe’s to its platform in the last 18 months, along with biggest acquisition to date anywhere. (Sendwave progressive feature expansion. And second is how (www.sendwave.com), acquired by WorldRemit Stripe is putting a bet on the emerging markets of (www.businesswire.com/news/home/20200825005820/en/ Africa specifi cally in the future of its own growth. WorldRemit-to-Acquire-Sendwave) in a $500 million “There is enormous opportunity,” said Patrick deal in August, is based out of Kenya.) Collison, Stripe’s co-founder and CEO, in an

It’s also a notable shift in Stripe’s strategy as it interview with TechCrunch (https://techcrunch.com). continues to mature: Typically, it has only acquired “In absolute numbers, Africa may be smaller right

now than other regions, but online commerce will grow about 30% every year. And even with wider global declines, online shoppers are growing twice as fast. Stripe thinks on a longer time horizon than others because we are an infrastructure company.

We are thinking of what the world will look like in 2040-2050.”

For Paystack, the deal will give the company a lot more fuel (that is, investment) to build out further in Nigeria and expand to other markets, CEO Shola Akinlade said in an interview.

“Paystack was not for sale when Stripe approached us,” said Akinlade, who co-founded the company with Ezra Olubi (who is the CTO). “For us, it’s about the mission. I’m driven by the mission to accelerate payments on the continent, and I am convinced that Stripe will help us get there faster. It is a very natural move.”

Paystack had been on Stripe’s radar for some time prior to acquiring it. Like its U.S. counterpart, the Nigerian startup went through Y Combinator — that was in 2016, and it was actually the fi rstever startup out of Nigeria to get into the worldfamous incubator. Then, in 2018, Stripe led an $8 million funding round for Paystack, with others participating, including Visa and Tencent. (And for the record, Akinlade said that Visa and Tencent had not approached it for acquisition. Both have been regular investors in startups on the continent.)

In the last several years, Stripe has made a number of investments into startups building technology or businesses in areas where Stripe has yet to move. This year, those investments have included backing an investment in universal checkout service Fast, and backing the Philippinesbased payment platform PayMongo.

Collison said that while acquiring Paystack after investing in it was a big move for the company, people also shouldn’t read too much into it in terms of Stripe’s bigger acquisition policy.

“When we invest in startups we’re not trying to tie them up with complicated strategic investments,” Collison said. “We try to understand the broader ecosystem, and keep our eyes pointed outwards and see where we can help.” That is to say, there are no plans to acquire other regional companies or other operations simply to expand Stripe’s footprint, with the interest in Paystack being about how well they’d built the company, not just where they are located.

“A lot of companies have been, let’s say, heavily infl uenced by Stripe,” Collison said, raising his eyebrows a little. “But with Paystack, clearly they’ve put a lot of original thinking into how to do things better. There are some details of Stripe that we consider mistakes, but we can see that Paystack ‘gets it,’ it’s clear from the site and from the product sensibilities, and that has nothing to do with them being in Africa or African.”

Stripe, with its business fi rmly in the world of digital transactions, already has a strong line in the detection and prevention of fraud and other fi nancial crimes. It has developed an extensive platform of fraud protection tools, but even with that, incidents can slip through the cracks. Just last month, Stripe was ordered to pay $120,000 in a case in Massachusetts after failing to protect users in a $15 million cryptocurrency scam.

Now, bringing on a business from Nigeria could give the company a diff erent kind of risk exposure. Nigeria is the biggest economy in Africa, but it is also one of the more corrupt on the continent, according to research from Transparency International.

And related to that, it also has a very contentious approach to law and order. Nigeria has been embroiled in protests in the last week with demonstrators calling for the disbanding of

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the country’s Special Anti-Robbery Squad, after multiple accusations of brutality, including extrajudicial killings, extortion and torture. In fact, Stripe and Paystack postponed the original announcement in part because of the current situation in the country.

But while those troubles continue to be worked through (and hopefully eventually resolved, by way of government reform in response to demonstrators’ demands), Paystack’s acquisition is a notable foil to those themes. It points to how talented people in the region are identifying problems in the market and building technology to help fi x them, as a way of improving how people can transact, and in turn, economic outcomes more generally.

The company got its start back when Akinlade, for fun (!) built a quick way of integrating a card transaction into a web page, and it was the simplicity of how it worked that spurred him and his co-founder to think of how to develop that into something others could use. That became the germination of the idea that eventually landed them at YC and in the scope of Stripe.

“We’re still very early in the Paystack payments ecosystem, which is super broken,” said Akinlade. The company today provides a payments API, and it makes revenue every time a transaction is made using it. He wouldn’t talk about what else

is on Paystack’s radar, but when you consider Stripe’s own product trajectory as a template, there is a wide range of accounting, fraud, card, cash advance and other services to meet business needs that could be built around that to expand the business. “Most of what we will be building in Africa has not been built yet.”

Last month, at Disrupt (https://techcrunch.com/ events/disrupt-sf-2020), we interviewed another successful entrepreneur in the country, Tunde Kehinde, who wisely noted that more exits of promising startups — either by going public or getting acquired — will help lift up the whole ecosystem. In that regard, Stripe’s move is a vote of confi dence not just for the potential of the region, but for those putting in the eff orts to build tech and continue improving outcomes for everyone. https://techcrunch.com/2020/10/15/stripe-acquiresnigerias-paystack-for-200m-to-expand-into-theafrican-continent Image credits: okay.ng, technext.ng See page 27 for related article.