Payday's $3mm raise
Initial thoughts whilst its still hot
Yesterday Payday raised $3mm in a round led by Moniepoint. I like the transaction for several reasons. But first I need to drag Tage who described Moneypoint Inc as ‘the U.S. entity that houses Moniepoint Microfinance Bank and TeamApt Nigeria’. Everybody come and see o - Tage is helping them steal our unicorns. Tage abeg let us keep this one please - we dash USA the entity tht owns Jumia. As my mama used to told me, ‘Exchange is no robbery’.
So why does this deal make me happy; Three key reasons
I only met Favour recently in San Francisco - he is a bundle of energy that has built in public and is not shy of discussing the challenges, the successes and the agonies. He’s the kind of founder that I like seeing succeed. A transparent one that (unlike me) is not scared of slapping down some overly demanding customers:
Favor@Favourori_You never ready for global banking. You need an international passport, driver license etc 🙏🏿
BLINKZ 🍷 @_Blinkz01@Favourori_ I don't have. Only my printed NIN. Chaiii wahala8:48 PM · Mar 10, 202322 LikesThe deal is led by an African firm (Tage are you listening); I, I have argued that local capital needs to be involved for African startups to thrive and in this case we have not just Moniepoint the very Nigerian & African lead, but other notable founders including Dare Okoudjou of the octopus-like MFS Africa, that is spreading its long tentacles across the continent eating up startups like shrimps & molluscs. Having investors that are also operators is not to be dismissed.
Payday is an example of the type of company I discussed in a recent piece, Unshackling African entrepreneurs from the chains of foreign exchange & digital banking. It is twist of irony for me in saying this given that that Payday is the type of company I argued against i.e. a neobank and fx platform. But in my defense, it does have three of the characteristics that I said are needed to succeed:
Capital light
Address the real sector - it doesn’t pass on this one
Solve an extreme problem (relative to more developed markets). You will probably argue against this one but go and ask a spare parts dealer looking to pay for their goods. Or a tech-bro looking to pay for AWS!
With an addressable global market - the truth is that what Payday is offering has equal validity in Argentina, Brazil, India, South Africa - all emerging markets with a strong demand for dollar accounts
On valuation
A $15mm acquisition offer was rejected from an African unicorn. I don’t think there are up to 5 so we can all guess a couple that have relevant businesses: Interswitch, Chipper, or Flutterwave abi? If anyone knows the answer please let me know.
Payday has grown its user base 3x in the last 3 months (with the usual caveats for vanity metrics that I have been vocal about or 44% monthly. Not sure how much of its income is split between interchange from card spend and foreign exchange spread but assuming a 3-5% fee, then its $25mm run rate equates to $750k to $1.25mm per month revenue.
Payment businesses have typically been valued as a multiple of GMV with a premium for growth. So a $15mm acquisition offer would have valued Payday at 5% of its annual run rate GMV. I don’t think that is too shabby on the surface.
But I suspect at the growth they have exhibited this year and the momentum they are showing per Favor, the team have some reason to be bullish.
In conclusion
Much needed good news after a spate of bad news internationally and should be a good fillip for some of the local startups who are seeing an International funding window that has all but shut down. The bigger boys and girls in the ecosystem need too be playing a bigger role in funding local startups and building partnerships. I know Interswitch started this a while back but the more the merrier. Let’s watch this space.
As usual, an absolute good read.