Since the inception of the company thirteen years ago, Dare Okoudjou, founder of MFS Africa, has amassed a network of 320 million mobile wallets across Africa. Image courtesy of MFS Africa
MFS Africa is having a great year so far. MFS Africa, a fintech company that specializes in mobile payments, has just announced that it has successfully closed a $100 million Series C extension. This news comes just over a week after the mobile payments fintech company announced that it had acquired the United States-based Global Technology Partners. The company initially raised $100 million in Series C funding, and this new financing brings that total to $200 million.
Vitruvian Partners and the alternative investments arm of AXA Investment Managers (AXA IM Alts) were new investors in the extension funding round. The round, which was a mixture of equity and debt, was led by the private equity firm Admaius Capital Partners. A number of the company's current investors, including AfricInvest FIVE and CommerzVentures, contributed additional capital, and Stanbic IBTC Bank Nigeria and Symbiotic were responsible for providing debt financing.
This is the very first investment that the European private equity firm Vitruvian Partners, which specializes in the middle market, has made anywhere in Africa. Other companies that have invested in MFS Africa in the past include the LUN Partners Group, Goodwell Investments, Allan Gray Ventures, Endeavor Catalyst and Endeavor Harvest, Equator Capital Partners, Ulme B. V., and Vlemeij B. V.
MFS Africa has completed the acquisition of BAXI in Nigeria and secured licenses from the Central Bank of Nigeria since the closing of a Series C fundraise in November 2021. These licenses include a Payment Service Solution Provider (PSSP) license and a Payment Terminal Service Provider (PTSP) license. PSSP licenses are granted to businesses in Nigeria that are in the process of constructing underlying digital payment infrastructures. They make it possible for these businesses to construct payment processing gateways and aggregate merchants, while PTSP licenses are essential for deploying the point-of-sale terminals that are used in agency banking.
According to a press statement released by MFS Africa that was obtained by TechCabal, this extension will help "accelerate MFS Africa's expansion plans across Africa, its integration into the global digital payment ecosystem, its expansion into Asia through its joint venture with LUN Partners to enable cross-border digital payments between Africa and China, and its ambitious growth plans for the BAXI network of merchants and agents in Nigeria and beyond."
MFS Africa also intends to put this recent funding toward driving growth in Nigeria, which is the company's newest market. On a call with TechCabal, the founder and CEO of MFS Africa, Dare Okoudjou, stated that a portion of this funding would be used to fund growth in Nigeria and take market share through Baxi.
" We have done something pretty unorthodox, which is to do two major M&As in two difficult markets," Okoudojou says, referring to the acquisitions of BAXI and GTP. Okoudojou is referring to the acquisitions of BAXI and GTP. He continues by saying that the primary focus for the time being will be on "how do we integrate into one company and make sure that we realize synergy."
MFS Africa made the decision to hire Meghan Taylor, a former partner at Boston Consulting Group, to fill the position of Chief of Staff with the intention of guiding the process of integrating the three distinct businesses into a single entity. MFS Africa has also brought on Julian Adkins, formerly the Africa CFO at Millicom (Tigo), to serve as its new Chief Financial Officer. Adkins is part of the company's leadership team. In the press statement that was mentioned earlier, Okoudjou thanked both new and existing investors for their support of MFS Africa's "journey to making borders matter less when it comes to payments." He also mentioned that the company's objective is to build an interoperable and long-lasting digital infrastructure that will simplify payments in Africa.
Extension rounds are notoriously difficult affairs, and in some instances, they are nothing more than flat rounds dressed up. When a company raises additional capital at the same valuation and terms as a previous round, this type of round is referred to as a flat round. When a company signs completely new term sheets for the same valuation but under different terms, this is known as a flat round, which can also be renamed a "extension." From the outside, it does not appear that this has been the case here; however, specifics like these are typically not disclosed to the public. On the other hand, Okoudjou explained why MFS Africa decided to extend their round while they were on the call with TechCabal.
" Among these investors, there were a few who expressed an interest in participating in the [Series] C round. They simply were unable to make it at that time when we were closing it, so we have kept the conversation going knowing that we will need future capital regardless. " he explained.
The funding round was successfully completed and the news was made public in November of that year, during a different market environment in which tech stocks were at an all-time high and capital was freely flowing to venture firms. However, as a result of a shift in the macroeconomic outlook, particularly for growth-stage companies like MFS Africa that have significant capital requirements, the company made the decision to accept the supplemental funding. Because of the shifts in the funding market and the fact that we were well aware of everything we had available, we decided that now would be a good time to bring in some additional cash in order to be better prepared for the upcoming winter. This was another point that Okoudjou made.
And it makes sense. Since the underlying signs of a funding slowdown burst through the veneer of continued capital growth more than a month ago, investors and analysts in the private market have been preaching the same mantra: "Raise what you can now."
Okoudjou is of the opinion that the hysteria surrounding funding for growth-stage companies runs the risk of obscuring the value signal that is being sent out by companies in Africa that have already been through the ringer.
He explained that entrepreneurs in more mature ecosystems have to innovate on the razor's edge of multiple convenience options, but entrepreneurs in Africa have to build the fundamental digital infrastructure required to pull people into the formal economy. This is in contrast to the situation in more mature ecosystems, where entrepreneurs have to innovate on the thin edge of multiple convenience options.
Even though he is concerned that the noise caused by the slowdown in funding could make it more difficult for founders to get their message across, Okoudjou is confident that, in the short term at least, the singularity of Africa's story and potential, along with the tenacity of entrepreneurial spirit, will ultimately prevail.
If the purpose of your company is to enable people in the Central African Republic to connect to the rest of the world, to monetize their presence on YouTube, or to sell the dress they made to someone in Dakar, then having access to the internet is still essential. When things are difficult, it is even more important to do so," he said.
Okoudjou makes an excellent point, and this most recent extension round of $100 million drives the point home. MFS Africa connects over 400 million mobile wallets in 35 African countries, is expanding its agent banking business, and is working on plans to enable cross-border payments between Africa and China, an important trading partner for African small and medium-sized enterprises (SMEs). Even if venture capital funding were to dry up, the problem he is solving and the value he is capturing while doing so would not disappear. In point of fact, funding an extension round six months after the first close indicates that MFS Africa's investors are betting on getting essentially the same goods they were promised in better times. This is despite the fact that the macro-finance environment has changed since the first close. This is an impressive vote of confidence in the company as well as in the fintech opportunity in Africa more generally. Our conference call came to a close with Okoudjou issuing a challenge to the venture-backed teams in Africa. He repeated over and over again, "This is the place where champions are born." I hope that you are able to find the strength to get through this if you are able to refocus on the mission. And it is my hope that we can serve as an example of how maintaining a dogged concentration on the mission can also be an asset in trying times like these.