Paystack’s $200m acquisition by Stripe sets stage for more exits in tech ecosystem
The news that USbased global payment company Stripe on Thursday acquired Nigerian payment company Paystack in a deal reportedly around $200 million, was the relief the Nigerian tech ecosystem needed after going through a year everyone is in a hurry to forget.
While every sector of the Nigerian economy has been affected by the COVID-19 pandemic, startups in the tech ecosystem were among the most hit. Comprising mostly of very small companies led by techsavvy young men and women, some of whom are fresh out of the university, there is really little in terms of business experience that supports the ecosystem. The makeup for what it grossly lacks, more experienced tech founders took up the roles of mentors for the newbies in the ecosystem. However, it was not enough to prepare these businesses for the blizzard that the pandemic unleashed.
For instance, Andela a firm that has closed more funding than the majority of the players in the space was forced to change its business strategy a record twice and laid off most of its engineers. Iroko TV took the high road by announcing that it was exiting its African operations. Renmoney and many others took a short cut by laying off and furloughing staff. Many of the agritech businesses like Thrive Agric, Agropark, and HO Corn are currently locked in a cat-and-mouse battle with investors over failure to fulfill financial obligations.
But it was not all negative for the ecosystem, at least for the tech firms in the health sector. 54Gene closed funding during the lockdown and sealed a partnership with a global organisation to expand the frontiers of precision medicine. Fintech companies were also among the positive notes of the pandemic as a few of them continued to attract funding and new customers, which has now culminated in the acquisition of Paystack.
It is not the first time a Nigerian tech company is being acquired. Canal+ acquired Rok Studio in 2019 for an undisclosed amount. Autochek acquired Cheki Nigeria and Cheki Ghana in August. However, the Paystack acquisition leaves a sweeter taste in the mouth not just because of the company that is involved - Stripe currently has the second-largest market share (18.15%) of the global payment market - It is also a confirmation that the Nigeria tech ecosystem is becoming mature. Niyi Toluwalope, CEO and managing director of etranzact, one of the few fintechs on the Nigeria Stock Exchange, have also predicted that the ecosystem was ripe for a mega exit and would soon start seeing more exits in the months to come.
“Many capital sources have been reluctant to invest in Africa because it was unclear how the money would ever get back out,” said Timon Capital, a firm that provides early-stage startups with funding. The acquisition of Paystack brings the total merger and acquisition done in Africa so far to $1.1 billion.
“Setting a bar at $ 100- 250 million valuations for strategic merger and acquisition in Africa gives some backbone to pricing financings for all entrepreneurs out there raising Series A/B,” the company said.
The Paystack deal seals about two years of co-existing as partners by the two companies. Stripe had led Paystack’s Series A financing round and provided guidance as the company scaled to new markets.
According to Stripe’s business lead in Europe, the Middle East, and Africa, Matt Henderson, the acquisition would allow Paystack to develop new products, support more businesses, and consolidate the hyper-fragmented African payments market.
“We can’t wait to see what they will build next and how their growth can turbocharge the African tech ecosystem,” Henderson said in a statement Businessday received.
Founded in 2015 and launched in January 2016 by Shola Akindele (CEO) and Ezra Olubi (CTO), Paystack has grown to become a major player in the digital payment segment of the financial services. It currently services more than 60,000 businesses in Nigeria and Ghana which use its platform to securely collect online and offline payments, launch new business models, and deepen customer relationships.
Interestingly, Paystack processes more than half of all online transactions in Nigeria and has ambitions to expand across the African continent. It recently kicked off a pilot with businesses in South Africa.
“Paystack is a growth engine for modern businesses in Africa, and we couldn’t be more excited to join forces with Stripe, whose mission and values are so aligned with ours, to nurture transformative businesses on the continent,” Shola Akinlade, said. “We believe deeply that with the right tools, African creators, developers, and entrepreneurs can do incredible things. Leveraging Stripe’s resources and deep expertise, we’re excited to accelerate our geographic expansion and introduce more payment channels, more value- added services, and deeper integrations with global platforms.”
Following the acquisition, Paystack will continue to operate independently, growing its operations in Africa and adding more international payment methods. The company will gradually integrate its capabilities in Stripe’s Global Payments and Treasury Network (GPTN), a programmable platform for global money movement that currently spans 42 countries.
Paystack which was the first company from Nigeria to join Y Combinator employs 114 people representing 12 nationalities and working remotely across 9 countries.
Paystack is a growth engine for modern businesses in Africa, and we couldn’t be more excited to join forces with Stripe, whose mission and values are so aligned with ours, to nurture transformative businesses on the continent