Investing in African Fintech
A Q&A with Robel Chiappini, Investor in African Tech companies at CRE Ventures
For this edition of the Fintech Explorer, I was excited to do a Q&A about Fintech investing in Africa with my friend and MBA classmate Robel Chiappini, an investor at CRE Ventures. We cover topics including Robel’s career path, current trends in African financial services, lessons for American investors looking to invest in African fintech, and most importantly, NBA season predictions. Enjoy! And if you might be interested in doing a Q&A for the Fintech Explorer in the future, or have ideas for topics, please do reach out.
Q: Robel, thanks for taking some time to do this Q&A! Could you start off by telling us a little about your background, and what got you interested in fintech in Africa?
Of course, Ravi. Happy to share. I had a very familiar upbringing in the US as the first born of immigrant parents from Ethiopia. It's a common story within the African diaspora community. A generation of young and purpose-driven people had their lives torn apart. In that splintering some were compelled to rebuild in foreign places. I was fortunate to have parents that processed that trauma by committing themselves to building a safe and loving home.
A couple decades later after spending time advising tech companies in the US, I too felt compelled to redirect important parts of my life towards the region. With the help and support of very generous family, friends, mentors, and strangers I found my way to CRE where we invest in tech companies levered to Africa. We're lucky to draw inspiration from some great teams building fintech in the region. Some of our fintech investments include: Flutterwave, Yoco, Stitch, and SmileID.
Q: What are some of the macro trends you are currently seeing in the financial services sector in Africa?
I won't spend much time on the impending demographic dividend, advances in financial inclusion, or the digital leapfrogging phenomenon that have been covered quite extensively elsewhere - including Fintech Explorer. But rather there are two specific trends that I think are worth highlighting:
Africa is becoming more interconnected with the world. The opportunity to express, and the potential to recognize, brilliance has never been less restrained by your life circumstance. Today, a founder from Abuja can be inspired by a success story out of Mumbai, build a support network in Montevideo, raise capital from investors in Boston, and source talent in Lisbon. That wasn't possible just one venture cycle ago.
Cash as an incumbent method is under attack. Cash is the dominant transaction method in many of our markets, in some cases more than 3.5x the global average. Digital means of transacting, whether via PVC or mobile device, have proven to be more convenient, efficient, and secure. Those same conditions hold in Africa - and there's meaningful competition amongst multinational organizations, local champions, and tech enabled challengers for digitizing that marginal transaction.
Q: Could you give an example of a subsector or specific geography you’re especially excited about in African fintech over the next few years?
The scale, maturity, and interconnectedness of the South African financial services sector tends to be underappreciated. Historically a gateway to the rest of the continent, with English, Dutch, and Indian heritage, and strong economic ties with both the US and China (its top trade partners), South Africa sits at an interesting fault line for the global economy. With a strong regulator, globally recognized currency, and mature banking sector (the top 5 banks represent $50bn+ in cumulative market capitalization), the market is deep enough to support new entrants at a scale that matters.
Q: What would you say American fintech investors and operators who are interested in expanding into Africa should understand is different about investing in the African continent than in the US?
The challenges across the continent may rhyme but the solutions won't. Our financial economies are diverse with independent regulators, currencies, financial institutions, and consumer habits. Innovation in one market may be status quo in another. A new payment modality blossoming in one region may be explicitly forbidden in another. Innocuous borrowing habits in one area may be culturally non-compliant in another. Build relationships with experienced advisors and investors, partner with operators that you can trust, and respect your local counterparties - they are often the difference between timely progress and prolonged frustration.
Q: How would you describe the current funding environment for startups in Africa? Is there enough capital for talented entrepreneurs, or are there still opportunities for new investing entrants to make a dent?
I think the opportunities in the region are abundant, that the talent pool is truly global, and that capital tends to flow to where it's treated best.
But, as is the case with any relatively new sector, founders building tech companies in Africa have to combat a far more expansive universe of perceived risk than their peers in developed markets. The larger the checks, the further removed the check writers tend to be from the markets where these companies are building. This often creates fundraising journeys that paradoxically get harder the more a business derisks.
Structurally consequential businesses are being seeded and scaled today. Take your time building an intuition for the region. The opportunity is generational and that upfront investment will make you a stronger partner to the entrepreneurs you support when they invariably encounter speed bumps along the way.
Q: Finally, let’s end with the real important topics. What are your NBA predictions for the season?
Wemby makes the All Star Team
Phoenix and Golden State won't make it past the 1st round
Joel Embiid repeats as MVP
Final Four of Philly, Milwaukee, Sacramento, and LA Lakers