#onlinedating | Post-pivot, African tech startups are peddling pandemic resilience | #bumble | #tinder | #pof

ImpactAlpha, November 4 – As Africa’s economies restart from COVID lockdowns, the businesses on the fastest path to recovery are tech startups helping improve the resilience of the continent’s small business sector. 

A raft of tech startups have raised recent venture rounds from investors for digital solutions designed to give informal, micro and small businesses a tech upgrade. Some are building digital offerings around financial services. Others are offering tools and services to help other businesses get back up and running, online.

And tech startups that have pivoted their own operation are finding new revenue opportunities in helping other businesses do the same. That’s putting a tech-innovation spin on many countries’ overall COVID economic response and recovery. 

That has investors looking for opportunities in online learning and remote work, as well as to support small businesses from food innovation to financial inclusion to essential services, especially businesses driving improvement in Africa’s healthcare and health services. 

Small business is big

The big opportunity in servicing small businesses was underlined by Stripe’s $200 million acquisition of Nigeria’s Paystack, which says it has enabled more than 60,000 small businesses to handle digital payments online and offline. 

The support is sorely needed. Micro and small businesses drive Africa’s economic activity. But most use only basic, analog tools to manage their inventory, payments, finances, and to pay salaries.

Kenya’s Data Integrated is helping communal taxi and bus operators institute digital ticketing and go cashless. Sokowatch is working with informal kiosk and retail owners to streamline inventory ordering and payments. Social finance lender Uganda’s Tugende used the pandemic to build out its digital offerings around financial services (see, Tugende helps Uganda’s motorcycle taxi drivers survive the lockdown – and raises $6 million to grow again). 

Field Intelligence is providing inventory forecasting and financing for small, locally-owned pharmacies in Kenya and Nigeria. Catalyst Fund just launched a new program in Ghana to support startups easing small businesses’ digital transition.

In Nigeria, Africa’s largest country and economy, 95% of daily transactions are still cash-based. When movement of people and goods all but stopped early in the pandemic, few had the operational agility to switch gears and capture new sources of income, either through new products and services or by serving their customers online. 

In Senegal, a passenger mobility company that was shut down for months in Senegal because of the lockdown shifted to logistics and delivering goods. Max.ng in Nigeria made a similar pivot. And Sendbox, also in Nigeria, shifted from standard e-commerce deliveries during the strictest period of the lockdown to getting a logistics license to deliver essential goods.

Managing the crisis

African governments from Senegal to Nigeria to Kenya to Uganda implemented strict lockdowns early in March. Many, like Uganda, Rwanda and South Africa, have only recently begun lifting restrictions and reopening international borders. 

To the extent to which the data is reliable, the interventions worked: Africa’s coronavirus cases and deaths are exceptionally low, compared to most other parts of the world, including emerging markets like India and most Latin American countries. 

But few small businesses are equipped with the capital they need to fully restart after months of closure or limited income. Government recovery schemes and funds from banks and multinational institutions have come up woefully short (see, Non-bank lenders need capital to finance African small businesses rejected by banks).

“The main difficulty they’re having is access to finance,” says Ndeye Thiaw of Brightmore Capital, a firm in Senegal that invests in Francophone Africa’s small businesses and the startups serving them. “The impact of COVID on their ability to sell their products has been severe, and their supply of raw materials has also been disrupted. The high cost of logistics and moving goods has had a negative impact on a lot of these businesses.”

The companies that are rebounding most quickly are those which are already tech savvy or companies helping small businesses to get there. The private sector, including a number of tech startups, stepped in early as well to ease bottlenecks and prevent resource-constrained government health authorities and facilities from getting overwhelmed (see,COVID pandemic gives Africa’s health tech startups a chance to shine)

Nigeria’s DrugStoc expanded from pharmaceuticals logistics to delivering personal protective equipment to frontline healthcare workers. LifeBank, which already handled medical supply logistics, set up COVID testing centers and an open-source repository of critical medical supplies to help hospitals manage their stock. Kenyan pharmacy chain Goodlife launched at-home prescription delivery and telehealth services to help prevent unnecessary trips to the hospital. 

“Many of them were really fast in engaging the government as well,” notes Dayo Koleowo of Microtraction, a very-early stage tech venture fund based in Lagos. Microtraction was an early investor in African biobank 54gene, which set up mobile COVID test labs to help the Nigerian government boost testing capacity. 

Such examples of collaboration helped COVID information and measures spread quickly, adds Koleowo. “You would see village men and women in Nigeria wearing masks, even if they didn’t have full context of what was happening,” he explains. “It underscores how important the private sector is to the government’s reach.” 

Recovery frontlines

Now such companies, themselves financially squeezed by the pandemic’s impacts, are supporting the COVID economic response and recovery as well. 

In Nigeria, digital lender Lidya is offering a “synthetic furlough”—effectively short-term, flexible business loans with grace periods for repayment—to help companies unable to access government relief funding retain workers while conserving their working capital. (Lidya has also expanded to Europe and is providing COVID-relief loans to small businesses in the Czech Republic and Poland, two of Europe’s worst pandemic-hit countries.) 

“It’s not a traditional government furlough, but by providing flexible loans at a time of such stress to help keep businesses alive, that’s the private sector version of a furlough,” says Tokunboh Ishmael of Alitheia Capital, a gender-focused investment fund that has invested in Lidya. 

Alitheia has invested in a dozen businesses serving Africa’s small business sector and women in particular. Across its portfolio, it is companies like Lidya that have strong digital foundations that are rebounding fastest from the pandemic, Ishmael observes. 

“They’re all shy of their projected targets for this year, but the ones that have succeeded in leveraging their digital capabilities will probably finish the year only about 10% shy,” she explains. “It’s the ones that still have brick-and-mortar, physical businesses, like microfinance and agribusinesses, that have taken a bigger hit.” 

Festival Coins, an event-planning platform, saw its revenues hit zero when the lockdowns started and large gatherings were cancelled. The team went back to the drawing board to think about alternative products and services, and carved out enough revenue through virtual event formats to stay afloat. In spite of the challenges, the company was accepted into the Google Launchpad’s program in Africa.

“The pandemic really forced them to pause and focus on their product and think about what they can build online,” notes Koleowo. “They’ve held it together.” 

Rethinking “business resilience” 

Capital providers working closely with Africa’s tech startups and small business sector, say a modest feeling that “normalcy” is returning, and little worry that a “second wave” of the pandemic would again warrant such extreme lockdown measures, like what Europe and the U.S. are experiencing. But they observe that  businesses are more conscious of the need to mitigate such risks in the future, and that technology will play an important role. 

One of Alithelia’s more recent investments, tomato processor Tomato Jos, was heavily impacted by the disruption in the flow of goods—from its farmer suppliers to its facilities and then to market—and workers’ ability to work. The company is now looking at measures that will help it manage market volatility better, so it can better ensure connectivity to its farmers and cost-effectively back-stock product. 

Capital providers themselves are now also rethinking where the opportunities will be in the near-term. Brightmore is looking at companies supporting the small business sector in everything from food innovation to financial inclusion to essential services. Alithelia, which invested heavily in financial services in its first fund, is looking at expanding more into businesses driving improvement in Africa’s healthcare and health services. 

And Microtraction says it is now scanning African markets outside of Nigeria for early innovations facilitating online learning, remote work, as well as other aspects of daily life that the pandemic has upended, like digital entertainment and online dating. 

“More companies feel that they’re seeing the light at the end of the tunnel,” says Thiaw. “2020 is still going to be a really bad year for many, but a lot of them are beginning to talk about what they intend to do,” she adds, which is a positive sign.


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