Bitmama, a cryptocurrency exchange platform, is moving ahead with plans to acquire Payday by proposing a $1 acquisition fee and $1 million equity to all current investors of the beleaguered startup, according to people knowledgeable on the matter.
The equity deal in Bitmama values the crypto company at $30 million. Bitmama will also assume all existing bad debts and liabilities of Payday.
Bitmama’s interest in acquiring PayDay, according to TechCabal, is primarily to bolster its product Changera. Information on the company’s website describes Changera as a product that allows users to make deposits, payments to and accept payments in both fiat and crypto from third parties.
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“Favour reached out to me because we’re building products beyond crypto, one of those products is Changera, and it made sense to me,” Ruth Iselema told TechCabal.
According to sources, in the wake of the deal, Favour Ori, co-founder and CEO of PayDay informed investors that the company might need to shut down by the end of the month if the acquisition deal fails to succeed.
BusinessDay learnt that other parts of the deal include putting all current investors into one syndicate to be incorporated in the United States or the United Kingdom. This is on the condition that the investors can find an investor to act as a syndicate leader. Moniepoint which led the $3 million investment in PayDay, was not interested.
In October 2021, less than five months after it launched, Payday announced a $1m pre-seed fundraise. The raise was supported by several investors including LoftyInc, Microtraction, Magic Fund, Ventures Platform, Voltron Capital, CcHub Syndicate, Helicarrier Inc, Greencap Equity, Midlothian Angel Network and Emergence Capital.
Other individual investors participated in the round. These include Olugbenga Agboola (GB), Charles Odita, Eke Eleanya, Adegoke Olubusi, Edmund Olotu (Bloc), Prosper Otemuyiwa (Eden), Dimeji Sofowora and a host of others also contributed to the round.
The company will go on to raise $3 million in March 2023. The funding was led by Moniepoint. Other investors in the round included Techstars, HoaQ, DFS Lab’s Stellar Africa Fund II, and angel investors like Dare Okoudjou, the CEO of MFS Africa, and Tola Onayemi, the CEO of Norebase, and Angels Touch.
On Friday BusinessDay learnt that the investors have found a lead syndicate. However some investors are also uncomfortable with the $1 million equity being offered by Bitmama as some are not convinced with the valuation of the crypto company. The investors are demanding more equity.
PayDay was incorporated on May 1, 2021, in Vancouver, British Columbia, Canada, by Favour Ori and his co-founder Elijah Kingston. The company which established its first headquarters in Rwanda, provides global payment solutions such as virtual mastercards and payments for foreign employees. The PayDay platform can also be used to handle payroll, taxes, and compliance by foreign companies with African employees.
At the peak of its operations, PayDay was enabling remote workers and freelancers in Rwanda and Nigeria to send and receive money in 20 different currencies, including USD, GBP, and EUR. The company served more than 300,000 users with its virtual cards and other products. The company also handled an average of 40,000 transactions per day and more than $25 million per month. These were part of the attraction for investors that invested in the total $4 million the company secured so far.
However, with quick growth also came some challenges. These challenges became obvious as reports emerged the company was looking for potential buyers only six months after it raised $3 million. Stories of leadership highhandedness, arbitrary salary slashes while the CEO maintained his salary of $15,000, and the exit of several employees including Ogechi Obike, co-founder and Chief Operating Officer of PayDay who cited the misalignment of goals as responsible for her exit. Favour Ori has also worked as a full-time staff of GitHub while he was CEO of PayDay leading many employees to assume he was a part-time employee of the fintech company.
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PayDay also got a dose of bad press when in August suspended access to customer accounts after it noticed some customers had lost funds to fraudulent activities.
Some investors only found out how deep in trouble the company was during the Bitmama deal and the CEO’s admission that the company would be forced to shut down by the end of December should the deal not succeed.
While Ori is expected to get nothing from the Bitmama deal, he has indicated interest in staying for another 6 months to help with the transition. It is unlikely at the moment what role he will be taking and whether he will be allowed to stay for that long at Bitmama.
“I don’t think Bitmama knows what it is walking into by agreeing to go on with the deal. The responsibility the crypto company will inherit are a lot. How do they plan to pay? The crypto market is not particularly lucrative at the moment,” a source told BusinessDay.
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