BusinessDay

Flutterwave’s $250m Series D funding increases liquidity for payment competition

Flutterwave has closed $250 million in Series D funding making it the most valued tech startup in Africa at a new valuation of $3 billion. Experts say the funding gives the company significant leverage to compete with incumbent financial service providers in the areas of talent recruitment and customer adoption possibly through pricing wars.

The funding is led by one of the world’s top investors B Capital Group and with participation from new investors such as Alta Park Capital, Whale Rock Capital, Lux Capital, among others. There was also participation from old investors including, Glynn Capital, Avenir Growth, Tiger Global, Green Visor Capital, and Salesforce Ventures.

Flutterwave plans to spend the new funds on its ambitious expansion to accelerate customer acquisition in existing markets and growth through merger and acquisition, and develop complementary products while encouraging new innovations in its products and services development. It also plans to share more details on a virtual event Flutterwave 3.0 scheduled for 18 February 2022.

“We expect to see even more competition for the best talent in Africa, as these tech companies now have significantly more room to out-compete some of the incumbent employers in traditional sectors,” says Adesoji Solanke, Director Frontier, Sub-Saharan Africa Banks and Fintech, Renaissance Capital. “It would also be important to see how their dry powder affects take rates in the different market segments where the company operates particularly if it decides to compete on pricing to win more market share. We would also expect to see Flutterwave consolidate certain verticals in the payments space that may be tangential to its core business, across online and offline payments, domestic and cross-border.”

Launched in 2016, Flutterwave has grown to become one of Africa’s top payment gateways. The company has since grown its operations recording over 200 million transactions worth over $16 billion to date across 34 countries in Africa. Flutterwave currently serves over 900,000 businesses across the globe.

Olugbenga ‘GB’ Agboola, founder and CEO of Flutterwave describes the company’s journey as a product of resilience and hard work.

“Our growth so far is due to the support of our customers, our partners, the banks, the public, the regulators, and importantly our people,” Agboola said.

The $250 million Series D may not be the highest by a fintech company – OPay raised $400 million in 2021 – it has certainly placed Flutterwave on a valuation pedestal that could see it become a major competitor for big financial institutions that will be anticipating the next move of Flutterwave in the coming months.

Flutterwave has never made a secret the size of its ambitions, especially in the ecommerce space and controlling payment services across Africa. It has already acquired a social commerce company, Disha, and co-led a $2.4 million funding in Francophone-focused fintech company, CinetPay. Experts say it could be looking for its big buy very soon.

Solanke sees merger and acquisition (M&A) becoming even more critical tool in the growth box of many African tech and fintech companies over the near to medium term, particularly as they look to scale domestically and internationally. In the case of Flutterwave, M&A would likely be in two areas. First, in larger markets where the company is just commencing operations or such market is highly competitive. The CinetPay funding for example gave, Flutterwave is first entry into the Francophone region in Africa.

The second area is in other payments verticals that are complementary to their ultimate goal of growing payments volumes increasingly over time, say in offline acquisition for example, says Solanke.

“M&A is also a veritable market entry strategy particularly in markets where regulators are hesitant to issue too many new licences to payments companies,” he says.

While traditional banks in Nigeria have always seen Flutterwave in some regard as a threat, the Series B is bound to even increase their agitation. Banks like GTBank have already announced grand designs to confront the new threats with a holding company structure that enables them play in every vertical. Recently, GTBank re-acquired its wealth management company One Investment Group. There is also competition from Stanbic IBTC which plans to launch a payment subsidiary as soon as its regulatory approval is secured.

Flutterwave has also been busy especially last year. In 2021, the company launched a series of products including Flutterwave Market for merchants to sell their goods via an online marketplace and, most recently, Send, a remittance service that empowers customers to seamlessly send money to recipients to and from Africa.

Flutterwave also partnered with global and pan-African technology and telecommunication companies such as PayPal, MTN, Airtel Africa to drive financial inclusion on the continent and create endless possibilities for customers who can build customisable payment applications through its APIs.

However, Agboola says the future lies with solving the frictions in payments, logistics, and commerce within and outside Africa and enabling a seamless marriage of the three.

“If we fix logistics within and outside of Africa, it means that a brilliant kente fabric maker can sell to a customer in Los Angeles, receive payments promptly, process the delivery and the customer receives their bright-colored dresses in good condition, affordable cost and record time,” Agboola said in a post on the company’s website.

With Series D, Flutterwave has now raised total funding of $484.7 million over 12 rounds sourced from 48 investors.

“In addition to their emergence as the leading, enterprise payments processor for the continent, Flutterwave is innovating at breakneck speed with novel fintech solutions for large corporates, SMEs, and consumers,” said Matt Levinson, Partner at B Capital. “I’ve had the pleasure of backing this world-class team since 2017 and couldn’t be more thrilled that B Capital is leading their Series D. Flutterwave may ultimately build one of the most consequential fintech businesses in the world, enabling hundreds of thousands of merchants to transact online and connect Africa to the global economy.”

With new investors coming on board the Flutterwave ship, experts say the possibility of questions around a path to exit would grow. In that regard, Flutterwave has two options according to Renaissance Capital experts; a strategic investor or via public markets. The two options have their pros and cons. A public listing would require the Flutterwave team’s ability to deliver transaction volumes and ultimately the revenues and profitability to justify their valuations and prove to investors that they won’r perpetually rely on fund raising to drive the business.

“For a strategic investor, profits may be less critical, as the synergistic benefits of a pan-African payments platform in a highly underpenetrated and highly growing market may be significantly more appealing,” Solanke said.

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