Fast growth, big capital, and how Moniepoint is building a fintech unicorn in Africa | E2036

0:00A nine-figure fintech round in 2024 and the startup in question has a focus on the African market. I bet you don't know who I'm talking about, but you're about to. I'll see you in a second. This Week in Startups is brought to you by OpenPhone. Create business phone numbers for you and your team that work through an app on your smartphone or desktop. Twist listeners can get an extra 20 % off any plan for your first six months at openphone.com slash twist. Lemon.io. Hire pre-vetted remote developers. Get 15 % off your first four weeks of developer time at lemon.io slash twist. And linear. Linear helps product teams focus on what they do best, planning and building great products.

0:42Streamline issues, projects, and product roadmaps in a tool your team will actually enjoy using. Get 25 % off at linear.app.twist. Welcome back to This Week in Startups. I'm so excited about today. I have Tosin Anya-Larunda, the CEO and co-founder of MoneyPoint. just raised a$110 million Series C that everyone covered, and the company is now reportedly a brand new unicorn. Please welcome Tosin to the show. Tosin, how are you? Hi, Alex. Thank you very much for having me on the show. Excited to be here. I'm very glad to have you. And you get three points for being a CEO that managed a very quick planning and scheduling turnaround, so 10 points to your team.

1:25We really appreciate it. I want to get to the present moment in a second, but I also want to go back in time because MoneyPoint, and this was a new learning to me, actually started off life for the first, I think, four years as a company called Team Act. So I'm hoping you can tell me just a little bit about the start of the company up until the point in 2019 when you launched MoneyPoint. Yeah, of course, Alex. All right. So MoneyPoint started as Team Act, like you mentioned. It was founded in 2015. It was founded when I and my co-founder left a previous place of work where I was an engineering manager and a product manager.

2:05And he was a software engineer. And we formed TeamApp. And TeamApp was a software company where we're building, widely built software solutions for banks. These were digital banking solutions for merchants, for businesses, for consumers, sometimes back office operations, reconciliation systems, access and liability management systems. So it was a software shop. And we did that for about four years. And this was a critical period for us because it was a critical period where we learned a lot about profitability and running a company not necessarily on a deficit. We've always figured out that at the end of the day, what matters is to have a very large pie.

2:58And next is to have a good portion of that pie. so we focus on having a business that's going to be worth a lot before we figured out how to raise funding for it so since the first four years it was a software business when we were not so confident that this was something we should raise funds for and in 2019 we decided to pivot that business business model into something we felt like could be far larger i want to pause you there because when I was learning about Team Apt just prepping for our chat today you guys ended up supporting something like 26 out of the top 30 banks in Nigeria and I read that you scaled the revenues of Team Apt to seven figures so it didn't seem like that business struggled so I'm curious about the gap between the results and your stated you know lack of confidence in it what am I missing there yeah I mean it's like you know a software business is a service business and in a service business, it does not have recurring revenue.

4:01It's based on winning contracts as a first thing. The second thing also was we were going to be restricted generally to the total addressable market of banks. And I felt like we should choose an industry where the serviceable and addressable markets are far larger. And more importantly, we could see the gaps in the services that the banks were giving to their customers. And we knew that these services could be better. So that's why we decided to do the pivots. But here's the thing that I have as a question there, because it feels like you guys went from servicing and helping the banks become more digital and more modern.

4:41And then you decided to, in a way, go out there and almost challenge the banks. Is that a fair kind of like encapsulation of the pivot in 2019? Fair enough. Actually, that's what it is. We made it a mandate that we're going to be one of the biggest financial service providers in the country. So yeah, fair enough. I absolutely love that. But tell me a little bit about day two. So you guys decide 2019, we're going to change the business. It's also the year you went on and raised your first external capital. I think it was a$5.5 million round. How hard was it to put aside what you had done and take that leap of faith into essentially a net new business?

5:20Because we were resolute about making that pivot, we knew there was no way back. What we essentially did was split the organization into two. There's a part that was business as usual. Just make sure that all our contracts close properly. Nobody comes after us. Nobody sues us. Maintain it and close all our projects. The second part, you focus on the new things. And I pushed my own personal attention into the new things. And we did a couple of experimentation of what do we think the industry will like, what we seek. We attempted to launch Merchant Aquiring online and offline. The rest is history.

6:06So let's talk about that early history because MoneyPoint seemed to grow very quickly from 2019 after you founded it. I think that by 2021, you guys had onboarded 30 ,000 agents and were doing about 23 million transactions a month. So one, how did you get such insane volume so quickly? And can you explain to people who may not be familiar what an agent does in the MoneyPoint context? Of course, Alex. An agent is a human financial service provider. That's the way you should see it. For people that don't know what an agent is. is so think of it like a single man bank where someone could go meet this individual who oppresses as a business um in locations that are close to where people live or do or or work and they offer micro financial services and these financial services are like cash withdrawals cash deposits bill payments, airtime purchase, account opening, and in some cases, account support services like debit card issuance.

7:18And these agents are pretty important because they bridge the cap for financial inclusion, where they can allow people to earn trust and access digital financial services that otherwise they would have needed to go to a bank branch to access. So you could think of them as miniaturization of bank branches done by entrepreneurs that are close to where people work or live. Is there a need to help people who may have less of a technological background make the jump from cash to a digital banking situation? And that's why having a human agent helps because it puts a human face on effectively the cloud?

8:02Alex, you got it right. So these are like trust centers where people are like, oh, okay, I know this guy and this guy opened the account for me. Hence, I now put my money in this account. I don't need to carry cash around. And of course, when I need cash, I can go to him to withdraw some cash. And when I want to put money into it, I go to this guy. So I don't need to really go to a big branch that's probably 10 kilometers away. I bank with this guy. that's close to me. So that's what agents represent. And this, of course, the services that they give are digital financial services. Because their customers are actually digital customers.

8:38The customer coming to them will typically have a bank account and a debit card. But for them to now access, for example, cash withdrawal and cash deposits, they go to an agent, they want to get a card, they go to the agent. So they're essentially mini bank branches where people get digital financial services are these agents uh your employees or are they separate people that run their own effectively small business they are business owners they're small businesses well i mean that that matters because you know just learning more about money point prepping for our chat i i learned that you guys have a pretty serious smb and kind of mid-market focus at least at the start so not only were you servicing those uh types of companies who were also helping to build up new ones.

9:23I kind of like that kind of full circle moment. Exactly, exactly. And what MoneyPoint does is we help, we power small businesses. So these agents were some of the small businesses that we got initially. And one of the major reasons they came to us was that for them to be able to offer cash withdrawal services, they needed to have a point of sale device that people can use to withdraw cash. So it's almost like if they were in the US, they would have gotten a square device where they can use the charge cards and give cash to people, essentially humanity. And going back in time, when you were team apt, you guys actually built a point of sale acquiring solution.

10:06So you already had some POS bona fides, if you will. Exactly. And as an engineering manager and as a product manager, I was pretty exposed to point of sales systems, just like my co-founder, also Felix. So we already had the experience in the market, knew what some of the problems were, some of the things that we needed to give to the market. So these were pretty clear for answer to that. Are you still using multiple devices and apps to run your business? Well, you need OpenPhone. Open Phone has rethought what the modern business phone should be. And what's so magical about Open Phone is that it works through one single elegant app right on your existing phone, and you can use it on your desktop.

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11:23OpenPhone.com slash Twist. And if you have an existing phone number with other services, no problem. Easy peasy, lemon squeezy. OpenPhone will port them over at no extra cost. So head over to openphone.com slash twist to start your free trial and get 20 % off. So how hard was it to launch a new brand and scale it inside of the Nigeria market, where I believe the majority of MoneyPoint's business still is? Because I know of Nigeria as one of the most populous nations, you know, rapidly digitizing, pretty quick economic growth. I have a whole list of stats in the bottom of my note sheet about the country.

11:58But what I don't know is how competitive its banking sector is or how hard it would have been for MoneyPoint to grow initially. So tell me a little bit more about that. Absolutely. It was a challenging period. I would not want to hold that back. But it was for us. We have at the beach and we've burned our ship. We'd have no other way than to win the battle. We had no other way than to survive. and we were competing against pretty well-funded startups, which we still compete with, by the way. One of them includes probably one of the most funded startups in Africa. And we were also competing against banks and many other startups that had similar ideas.

12:41But of course, ultimately, superior products, superior distribution always wins. And we focus heavily on having a great product at an accessible price point, innovated on that and made sure that we had an excellent distribution network to distribute this product to our businesses. You did it with very little money. So I want to go back to the point about bootstrapping because before you guys pivoted towards MoneyPoint, you had essentially self-financed the company and reinvested profits into it. Why did you decide to leave that behind and instead go out there and raise successively larger venture capital rounds?

13:18Of course. So, So, I mean, like I said, ultimately, the way you would look at the value you are creating for yourself is the value of your stake in whatever the pie is. Like, how large is my piece in this pie? There's no point being a small pie that you own everything of. So I'd rather want to partner, take venture capital, grow the pie, and however, retain a good portion of the pie for me and my co-founders and my stakeholders. And that's exactly what we did. What was, however, quite important to us is that while we were building this pie and making it larger, we never wanted to be at the mercy of venture capital or private equity.

14:05and what that meant was profitability. As long as you're profitable as a business, you are not under any pressure to raise an extra funding. You essentially only raise funding when you need it. There's a diminishing return to production. You should only inject extra factors of production when it is needed. If you raise more than is needed, there's a diminishing return to it. So we always wanted to grow every other factor of production, every label, product market feed, all those things were clear. And we knew that what was just remaining was going to be to inject extra capital. And that's the philosophy that we keep till today.

14:47So often, though, when a company raises more money, when a startup raises more venture capital, they tend to expand their headcount, marketing, whatever. They increase their expenses and often burn a little bit more. does money point after raising around except a period of unprofitability as the capital is invested or do you guys try to remain profitable even after a new venture capital round the philosophy is to always be profitable so it's a balance between growth and and and uh and how much you burn for growth right and money yeah money point has for the max will never be unprofitable for six months in the first six months of our first fundraise.

15:33And we quickly went back to profitability because we simply could not bear that risk. I think that in markets where you think it is pretty easy for you to raise funds, it's not going to be a problem. I think it's fine if you want to go quite unprofitable. But if you run a business that you are not pretty sure how long the next fundraise is going to take you, if you are going to get there, you are taking a pretty huge risk. And it's a business that's based in Africa. It's a business where venture capital is not as rich as what you are going to find in the Western countries. And as well as also a B2B business that is fundamentally unit economics positive.

16:15The only reason why you'll be unprofitable is burn. It's just simply OPEX. So as long as you can reach the growth target that you assert for yourself with a bond rate that is less than what you have, that is less than your gross profit, you're fine. Essentially, attempt to bond everything that every other margin that you're making, just make sure that you're not in a position that you are at the mercy of anybody. I think it's a pretty straightforward philosophy. I like that because it's external capital, very useful. Having someone else own your future, less attractive. I mean, let's be honest, who wants that?

16:54And if you're profitable, you can tell your investors to go take a hike because what are they going to do? Exactly, exactly. I mean, it's a risk exercise. If you think that you need to burn everything and more, maybe you're fighting some tough battles and you have a very clear path to how you're going to raise. Maybe you're just extra capital is just a simple focus. Make that risk. but majority of the startups are in that position and they simply follow a philosophy of where oh we must be unprofitable and i think another fear that most people have is that when you are unprofitable companies are forced to be valued on the basis of gross profit or revenue as multiples of gross profit or revenue and typically you are not yet held to any accountability that comes with EBITDA positivity and this generally leads to inflated valuations.

17:50But when you start getting profitable and there's an expectation of the bottom line, you start getting EBITDA multiples, which is inevitable. It's quite inevitable as you start getting matured because ultimately, investors want to return. So I feel like that's another reason why a lot of startups take that approach. But like I said, it's a different thing if you have easy access to cash, burn where you need to burn for growth. Well, I mean, I think everyone thinks they have easy access to cash. I mean, every startup that raised 100, 150 million in 2021 thought they were the next Microsoft and that the next capital was always going to be there.

18:27So even I think in markets with the most developed venture capital networks, be it California or pick your favorite, I mean, the risk is still there. But I want to underscore what you just said by talking about the results of the business, because it's been pretty impressive. Um, you guys shared data with the financial times regarding your historical growth, uh, in both 2023 and 2024 and Tosin, uh, in 2023 for the period of 2018 to 2021, you guys had a compound annual growth rate of 321%, which is pretty insane. and then you added another year. So from 2019 to 2022, it was 332%. It actually went up.

19:13Those are some of the highest numbers I can recall seeing on a compound basis. So I have to ask, is this one of the fastest growing startups in the world right now? It's cool to have hard numbers. I don't usually get such... I mean, these were exercises that were done on the basis of I believe audited accounts or management accounts. I'm not sure what we shared. I mean, all I could say is that we were insanely lucky and we worked extremely hard at the same time. The insane luck that we had was we rode a massive wave of digitalization, which is a strong tailwind. It's a combination of people really needing to adopt digital payments because it's more convenient, it's more secure.

20:06And there was also a serendipitous moment where Nigeria pulled an India where in a short period of time, the central bank wanted to change cash. Oh, the demurantization famous in India to remove the higher rupee notes from circulation. Beautiful. So Nigeria pulled that thing, which led to a massive influx of people adopting digital payments in a very short period that banks could not handle. So a lot of banks failed. The infrastructure were not set up for such massive increases in volume. And of course, we've been a fintech company, tech press, hosted in the cloud, were able to absorb such massive inflows.

20:55So this also led to an establishment of the brand and a strong brand equity to say money point is associated with reliability. Of course, this compounded growth and at the same time increases the general digital payments volume in the ecosystem. The hard work there is being prepared for it. And we're so aware. Yeah. Well, I mean, preparation is how luck is made. Preparation and opportunity meet, luck comes out of it. But I will say I'm surprised by your answer because I thought you were going to say the COVID-19 pandemic pushed people towards a more digital banking environment. But you had an entirely different answer.

21:35So I'm curious, was COVID a factor in the company's growth? You're right. So I missed that. And that started, of course, in the COVID years. The COVID years were also massive uptake in digitalization where it was driven by the fact that people couldn't go far. And they needed to adopt digital payments, either directly to merchants or through agents. So there was a massive, just like most fintechs, a massive increase in their volumes. COVID happened, then also demonetization happened. So when I was looking at the list of all the fastest growing African companies, which you guys took part in, I was really impressed by all the numbers.

22:16But I just want to go back to that increase in your compound annual growth rate from 2018 to 21 to 2019 to 22. Has the company managed to stay in the triple digit growth pace since 2022? Because my data stops about 22 months ago. So I'm curious what's happened since those numbers. Yeah, well, of course, we've managed to continue growing that way. I will not know what the compounded number looks like unless I do the calculation, but we have actually managed to continue keeping the growth. We are still onboarding more and more businesses daily. We have added more services. We now have a digital bank for customers, not just small businesses.

23:03Essentially, we're now closer to what Square and Cash App is now, where we are building both sides of the equation. we launched cash advance working capital floats for businesses where you could access short-term loans to be able to finance your business launch business tools which is we're launching business tools which is inventory management and other tools as a business that you need to operate we launch debit cards we launch savings so these are extra products and we're launching cross-border payments so these are all you know extra services that we launched As you may know, as the country's company is growing, keeping the same growth rates becomes harder because you have a stronger base.

23:47It's easy to increase$10 million revenue to$20 million. It's not the same to increase$300 million to$600 million. But one thing that we would love to keep adding will be the growths, the same growth rates that we've been maintaining in the past. And to make a point about the numbers you just brought up, according to the same data set shared by the Financial Times and Statista, MoneyPoint's revenue in 2022 was just under$149 million, which, you know, honestly puts you at even a couple of years ago IPO scale. Add in a couple more years of growth to that number, Tosin. Are you guys considering an IPO anytime in the near future or is that still pretty far out from MoneyPoint?

24:31I mean, yes. I mean, obviously, we are bunched back to our venture capital and private equity. They want, at a point in time, they will want to return fund. And an IPO is one of the parts to get liquidity for them to return fund. So it's something that we'll consider in the nearest future. For now, we still just want to hunker heads down, continue making our customers happy, launch to more geographies, launch more products, continue growing, growth rates, profitable growth is something that's extremely, extremely important for us, as much as the impact that we're also having on the society. All right, founders, are you tired of doing all your own software development?

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25:58They only offer handpicked developers with three years of experience at a minimum, and they have to be in the top 1 % of applicants, right? Something goes wrong, don't sweat it. Lemon.io will find you a replacement developer ASAP. So many of our launch founders have worked with Lemon.io and they've had great experiences. So to lemon.io slash twist and find you're a perfect developer or the perfect tech team in 48 hours or less that's right and twist listeners get 15 off the first four weeks stop burning money hire developers smarter and faster at lemon.io slash twist so one thing we talked about actually before we we hit record was the the makeup of the money point office setup you guys have a uk office you have a U.S.

26:48corporation. You're kind of a micro multinational in the way that I think of it. If you guys were to list and go public, you have a variety of options. And I'm just curious. I know this is me just having fun, but would you want to float in an African index in Europe, in the U.S.? Where would you kind of look first? I think by the time we might be taking a look at an exit that may look like an IPO, which showed the multi-geography. And at that time, that opens up a lot of the typical places to float for such businesses. It would be hard to see anyone, to be honest, right now, without consulting the lawyers or saying anything.

27:29That is a very responsible answer. That's the good question, but I don't want to get in trouble when I hang out. Yeah, yeah, yeah, yeah. So, it's a bit hard to say that right now, what I know that all the options you mentioned are all up for consideration. Okay. Yeah. Yeah. I just think it'd be cool to see more dual listings in like the US and Africa or across the Atlantic or, you know, whatever. I think it's cool when companies that have roots in different parts of the world list in more than one place, but we don't see it too often. I think just because the American markets are so deep, if you go public on the New York Stock Exchange, it's going to be fine.

28:05but it's a little boring you know so i'm hoping that when we talk in you know 18 to 24 months when it is ipo time um we'll have uh we'll have some fun things to add in there but toson we have to go back really quickly to your point about adding consumer banking because money pointed very well on the smb on the business side of things and then you guys decided to open up to just regular folks and to me that feels like a pretty big change in i mean your focus because selling to individuals is harder than selling to businesses. So why was that the right move for MoneyPoint? Well, yes, of course. First of all, let me state unequivocally that our focus is still on businesses, especially small businesses.

28:46And the launching of the consumer business is just a way to also continue in that line. And we launched consumer business in Nigeria when we saw that also continue servicing our businesses well, customers also need to have access to digital payments at a real-time and instant. I'm pretty sure it's a similar thing that Cash App did as an ecosystem play against Square. And the infrastructure for launching such a product, which will require you to have onboarding KYC, AML, action processing systems, distribution networks, and as well as a brand already existed. And we didn't need to do a lot of extra work for us to bring this to market.