Image credits: Bryce Durbin
What could be more rewarding for an angel investor than paper returns in a startup? An acquisition that turns paper revenues into cash payments while retaining an equity stake in the company. “The diluted return was eight times my investment,” Selma Ribica said in a recent interview with TechCrunch. “I had some stock in the new company, but mostly in cash.”
Ribica currently serves as a general partner at First Circle Capital, a venture capital firm specializing in FinTech SaaS (FinTech 2.0 in her words). Sources familiar with her dealings said she made an angel investment in Expensya, an expense management startup based in Tunis and Paris, which in turn made a $100 million investment in private equity firm Medius last June. It was acquired for slightly more than that.
Only a few African or African-focused technology companies have been acquired for more than this amount, including InstaDeep to BioNTech, Sendwave to WorldRemit, DPO Group to Network International, and Paystack to Stripe. Similar to InstaDeep, the Expensya acquisition highlights the potential for products founded in Africa to serve global markets and then be acquired by larger companies.
For years, venture capital has experienced a bullish trend around the world, and Africa, although a latecomer, rode the wave before conditions worsened for the asset class in late 2022. Before the collapse, local investors were primarily encouraging African startups to focus on: We are committed to building solutions for the continent and ensuring capital will follow. Building global products often took a backseat, especially as local his solutions, especially fintech, presented an exit opportunity by only targeting markets within the continent.
But the past 18 months have seen a notable shift in this narrative. As African startups strive to develop solutions to local challenges, they now face headwinds and macroeconomic challenges beyond their control. The economies of Nigeria, Kenya and Egypt, the continent's most prominent technology markets, are currently grappling with the issue of currency devaluation, resulting in lower dollar-based revenues for startups operating in these markets. growth has stagnated or slowed, resulting in a decline in the company's reputation in the eyes of the world. investors.
In response, investors are now pushing startups to explore strategies to protect their bottom lines, encouraging local founders to adopt a global mindset when developing their products. There is a renewed debate about its importance. For founders like Expensya founder and CEO Karim Joyni, that mindset was essential from the beginning.
“Adopting a global focus has been in place almost from day one for a variety of reasons. Regardless of what we are building as a company, Tunisia is a very small company that is not well integrated with its neighbors. The market,” Juini said in an interview with TechCrunch. “This is a country with an average income level where companies are not necessarily mature enough to care about spending management. Their companies are still setting up their first CRM or ERP. So we started from the beginning. , we were looking to build a product for a market where companies are maturing and looking at employee productivity and spend management.”
From Tunis to Europe
Founded in 2014 by Jouini and CTO Jihed Othmani, Expensya specializes in automated expense management solutions customized for European businesses. Its software allows businesses to perform autonomous spending within predefined rules and limits, optimizing time and simplifying employee expense processing. Integrating Expensya with his ERP application enables finance teams to monitor and track business spending and streamline staff reimbursement procedures.
The spend management startup aims to help companies of all sizes automate professional expenses, and is launching in France first, leveraging the CEO's network and over 10 years of experience at Parrot, Musiwave and Microsoft. It was raised. Expensya's first customers were his 1,000 to 10,000 employees and operations in multiple European countries. As a result, the startup quickly adapted its product to work in other countries, handling local taxes and certificates along the way, which fueled the company's move. to Spain and Germany.
And while being close to Europe seemed to have its advantages, being a Tunisian startup had its challenges. First, navigating the European market, which is reasonably protected from external competition due to laws such as GDPR, has been a major hurdle. Complying with GDPR required setting up operations in Europe, and establishing a strong local sales and marketing team was essential for the startup to sell to larger companies. To address this requirement and compete with Concur, Nautilus, and N2F, we have established teams in France, Spain, and Germany.
“When using products developed by African start-ups, our large customers sometimes felt a little hesitation. I wanted to know if that was the case,” Juini added. “So we invested heavily to offer the best product in town. If you look at the public ratings for solutions like ours on the App Store and Google Play, you'll see how we stack up against our European competitors. You can see that we have the highest reputation in the market because we focus on never talking about quality.Going back, you are an African start-up, so the standards may be low.”
Setting up and maintaining a high-quality product often depends on a startup's talent base. Tunisia and Africa have a wealth of young talent, especially in engineering and other technical fields, but the lack of experienced managers and leaders is also compounded by the lack of successful local SaaS companies. Juini acknowledged that this is an obstacle for Expensya to scale up. .
In general, immigration has further reduced the availability of experienced talent in Africa, with many skilled workers choosing to pursue opportunities in Europe and the United States. These factors contribute to the challenge for African startups to compete with global startups.
Some of the global success stories
However, positioning talent is a double-edged sword. Despite the talent shortage, Expensya benefited from lower operating costs than similar companies operating in Europe. Moreover, even if Parisian startups struggle to attract top 5% talent due to fierce competition from tech giants such as Google and Microsoft in the region, Expensya is one of Tunisia's best-funded companies. Because it is recognized as one of the top talent in Tunisia, it has the potential to attract the top 5% of talent in Tunisia. and startups with resources.
Mr. Juini also said that while Expensya, a Tunisian-born and Paris-headquartered company, was seen as just another SaaS company among many European SaaS companies, the company's employees and early investors realized that the company He also emphasized that he believed he was contributing something unique in Africa and remained bullish on its potential.
“When our employees join and spend time here, they have an engagement that goes beyond their paycheck and their job. It's that sense of building something big, and that's really the big difference.” he said. “This is a sentiment that is probably not talked about enough. People in Africa, at least in countries I know well, have a passion to contribute to a global success story.”
The optimism shared by investors and employees last year has come true.
After more than eight years of operation and raising approximately $30 million, including a $20 million Series B at a 2021 post-valuation of $83 million, Expensya was acquired and its employees remain elusive to many of its peers. It became part of the experience. within the African technology ecosystem.
Of the 190 employees at the time of acquisition, 110 were based in Tunisia. Those employees, including former staff from Expensia's Tunis office, were among 180 shareholders who made a combined $10 million from the deal, Juini revealed during the call. It is said that He said two-thirds of this amount was in cash. “Some people made $200,000 to $250,000. It's not necessarily life-changing money, but it's certainly path-changing,” said Joyni, now head of product and technology at Medius. He talked about employees cashing out.
Medius, a Swedish conglomerate backed by a prominent European private equity firm, has long sought to create a global CFO automation conglomerate and has made several acquisitions in the UK, US and Sweden, including Expensya. Ta. Integrating these solutions creates a more consistent and robust product for Medius. Geographically, the private equity firm and its subsidiaries can gain a wider reach across Europe and North America, even though his Expensya, for example, continues to operate independently. Prior to the acquisition, Expensya said it had doubled its recurring revenue over the past two years and grown its customer base to 6,000 businesses in 100 countries and 700,000 active individual users.
Acquisition events such as Expensya and Instadeep are noteworthy as they demonstrate that African startups can complete a full cycle, benefiting business angels and venture capital as well as employees. Although this scale is far from the scale of Silicon Valley or more mature technology ecosystems, it represents a positive step forward. These stakeholders will likely invest in startups or even launch their own ventures to contribute to the growth of Africa's technology ecosystem.
“Expensya has been built very efficiently. When you look at return on capital, revenue-to-investment ratio, and number of employees, we have achieved double-digit revenue growth while maintaining a modest valuation compared to similar models in Europe. It turns out to be a super efficient structure that allowed us to scale up to 1 million,” said Ribika, a former M-Pesa executive who has invested in fintech companies such as Qonto and Bamboo. “We will encourage more African startups to set up and compete globally, create good-paying jobs at home, where local engineering talent is abundant, and encourage more African startups to set up and compete globally. No one should ever leave their home country for a job in Europe or the United States. This is the vision.”
For enterprise products like Expensya, growing domestically can be more difficult than expanding internationally due to less mature markets and slower decision-making. Jouini advises founders to focus on selling their products and make adjustments as soon as possible. “Don't spend too much time over-engineering,” he says. “Selling customers, closing deals, and learning from customers is how you make your SaaS product local or global.” Next, Jouini and Ribica urge founders to prioritize talent and at the same time and hire for their future, while encouraging them to share equity and make them feel part of the journey along the way.
“Stage 1: Build the product. Stage 2: Launch your product with a few customers to fine-tune, improve, and build your unique selling proposition (USP). Phase 3: Build, Adopt, Sustain, this is how you establish and then scale an enterprise sales machine,” he said.