Unique: Romain Poirot-Lellig on how acquisitions can enhance the African tech ecosystem.

The Kwik cofounder talks in regards to the state of funding in Africa, a brand new part for the African tech ecosystem, and what consolidation may imply for African startups. 

Romain Poirot-Lellig comes throughout as a posh man. This assumption may very well be due to his huge expertise within the tech business, which spans three continents. On the age of 14, he began a journalistic profession with tech magazines in France that noticed him interview the CEO of Apple Computer systems Europe in that very same 12 months. At 22, he switched to elevating funds for startups, leveraging the relationships he had constructed as a journalist. 

After a tour throughout Asia, he returned to France to review worldwide relations and company administration. By 2018, he had cofounded Kwik, a logistics firm, with Olivier Decrock in Lagos. Earlier than that, he had served as a European Union diplomat in Asian nations for ten years.

Seated in his Lagos workplace, he talks to TechCabal about how acquisitions can enhance Africa’s tech ecosystem. 

This interview has been edited for readability and consistency. 

Muktar: In your opinion, how is the present state of funding throughout the African tech ecosystem?

Romain: There’s been a basic drop within the valuation of tech corporations as a result of, in contrast to earlier than, traders are taking a stronger take a look at the businesses. They’re paying extra consideration to key efficiency indicators and demanding rather more self-discipline and rigour. I feel it’s a chance for the African tech ecosystem to reveal that it’s rising into a brand new part of maturity. I feel it’s good as a result of, from my expertise, low-cost cash has plenty of downsides. 

I’ve seen it in different ecosystems previously, significantly in France and the US. There’s going to be a line of division between startups which have managed to scale up moderately and people who haven’t completed so and received’t have the ability to take action as a result of funding is scarce.

So what we will count on is that startups which can be within the first class are going to play a number one position of their verticals. They’re going to take about 20 of the startups that haven’t been capable of scale up however could current some curiosity when it comes to expertise, market share, and workers. Hopefully, they may come out of this stronger and with the capability to department out and broaden.

Learn additionally: Kwik held talks in 2022 to acquire Gokada

Muktar: In your current speech on the World Financial institution, you talked in regards to the want for organised consolidation within the African tech ecosystem. Are you able to shed some gentle on what you imply by “organised consolidation”?

Romain: Lots of startups get created and die. It’s a part of the educational curve, and it by no means stops. Each tech ecosystem is constructed on the precept that almost all startups don’t succeed. Startup failure just isn’t an enormous deal so long as you study from it and might innovate together with your subsequent firm.

It shouldn’t be seen as a failure of the ecosystem; it must be seen as an indication that the ecosystem is evolving and individuals are studying from it. Issues will get higher with time as a result of individuals are getting stronger and higher at what they do.  

After I discuss organised consolidation, I’m referring to acquisitions. It’s essential that there are acquisitions within the African tech ecosystem as a result of it’ll present that investing in Africa is a worthwhile idea and that there’s an acquisition marketplace for corporations that aren’t so profitable. 

Lots of companies and rich people have taken dangers by investing in African startups previously 10 years. Though not each funding will carry returns, there must be a wholesome steadiness. An acquisition market will permit traders to recoup a few of their losses whereas additionally vindicating founders.

Learn additionally: Nigeria’s logistic market claims another startup as Hytch shuts down

Muktar: How would these acquisitions occur? 

Romain: It may possibly occur in numerous methods. For a very long time, valuations have been exaggerated, and it’s a optimistic step that valuations have gotten extra linked to fundamentals and KPIs. Consolidation can happen in varied methods. 

Firstly, it could actually occur within the type of geographical growth. A startup in Lagos may purchase one other startup that matches its wants within the Congo or Kenya. One other may very well be the acquisition of mental property. An organization may develop a model or a bit of software program that you just wish to use. They could not have the ability to entry funding anymore, however you should purchase their software program at an affordable worth, and it’s going so as to add worth to your personal firm. The identical logic is also utilized to expertise acquisition. 

Typically, a rise in acquisitions may assist the ecosystem transfer ahead. I’m positive that for lots of firm executives, it’s higher to hitch one other firm than go bankrupt.

Learn additionally: Startup acquisitions in African tech grew by 41% in Q3 2022

The worldwide tech VC market is experiencing a downturn, and as an ecosystem with a heavy reliance on overseas traders, Africa just isn’t exempt. Specialists have predicted that funding sources would possibly dry up in what will probably be a troublesome 12 months. Nonetheless, Romain’s recommendation on “organised consolidation” gives a gleam of sunshine in a darkening tunnel, a attainable manner of salvation for troubled startups.