Frontier Giants: Companies to Watch in Emerging Markets
Great businesses are being built in Africa, Latin America, Central Asia, Southeast Asia, and beyond.
It was, for a time, the most expensive road in the world. An unremarkable thoroughfare in Northern California was dearer than Manhattan’s most coveted neighborhoods and pricier than London’s West End.
Beginning with Kleiner Perkins in the early 1970s, Sand Hill Road established itself not only as an expensive place to rent an office but the spiritual home of venture capital. Since the industry’s first occupant, Sand Hill Road has attracted most of America’s prominent firms including Sequoia, a16z, Accel, and many, many others. It is both a meme and metonym — the symbol of an asset class.
And, increasingly, it is an anachronism.
While the lamentations of San Francisco’s demise are exaggerated — too much capital, talent, and power remain in the Golden City for it to disappear — great startups are progressively being built not only out of state but out of the country.
I believe we are at the beginning of a significant reorganization in entrepreneurship and its backers. While the last decade has seen giants emerge from many less mature economies — think Kaspi in Kazakhstan, Nubank in Brazil, or GoTo in Indonesia — capital remains highly concentrated in North America. Of last year’s $260 billion in venture capital allocated, more than 51% went to American and Canadian startups, according to data compiled by Statista. That was followed by 34% into Asian businesses, 13% into European companies, and 2% into a group classified as “Other.”
What is “other?”
“Other” is Africa, with its 1.2 billion people, 54 countries, and more than 200 languages.
“Other” is Latin America, a region that includes major economies like Mexico and Brazil.
“Other” is Oceania, home to one of the world’s most valuable private companies in Canva.
“Other” is the Middle East, which has produced unicorns like Careem and Souq.
“Other” is, at the very least, 2.2 billion people and, depending on how this data was parsed, perhaps many more.
What looks like a rounding error from an investment perspective now is the future. Many of the regions mentioned above — along with nations buried in other segments — will produce a growing portion of the world’s most important, impactful, and valuable businesses. In the process, they will also draw greater capital and attention.
My hope is that this piece introduces some of the companies that will go on to define this new generation. To bring the most interesting companies to bear, I’ve asked a selection of the world’s sharpest emerging market fund managers, founders, and angels to share a business they think is truly exceptional and should be known by a broader audience.
Increasingly, the most interesting startups are being funded and founded thousands of miles from Sand Hill Road.
Thank you to Eddy Chan, Eloho Omame, Emeka Ajene, Hayden Simmons, Julio Vasconcellos, Kiyan Zandiyeh, Nathan Lustig, Sacha Haider, Sajith Pai, and Sumon Sadhu for generously sharing their insights.
Cryptocurrency has been on a tear over the past year, driven by mass global adoption by institutions and individuals. As a global phenomenon, blockchain innovation is occurring across geographies, breaking down traditional barriers and democratizing access to new asset classes. Indonesia in particular has stood out, with over 6 million individual traders adopting cryptocurrencies. As a comparison, the country has just 2.6 million retail investors trading public equities.
In 2018, we met Jeth Soetoyo, the founder of Pintu. He sought to create a trading platform for Indonesian retail investors to invest and own cryptocurrencies. By March 2019 when we issued a term sheet to Pintu, appetite for blockchain-related investments had bottomed out with bitcoin at $3,000 amid fallout from the ICO craze. The Pintu team was unfazed by the market malaise, believing that a regulatory-approved cryptocurrency trading platform in Indonesia would be able to tap into an underserved market of investors looking to diversify.
Conviction is infectious—while we’re not a pure-play crypto fund, we believe in founder conviction first and foremost. And that’s what convinced us to invest in Pintu while Soetoyo was still completing his studies at Harvard Business School.
Since then, with the sustained rally in cryptocurrency, Pintu has established itself as a market leader and the go-to platform for Indonesians seeking to invest in this asset class. By attracting technical talent passionate about cryptocurrencies and working closely with regulators, Pintu has created a platform that is both trusted and catered to the preferences of Indonesian users. The company has since gained the backing of global investors like Pantera Capital, Coinbase Ventures, and Lightspeed, demonstrating that Indonesian startups are now global caliber.
Some of the key takeaways from Pintu’s example can be reapplied for others investing in emerging markets.
First, look for founders that are working on something driven by deep commitment. Founders that aspire to do something challenging based on personal belief are more likely to succeed because their heart and soul is the core driver of motivation.
Second, specialized models attract specialized talent. Companies working in cutting-edge or extremely technical areas have an unfair advantage in attracting high-level talent. These businesses are often the only place said talent can go to work on these problems.
Third, find companies that can create defensive moats through regulation. Once a business has secured regulatory approval, it may be able to prevent outsiders from joining the space. By doing so, these regulated players can gain a larger market share, as we’ve seen with Pintu.
– Eddy Chan, Founding Partner of “Indonesia-only” Intudo Ventures
KOKO is scaling a proprietary technological solution for urban African retail, in the climate space. Its unique flywheel makes it particularly compelling.
It starts at small mom-and-pop stores. These are where 70% of Africans do their shopping, including for cooking fuel. Though an uncommon purchase in the US and Western Europe, cooking fuel is one of the largest non-discretionary categories among African consumers. On the continent, cooking fuel is estimated to be worth $40 billion and is highly fragmented.
It also happens to be extremely damaging to the environment. Traditional fuel is charcoal-based; production of it involves mass deforestation. Over 5 million acres of tropical forest are lost every year to meet the charcoal industry’s demand, with 1 billion tons of CO2 emitted in the process.
KOKO deftly addresses this issue from multiple angles. First, it partners with local stores to provide liquid bio-ethanol fuel. This is more environmentally friendly but still fills a need 250 million low-to-middle income households have.
Perhaps even more interestingly, KOKO uses this wedge to layer on other purchases. From “KOKO Point” vending machines, consumers can refill their canisters, buy other consumer goods, and access financial services. The company uses this high-need, high-frequency purchase to address other issues in consumers’ lives.
Cleverly, KOKO doesn’t stop here. Rather, the company monetizes the emissions reductions it delivers by working with institutional trading partners in global markets, using the revenues to lower the cost of its products to the Kenyan households it serves.
So far, it is working extraordinarily well. Since the launch of its Nairobi network of 700 shops in Q4 of 2019, KOKO has scaled to serve more than 1 million Kenyans. In 2021, it has grown 500% and is not only expanding across Kenya but into six new countries over the next three years. The 1,000-person team powering this is split between Kenya and India.
In sum, KOKO brings together technology, infrastructure, and policy to solve the dirty cooking fuel crisis with a capital expenditure that’s about 1/18th of the liquid petroleum industry. With 60 emerging market countries that need networks like the one KOKO provides, there seems to be plenty of opportunity ahead — something management recognizes. Already, KOKO is investing in increasing its supply to enable licensing and pursue joint ventures with strong partners in different markets.
— Steven Grin, co-founder of Lateral Frontiers
I’m extremely excited about Termii, one of Rally Cap’s first investments, building “Twilio for Africa.” In a fragmented continent where mobile has long since leapfrogged legacy tech, fintech success often depends upon onboarding and retaining users scalably, securely and cost-effectively, across multiple markets. Termii offers a developer-centric suite of cross-channel OTP and verification APIs, providing these critical messaging rails.
Since graduating from YC’s summer 2020 batch, Termii’s growth has been spectacular. A snapshot:
- 4000 enterprise customers
- MRR up 670% over the last seven months
- Exceeded 2020 ARR by 300% in the first half of 2021
This is a business addressing a huge need and executing very impressively.
— Hayden Simmons, Founder of Rally Cap Ventures
Zoodpay (Central Asia and Middle East)
Whilst we’re biased as investors, we believe Zoodpay is on to something extremely special. The company is leading the way in building the largest e-commerce and omnichannel “buy now, pay later” (BNPL) business in countries where smartphone penetration is very high (above 70%) but e-commerce and consumer financial penetration is very low (sub 1% and 5%, respectively).
These countries collectively represent a population of 150 million people and we estimate the Total Addressable Market for that e-commerce/BNPL combination to be between $20 billion and $30 billion. At the moment, Zoodpay is active in a number of different emerging and frontier markets, including Uzbekistan, Kazakhstan, Iraq, Jordan, and Kuwait.
Zoodpay has effectively developed a solution that enables last-mile logistics and payments, winning a dedicated userbase in the process. Today, the company boasts 7 million app downloads and 1.5 million monthly active users.
On the e-commerce front, headline GMV growth has grown 7x year-over-year for three years with an average take rate of 10%. The e-commerce platform also acts as a demand generator for the BNPL business, creating a flywheel of higher basket size, increased conversion, and a higher take rate with little to no merchant acquisition costs.
Offline, the company has integrated with the largest payment processors and POS providers, such that customers can choose to purchase products through the Zoodpay app.
The majority of countries Zoodpay operates in are still in their nascency when it comes to digitalization and as a result, no businesses have significant consumer distribution. (The exception is telecom operators.) Thanks to its large and growing user pool, Zoodpay has a huge distribution opportunity. We believe the company has the chance to establish itself as a true super app, handling the bulk of consumers’ day-to-day transactions. This could include utility bill payments, domestic and international travel, or even financial products like insurance — all of which can be financed through BNPL, too.
On the competitive front, the nascency of the venture ecosystems in these markets means that no local players have the access to capital to meaningfully compete. Moreover, individual countries — think Uzbekistan — are both too complex and too small for international incumbents to compete in. Whilst BNPL in principal is a low barrier to entry business, scale is a function of merchant acquisition costs (low in Zoodpay’s case since it’s driven by the e-commerce business) and access to debt; Zoodpay’s Series B round has secured the latter.
Ultimately, we believe Zoodpay has built (and continues to deepen) a strong moat and has the runway to build a sizable, meaningful business over the next five years.
— Kiyan Zandiyeh, CIO of Sturgeon Capital
Tambua Health (Kenya)
I find that exciting emerging market investments have three key traits: they’re highly original, capable of securing a monopoly, and leapfrog existing technology due to restrained starting conditions.
Tambua Health, an African deep-tech company has all three.
The company is led by 21-year old Lewis Wanyeki, an MIT dropout from the spectral imaging lab. He could be considered one of the most intensely technical founders on the continent. He and the Tambua team have created a low-cost, portable ultrasound machine that leverages advances in neural networks for acoustic detection, sensor arrays, and software. Those innovations allow doctors to conduct ultrasound exams with instant image analysis on a rugged android tablet screen. The product can be used by hospital systems to build their own low-cost medical imaging practice, or by developers — Tambua has a number of APIs that can be accessed by others.
The company’s interdisciplinary approach across hardware, software, cloud, and sensors effectively replaces expensive ultrasound devices with a miniaturized machine costing less than $1,000. That’s an order of magnitude lower than existing devices, putting it within reach of many African healthcare facilities that have traditionally been priced out. This has profound implications, allowing for the rapid detection of many medical ailments that rely upon instant ultrasound for diagnosis, including respiratory illnesses.
What I find most exceptional is that the company created its sophisticated hardware and software product with less than 15 people and $3 million in financing. Tambua is quickly becoming a destination for great African deep-tech talent.
By being forced to miniaturize, Tambua has re-invented one of the most fundamental healthcare services: medical imaging. That would be a feat for any deep-tech company, let alone an African one. With that achieved, Tambua has the chance to become a global giant that the likes of Siemens and other incumbents couldn’t see coming from the continent.
— Sumon Sadhu, Global Angel Investor
At FirstCheck Africa, we invest in the overlooked potential of Africa’s women in technology. We back female founders early, at the pre-seed stage, so I’m always on the lookout for startups with excellent leadership. We only started this journey in January 2021, and we’ve made a few exciting investments. Still, if there’s one that’s gotten away so far, it’s Ejara, a decentralized investment and savings platform. The startup is led by Nelly Chatue Diop, a high-octane female founder from Douala, Cameroon.
Nelly is one of the pioneers of Africa’s crypto industry. She and her team at Ejara are exceptional on multiple fronts. They’re tackling a complex, meaningful problem with crypto and scaling a mission-driven startup to address the financial needs of Francophone Africa’s 430 million people. Many are locked out of the region’s sub-optimal, inefficient, expensive, and politically complex financial system. Ejara wants to give underserved users — including women, urban gig-workers, community savings groups, smallholder farmers, and rural populations — the ability to invest and save in cryptocurrencies, stablecoins, and tokenized assets.
There’s so much to admire about Ejara’s approach, and what the team has achieved already. They’ve built a simple mobile interface on a proprietary platform, with a few clever design decisions to help drive inclusion. By using crypto rails, Ejara can offer lower fees, faster transaction processing, and higher yields. Nelly is particularly keen on reaching female users. Already, about 40% of Ejara’s user base are women (roughly 3x crypto averages), though she is targeting 50%. Ejara created the first non-custodial wallet in Africa, meaning their users can exercise complete control over their assets. This decision is pivotal on a continent where men hold 80% or more of financial assets and where gender social norms can limit women’s financial freedoms. Ejara’s wallet is simple, operates in local languages, and works on basic smartphones in low-data environments. The startup’s platforms provide financial education on investment and savings, risk, and responsible crypto trading. Ejara is growing its user base at 25% month on month and is already live in eight countries one year after launch.
I first came across Nelly early this year when she joined one of the regular Clubhouse rooms that my partner and I started for Africa’s female founders and women in tech. She spoke about her frustration trying to raise VC for her startup, and without revealing much about the business, talked about how she’d put the entire process on pause to bootstrap instead. Our fund planned to stay in touch with her, but somehow, regrettably, never did. When Nelly and I reconnected not long ago, she had raised one of Sub-Saharan Africa’s largest female-led seed rounds to date and in record time. Her serendipitous journey kicked off with an interview on the Blockworks podcast, Empire, with Jason Yanowitz, which took her inspiring story of building in crypto from Francophone West Africa to the world.
Ejara announced its $2 million seed round a few weeks ago, with a press photo that made me incredibly proud. Here were six female technology leaders of one of the most exciting crypto startups in Africa who looked like me and many of the women I know. They were dressed boldly in bright, traditional African prints, each beautifully poised, with her head held high. Nelly tells me that every single decision in the photo was deliberate. Her team at Ejara is gender-balanced, but it was important to show the world what funds like FirstCheck Africa know already: African women are building too.
African female founders, like Nelly, are unicorns in the truest sense of the word. In 2021 so far, a record fundraising year for the continent, below 1% of the $3 billion of venture capital deployed has gone to startups led by a woman — less than $30 million. Just six startups led by an African woman have raised a seed round of more than $1 million this year. Nelly and her African female founder peers are trailblazers.
Stories like Nelly’s are why FirstCheck Africa exists. In a recent conversation, she and I spoke animatedly about the dream we share for female founders in Africa: record rounds in record time to build the startups, like Ejara, that will change the face of a continent.
— Eloho Omame, Co-Founder & General Partner of FirstCheck Africa
smallcase is an Indian fintech startup that I want the world to know. (Yes, that “s” is intentionally in lowercase.) It’s one of the few startups in the world that functions as a noun and must be one of the lowest-valued. The only other companies I think of as nouns are Calendly and Substack — you might say to someone, “could you share your Calendly/Substack with me, please.” Substack’s last valuation was $650 million and Calendly’s was $3 billion. smallcase, on the other hand, was valued in its recent Series C round at just $200m.
What does smallcase do? What is a smallcase?
Well, a smallcase is a basket of stocks that reflects a theme, idea, or strategy. That could be “Speciality Chemicals,” “Rising Rural Demand,” or “The Great Indian Middle Class,” all of which are available as “smallcases” on the platform. Users can create their own smallcases or buy into those that resonate. Popular money managers have launched smallcases on the platform, with fans rallying to invest.
The product has 3.5 million users and sees $250 million of capital flowing into smallcases every month — rising at a furious clip. Copycats have entered the space, offering themed baskets of stocks to compete with the pioneer. Ultimately, that’s for the best, as they will help expand the base of retail investors in India.
My firm, Blume Ventures, led the seed round in late 2015 and doubled down in an extension two years later. In early 2019, Sequoia led a Series A and since then, the company has raised a round every year, aided by two years of spectacular growth.
smallcases are a big idea for the world from a frontier market.
— Sajith Pai, early-stage investor at Blume Ventures, India
Kushki (Latin America)
Imagine getting a paper paycheck and cashing it in for paper money, then lining up for 30-90 minutes to pay your electric, internet, and water bills. Now imagine doing that 12-24 times per year, in rain, shine, and hot weather; in dangerous neighborhoods and safe ones. That’s how it was, and still is, for the vast majority of Latin Americans.
Aron Schwarzkopf and Sebastián Castro Galnares were educated in the US, started a successful payments business, and exited. They decided to move back to Latin America to fix a broken industry. Along with Daniela Espinosa and Madeleine Clavijo Verjel, the quartet cofounded Kushki, an Ecuadorian startup that helps empower Latin Americans to pay online and is quietly transforming the region.
Unlike Stripe, which started by helping startups accept payments online, Kushki began by working with Latin America’s largest companies to empower online payments. The team had two main goals: (i) make businesses more efficient and responsive to user needs and (ii) kill the biweekly lines that drained customers’ time.
We take paying for things online for granted in the US and Europe. Consumers can pay for nearly everything online quickly, easily, and safely. Businesses can integrate online payments via APIs. Consumers can enter their credit card into a payment form, set it, and forget it.
But Latin America is more complicated. There are 20+ countries with different currencies and different payment systems. Many of these systems break because they haven’t been maintained by legacy companies, some of which run as quasi-monopolies. It’s not uncommon for Chile’s entire payment system to be down for 15-90 minutes, or parts of Colombia’s or Mexico’s set-up to falter for 24 hours. These blackouts cost businesses revenue and create massive frustration for consumers.
Kushki has rebuilt or repurposed the region’s payment rails from scratch to empower companies to move away from requiring cash or relying on creaky legacy systems. The business is making life meaningfully better for Latin America’s 650 million consumers and bringing businesses into the internet age.
— Nathan Lustig, Managing Partner, Magma Partners
Karvi (Latin America)
While the world focuses on the unexpected success of Carvana and Kavak, Karvi is challenging the idea that asset-heavy vertical models are the only way to simplify the car buying experience. In particular, the company is innovating in Brazil’s used car segment.
Karvi’s managed marketplace aims to provide a seamless online buying experience for the consumer while empowering small dealers to compete in the digital world. Dealers can integrate with the Karvi marketplace with zero listing fees by allowing their stock to be inspected by Karvi, who leverages technology to conduct a quick, thorough inspection. The company then uploads high-quality pictures and provides extended warranties for all inspected cars. The dealer can still sell its cars directly to offline consumers, who are more likely to convert given the vehicle has undergone an inspection report from a trusted brand. Online customers can select the car they desire on Karvi’s website and Karvi handles the logistics with the dealer, ensuring a seamless digital buying experience. So far, the company has raised $15 million.
Founders Matias Fernandez and Mattias Rossetto met at Wharton while pursuing their MBAs. Originally from Argentina, both had worked at top-tier consulting firms prior to founding the company, with Rosetto bringing additional automotive expertise to the table. The pair pivoted multiple times until they found the right asset-light model for simplifying car sales, having started Karvi as a “full-service” integration for dealers in Argentina, back in 2017. Since launching its current model in May of 2021, the company has entered hyper-growth, integrating with hundreds of dealers across Brazil and Argentina and quickly increasing the variety of makes and models sold.
While we are not investors in Karvi (yet), we believe the model is feasible and can scale quickly in a market like Brazil, where dealerships are fragmented and vertical players do not dominate. The car market, in addition to being massive, is still very offline and the experience for consumers when buying from traditional dealers remains subpar, to say the least. The offline nature of car-buying means vertical players like Kavak will take more time to penetrate and can co-exist with models like Karvi, who are able to access a different, larger segment of the market, disrupting how car sales are made both online and offline.
— Julio Vasconcellos, Founder and Managing Partner of Atlantico
Over 70% of Egypt’s fast-growing population of 100 million is financially underserved, with mobile penetration exceeding 90% and over half of the population being under 30 years of age. Subsequently, the market for solutions that expand financial inclusion and literacy among the young and underbanked is sizable. Thndr is one company addressing this opportunity.
Founded in 2019, the Cairo-based investment platform is on a mission to make investing easy and accessible to everyone. A pioneer in commission-free investment in the country, the startup facilitates access to the necessary tools and resources that equip aspiring and existing investors with the means to achieve financial freedom. Trading with Thndr is supplemented by access to educational material, news, and market data.
It all started in 2016 when co-founders Seif Amr and former General Manager of Uber Egypt, Ahmed Hammouda, recognized the inaccessibility of legacy offerings. As a former investment banker, Ahmed had witnessed firsthand how outdated the systems were and how fully they failed to serve average consumers. Seif, meanwhile, realized how broken the space was when trying to open an investment account of his own — the process was time-consuming, complicated, and support was minimal. Digging into the space, the pair learned that the average age of investors in the Egyptian market was 40 years old. It felt like the right time for a fresher solution.
After graduating from Y Combinator in 2019, Thndr began by offering a commission-free, mobile-first equities trading platform that simplified investing into stocks, bonds, and funds. A year later, they expanded to include a second financial instrument: mutual funds. The startup became the first company to receive a brokerage license in Egypt since 2008 and with it, partnered with Azimut Egypt, to offer an Egypt-focused fixed income mutual fund called “AZ-Savings.” This new product is an open-ended private placement fund investing mostly in near-term fixed income instruments and is considered a low-risk, liquid investment instrument.
Thndr’s mission to democratize access to investing seems to be working: 67% of its user base had never invested before. Led by a strong team and supported by favorable macroeconomic fundamentals, the company has seen weekly sign-ups grow 5x. For Thndr, the journey toward a more financially-included society is only beginning.
— Sacha Haider, Principal at Global Ventures
Generally speaking, exceptional businesses in frontier markets lean into the unique characteristics of their environment, creating models that respond directly to local realities. One such company is Nigerian fintech TeamApt. The company provides payment processing and other financial services to businesses.
While it’s increasingly sexy for fintech innovators to focus on purely digital solutions such as neobanks, the reality is that large swathes of Africa are still analog with a majority of consumers not yet online. Cash still plays a dominant role.
It’s against this backdrop that TeamApt operates, occupying an intermediate position between analog and digital worlds. The company provides a full-stack solution that combines tech solutions with a robust agency banking platform. In this role, TeamApt not only serves digital natives but acts as an on-ramp for the ongoing digital transformation.
For example, there are large segments of users at the bottom of the pyramid that are not yet ready to transact completely digitally, preferring a face-to-face experience. TeamApt can accommodate this thanks to its network of ~100,000 agents strategically positioned across Nigeria. (Interestingly, innovators across various industries are recognizing that an offline presence is vital, and can bolster the success of online offerings.)
TeamApt currently processes ~$4 billion in transaction volume each month and is growing steadily. Moreover, the company is positioned to thrive as Africa’s digital revolution becomes more pronounced; it’s among those that could, in short order, join Africa’s list of unicorns.
— Emeka Ajene, Co-Founder of Gozem; writer, Afridigest
Original article published on The Generalist
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