In October 2020, I wrote “If you want to run a small comparison, Flutterwave has raised $64.5 million. If you want to keep the same multiples, Flutterwave should be worth at least $1 billion. Certainly, Flutterwave is not yet a unicorn.” I had used Paystack numbers to extrapolate on the valuation of Flutterwave. That number came close to $1 billion but I quickly held by noting that Flutterwave was not yet $1 billion. But when it raised $170 million, this week, it completed.

Read this comment from Ladi:

The recent $170m Series C funding (Total Funding = $234.7m) informed the $1 billion at 10 March March 2021 valuation ($830m before the $170m Series C Funding) – see attached as exhibit.

Your comments around October 2020 refers to Series A and B funding ($64.5m) only.

This critical factor was absent at the time of your submission and basing a company”s valuation on parallel (black) market exchange rate to USD is a fantasmal joke that’s not even funny at all.

It clearly seems that you’re trying to retrospectively fit the $1 billion valuation into a 2021 conjecture – by fire and by force Prof.

Velocity, Harvard Business Review or One Oasis valuation modelling have nothing to do with black market valuation; the $170m Series C funding fully explains causality ($830m + $170m).

He was referring to this post which was copied by a Senator

My response: “That makes me a zen master if I predicted months ago that Flutterwave should be worth $1 billion. I have even forgotten I wrote that. Thanks for sharing. So, I need to celebrate that call. I did say it was not $1b, so, the $170m completed it. I do not see what to fault there. I wrote that many months ago after extrapolating from Paystack number!

Another comment: Well done. The image above fully accounts for the difference. You have not yet demonstrated any model efficacy – One Oasis. Please do and don’t refer to black market valuation please.

My response: I do not know which image. You hard pre-money $830m which the $170 completed to $1b. I wrote it was $1b but quickly noted, it was not a unicorn. That $170M completed it. On model efficacy, you have no basis to judge. So, I leave it that way.

On black market, it is a number and we use it provided you declare it. You can also use official provided you declare it. They are numbers, just make it clear which one you are using. Bloomberg, Reuters, etc use black market rates and that I am using it should not be a taboo.

Yet, picking an Oct 2020 article to challenge one with more insights you have in March 2021 is another black market deal. You could have challenged me then. Do you not think an official rate would have focused on March 2021 and leave Oct 2020 alone? Read the full article which Senator Ojudu shared here – https://www.tekedia.com/paystack-is-the-most-successful-nigerian-tech-startup-on-large-value-creation-for-investors/ . I think I did very well, predicting March 2021. A hedge fund would have been happy to extend my contract.

Comment on the article: Uber and Lyft raised billions which continues to be debt their debt burden and they are still operating in the red. People should question what a business that’s on the market needs infusion of capital for. I dont consider funding as profit. A business that is on the market should be able to expand from market adoption, without such large infusion of cash, unless it is building infrastructure to meet demand. Lets just stop seeing fund raising as success. It’s not.

My response: You have a point but it misses how digital companies are valued and modelled. You are using an industrial age mentality to examine digital native companies. Amazon is worth $1.54 trillion today but was profitless for ages as it pursued that inflection point to make it a category-king.

Until you get to that state, no steady state has been reached as the golden virtuous circle of network effect cannot set in at scale with near-zero marginal cost. To assure that the money Uber raised is not lost, it did not drop to zero on IPO day. In other words, it created value after all “mass investors” have looked at it.

Next time I visit Nigeria, I plan to visit Nigerian Senate to have a chat on how we need to look at digital firms. It is not about profit. Amazon, an online firm, is America’s second largest employer.

Wish President Buhari can see this. We need to change how we look at these things in Nigeria. We can create 10 million in 4 years and employ everyone!

Last month in Harvard Business Review, I shared a small window on how I examine companies. I am proud that more companies and people are using the One Oasis and Double Play Strategies. More than five VCs have reached out and like a happy village boy with blessings, one paid me $$ to explain the constructs deeper.  When I look at companies, I examine its momentum (in physics, mass x velocity). A company must have velocity (not just speed) which is speed with direction to become exciting to me. 

As I noted when I wrote on Flutterwave, I explained that except Zenith and GTBank in the Nigerian Stock Exchange, that its $1 billion valuation was more than any of the trading banks there, using N480/$ black market rate. A commenter disputed the basis of that call; I responded thus, using Access Bank.

• UBA – N239 billion
• Access –  N275.475B
• Stanbic – N444.240B
• First Bank FBH – N260.241B
• As it stands today, at N480/$, Flutterwave is more than all those. Except Zenith and GTBank, FLW is ahead. (Source: Nigerian Stock Exchange)

If NSE investors said Access is worth N275.475B and FLW investors said it is worth $1billion, everything else is irrelevant. That one is public and one is private cannot change the numbers. In short, if FLW goes public now, it would be worth more. If Tesla is not public, people will still argue that it cannot be worth twice  of Toyota because it sells less than 10.5 million cars to what Toyota sells.

Those valuation models you quoted are modelling Needs and Expectations; great companies are modelled on Perception. Revenue, income, etc are great but industry trajectory and momentum (mass x velocity) are key. If you have speed instead of velocity, you have no direction as a firm. FLW has velocity and most banks run on speed!

Velocity brings the edges of the smiling curve while speed keeps you at the center. Extra value is captured at the edges. It is the same thing which makes Paypal ( $282.93B) more valuable than Goldman Sachs ($117.59B).

It comes down to this: new basis of competition and the ability to turn your consumers to customers, and those customers to FANS. Yes, velocity makes consumers become Fans, and fandom unlocks Perception during valuation, as huge leverageable factors emerge. 

During a Tekedia Live session last week, Akintunde said it brilliantly” “Beatitude of Business – Blessed is the business that converts its customers to fans.” Build at the edges even if you have things at the center.

A unicorn is born and it has to find a home to rest. Yes, Flutterwave is an Africa-born unicorn, valued at excess of $1 billion, after raising $170 million. It is not necessarily surprising when you see how the company has integrated the disparate African countries. When others were working on needs and expectations, Flutterwave moved to perception. In his class note at Tekedia Mini-MBA, the company’s CEO, Olugbenga GB Agboola, explained his view of Africa and the world, and used his company to explain how they are tackling the opportunities. There is no way you will read that document and will not admire his firm.

“The company’s valuation is now in excess of $1 billion. The fundraise brings the total investment in Flutterwave to $225 million,” the company said in a statement.

“We may consider the possibility of listing in New York or a possible dual listing in New York and Nigeria,” Flutterwave CEO and co-founder Olugbenga Agboola told Reuters on Tuesday.

And the company will open its war chest now for acquisitions because the Flutterwave Treasury with new $170 million can do great things: “We believe in payments in partnerships as you have to partner to scale. So, if in the course of making partnerships and scaling and we identify promising companies with a similar ethos and have our vision in mind, that is in making Africa a country, an acquisition isn’t off the table,” he said.

Yes, I am expecting Flutterwave to make its major acquisition before the end of Q4 2021. Any fintech with core value provision will become a natural suitor because the company has the capacity to unlock more resources for deals. I also expect the firm to move vertically, using its resources to fund more feeders into its ecosystems. That means, it could dedicate 5% of its revenue to support ecosystem players that would feed transactions into its platforms. 

Flutterwave’s biggest competitor is not the banks, Interswitch or Stripe (Paystack), but OPay. OPay which processed $2 billion worth of transactions in December 2020 has eclipsed every fintech in Nigeria. In comparison, “Flutterwave has carried out more than 140 million transactions worth more than $9 billion since it was founded in 2016”. So, OPay and Flutterwave are the dominant forces to battle this out as OPay begins its expansion out of Nigeria. 

Opera controls OPay, and from Opera’s earnings call, “In December OPay processed a gross transaction value of $2 billion on its platform compared to $1.4 billion in October, or a 43% increase in just over two months. Further, OPay’s revenue is increasing quite rapidly while the company is able to achieve profits right around breakeven despite the growth. We expect this growth to continue as OPay continues to scale in Nigeria and expands to an additional country in Africa.” Yes, OPay, the fintech company, which has Nigeria as its main base grossed $2 billion on transaction value in December 2020, hitting 43% growth from October numbers.

What can we say? We hope transaction fees drop to near-zero as that is what competition brings. In a class yesterday, Tekedia Beijing-based faculty, Dr Henry Chan, said it clearly: “Dr. Chan explained deeper why Alipay does more transactions than Visa and Mastercard combined. Alipay does $18 trillion while Visa and Mastercard combine for $16 trillion. He explained that a merchant will lose about 2-5% with Visa or Mastercard while Alipay will pick about 0.6%. With that construct, China went ahead of the West on the adoption of digital payment even though Visa has been around for decades before Alipay”.

Flutterwave Raises $170m in Series C Round, Becomes a Unicorn