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

The Kwik cofounder talks about 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 fancy man. This assumption might be due to his huge expertise in the tech business, which spans three continents. At the age of 14, he began a journalistic profession with tech magazines in France that noticed him interview the CEO of Apple Computers 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 check worldwide relations and company administration. By 2018, he had cofounded Kwik, a logistics firm, with Olivier Decrock in Lagos. Before that, he had served as a European Union diplomat in Asian international locations for ten years.

Seated in his Lagos workplace, he talks to TechCabal about how acquisitions can improve 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 normal drop in the valuation of tech corporations as a result of, not like earlier than, buyers are taking a stronger have a look at the corporations. They are paying extra consideration to key efficiency indicators and demanding far more self-discipline and rigour. I feel it’s a chance for the African tech ecosystem to exhibit 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 lots of downsides. 

I’ve seen it in different ecosystems in the previous, significantly in France and the US. There goes to be a line of division between startups which have managed to scale up moderately and people who haven’t finished so and received’t give you the chance to take action as a result of funding is scarce.

So what we can anticipate is that startups which are in the first class are going to play a number one function 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 know-how, market share, and employees. Hopefully, they may come out of this stronger and with the capability to department out and broaden.

Read additionally: Kwik held talks in 2022 to amass Gokada

Muktar: In your current speech at the World Bank, you talked about the want for organised consolidation in the African tech ecosystem. Can you shed some mild on what you imply by “organised consolidation”?

Romain: A whole lot of startups get created and die. It’s a part of the studying curve, and it by no means stops. Every tech ecosystem is constructed on the precept that the majority startups don’t succeed. Startup failure is just not a giant deal so long as you be taught from it and can innovate along with your subsequent firm.

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

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

A whole lot of companies and rich people have taken dangers by investing in African startups in the previous 10 years. Although not each funding will deliver returns, there must be a wholesome steadiness. An acquisition market will permit buyers to recoup a few of their losses whereas additionally vindicating founders.

Read additionally: Nigeria’s logistic market claims one other startup as Hytch shuts down

Muktar: How would these acquisitions occur? 

Romain: It can 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 numerous methods. 

Firstly, it can occur in the type of geographical growth. A startup in Lagos may purchase one other startup that matches its wants in the Congo or Kenya. Another might 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 can buy their software program at an affordable worth, and it’s going so as to add worth to your individual firm. The similar logic is also utilized to expertise acquisition. 

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

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

The international tech VC market is experiencing a downturn, and as an ecosystem with a heavy reliance on international buyers, Africa is just not exempt. Experts have predicted that funding sources would possibly dry up in what will probably be a troublesome 12 months. However, Romain’s recommendation on “organised consolidation” presents a gleam of sunshine in a darkening tunnel, a doable method of salvation for troubled startups.