Ethiopia... | November 2019

Ethiopia... | November 2019

November 2019

Our portfolio of companies continue to make great progress building their businesses, including hiring terrific talent and growing in their core markets.  In November, Lori Systems and Twiga Foods announced new funding rounds led by Hillhouse Capital and Goldman Sachs, respectively.  We have three new portfolio companies joining Raba — stealth company A (logistics, pre-seed/build), Stitch (payments, pre-seed), and Yoco Technologies (payments, Series B extension).  I will provide deeper dives into each company in our year-end LP letter.

The majority of this update will focus on my trip to Ethiopia, a “new” market for Raba.  I’m excited about the potential there, and look forward to sharing more in future conversations and letters with you.


I traveled to Ethiopia in October, and met with founders, local investors, business people and operators to help better understand the opportunities and challenges in the market.  I came away with two clear thoughts.  First, the talent to build technology companies is definitely there.  Second, Ethiopia is very early in the technology company building phase — companies in foundational layers like payments infrastructure are very early and limited in scope and market penetration.  Despite legacy friction (and despite raising very little outside capital), one payments company I met is growing 20% MoM with over 1M customers.

Why is Ethiopia exciting?

Aside from the impressive talent, Ethiopia has the second-largest population in Africa (108 million people), and has over 50 million phone subscribers.  My conversations with local founders and investors focused on common themes of friction in the infrastructure domains of logistics, supply chains and payments (focus areas for Raba).  I believe there will be opportunities for existing Raba companies to expand into Ethiopia and potentially invest in local companies building the next generation of foundational businesses.

Some background on Ethiopia is important to fully grasp the opportunity.  Ethiopia is one of the first Christian countries in the world and is the only large African country that has not been ruled by Europeans.  From my walks through Addis and visits to local establishments, the culture felt unique and it’s own.  Education is valued, and the government substantiated that cultural commitment earlier this year by earmarking ~13% of its budget to education across 50 federally administered universities.  It’s also worth noting that one of the world’s best and most profitable airlines is Ethiopian Airlines, run entirely by Ethiopians (thank you Miles for this stat).  The foundational elements of a thriving growth economy seem to be in place, and what is needed to complete the picture is clear policies for potential foreign investment.

Just think, it’s 2019 and there is a clear blue sky opportunity to build the foundational technology companies to serve a population of over 100 million people.  The possibilities here are very exciting.  Today, Ethiopia is led by Abiy Ahmed, a charismatic young leader (he’s 43 and much younger than most African leaders) who was recently awarded the Nobel Peace Prize.  Independent of varying political views about his leadership, it is clear that young people are excited about the change he is bringing to Ethiopia.  Granted, my meetings were mainly with technology company founders and business people, but it was refreshing to hear a country’s youth express enthusiasm for a political leader (it’s usually the opposite around the world today).  Also, it appears the current administration is focused on opening the country to potential investment.  The finance minister was recently quoted as saying “in the past, we have been actively involved in economic affairs, but now we are rebalancing.  We need to facilitate the sustainability of growth.  We will first privatize four sectors: telecom, aviation, energy and logistics.”  We understand that there is considerable interest from global investors in the coming privatization deals — the spectrum sale, for example, has garnered interest from larger telecom players.  Safaricom CEO Michael Joseph recently described the sale as “the biggest prize left in Africa from a telecoms point of view.”

I look forward to sharing more insights and appreciate any suggestions regarding people we should get to know in the Ethiopian ecosystem.

Transsion, who?

I recently attended a Transsion mobile internet conference in Nairobi.  For those who don’t know Transsion, it’s a Chinese handset company that sold over 120M devices last year with a dominant market share in Africa, generating over $3.2B in revenue in 2018.  It’s considered an African tech success story, especially in China.

A few thoughts from the summit:

  • The conference had a significant number of blue chip institutional Chinese investors in attendance, and they are very focused on building relationships with African investors and company founders. Aside from a few African VC investors, there was a clear void of non-Chinese institutional capital in attendance.
  • Transsion is looking to use its large installed base of users to build additional consumer services. Boomplay, an African focused music streaming service with over 60M users (reportedly adding 2M users per month), is one example. I expect to see more partnership agreements and direct consumer services to be built on top of Transsion’s significant installed base. I had the opportunity to meet with a member of Transsion’s investment team, and I expect to see them become more active investing in early to later-stage companies across the continent.
  • Chinese technology companies will compete with U.S. (and other) companies for strategic technology partnerships in infrastructure layer areas like payments. A recent example of this is Visa’s $200M investment earlier this month in Nigerian fintech company Interswitch. Andrew Torre from Visa summed up their stance: “Africa is a priority region for us, and we continually seek strategic partnerships with local players to further strengthen our leadership position and enhance the payments ecosystem across the continent.” We are also seeing Chinese entrants (funded by Chinese investors) enter the consumer payments space (Opay is an example, having raised $170M over the last 6 months) another recent example was PalmPay, raising a $40M seed round. Below is an image of the investors involved:


Earlier this month, the South African Rugby team, the Springboks, won the Rugby World Cup.  The win was described by players and fans as unifying the country, and more than just about sport.  The Springboks are a team that hails from a wide range of backgrounds, none more inspiring than team captain Siya Kolisi, who after the game summed it up best with “we can achieve anything if we work as one.”  Here is a link to Siya’s post-game interview.

I recently participated in an interview with Eric Orlander at The China Africa Project on Chinese Venture Capitalist investing in African startups.  Read more here.

I was the subject of an interview with Patrick O'Shaughnessy on his popular Invest Like the Best podcast.  You can listen to it here.  Special thanks to Ryan Petersen at Flexport for the introduction to Patrick.