The Next Wave: Exits are not always beautiful

Yesterday international flights kicked off in Nigeria, I’ve been stuck in Lagos for so long that this news was, maybe, the highlight of my week. The Federal Airports Authority of Nigeria (FAAN) posted pictures on its official Twitter handle that showed travelers heading out.

Anyway, how are you doing, really? I am burnt out myself and due for a mini-vacay. You should take a break too if you can afford to, no matter how small, rest a bit.

Above everything else, I strongly hope you are still keeping safe in the face of an ongoing pandemic.

In the last few weeks, we
have talked extensively about exits in Africa, especially their beauty and necessity.

Today, let’s talk about the not so beautiful exits.
Catch up on older episodes of The Next Wave newsletter, subscribe, and then come along for this ride.

The Cars45 mugshot and trouble in paradise
ICYMI, within the week, digital African used cars marketplace, Cars45 posted a social media disclaimer that warned the public about dealing with 11 (now) former members of the startups.

“They are not authorised to represent the company in any matter whatsoever. Anyone dealing with them on behalf of Cars45 is doing so at his own responsibility,” the now
deleted Instagram post read.

Interestingly, a number of people in the collage were top members of the team, including co-founder Iyamu Mohammed.

It is also important to note that CEO and founder, Etop Ikpe, had exited the company in July, and has now founded a new company called NewCo, and most of the people that exited Cars45 have, according to their LinkedIn profiles, joined him at NewCo.

There’s no info online for NewCo, but I strongly believe that it is a NewCo; a generic placeholder name for new companies before they are named. It’s like how you start calling your new dog Dog before you
figure out a fitting name.

And sometimes forget to change the name.

Anyway, in the coming week, Cars45 may (or may not) make a detailed announcement about the drama surrounding these exits, but as at press time, the silence is loud.

[READ: 11 Senior Execs dramatically leave Cars45; Here’s what we know so far]

But what exactly is
happening at Cars45?

This drama is the makings of a tussle at the top, and there is most likely a shake-up with Cars45’s investors, and here’s why I think so;

In 2017, one year after launch, Cars45 raised $5 million in a Series A round from the Frontier Cars Group (FCG). This was its first-ever official raise, and according to TechCrunch, the money was supposed to be used to;

“…to improve its platform that buys, sells, prices, and rates the condition of pre-owned autos.”

There was also talk of scale across the continent that eventually happened more than 2 years later in December 2019, it was an expansion to Ghana and Kenya.

All seemed to be well, but there’s one more piece of this puzzle: FCG and a (not so) new investor.

In November 2019, the FCG received $400 million investment
from the OLX Group, bringing its total investment received to $569, and valuing it at $700 million.

[READ: Cars45 parent company Frontier Car Group raises $400 million from OLX]

According to Reuters, the “capital [was injected] in exchange for new shares and a tender offer to buy out existing shareholders.”

Again, all seemed well, but in August, co-founder and CEO of FCG Sujay Tyle quit the company. In a farewell LinkedIn note, Tyle announced that he was moving, and that “The strong teams at FCG and OLX Group will continue growing these transformative marketplaces.”

Maybe it is pure coincidence that founders and CEOs of two of the OLX Group’s companies are quitting. And or, it may also be a change in direction that requires a reshuffle.

It is also important to note that other companies in the FCG portfolio are seemingly doing well and do not have any drama.

But Nigeria is a different market, and maybe this is a sign of trouble brewing.

Either way, this won’t be the first publicized case of a CEO and founder leaving after an acquisition.

In 2018, Nigeria-based and Africa-focused travel agency, Wakanow raised $40 million from the Carlyle Group. This new capital was a breakthrough for the company and was supposed to help them do big things.

One year later, following allegations of not running the company well, investors
and shareholders reportedly ousted founder and CEO, Obinna Ekezie. People with knowledge of the situation say it was not the most palatable experience.

What is the lesson from today’s conversation?

Exits can be ugly too. Investors and founders can sometimes be misaligned.

What can you do about this?

TBVH, I do not know myself, or I will rather not say. FWIW, this is
a classical “make of that what you will situation”, and that’s exactly what I want you to do.

Why Gozem’s super app experiment depends on transportation.
TechCabal had earlier spotlighted five Africa-focused companies at different stages of the super app business, with varying potentials for success.

One of the five, Gozem was originally launched as a transportation and ridehailing startup in francophone Africa. The recent edition The BackEnd series, takes a more detailed look into the startup’s superapp experiment.

Exponential growth was pivotal to the acquisition of Beyonic by MFS Africa. In June, MFS Africa, a mobile payments hub connecting banks, money transfer and telecom network operators, acquired Beyonic, a Uganda-based digital payments company.

In the latest edition of TC Live, Beyonic CEO, Carina Rumberger talks about how exponential growth was pivotal to the acquisition, intricacies of the deal, taking over leadership from founders, and every other thing in between.

“The pandemic provided a new perspective on how businesses work in Africa. More specifically, the use of technology has been accelerated due to the fact that most people have had to work from home, relying on platforms such as Zoom, Hangouts and WhatsApp to stay connected. We have seen a large consumer shift to online marketplaces.

E-commerce has been a lifeline to millions of Africans and SMEs during the lockdown, with over 29% of the population in markets such as Nigeria, South Africa and Kenya shopping online due to restrictions. This has further exposed the discrepancies in Africa’s supply chain and I believe that this is the necessary push that the private sector need in order to create more solid contingency plans and for African governments to work on the improvement of infrastructure such as roads, rail, cheaper internet and create favorable laws to aid trade and attract new businesses and investments into the continent.”

– Kagure Wamunyu, Chief Strategy Officer, Kobo360

Every week, we will ask our readers, stakeholders, and operators in Africa’s tech ecosystem what they think the new normal will look like, and will
share their thoughts here. You can share yours with victor@bigcabal.com with ‘The Crystal Ball’ in the subject line.

Journey to dominance
In April 1997, an Indian businessman Sanjeev Bikhchandani launched a website listing 1,000 jobs curated from 29 newspapers. Bikhchandani had just dealt with a devastating financial loss owing to a recession. Ten years later, the website, Naukri went on to list on the Indian Stock
Exchange through its parent company, Info Edge.

Bikchandani’s story inspired three Nigerian undergraduates; Olalekan Olude, Ayodeji Adewunmi and Opeyemi Awoyemi. In August 2009, they came together in their university dormitory to launch a jobs website. It was one of Nigeria’s earliest internet startups.

It received a seed investment from Chika Nwobi’s L5 Lab in 2010 and reportedly got an investment from Tiger Global a year later. Jobberman shot to global acclaim when Facebook founder, Mark Zuckerberg mentioned the founding team as one to look out for. Zuckerberg said they were “examples of young Nigerians using digital technology to make an impact across Africa.”

But Jobberman’s real big break happened in 2015 when it got acquired by One Africa Media, a classifieds group backed by SEEK, the largest employment marketplace by market
capitalization. One Africa Media joined forces with Ringier to become ROAM. Cars45 major competitor, Cheki is owned by ROAM.

Armed with fresh capital, Jobberman made a strategic investment in internship platform, Stutern. And last week it acquired a major competitor, NG Careers.

While all Jobberman’s founders initially remained as Directors and executives at the new group, none of them holds an active executive role at the company as of today. It did raise a few questions but all founders have since moved on to other
projects. The company is now being run by McKinsey alumnus, Hilda Kragha. But its ambitions, it seems, are still intact.

If you are a founder in Africa, please fill our investor list here to let us know who gave you your first check. Get TechCabal’s reports and send us your custom research requests here.

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– Victor Ekwealor, Managing Editor, TechCabal