Wave Raises $200M Led by Sequoia Heritage and Stripe

Wave Achieves Unicorn Status, Leading Fintech Growth in Francophone Africa

The first unicorn company originating from Francophone Africa has emerged, and observers of the African tech landscape will find its sector unsurprising: fintech.

$200 Million Series A Funding for Wave

Wave, a mobile money provider operating in both the U.S. and Senegal, has successfully secured $200 million in a Series A funding round. This investment represents the largest Series A round ever recorded for the region.

As a result of this funding, Wave is now valued at $1.7 billion.

Key Investors in the Round

The funding round was co-led by four prominent investment firms. These include Sequoia Heritage, a fund operating independently within the Sequoia brand; Founders Fund; the global payments leader, Stripe; and Ribbit Capital.

Additional participation came from existing investors Partech Africa and Sam Altman, who previously served as CEO of Y Combinator and currently leads OpenAI.

Exponential Growth in the Mobile Money Market

The mobile money market across sub-Saharan Africa is experiencing rapid expansion. Approximately $500 billion was transacted through the accounts of 300 million active mobile money users in the region during the last year.

Despite its status as one of the world’s most significant alternative financial infrastructures, this figure still represents a limited portion of the total potential market.

Mobile Money vs. Traditional Banking

Data from the International Monetary Fund indicates that only 43% of adults in sub-Saharan Africa had access to traditional banking or mobile money accounts as of 2017.

However, mobile money, due to its simpler technology and streamlined onboarding procedures, is poised to increase its market share at a faster rate than traditional banking, driving efforts to expand financial inclusion.

This growth potential is attracting significant interest from investors, particularly those based internationally.

The Role of Neobanking

Neobanking, also leveraging mobile technology, occupies a position between traditional banking and mobile money in terms of complexity and accessibility.

Wave: Emerging from Sendwave

The origins of Wave may not be widely known, largely because it began as a project spun out of the Africa-focused remittance company, Sendwave.

Sendwave was established in 2014 by Drew Durbin and Lincoln Quirk, with the goal of providing remittances to select nations in Africa and Asia from North America and Europe, often with minimal or no fees. Backed by Y Combinator, the company was acquired by WorldRemit last year in a deal valued at up to $500 million in cash and stock.

Prior to the acquisition, the team had been quietly developing a mobile money solution designed to be free of account fees and universally accessible.

Initial testing of this product, branded as Wave, took place in Senegal in 2018. However, at this stage, it still operated as part of the Sendwave infrastructure.

Following WorldRemit’s acquisition of Sendwave, Durbin and his team shifted their complete attention to the development and expansion of Wave.

In a TechCrunch interview, Durbin explained their motivation: “Our assessment revealed a chance to create a significantly improved and more cost-effective mobile money service compared to those offered by telecommunications companies across much of sub-Saharan Africa.” He further stated, “We observed a lack of competition from companies actively addressing this need outside of the telcos.”

The Vision Behind Wave

The core aim of Wave is to provide a mobile money service that is both accessible and affordable. This contrasts with existing solutions often provided by telecommunication companies.

The founders identified a gap in the market for a truly user-friendly and cost-effective mobile money platform in sub-Saharan Africa.

• Low Fees: Wave aims to eliminate or significantly reduce account fees.
• Instant Access: Funds are designed to be immediately available for use.
• Wide Acceptance: The platform is intended to be accepted by a broad range of merchants and individuals.

This focus on accessibility and affordability is central to Wave’s strategy for disrupting the mobile money landscape in Africa.

Challenging Established Market Leaders

Traditionally, telecommunication companies and banks have dominated the mobile money sector. This is largely due to their control over essential infrastructure, encompassing mobile networks with subscriber access and the financial systems required for managing monetary transactions.

While numerous third-party fintech companies have attempted to gain a foothold against these established players, Wave is positioned to fundamentally alter the competitive landscape.

Durbin explains to TechCrunch that, in contrast to M-Pesa, spearheaded by Safaricom, and similar offerings from telecom giants like Orange and Tigo, Wave is developing a mobile money service characterized by its “remarkably low cost.”

This Dakar-based platform functions similarly to PayPal, utilizing mobile money accounts instead of traditional bank accounts, and operates through an agent network. These agents leverage their available cash to facilitate transactions for Wave users. The company states that deposits and withdrawals are free, with a 1% fee applied to money transfers.

Durbin emphasizes that this fee structure represents a 70% reduction compared to fees levied by telecom-operated mobile money services. Furthermore, Wave provides immediate refunds in the event of a transfer issue, a stark contrast to the potential delays experienced with incumbent providers.

Wave’s technological approach also diverges from that of traditional telecom-based mobile money systems. While incumbents often rely on USSD technology, with some offering applications, Wave is exclusively app-based. For users lacking smartphones, Wave offers a complimentary QR-card for transactions with agents.

By constructing a complete, end-to-end infrastructure – including an agent network, applications for both agents and consumers, QR cards, and systems for business collections and disbursements – Wave has successfully driven growth to encompass millions of monthly active users and billions of dollars in annual transaction volume.

The startup, founded two years ago, asserts its position as the leading mobile money provider in Senegal, with over half of the adult population actively using its services. This translates to an estimated 4 to 5 million users, and Wave aims to replicate this success in Ivory Coast, its second official market expansion last year.

This rapid expansion is creating challenges for established telecom operators. Orange, the leading telecom provider in both Senegal and Ivory Coast, has already responded by preventing users from purchasing Orange airtime through Wave’s mobile application in June.

Wave contends that Orange is employing anti-competitive practices by restricting its ability to sell directly or through authorized wholesalers. Orange, however, maintains that it has extended proposals “consistent with those offered to other providers” and that Wave was seeking preferential treatment.

Both parties are currently collaborating with the Regulatory Authority for Telecommunications and Posts (RATP) to reach a resolution. Should the regulator be unable to resolve the dispute, the regional bank for Francophone countries, BCEAO, will intervene.

Wave’s CEO attributes the company’s ability to challenge telecom operators, in part, to the regulatory framework established by the regional bank. However, the question remains: why launch initially in Senegal, an emerging market, among the numerous West African countries with prevalent mobile money usage?

“Senegal presented a market large enough to necessitate significant effort for potential domination, yet small enough to allow for quicker success if we performed well,” Durbin explained. “This combination of factors made it an ideal starting point.”

The recent funding will be used to strengthen Wave’s presence in Senegal and Ivory Coast, and to expand its team, currently numbering 800 employees across product, engineering, and business functions. Additionally, Wave plans to extend its operations to other markets with favorable regulatory environments, such as Uganda.

“We believe numerous countries possess strong central banks and transparent regulations that are receptive to new entrants, or even actively encourage competition with telecom companies,” Durbin stated. “We are currently pursuing licenses in several countries and will prioritize those where we can launch operations most expeditiously.”

Wave Achieves Unicorn Status After Series A Funding

Details surrounding Wave’s prior funding remain unconfirmed, as Durbin refrained from commenting on reports of a $13.8 million raise. He did, however, disclose that Partech, a French investment firm with a dedicated African fund, participated in a seed funding round, alongside investors including Founders Fund and Stripe.

The Series A round attracted participation from the same investor group as previous rounds, including Sequoia, Ribbit, and Sam Altman.

Tidjane Deme, a general partner at Partech, believes this investment will facilitate improvements to Wave’s service within a historically stagnant market.

“We’ve been supporting Wave since 2018, driven by our conviction that mobile money solutions remain largely unresolved in Africa,” Deme stated. “Wave demonstrates exceptional product design, strong execution capabilities, and a promising financial outlook. We are proud to witness its emergence as Senegal’s first unicorn.”

Sequoia Capital’s investment in Egyptian fintech Telda in May marked its initial significant deal on the African continent. This Wave investment originates from Sequoia Heritage, an endowment-style fund, and represents its first venture into an Africa-focused startup.

Altman explained during a conversation with TechCrunch that Wave satisfied his key investment criteria: capable founders, a critical problem within a substantial market, a functional product, and demonstrable traction.

“I have a long-standing relationship with these founders and consider them exceptionally talented,” he commented. “I’m consistently impressed by their ability to understand user needs and drive growth. They are addressing a crucial issue in African money transfer, streamlining inefficient agent networks.”

Currently, OPay’s recent $400 million raise and Jumia’s $400 million funding in 2016 represent the largest venture rounds in Africa, both being Series C rounds.

Interswitch’s $200 million investment from Visa and Flutterwave’s $170 million Series C round also stand as significant investments.

These companies all achieved unicorn status after their respective funding rounds. Wave’s accomplishment is particularly noteworthy, securing this valuation in a Series A round, and it’s becoming one of the largest A-rounds seen globally this year.

Wave now joins OPay and Flutterwave as recent additions to the list of African unicorns – startups valued at over $1 billion – and becomes the fourth African company to reach this milestone, following Interswitch. Other billion-dollar companies operating in Africa include the publicly listed Jumia and Egyptian fintech firm Fawry.

Investment sizes in Africa are steadily increasing, indicating a pivotal moment for the continent. Nevertheless, some observers have raised concerns regarding the valuations of previous unicorns, and Wave may not be exempt from such scrutiny.

A point of discussion centers on Wave’s high valuation compared to established telecom operators like Airtel and MTN, who are considering listing their mobile money businesses at valuations between $2 to $6 billion, despite years of operation across numerous African nations.

However, mirroring the optimism of any investor regarding a portfolio company, Altman does not believe Wave is overpriced. In fact, he suggests the company is undervalued.

“The potential ahead for this company is substantial. However, I’ve been incorrect in predictions before, so certainty is impossible. I have, however, been fortunate enough to make several successful investments, and I am confident Wave has a strong chance of success,” he stated. “Africa is poised to become the fastest-growing and most important market for many companies in the coming decades. It’s becoming clear how significant the market opportunity is and how much value will be generated, and we can expect to see more developments like this.”

 

Correction: An earlier iteration of this article incorrectly stated that Sequoia Heritage is a private investment fund and a subsidiary of Sequoia Capital. It is, in fact, an endowment-style fund operating as a separate entity under the Sequoia brand.