Flutterwave and Fintech Valuations

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Friday, October 15, 2021 / 01:22 PM / by CSL Research / Header Image Credit: CNBC


A Bloomberg report says Flutterwave Inc., a Nigerian payments firm, is seeking fresh funding at a valuation of US$3bn or more, a figure that would roughly triple its last valuation. According to the report, the company recently held discussions with potential investors, however, the terms of the funding round are yet to be finalised. The company in March said it had achieved unicorn status after raising US$170m in a funding round led by Avenir Growth Capital and Tiger Global Management LLC. The US$170m raised took Flutterwave's overall investment to US$225m. Flutterwave, which was founded by Olugbenga Agboola in 2016, is estimated to be worth more than US$1bn.


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Fintech valuations remained very high in the nine months of 2021 as investors continued to see the space as attractive. According to CB Insights, Q2 2021 was the largest funding quarter on record globally. Across 657 deals, global venture cash-backed Fintech companies raised a record US$30.8bn in Q2 2021, 30% growth over Q1 funding record. Following a record-breaking Q2 in the world of Fintech, investments in Fintech continued to climb to new highs in Q3 2021. Total Fintech funding in Q3 2021 grew 161% y/y to reach US$31bn. The yearly sum so far of US$91.5bn is already almost double 2020's full-year total, and there's still a quarter to go. Funding activity grew in nearly all FINTECH subsectors except for wealth tech and capital markets tech. The digital lending, banking, and SMB FINTECH sectors saw the most pronounced deal activity growth quarter on quarter.

 

Nigeria's significantly under-tapped digital payments industry is poised for significant growth. A myriad of factors across industry fundamentals, positive country demographics, and regulatory support have formed the base of expected accelerated growth for the Fintech industry in Nigeria. This expectation has received much attention from investors, which has led to significant investments as existing players look to position for future growth. Nigeria's Fintech industry has seen funding rounds from various global investors since 2014, either through equity or grants. Fintechs in Nigeria raised over US$500m between 2014 and 2020 and with reports of over US$500m raised in the first 9months of 2021, the industry has attracted c.US$1bn. Increased funding, high valuations and successful exits point to the fact that digital engagement of customers which intensified during the pandemic is here to stay.

 

Current valuations of fintechs are becoming significantly higher than those of many banks. These developments have led many banks with a vibrant payment system to consider either operating the payment business as a subsidiary like Guaranty Trust Bank has done or selling a stake of their payment business like FBN Holdings plans to do with First Monie. In our conversation with the bank and also based on communications from previous conference calls, the bank has been considering selling a stake in First Monie. Firstmonie is an official service from FirstBank through which customers in unbanked or underbanked regions can process financial requests through registered Agents and existing businesses.


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