It was at a dinner reception on 14 July at the Palazzo Versace in Dubai where Tony Elumelu heralded the start of a new chapter for United Bank of Africa (UBA) with the official opening of a new branch at the Dubai International Financial Centre.
Overtime, Ogungbe had amassed hundreds of names of people and companies that his peers in the start-up community had spoken to him about – some of which may have been amenable to investing in Identitypass. One by one, he called them up, hoping that someone would buy into the business.
“Sometimes it would take months to secure one meeting and nothing would come of it. Other times, I would get a message via LinkedIn from someone interested to learn more about the business,” says Ogungbe. “It was a real roller-coaster ride.”
According to Bloomberg, funding for startups in Africa rose by 140% to $3.14bn in the first half of 2022 compared to the same period just one year earlier – bucking the trend globally, where investment declined 3.7% in Europe, 11.4% in the US, 25.7% in Asia and 43% in Latin American and the Caribbean.
However, all this interest and activity in Africa’s start-up ecosystem doesn’t necessarily mean that fundraising will be easy, as Ogungbe found out. “Your business basically goes offline for a couple of months as the normal running of the day-to-day business takes a back seat while you try to raise the cash that will take your business to the next level,” says Ogungbe.
“[…] while the whole ecosystem is evolving, there are lots of opportunities here – but it still takes time for potential investors to buy into this,” he says.
Identitypass started off as Identitypay. The original idea behind the company was to create a system that allowed individuals to make payments without a physical mobile phone or debit card present. “There have been a couple of times when I have been caught out myself,” says Ogungbe.
“I’ve been at the supermarket, and I’ve got the wrong card or have forgotten my mobile, so I thought to myself, wouldn’t it be amazing if there was a way to checkout of a store without any device whatsoever?”
Although Ogungbe and his team started work on developing the biometric infrastructure needed for Identitypay, they came up against one major issue: compliance and authentication. Additionally, infrastructure for biometric recognition was lacking and so was the infrastructure for Know Your Customer (KYC), anti-money laundering (AML) and other compliance screening.
For Ogungbe, this was when the company was pivoting from development of a payment platform to production of an authentication service, which would allow companies in Nigeria, Africa and abroad to verify users from numerous data sources and ensure that payments made were legitimate.
Data laws in Africa are harder to navigate and data sets for verification and authentication are changing constantly
There are other companies out there that do similar things, but for Ogungbe, few – if any of them – have been able to create a viable, digital authentication service that works within an African context.
“Data laws in Africa are harder to navigate and data sets for verification and authentication are changing constantly,” says Ogungbe. “For an organisation to stay up to date with all these changes, they need people on the ground – which is precisely what we have.”
It’s also about relationships. As Ogungbe says, Identitypass has broad connections with local and regional banks as well as regulators, which helps them keep on top of changes. “This is something we need to look at every day. Other companies may not have the same capacity.”
Ogungbe is understandably reluctant to share the start-ups current valuation, but with a cost of around 25c a transaction and around 1.5 million verifications monthly, revenue is moving in the right direction.
A year ago, Identitypass worked with around 100 companies, mainly in Nigeria. Today, the start-up works with 500 businesses across Africa, the UK, India and the US, which can connect to 18 data points to verify their customers’ identities via the platform – making it increasingly easier for companies in Africa to conduct business cross-border.
“Before, [a] company in the UK would not have easily been able to verify a buyer or user in Ghana, and this may have put them off [from] doing business in the country, but this has completely changed with Identitypass,” says Ogungbe.
“This is part of our story that I have shared with investors […] to get them on board,” says Ogungbe. “But this is only one of a number of factors that they will assess when it comes to valuations.”
In addition to revenue, track record and current traction, other factors that investors will consider include the success of similar start-ups in similar markets; potential areas of growth; how the VC and PE markets are doing more broadly; recent initial public offering (IPO) listings; social media, education, and background of the founders; whether they have been part of a successful incubator – and much more.
It may be that you can convince them that you have the right valuation in the first place
“It’s not surprising that some start-ups make strategic hires just before they announce a funding round,” says Ogungbe. “If – for some unknown reason – Mark Zuckerberg or Elon Musk decided to join my team, I have no doubt that our valuation would go through the roof.
A lot of it comes down to marketing, he says. “That is why you often get two founders or CEOs at one start-up – one that knows the business side of things and the other who […] becomes the de facto spokesperson of your brand.
“It may be that you can convince them that you have the right valuation in the first place [or] it may be that you can’t. Either way, it’s always a conversation – and they are usually the trickiest conversations you will ever have.”
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