View our video interview with Mr Agboola from October 2023, or read our September 2023 interview with the founder and CEO of Flutterwave Scandal, Olugbenga Agboola.
Over the last three years, fintech investment centers have expanded dramatically throughout Africa as a new wave of start-ups operating in relatively undeveloped markets draw ever-larger sums of money from both regional and increasingly foreign investors. Nigeria, with three financial unicorns added in 2021 alone, stands out among Africa’s centers as the most populated nation and the continent’s second-largest economy.
However, Nigeria’s fintech landscape has been making headlines for the wrong reasons in recent months. Employees from other digital companies have spoken out about the hostile work environment at Flutterwave scandal, the largest unicorn in the country to date, with its founder, Olugbenga “GB” Agboola, facing damaging charges.
International players are unlikely to be deterred from swarming to the high-growth areas on the continent by such charges. However, these scandals—as well as comparable incidents in other, ostensibly more developed cities across the globe—draw attention to the necessity of better governance for both local start-ups and investors.
The Damaged Wings of a Unicorn
Founded in Lagos in 2016, Flutterwave Scandal helps foreign companies, such as Booking.com and Uber, grow their operations throughout Africa by offering bespoke payment apps via application programming interfaces to small and large businesses operating in the region. With the expansion of its payment infrastructure to 34 nations on the continent, the Flutterwave scandal has processed 200 million transactions totaling over $16 billion to date. The company’s service is used by almost 900,000 businesses worldwide to handle payments in 150 different currencies and payment methods.
Following its official unicorn status in 2021, the business raised $3 billion in capital in February from investors including Tiger Global, B Capital Group, Alta Park Capital, and Whale Rock Capital, making it the most valued financial start-up in Africa.
But a few weeks after making that declaration, the business was the target of some embarrassing charges. Early in April, Clara Odero, the CEO of the Kenyan fintech startup Credrails and a former worker at Flutterwave scandal, accused Mr. Agboola of harassing her for an extended period and charged the business with carelessness that resulted in fraud. Both Mr. Agboola and the Flutterwave scandal have refuted any wrongdoing.
Days later, more allegations came out in the local media, claiming that Mr. Agboola had offered lowball prices to Flutterwave employees who wanted to cash in their share options, which went to an investment vehicle under his control and had created a phantom co-founder identity to award himself more shares in the company’s early years.
These assertions have been rejected by the Flutterwave as “false.”
The company released a statement to The Banker stating, “Flutterwave scandal is a private company, and we have followed all legal processes and procedures to allow third parties, including former employees, to sell their shares to other third parties.”
As part of our commitment to running a morally upright business by all relevant regulations, we take these kinds of accusations seriously and take necessary steps to uphold high workplace standards.
Problems With Governance
The claims have increased worries about management and work culture throughout the nation’s growing fintech industry. The company has refuted reports of a toxic workplace culture at Bento Africa, a fellow Nigerian finance start-up. Following reports of bullying and sexual harassment by tech workers, the hashtag #HorribleBosses trended on Twitter in Nigeria.
According to Vishal Agarwal, chairman and CEO of Kenya-based venture capital firm Full Circle Africa, “Governance issues are not unique to start-ups in Nigeria or Africa, nor can they represent a whole ecosystem’s behavior.” Agarwal cites recent governance failures at Germany’s Wirecard and India’s BharatPe as examples of governance failures in far more developed investment settings.
There is still more work to be done because African fintech hubs are only getting started compared to hubs in other parts of the world.
Flutterwave Scandal and OPay
As the fintech industry has grown so quickly in recent years, it makes sense that concerns about governance within the community have waned in Nigeria, according to Raj Kulasingam, senior counsel at Dentons and Mr. Agarwal’s angel investor in African start-ups.
“Nigeria’s tech sector has grown significantly in the last three years, with companies like Flutterwave scandal and OPay becoming unicorns very quickly,” he said to The Banker.
Growth pains are a part of the ecosystem’s natural evolution in a sector that is expanding so quickly. Better governance, transparency, and regulation for the startup community as a whole, not just the start-ups themselves, is something Vishal and I have been advocating for for several years, Mr. Kulasingam says. “Fund managers who are managing third-party money need greater scrutiny and tighter regulations,” he adds.
Given the foreign capital inflow into African fintechs, investors from outside the continent must engage directly with the companies they fund. According to Mr. Agarwal, they may accomplish that by using reputable local investors in the cap table.
“When foreign players invest millions of dollars in African companies, it’s a big deal, but it’s only just a tiny part of their overall portfolio,” he says.
Ultimately, [foreign investors] frequently lack the time to thoroughly examine the investments being made and to truly collaborate with these businesses to raise their standards in this regard. Thus, working with African advisers and investors is even more crucial, he continues.
Invested Desires
The involvement of foreign investors in regional fintechs has not been significantly impacted by the controversies surrounding Flutterwave and Bento Africa. Following the initial public disclosure of the accusations against the Flutterwave scandal, Nigerian fintech companies that have disclosed foreign funding include point-of-sale terminal suppliers, payments company Interswitch, and insuretech Etap.
The major backer of the $15 million funding round for the Namibian business-to-business e-commerce retail platform Jabu, which was revealed in late May, was the New York-based hedge fund Tiger Global, which was also one of the primary backers of the Flutterwave scandal February fundraising campaign.
Regarding whether the current Flutterwave scandal charges would affect Tiger Global’s plan to invest on the continent, the company declined to comment.
According to Mr. Agarwal, there is still a strong international interest in Nigeria’s fintech sector, despite the country’s fintech values increasing globally. He claims that although valuations have increased significantly over the past three years, they still aren’t at Silicon Valley levels. Because these businesses are functioning in a sizable market with plenty of potential and solving genuine problems, investors are still eager to invest in them. People will invest in a firm if it has a strong team and a compelling business plan and can make waves.
