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Nicole Dunn and Brian Kearney, hosts of The Next Frontier Podcast, interview founders and investors in Africa, from Pre-Seed to Unicorn stage entrepreneurs and angels to professional VCs. The podcast aims to shine a light on the dynamic startup ecosystem and bring equitable funding to entrepreneurs that are tackling the most difficult problems on Earth. Their goal is to shift the narrative on startup investing in emerging markets and help grow the African yearly VC inflows to $20 billion.
New episodes drop every Thursday in your favorite podcast app and at nextfrontierpod.com.
Daniel Yu: This idea that the only way you can scale is through pure digital distribution or something like that is pretty nonsense and in a lot of verticals, I think, impossible, when it comes to different sectors of the African economy. I mean, the reality is that these are trust-based societies, right? And the social fabric that exists is far more ingrained in people's day-to-day lives than what you see maybe these days in the global North.
Nicole Dunn: Welcome to the Next Frontier. I'm Nicole Dunn, co-founder and COO at a venture-backed African Startup. I'm a VC investor turned startup operator, passionate about unlocking untapped entrepreneurial potential in Africa.
Brian Kearney: And I am Brian Kearney, a three-time entrepreneur, nonprofit founder, and angel investor based in the U.S. I'm excited about connecting capital to entrepreneurs solving the world's toughest problems.
Nicole Dunn: Join us as we change the narrative on startup investing in emerging markets and help bring the yearly African VC inflows to 20 billion dollars.
Brian Kearney: Daniel, the first thing I wanted to ask you that I was doing in my research is you were going to one of the top universities in the world. And you dropped out to do this. You could have made more money staying in the university or doing VC in the U.S. You have the skills, the skills are transferable. What made you go into the African startup market? And I know it can't be the money side because you also signed the giving pledge. So what was it? What made you dive into that?
Daniel Yu: I would say, and I definitely do want to caveat that, as a 20-year-old college dropout, I certainly did not, being myself, particularly qualified to do anything when I got started. What I would say, I did have a background as a software developer, so at least I could code and I could make websites and basic apps and stuff like that, but not particularly a savant to that either.
But I think what I did have was a very adventurous spirit and curiosity. And it was actually my time spent doing a study abroad program in Egypt where I happened to be learning Arabic of all things at the time, so not anything particularly relevant to what you would consider to be a typical, say, startup founder career.
But, I think that in a lot of ways is where the best opportunities come from in these kinds of offbeat path trajectories. And so in my time in Egypt, I got to know some of the local shopkeepers in the neighborhood where I was staying and through them realized that they had this complete gap in terms of actually getting goods to restock their stores.
So the typical shopkeeper has to actually physically leave their store, travel to the other side of town, buy the goods themselves, arrange their own transport, bring them back. And this wastes a lot of time and costs a lot of money for these shopkeepers, and it's a real big pain point and hassle that kind of affects the entire supply chain and the local community that relies on that shop to be able to get their essential products.
And so for me, that was a real aha moment. And I think also, certainly in retrospect, exhibits what I've come to characterize as the most interesting problems to focus on, which is, yes, I'm incredibly grateful and fortunate to have grown up in the U.S. I'm from California originally.
And so, you know, have a lot of friends who work in Silicon Valley and definitely have prestigious and well-paid jobs, but if I just kind of look at what kinds of problems these companies are solving that some of my friends at Silicon Valley work at, it's either very kind of my new optimization types of services where it's like, “Okay, we help do email advertising 0.2% better than the competition,” and because, email clickbait advertising is a big business in the U.S., sure, you can make a decent amount of money if you have an algorithm that increases conversions by 0.2% better than the competition, but or you have that group and then you have this other group, which is, you know, kind of people doing Uber for dog-walking types of companies, which are not actually solving real problems for humanity, right?
This is just kind of solving problems for the 1%. That's more of a reflection of the fact that you have a lot of this talent and these resources that just haven't found better places to go.
And I think a big part of how do we kind of unlock and how do we actually ensure that the resources and the talent are going to where the world most needs it to is by kind of building these bridges and kind of, in my case, traveling, kind of getting off the beaten path and kind of recognizing that, wait, there are these enormous markets that are out there.
So in our case, small mom-and-pop store retail in Africa is over 800 billion dollars a year. And yet it's still entirely run on pencil paper with no deliveries and no restocking and no digitization happening to support these small businesses. And yet, at the time that I was getting started, there was nothing in tech that was really happening for these stores.
So I think being in the position that I was in, which, as I said, completely unqualified to do most things I would have, sure, if I got lucky, and applied to a job at some of these big prestigious tech companies or consulting firms and stuff like that, maybe I would have been able to get a job like a lot of my friends and fellow peers, but at the same time, if I hadn't taken that job at McKinsey or at Google or whatever, I'm sure they would have had a thousand other kids right behind me who would have taken that job and done just as well, if not better.
And so, from my perspective, the opportunity to kind of go down this path of kind of true adventure and true kind of unknown of, you know, when I got started, I was like, okay, I have no clue if this is going to go anywhere, if this is even the right thing. I mean, the business in effect pivoted quite a bit by the time we got to actually certainly, you know, the model that we have today.
And so, but I knew it was going to be interesting and I knew that I was going to learn a lot from it and that ultimately would take me to places that I never knew existed otherwise, at least professionally. So I think for me that's certainly was the huge motivating factor early on.
And I would say it continues to be what excites me every day about the business we still have.
Nicole Dunn: It’s an amazing story. I'm so curious how you explained that to the people around you, these friends that are going off down the predictable path, right? You're now making this crazy decision to drop out of university.
I guess that was becoming more and more popular at the time, but you're going out to solve this problem that most of your peers and family can't relate to. What were some of the reactions you got at that time?
Daniel Yu: There were definitely a lot of people who thought that I was pretty crazy, I think pretty kind of delusional, or I would say, the more kind of typical reaction would be, “Okay, this is just kind of a phase, right?”
Like, “Okay, Daniel will go and he'll try this out for a few months and then he'll come back and we'll see him in class next semester, right?” So I think, which honestly, I was perfectly, I think, accepting of too, you know, I had no clue whether this had any potential, had any legs.
And so for me, I initially did just take a leave of absence from university. I guess I'm technically still on leave 10 years later, but it's one of these things where you just gotta take a bit of a leap. And at the time, I definitely did benefit from the fact that my university had a flexible policy where they would welcome you back if you want to take 6 months to go do a project. No problem. Give it a shot, if not, come back. And I think that helps certainly my parents and some other folks kind of get a bit more if not comfortable at least outright rejecting of my plan and my ambition.
But yeah, in this case, I was able to just kind of keep pulling at the thread and keep finding more and more things to kind of keep me moving in the direction that ultimately led to where I am today. I think it's because of that initial leap that all of this has come to fruition.
Brian Kearney: What do you think in your experience can be kind of learned from the Silicon Valley system and transplanted to African venture and what doesn't transfer at all? Like I'm sure there are things on both ends.
Daniel Yu: I think what Silicon Valley has done overall or at least stereotypically is known for is this idea of the meritocracy from the point of view that if you have an idea that is getting traction now, I mean, there's a lot of things.
And I think this is–I say stereotype because I actually do think that a lot of this signaling effect, “Okay. Did you go to Harvard? Did you go to Stanford? And is your background…do you look like Mark Zuckerberg,” and all that. I think there's a lot more rightful discussion around these kinds of pattern matching that I think is actually not necessarily representative of true entrepreneurial potential and success, but at least in theory, this idea that any kid in a garage can come up with the idea and if he or she gets an MVP going and sees traction that there are people who are willing to take a bet on that kid, in a way that, say, 50 years ago wouldn't be possible because in order to get any kind of investment back then you would have had to have a nice suit and gray hair and go into a bank and present a full five-year business plan with a profitable audited financials.
And this idea of a kind of like a venture ecosystem was still quite limited until the past 20, 20, 30 years or so. And certainly when we kind of look at the African investment ecosystem, the vast majority of it still looks like the traditional, whether it's banking-led or PE-led kind of investment, which is much more still buttoned up, been running a business for decades and have these audited financials and these relationships and this CV and whatnot.
And so I think taking the–recognizing that the opportunities for entrepreneurial disruption and talent are really in the youth, and that's quadruply the case when you look at Africa, the vast majority of the population, it falls into that category. I mean, the median age of 19, it tells you everything you need to know, which is how can we expect old, grayed-hair men to innovate and create products that are going to be loved by the population, that there's so many years, kind of far out from where the actual population really is. So I think that idea of the pure or the ideal, at least, of a meritocracy where anyone can kind of work an idea. I think the collaborative spirit as well is something that I think is very important.
And I've definitely experienced it both in Silicon Valley and in my time, primarily in East Africa, which is just this kind of open community where anything that you can do to help anyone, you know, that is what's encouraged and that's what's rewarded in the community and in the kind of value system that exists without kind of keeping score or kind of expecting immediate payback.
You just kind of, you get forward and you expect things to come around, and I think we've definitely seen that just in the kind of cycles of the ecosystem, at least that I've been a part of so far.
Nicole Dunn: Yeah, I thought it was interesting that recently Brighter Bridge has released some data on the fundraising climate last year.
And of course, overall, the message is funding declined quite significantly. But one of the interesting data points to me is the count of early-stage deals actually increased in Africa in 2023. And I think that talks to what you've said there is you're starting to see a little bit more appetite at those earlier stages, accelerators moving in, localizing with more talent with founders who are achieving success, getting some liquidity, whether that's in an acquisition or a secondary round and putting that back into the ecosystem, which I think is super encouraging.
And we're going to chat about fundraising a little bit later in the episode, but I'd love to hear about some of the beginning of the journey. You mentioned that you pivoted quite a bit between starting the business, the assumptions you had based on those early days in Egypt, and what you ultimately ended up building at Wasoko. What were some of those really impactful market dynamics or learnings that shifted how you built out the business and product?
Daniel Yu: Yes. A great question. So in terms of the trajectory and the pivots in the business, I would say the real big one was the original idea that I had being in Egypt and being a software person by background was, okay, I'm just going to have this pure digital platform that's going to enable ordering from the shop and then the digital platform will connect the shop with the supplier and anything to do with the actual logistics or on ground operations, that'll be handled separately by the shop, between the supplier and the shop themselves. That’s not anything I wanna get involved with.
That kind of nice digital-only products vision kind of met a hard reality once we actually kind of got going with our first partnerships. And so we had some invitations to launch our systems initially in Kenya with some companies over here. And that's how the idea really got challenged and ultimately failed, at least in its pilot version, because what ended up happening was orders were being placed, but then the distributors for the manufacturers were supposed to be actually taking the products, kind of seeing the orders coming in and then routing themselves to go deliver, we're not doing so–at least nowhere near reliably as it needs to be to actually make the kind of platform function.
And so that was really kind of critical juncture for us because I think, once again, faced another key point of just being completely unqualified to do anything, which was okay, it seems like this logistics is a big kind of blocker that needs to be figured out to really make this type of ordering solution actually valuable and solving the customer pain point. And so if the distributor themselves is not going to be able to take this on then is it worth actually giving it a shot ourselves?
Which was a pretty crazy thing to think, but I managed to kind of set up a small pilot operation of a two-bedroom apartment that was cleared out with just like boxes of soap and chewing gum to be pre-positioned and ready to deliver, you know, when those orders came in and got some help, got some support by some great local operations managers who kind of helped make sure that our team of delivery people on foot with backpacks would be ready to go once those orders came in.
And we ran that pilot for a couple months and it was actually a success. And what we ended up then kind of building on from there was, okay, I guess we really have to figure out how to do this stuff. How do you actually set up a large warehouse and proper delivery operations and negotiate all these contracts and manage inventory and whatnot?
And so there were many kind of mistakes and learnings over the following years from that process. But ultimately, that's still the model that we have today. And thankfully we now have people who are much, much better than myself at running all of these intricate parts of the operation.
Yeah, once again, it just kind of came from hitting a wall and realizing that okay, this direction is not working, looks like that's the way to go, don't know anything about it, but you know, we'll figure it out as we go along.
Brian Kearney: I love that story of pre-positioning the product in an apartment. That's awesome. That's scrappy. I love it. That also kind of talks a little bit about or speaks a little bit to what you were talking about earlier where you said companies in Silicon Valley are pretty much digital-only. At this point, if you're not a SaaS company, getting venture funding is pretty difficult, which is hilarious.
Nicole and I talk about that a lot. That's not the roots of Silicon Valley, but that's all they think about now. So it almost sounds like what you're talking about really is getting more to the roots of what venture capital is supposed to be, it's not a 2% if you're lucky, iteration on a software product bringing efficiencies, it's completely changing someone's day-to-day life.
And very few software companies can do that. Maybe people could say Uber has in a big city, but not many others. So that's really interesting. Is that kind of how you see or what you see the need for in Africa now?
Daniel Yu: Completely. I think, if you're looking for a really transformative, not 2%, you know, changes to business as usual, but kind of 200% changes to business as usual, then I think those opportunities about, right, more or less kind of every major part of the economy that you look at has these opportunities for transformation and improvement that can really materially change people's lives.
And I think for our customers, the difference between pressing a few buttons on an app and having rice, so Coca-Cola, whatever, like magically appear at your doorstep, as opposed to, as I said before, having to like physically go yourself all the way across town and pick up these goods at a bunch of different like dingy Costco's, like this is a totally different way of doing business and as I said, serving your community.
And then of course the other things that we're now building on the back of that to enable financing for these shops, payments and a number of other things that are in the works is just kind of the additional layers that become possible once you kind of do the hard work and set up, this initial infrastructure and network as well.
So I think that these kinds of transformative opportunities abound and it really just kind of takes some going in and looking for them, really kind of deep diving to understanding intricacies and why things are the way they are today—because there's always a reason—and where is there an opportunity to kind of cross-pollinate and kind of take new technologies or new capabilities and really use that to transform and ultimately make a difference. Make people's lives better.
Nicole Dunn: It makes me think of a conversation I was having with a founder a few years ago who built an asset financing business in East Africa, and he was saying that it was really tough because when speaking to international investors, they couldn't understand this need for a hybrid or omni channel or offline type of distribution network and so he had to position with them that this is an asset-light model where they don't need boots on the ground and they acquire customers through referral partnerships with Bolt and Uber, right? Where in the reality you're going to the community associations where there's a chief, or the king of the association, and one by one, you're willing and winning trust, and in time, that creates a sort of network effect as people trust your product. And I think where it's coming from is VCs have gotten this idea that asset life models are more scalable in some way and that's the way they're going to realize return.
So I'm curious because Wasoko has grown incredibly well over the past 10 or so years that you've been doing this. How do you think about scale in the context of an African startup?
Daniel Yu: I would say that certainly this idea that the only way you can scale is through pure digital distribution or something like that is pretty nonsense, and in a lot of verticals, I think impossible, when it comes to different sectors of the African economy. I mean, the reality is that these are trust-based societies, right? And the social fabric that exists is far more ingrained in people's day-to-day lives than what you see maybe these days in the global north. And so, people don't Google or look up on Yelp when they need a plumber. They call up their mom or their aunt or their friends and they say, “Hey, do you know any good plumbers?”
And then, you know, it's all based off of that. And people do that not necessarily out of a burden or they don't just like it. It's actually, it's this kind of having this knowledge and knowing about services or having contacts that can be valuable is actually a sort of social currency like that's what brings you value in a community because you can kind of connect people with resources that are helpful. And so this idea that like somehow you would disconnect and like somehow figure it out on your own just by using the internet or something is something that I think is a very kind of foreign concept.
And so, certainly, in our business, we continue to rely exclusively actually on our own sales force going out into communities and signing up shops to join our platform. And while that might sound somewhat crazy, I think anybody who is familiar with how onboarding was done for, say, restaurant delivery apps in the U.S. and all that, obviously they still relied on huge field forces to sign up restaurants, get them established one as well. The big difference, obviously, is these are economies that have a surplus of workers, especially at that entry or kind of blue-collar level. And so for us, there is no digital channel that can reach all of these mom-and-pop stores.
They're not on kind of Twitter looking for apps that they can download that are going to magically start delivering them things. These are shopkeepers who have never used any e-commerce service in their life whatsoever. So if someone showed up to you at your shop today that you've been running for 20 years or even worse, let's say you had an ad that kind of popped up and say, “Hey, we're going to deliver you stuff,” you know, no way. It actually usually takes one of our reps two to three times of actually stopping and getting to know the shopkeeper and explaining to them that, “Hey, this is not a scam, like you just place an order and use this app to place an order. And the goods come,” and even some of the adjustments, the adaptations that you have to make versus say e-commerce in the U.S. or in Europe where everybody's swiping or paying with a credit card upfront on their order, and then it gets delivered 3 days later by, by UPS or DHL.
In these markets, people won't pay until you deliver because once again, trust-based and if I don't know you, I don't know your service, then no way. And that's fine. That's not something that fundamentally inhibits the business model, but you know, for someone who is, let's say, unacquainted with the markets, I think these are all things that kind of appear as somehow red flags or there's like kind of certain buzzwords.
And I think what you mentioned in terms of being asset light, it's like, “Ooh, well, if you have too many people or you have too much of–you have inventory, you have delivery trucks or whatever,” then, “Oh no, no, no, there's no way that's going to work.” And I think, to me, it's very much the opposite.
It's like well, if you don't have that, then it's definitely not going to work. And if you do have it and you build it, well, it actually becomes your defensible asset like that is because what Africa fundamentally needs is infrastructure and infrastructure is having real assets, real capabilities that others don't have, and that enable, in this case, commerce, trade, supply chains, and if nobody actually has the trucks, then what good is it mean to have a platform that's connecting, you know, logistics. It's useless, right?
So I think this is, to me, really where the kind of misconceptions have come into play over the years. And I think I've always been kind of very adamant about what it's going to take to build and scale up our business and there's definitely been a lot of investors along the way who I think didn't quite follow and as a result didn't get involved. But I'm thankful for the ones that did. We've kind of proven what's possible following that vision.
Brian Kearney: Yeah, that's awesome. I have a couple of thoughts on that. The first is I bet that those investors who didn't invest early, you're now on their anti-portfolio where they're like, “Oh shoot, I missed it.”
So that's cool. That's a cool place to be, I'm sure. But the second question you were kind of starting to answer, and it sounds like you might've been starting to flesh out, but what do you think it will take for the average venture investor who still is for the most part European, American, and now starting to be also Southeast Asian, I would say those are kind of the three, what do you think it'll take for them to see the African market as viable for a portion of their funding? Do you think explaining more about building that moat through the trust relationships as part of it, or what do you think it will take?
Daniel Yu: I think the reality is we need to have the big actions. Showing people the money is always going to be the most critical step when it comes to driving more investment. We are getting there. It's been a journey for sure, but I am confident that we are part of the first wave, the fundamental generation that will catalyze the future cohorts of companies to really kind of take-off and build on top of, you know, I think a lot of the pioneering work that has been done over the past decade. I think what gives me optimism and excitement about that is I think the first wave is actually where the most foundational and iconic companies and established companies ultimately come from, right? So if you look at so in the U.S., well, the U.S. is, interesting examples, obviously, we have tech firms going all the way back to, say, Hewlett-Packard levels and many generations there, but maybe if you look at, say, the Chinese ecosystem, right?
And, Alibaba, which got started in the late 90s, which was like a crazy time to think about doing anything internet tech-related in China. And if you've followed anything that Jack Moss talks about over the years, it was absolutely insane what they were trying to do at the time.
But the fact that they persevered and they kept going and, I don't know, worth a half a trillion dollars or something like that. And they basically power everything in the ecosystem, right? You have all sorts of different Alibaba, e-commerce sites and companies.
Combined with Alipay, which is basically the payment system along with WeChat pay for the entire economy combined with logistics capabilities, combined with cross border capabilities that it is–all of these companies that kind of figured it out and really kind of pioneered and built the rails with blood, sweat, tears, to then enable the next generation of companies to come in after, I think just get kind of further cemented and supported and grow as well with those future generations.
So even though I think this is the hardest time to build a startup or a scale-up in Africa, I think it's–we're doing it now so that it becomes easier for the companies that get started next year, five years from now, 10 years from now. And if just a couple of us, I think make it then I think there really will be a catalytic cycle where you'll start to see that flywheel of experience with capital, with actual services and infrastructure that enable other companies to be built on top. And so that's what I'm super excited to be a part of both now with Wasoko as well as, you know, looking forward to for decades to come.
Nicole Dunn: I mean, you've managed to raise significant funding, including from global heavyweight funds, Tiger Global. What do you think you got right in the fundraising process and other than a belief in your vision, do you think that the investors that did decide to come on board had anything in common?
Daniel Yu: I would say once again, I'm extremely fortunate to, I think, have the background that I have, having grown up in the U.S. in California, school that had actually an active angel investor network. I mean, my first investors were angels from the University of Chicago. And that's something that unfortunately is still quite limited when it comes to, say, raising funding as a local founder in, say, Kenya or in Nigeria or other markets where it's grown tremendously.
Certainly, if you go back five, seven years, there were very few angels that were writing checks locally. And even to this day, I think it's far less than I ideally should be. And so having the networks that connected me to the largest pools of capital in the world, which for better or worse sit in the United States still and some other parts of the world.
And having, I think, kind of built the bridge and understood kind of both perspectives, right? I mean this, what we're doing is by no means, I'd say, intuitive to an investor based in New York, but when I sit down with big funds there, I say, “Hey, so picture the bodega down the street. So imagine if there was no Doritos truck that came and resupplied that shop every day. And if that shopkeeper had to go get their own Doritos from a Costco out in Queens and had to transport it back and blah, blah, blah,” all this stuff. And try to kind of localize and actually explain in concepts and terms that are actually fundamental, fundamentally comprehensible to that audience and put that market into perspective such that it is something that can actually be kind of grasped and then where the fundamentals are the same is definitely when it comes to the numbers, right?
So, you got to have strong numbers regardless, right? Obviously, by the time you're raising a hundred million dollars from Tiger Global and from some of these other big VCs, this is not ideas on a whiteboard, right? These is real hard numbers that are as good as any other global investment opportunity that they have, right?
Because they're global investment, they fundamentally, they want to find the best investments globally and there's no kind of lower standard for anything that they're looking at.
So I think that's something that obviously I think we've delivered on over time to be able to raise capital from some of these larger global funds and is something that I think continuing to kind of focus on in order to kind of demonstrate both to future investors.
And I think for the ecosystem at large that, “Hey, these are real markets that are worth caring about.” Hopefully, if we're able to go the distance with it, then, as I said, that can unlock and catalyze that much more to come into the ecosystem as well.
Brian Kearney: Yeah, that is very interesting and can probably, especially in the earlier conversations, be a difficult thing to explain and how did you explain that the kind of difference between there is quite a bit of opportunities as far as grants, and there's a lot of donations. You're like, “That's not what this is. This is a business.” And that can be a big hill to get over for some of these people in New York or in Palo Alto that, “Wait, you can have a business outside of New York or Palo Alto.” I mean, even in the central part of the U.S. there's almost no venture funding. It's hard to make that case. So how do you make that case for Africa at that really early stage?
Daniel: It's a great question. I think at the super early stage, you're definitely, and actually at all stages, I think you're constantly filtering for interest and for fit, right? So, I would never advise anyone with an African tech startup to just fly to the U.S. and try to talk to angels or VCs on a general basis, right? That's it. You want to make sure that these are people who are going to have some connection to what it is that you're working on. And ideally have some familiarity with the geography even if it's as tenuous as “Oh, I visited there on Safari once,” which is obviously not an in-depth market exploration, but at least, I found helps to break the ice and kind of get people into the frame of mind of what it is that we're doing. And so I think, in the early days, it's about figuring out what investors, what network is actually going to give you some overlap, some affinity between what we're doing and the investor's world view.
But if the investor is just completely unfamiliar with the landscape whatsoever, then I think you're going to have a hard shot making that work. So, thankfully, I did benefit from having a number of early investors who had spent time in the continent, or from the continent and who had kind of social circles and networks where they were able to kind of influence and pull in other individuals to help drive that as well, you know, definitely the kind of education never stops. And so, and I think you never should as well. I think maybe it can sometimes feel a bit repetitive and frustrating to explain the same kind of basic things over and over.
But I think that's what we need to do to ultimately get the message out there and change perceptions and every concrete set of progress whether it's bigger rounds that are made, bigger profile investors that are getting involved helps, but ultimately, I think I'm going to get back to that, that big end goal of having some major exits as well and so that's what we're working on.
Nicole Dunn: I mean, changing track a little bit, you recently announced a merger with another pretty well-known startup in the African landscape, Max Evie. Can you tell us a little bit how that partnership started and how you guys discovered the synergy between your two companies?
Daniel Yu: Absolutely. So we're very fortunate in that the Max app founders and myself have known each other since the beginning of their business. so they've been around for, about 5, 6 years, at this point had, had the opportunity, actually to even kind of come down and visit us, as, as they were getting started.
And so we've been trading notes, more or less since the beginning and even had a number of shared investors and the same investor lead our respective seed rounds. So I think, there's a lot to kind of support, our kind of parallel trajectories as we were kind of building out, this business model in different regions.
So them in North Africa and us, primarily in East Africa. And I think, one of the biggest things is just at a certain point, you kind of recognize that in order to really get the capabilities to reach the full potential of the business, which is for us focused on how do we help as many communities and small businesses across Africa as possible that you can go at it alone and just organically and try to figure out, okay, how do we get into Egypt, how do we get into Morocco and try to figure out this markets or you can partner up with people who have been doing it and doing it well, and who you have a strong relationship with and respect and ultimately, if those dynamics are all right, do something that I think is truly transformational. So in our case, the largest tech merger that's ever happened in Africa. I'm super excited about what this represents, not just for us in terms of giving us that much larger base and capabilities, but also, I think, for the ecosystem to kind of representing one of the pathways for how to try to–for how to scale up and kind of reach new markets and new areas. You don't have to do it all yourself. I would highly advise against it because I think, even just, building up a business to scale in kind of one region, it's quite difficult. And so, yeah, for us, we're super excited. Couldn't be more thrilled to be working with our new team members from Egypt. And, yeah, I expect that this will allow us to go that much further in our shared vision.
Brian Kearney: I won't have you, Answer this on the call, but I wonder if in your future from the largest tech merger, we eventually see the largest IPO from Africa. That could be cool down the road. So we'll be watching that. What is next? What is next for both companies now that they are combining resources?
Daniel Yu: Yeah, so what I could say at this point is, we're continuing to kind of build out and expand both in our existing markets as well as looking at new ones. We're also kind of particularly interested in building more capabilities and services to layer on the core eCommerce business that we already have.
So I mentioned currently we do some merchant financing. We have some kind of early payments products as well. We want to really build on that and offer, kind of even more capabilities, kind of help our shops and their communities grow with Wasoko. And so, yeah, I think it's going to be a really exciting period of innovation and kind of cross-pollination, especially, given both teams, I think, have very complimentary strengths. And so being able to kind of bring together the best from both sides has been hugely rewarding so far. And, yeah, use that to build the biggest business possible and help as many of these businesses across the continent as we can.
Nicole Dunn: It's an amazing story in some ways that were first inspired by going to Egypt, on a study abroad program all those years ago, right? And then end up merging with an Egyptian company. That's quite–there's a romantic love story in there somewhere. But I think it's great to see, especially last year we saw especially B2B commerce startups in Africa fall out of favor in the venture community, the one Starling, we've all read the headlines, so I'm curious about your outlook for the sector. Do you think there's a renewal coming? What have you figured out that others haven't? What's your outlook for the years ahead?
Daniel Yu: It's a great question. And I think beyond the kind of cyclical cycles that I think venture reflects and that you have certain businesses or models that kind of come into favor and that cycle out, what I'd say is distribution of goods to informal retailers is not a new business.
It's been around for hundreds of thousands of years, and it's not a small business either. So, as I said, 800 billion dollars a year and that's not charity, and back to your earlier point, right, these are, the people who are moving the rice, the soap, the toilet paper, whatever around to, these 10 million shops in Africa today, they're not doing it because tthey got a grant from USAID or they're working for the UN, like these are hustlers, these are traders, wholesalers, whoever who were making money doing that, you know, I think our thesis is from a business and a profit point of view is you have these 10 million shops, millions and hundreds of thousands of distributors and wholesalers and whatnot in those kind of layers and chains above them that are all working on pencil and paper. No visibility, no tooling, no digitization.
No optimization on how these goods are getting to market right now. It has to be the case that by aggregating and implementing technology to digitize these supply chains, that there is additional profit to be gained on top of what is already a profitable industry that has been around for thousands of years.
So I think, from that kind of standing point, I don't think that the need or the pain points of what we're solving are going away anytime soon. And I think that fundamentally, if you just look at the basic growth trends of basic consumption of consumer goods in Africa is growing even faster than population because it's also a reflection of rising incomes as well that demand for goods is going to have to be solved by supply chains, by logistics, and that's going to require and going to be best done by technology-enabled companies that are running those.
So, while we might not be in the heady days of 2021, I don't think that the prospects for this particular sector are any less than any other sector. In fact, I think that the prospects for this sector remain by far 1 of the strongest in Africa because, point to anything else, and it's a smaller proportion of GDP and a smaller portion of actual kind of fundamental consumption in the economy, and so I'm sure that even if it's not us, that distribution and supplying of essential goods to the African market is going to be a big part of the economy for many years to come.
Brian Kearney: Yeah, that is a perfect place to end. We're getting close to time, but I do have one more question for you that I've been wondering, and you said you were studying abroad in Egypt to learn Arabic. That's not typical. How many languages do you speak?
Daniel Yu: I speak eight languages.
Brian Kearney: Man, what are they?
Daniel Yu: So, English, Arabic, Swahili, which is spoken here in East Africa, Mandarin, Cantonese, Spanish, French, and Portuguese.
Nicole Dunn: Can I ask, I mean, you clearly love complex problem solving, you love adventure, where does the love for language come in?
Daniel Yu: Well, I think it's absolutely part of the adventure. It's part of, I think for me, cultural exploration is where I find some of the most fascinating and delightful parts of life. So I kind of put that box more than, say, climbing mountains or anything like that, which I'm ashamed to say I've been in the region for eight, nine years, still haven't done Kilimanjaro or any of those, but you know, I have spent a lot of time, whether it's learning Swahili or even working on some of the other local languages in different countries that we're in right now, and I think the experiences and the value that's supported for me, even in just being able to have conversations with our customers and understand how they're interacting with our services, what we can do better, those are things that not only are professionally, I think, quite important, but personally.
Brian Kearney: Yeah, that's awesome. Well, Daniel, thanks for the time. This has been a really fascinating conversation. What's the last quick piece of advice you would give to anyone–not that is thinking about building a startup in Africa because that's a standard question, but anyone who's thinking about investing in Africa, what advice would you give them?
Daniel Yu: Come out, come get on the ground, get in the market, talk to real users, real customers, don't just do your armchair research. That ultimately is a very limited part of the picture. And there's no substitute for actually talking to people and understanding their worldviews and pain points firsthand.
Brian Kearney: Awesome. Thanks, Daniel.
Daniel Yu: Thank you very much. It's been a pleasure.
That's it for today. Do you want to learn more about investment opportunities in Africa? Go to nextfrontierpod.com for more episodes, new insights, and the latest trends in the African startup world.