Tech Safari Takes: Are local tech IPOs making a comeback?

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Now, let’s get into this week’s Tech Safari Take.

Last week, South Africa saw its biggest IPO in three years - from a tech company.

Is this the start of something bigger in African tech?

Can we expect more local tech IPOs?

Let’s dive in and see.

The Story

WeBuyCars, a South African car marketplace went public for $444 million.

The company planned to list at $420 million.

But when you finish your opening day with $24 million more, you can’t complain.

It’s safe to say WeBuyCars is now half a unicorn.

But it isn’t half as rare as one.

Its business is just like Autochek in Nigeria, Peach Cars in Kenya, and Sylndr in Egypt.

So, it begs the question — if WeBuyCars can pull off an IPO, can other African startups do it too?

Let’s see.

The Context

While this IPO is one of Africa's biggest in a few years, it’s not the first we’ve ever had in African tech.

Africa’s first set of founders went down the IPO road.

And their companies still live on stock exchanges in Nigeria and South Africa today.

Names like Chams, Omatek, eTranzact and Mustek fill that list.

But here’s the thing: these companies listed small and stayed small.

Chams Plc made $11m (₦9.5 billion) in revenue last year but currently has a market cap of $10m, while the JSE values Mustek at less than $5m.

So, between this first wave of IPOs and the arrival of VC money in Africa, local IPOs lost their appeal.

In the last decade, only three tech companies IPO’d on the continent.

And when the local markets can’t keep up, startups need to go global.

Today, startups are chasing bigger bags — they want billion-dollar valuations and unicorn listings.

Jumia was listed for $3 billion on the NYSE in 2019, and Flutterwave is considering an IPO on the same exchange next year.

But the local stocks are rising.

In 2019, Fawry, a payments startup, listed 36% of its shares on the Egyptian Stock Exchange.

The listing had 30 times more interest from investors than expected and Fawry briefly became a unicorn in 2021.

When you add up the Fawry and WeBuyCars IPOs, we might be in different times now:

• African exchanges are growing. The JSE in South Africa is the 17th-largest in the world. Last year, Nigeria had the 4th best-performing index in the world. Ethiopia just started a new exchange that raised $26 million from investors, and the raise was oversubscribed.

• Some local exchanges are bigger and better. African stock markets have grown 10x in the last 20 years, from $245 billion to $2 trillion in market cap.

• VC funding has slowed down — it’s down 51% between last Q1 2023 and now. This funding winter means mature startups need to find new ways to raise money or return the bag.

When local exchanges are growing and VC dollars are drying up, it might be time for a new plan.

And the WeBuyCars IPO might be the start of that.

This year alone, there are nine more listings expected on the JSE.

That’s three times the number of listings in the past five years.

So, should more African tech companies make the leap?

The Tech Safari Take

Yes — local IPOs are a chance for startups to cash in on their brand strength in local markets.

For example, Piggyvest has over 2 million users in Nigeria - listing locally gives it a real chance at turning its users into investors.

But if Piggyvest gets listed globally, that advantage would be lost.

That local advantage is often missing when startups list on global exchanges.

Local exchanges also have way more cash flowing into them than ever before.

Between 2002 and 2023, African exchanges grew 10x from $245 billion in market cap to $2 trillion.

If Chams Plc went public today with $11 million in revenue, could it get a $100 million outcome instead of $10 million?

We’ll never know.

But even for startups looking to list locally today, it’s not an easy journey.

When a startup lists, growth stops being the only thing that matters - profit and public image also matter.

And for many venture-funded startups, this can be a big ask.

With most unicorns in African tech being privately held, there’s the question of whether or not their valuations will hold up in public markets.

If Flutterwave went public on the New York Stock Exchange today, would it still be worth $3 billion?

Looking at the US tech markets today, and the revenue multiples of similar payment companies like PayPal, Nubank, and Block, Flutterwave would need to make around $600 million in revenue to keep that valuation.

So, probably not.

But most African startups aren’t Flutterwave, and a $444m WeBuyCars outcome would be just fine for them.

Local IPOs might be the way for African tech startups to get there.

Do you think the local IPO will make a comeback?

Let us know here.

What we’re reading this week

💡You don’t think climate tech in Africa is huge? This article will make you think again. Read it here.

🤯 Remember Devin, the AI software engineer that’s coming for your job? You’re safe because the demo turned out to be fake. Read the full gist here.

💸 Humane wanted to build the iPhone for AI, and it raised $230m to do just that. Instead, it ended up with a $700 wearable pin and a bad review that millions of people agree with. Read about what went down here.

Tweet of the week

YouTuber Marques Brownlee has become the god of consumer product reviews. Last week, he gave Humane’s AI Pin a bad review, and now everyone is worried he has too much power.

That’s a wrap! Hope you enjoyed our Tech Safari Take.

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