February 4, 2023

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FTX cut Chipper Cash’s valuation from $2bn to $1.25bn • Eureka News Now

African fintech Chipper Cash was valued from $2 billion to $1.25 billion before FTX’s bankruptcy, according to documents shared by the Financial Times about Alameda’s venture capital portfolio.

Eureka News Now received a whiff of this information from sources familiar with the company’s financial position, and while the African cross-border payments company did not confirm the news when asked, the filings corroborate what our sources say. The news comes a day after Chipper Cash laid off 12.5% ​​of its workforce (about 50 employees).

Last May, Chipper Cash raised a $100 million Series C round led by SVB Capital, the investment arm of US high-tech commercial bank Silicon Valley Bank. Six months later, it received an additional $150 million, an extension of that round that saw Chipper Cash raise a total of $250 million. Sam Bankman-Fried’s now-defunct cryptocurrency exchange platform FTX led the round, and Chipper Cash’s valuation rose to $2 billion and became one of Africa’s five unicorns last year.

FTX funded more than a quarter of Chipper Cash’s $40 million extension round, according to documents revealing bets from Alameda and FTX. Despite raising over $250 million in 2021, Chipper Cash, whose celebrity backers include Afrobeats star Burna Boy and former French professional footballer Patrice Evra, went to the market this year to raise more money , most likely as a cushion to weather the current macroeconomic situation. But like many startups this year, it may have had to settle for a second half. It’s unclear how much new funding the four-year-old startup was able to raise, but the documents show that Chipper Cash received an additional $35 million in SAFE from FTX, valued at $1.25 billion. The new rating, which will take full effect later in a pricing round, represents a 62.5% drop from the rating Chipper Cash ordered months ago.

An ongoing bull run that saw public technology stocks and private investment boom for over a decade has slowed, ushering in a new wave of job and cost cuts. It’s a stark contrast to last year’s luscious fundraising environment, with startups moving fast to hire and raise money. Many are now struggling to prove and sustain the soaring valuations they achieved as the pendulum swung back from the founders’ market to the investor’s market.

Several startup valuations, particularly fintechs, have fallen spectacularly this year, with juggernauts like Stripe and Klarna taking serious valuation discounts of up to 85% and 61%, respectively. When Eureka News Now reported on the Chipper Cash layoffs yesterday, we found that some high-profile startups in Africa had downgraded valuations internally, just like their global counterparts. Like Chipper Cash, there have been reports of secondary sales of startup stock falling between 20% and 60%, lowering their 409A rating (an independent estimate of a startup’s fair market value, often used to price employee stock options). ).

Even smaller African startups are not exempt from this evaluation route. For example, Egyptian social commerce platform Brimore has had its valuation cut by as much as 50%, according to sources familiar with the company’s financials. In October, we reported on Nigerian genomics startup 54gene, which not only saw its valuation cut from $170 million to $50 million, but also completed the down round with investors demanding a 4x liquidation preference.

It’s not clear if Chipper Cash will maintain this rating in its next pricing round as its main investor FTX is currently bankrupt. According to FT, the four-year-old fintech was one of over 450 investments that Sam Bankman-Fried wanted to offer as collateral to raise money for the FTX Group, which includes 10 holding companies including Alameda Research, FTX Ventures, FTX Trading, Maclaurin Investments and Clifton Bay Investments (the arm that formerly invested in Chipper Cash).

Other African startups on the list include: OVEX, a South African digital asset exchange and OTC trading desk ($5 million from FTX at a $122 million valuation); Kenya-based payment automation and processing company AZA Finance ($25 million promissory note/loan); African Mobile Money Unicorn Wave ($10 million equity); South African crypto exchange platform VALR ($4 million in equity); Nigerian crypto exchange startup Bitnob ($500,000 from FTX at a $20M valuation); Nestcoin, a Nigerian Web3 platform whose assets got stuck on bankrupt crypto exchange SBF ($250,000 equity from FTX at a $30M valuation), and Congolese Web3 startup Jambo ($500,000 in tokens).

It has been rumored that due to FTX’s bankruptcy, some of FTX’s and Alameda’s portfolio companies have not received the full amount of investments disclosed in the financials. If Chipper Cash falls into that category, it’s not hard to see why it might have laid off employees to maintain the runway, as the company claims it wasn’t exposed to FTX’s collapse, according to two people involved with the The company’s handling of bankruptcy are exchange.

Chipper Cash was founded in 2018 to offer Africans a free cross-border peer-to-peer payment service. According to the company, its platform is used by over 5 million customers in Ghana, Uganda, Nigeria, Tanzania, Rwanda, South Africa and Kenya – and more recently in the US and UK, where the FTX-backed startup expanded this year to Facilitate peer-to-peer money movements from both countries to select regions in Africa. Last month, the African cross-border payments app announced it would acquire Zambian fintech firm Zoona to expand into the South African country.

The platform, which offers P2P transactions, crypto, stocks and virtual cards, saw a 21x increase in gross revenue from $8 million in Q1 2021 to about $169 million in Q1 2022 and an 8x increase TPV increased from $213 million to $1.65 billion within the same quarters, according to financial data from Eureka News Now.