African product, global market: Expensya employees cash $10M from 2023 acquisition | Tech Crunch

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More rewarding For an angel investor over paper returns in a startup? A purchase that converts that paper into a cash payment while retaining shares in the company. In a recent interview with TechCrunch, Selma Ribica said, “The return after dilution is eight times my investment. “I put some stock in the new entity, but the vast majority is cash.”

Ribica currently works as a general partner at First Circle Capital, a venture capital firm specializing in Fintech SaaS or fintech 2.0. She invested her angel investment in Tunis and Paris-based Expensya, which was bought last June by private equity firm Medius for more than $100 million, according to sources familiar with the deal.

Only a handful of African or Africa-focused tech companies have been acquired for more than that: InstaDeep to BioNTech, Sendwave to WorldRemit, DPO Group to Network International and Paystack to Stripe. Like InstaDeep, the acquisition of Expensya underscores the potential for Africa-based products to be offered to global markets and subsequently acquired by larger companies.

Over the years, venture capital has faced a bullish trend globally and Africa, albeit late to the party, has caught on before the asset class heads south in the latter half of 2022. Building solutions for the continent with the promise of capital to follow. Building global products is often an afterthought, especially as local solutions, particularly fintechs, have demonstrated exit opportunities by targeting markets across the continent.

However, in the last 18 months, this narrative has changed significantly. As African startups seek to develop solutions to local challenges, they now face headwinds and macroeconomic challenges beyond their control. The economies of the continent's most prominent tech markets — Nigeria, Kenya and Egypt — are currently grappling with currency devaluation issues, resulting in stagnant or slow returns in dollar terms for startups operating in these markets, thereby diminishing their values ​​in the global eye. Investors.

In response, investors are now asking startups to explore strategies to protect their revenues, with local entrepreneurs debating the importance of adopting a global mindset when developing their products. That idea has been inherent to entrepreneurs like Karim Jouni, Expensya's founder and chief executive officer, from the start.

“Receiving global attention has happened almost from day one for many reasons. Regardless of what you're building as a company, Tunisia is a pretty small market that's not integrated enough with its neighbors,” Jouni said in an interview with TechCrunch. A country with companies that are not mature enough to be interested. Their companies are still setting up the first CRM or ERP. So from the beginning, we've seen companies mature and build products for markets that are looking at employee productivity and cost management.

From Tunis to Europe

Founded by Jouini and CTO Jihed Othmani in 2014, Expensya specializes in automated expense management solutions tailored to European businesses. Its software enables companies to implement autonomous spending within pre-defined rules and limits, optimize time and streamline employee spending processes. When integrated with ERP applications, Expensya helps finance teams monitor and track business expenses and facilitate streamlined staff reimbursement procedures.

An expense management startup designed to support companies of all sizes in automating their professional expenses, originally launched in France, the CEO's network and more than a decade of experience working for Parrot, Musiwave and Microsoft. Expensya's first set of clients, consisting of between 1,000 and 10,000 employees, were organized in multiple European countries – as a result, the startup quickly adapted its product to operate in these other countries, catalyzing its move. into Spain and Germany.

And despite the apparent advantage of proximity to Europe, a Tunisian startup has its challenges. First, navigating the European market, which is reasonably protected from external competition due to laws like GDPR, is a significant hurdle. Setting up operations in Europe to comply with GDPR and building strong local teams in sales and marketing is key to selling a startup to larger companies; It formed teams in France, Spain and Germany to address this need and compete with Conquer, Nautilus and N2F.

“Sometimes, there is some hesitation from these big customers when using a product built by an African startup. For them, they wanted to know if our quality was good enough for them or if it was good enough for American or European products,” added Jouni. “So we've invested a lot in having the best product in town. If you look at the public ratings of solutions like ours on the App Store or Google Play, you'll see that we have the highest rating on the market compared to our European competition because we focus on making sure quality is never an issue. Take us back as an African startup and the standards might be lower.

Setting up and maintaining a high-quality product is often the talent base of a startup. Despite the wealth of young, talented people in engineering and other technology fields, particularly in Tunisia and Africa, the lack of experienced managers and leaders, coupled with a lack of successful local SaaS companies, has become a hurdle as Expensya scales, Jouini admits. .

In general, migration has further reduced the availability of experienced talent in Africa, with many skilled individuals choosing to pursue opportunities in Europe or the US, factors that contribute to the challenge for African startups to compete with their global counterparts.

Part of a global success story

However, talent positioning is a double-edged sword. Despite the talent shortage, Expensya has benefited from lower operating costs than similar firms operating in Europe. Additionally, while startups in Paris struggle to attract the top 5% due to stiff competition from tech giants like Google and Microsoft in their regions, Expensya can attract the top 5% of talent in Tunisia due to its visibility as one of the country's most well-funded. and resourceful startups.

Although Tunis-born and Paris-headquartered Expensya is seen as just another SaaS company among many in Europe, Jouni insists that its employees and early investors have contributed to something unique in Africa and maintain a bullish view on its potential.

“When our employees join and spend time here, they have an engagement that goes beyond a paycheck and a job. It's any larger architectural concept that actually makes a real difference,” he said. “It's a sentiment that's probably not talked about enough — people in Africa, or at least in the countries I'm familiar with, are eager to contribute to the global success story.”

Last year, shared optimism among investors and employees became a reality.

After working on raising nearly $30 million, including a $20 million Series B, at an $83 million post-money valuation in 2021, Expensya was acquired — and its employees became part of an experience elusive to their peers. In the African technology ecosystem.

At the time of the acquisition, 110 of the company's 190 employees were based in Tunisia. These employees, including previous staff who worked out of Expensya's Tunis office, totaling 180 shareholders, collectively earned $10 million through the acquisition, as revealed by Jouini during the call. Two-thirds of this amount is said to be in cash. “Some people have made as much as $200,000-$250,000. It's not exactly life-changing money, but it's certainly path-changing,” Jouni, who now serves as product and tech chief at Medius, commented on employee cashouts.

Medius, a Swedish conglomerate backed by leading European private equity firms, has for years aimed to establish a global CFO automation conglomerate, making several acquisitions in the UK, US and Sweden, including Expensya. Integrating these solutions creates a more cohesive and robust offering for Medium. Geographically, this gives the private equity firm and its subsidiaries a much wider reach across Europe and North America, where, for example, Expensia continues to operate independently. Prior to its acquisition, Expensya said it had doubled its recurring revenue in the previous two years and grown its customer base to 6,000 businesses and 700,000 active individual users spanning 100 countries.

Acquisition events like Expensya and Instadeep are noteworthy because African startups can complete a full cycle that benefits not only business angels and VCs, but also employees. Although the scale is far beyond that of Silicon Valley or more mature technology ecosystems, it represents a positive step forward. These stakeholders can invest in startups or even launch their own ventures, contributing to the growth of Africa's technology ecosystem.

“Expensya is very efficiently built. “When you look at their return on capital, return-on-investment ratio and employee count, it's a super-efficient structure that can scale to double-digit million revenues while maintaining a modest valuation compared to similar models in Europe,” says Ribica, a former M-Pesa executive who has invested in fintechs such as Qonto and Bamboo. . “We need to encourage more African startups to build and compete globally and create well-paying jobs at home with plenty of local engineering talent so they don't leave their home countries for jobs in Europe and the US.”

For enterprise products like Expensya, growing locally is more challenging than expanding internationally due to low market maturity and slow decision-making. Jouni advises founders to focus on selling their products and make tweaks as soon as possible. “Don't spend too much time on engineering,” he says. “Selling and closing customers and learning from them is how you build your SaaS product locally or globally.” Second, Jouni and Ribica want founders to prioritize talent and hire for the present and the future simultaneously, while sharing equity along the way and treating them as part of the journey.

Step One: Build the Product; Step Two: Launch the product with a couple of customers, tweak it, improve it, create a Unique Selling Proposition (USP); Step three: Build, recruit, retain, that's how you establish an enterprise sales machine, and then you scale,” Ribica commented.

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