There aren't many success stories out of Africa. But things appear to be changing now. According to a McKinsey research report, a third of the African population currently has Internet access. It estimates that Internet penetration will increase to 50% and that the country will see 360 million smartphone owners by the end of 2025. Africa Internet Group (Private:AFIG) is the first Billion-Dollar Unicorn out of the continent and it is already making big news.
Africa Internet Group's Offerings
Africa Internet Group was founded in Nigeria in 2012 by Fatoumata Ba, Aneesa Arsahd, Allie Morse and Joe Falter using funds from Rocket Internet. Since being founded, the company has spread operations across 26 countries through its portfolio of 71 companies in eight different verticals including online retail, food ordering platform, online marketplace, real estate marketplace, vehicle marketplace, taxi hailing, online travel agency, and the P2P lending marketplace. Some of its most popular services include online food delivery service Hellofood, a hotel booking service Jovago, e-commerce site Jumia and ride-hailing service Easy Taxi. Jumia was launched by AIG back in 2012, and it has grown to become one of the biggest e-commerce brands on the continent.
Africa Internet Group has not only used funds from Rocket Internet, but it has also been significantly influenced by its business model. Like Rocket Internet, AIG too operates through integrating the roles of an incubator and a venture fund. That is the reason why Africa Internet Group is backing businesses that are actually clones of other successful online businesses operating in other parts of the world.
While the business models may not be original, Africa Internet Group is still experimenting with customization. For instance, unlike Amazon (NASDAQ:AMZN), which uses third party delivery services for delivery of goods, AIG uses Jumia's own network to deliver 90% of its orders. It is also experimenting with delivering goods using drivers from its Easy Taxi service to better manage costs.
Africa Internet Group's Financials
Africa Internet Group is privately held and does not disclose its detailed financials. But the company is witnessing strong growth and revenues. Last reported results suggest that gross revenues for Africa Internet Group came in at $224 million for the nine months ended September 2015, translating to a 265% growth over the year. Overall, for the year 2015, AIG's revenues are estimated to have grown 282% over the year. But the high growth in revenues is not translating into profits. None of Africa Internet Group's businesses are profitable as yet. Africa Internet Group's Paris-based chief executive Sacha Poignonnec claims that the company is following the business principles of Amazon.
"We want to be profitable but we are very long-term oriented. Amazon is a great model to look at. They have a great valuation, they have a great customer base. Everyone one is confident that Amazon has a great future but they are still yet to make money."
The absence of profits hasn't hurt its valuations. Africa Internet Group's funding details are also not disclosed widely. But during the current year, the company has received $411.3 million in funding from AXA Group, Goldman Sachs, MTN, Orange and Rocket Internet. In March this year, AXA had purchased a 8% stake in AIG at a valuation of more than $1 billion, making Africa Internet Group the first Unicorn from Africa.
The valuation is impressive considering the largely middle-class population in Africa and the significant regulatory, logistical and infrastructural challenges facing the continent. And, for sure, there are better things to come for AIG. In my interview with Chris Folayan, CEO of Mall for Africa, he had spoken about how e-commerce in Africa is extremely hot, citing it as progressing faster than in the US and in other first world countries. AIG seems to be leveraging the fast paced dynamics of this market in its favor.